John Antony Investments Limited v Crighton HC Palmerston North CIV 2009-454-870
[2010] NZHC 1510
•26 May 2010
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV 2009-454-000870
BETWEEN JOHN ANTONY INVESTMENTS LIMITED
Plaintiff
ANDW J CRIGHTON First Defendant
ANDW CRIGHTON & SON LIMITED Second Defendant
Hearing: 18 May 2010
Appearances: C Heaton for the Plaintiff
J D Haig for the First Defendant
Judgment: 26 May 2010
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
26.05.10 at 3:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors/Counsel:
C Heaton, Morrison Kent, Wellington – Caroly[email protected]
J Haig, Barrister, Wellington – [email protected]
JOHN ANTONY INVESTMENTS LIMITED V W J CRIGHTON AND ANOR HC PMN CIV 2009-454-
000870 26 May 2010
[1] The first defendant (Mr Crighton) has applied to strike out the plaintiff’s claim. Alternatively, leave is sought by Mr Crighton to apply for summary judgment against the plaintiff.
[2] The defendants’ dispute concerns two agreements for the sale and purchase of shares. By the first, dated 21 August 2006 (the 2006 agreement) it is pleaded that Mr Crighton agreed to sell to the plaintiff and the plaintiff agreed to purchase 5,000 shares in a company called W Crighton & Son Paraparaumu Limited (the company). Upon the terms and conditions set out it is pleaded by the agreement dated 23
August 2007 (the 2007 agreement) that the second defendant agreed to sell to the plaintiff and the plaintiff agreed to purchase, 5000 shares in the company upon the terms and conditions set out in that agreement.
[3] The plaintiff pleads that it tendered a cheque in December 2006 as payment for the share purchase price in the 2006 agreement. It says this cheque was delivered to the defendants’ lawyers but was not banked by or behalf of either of the defendants.
[4] The plaintiff said that it paid the share purchase price of the 2007 agreement in October 2007. The plaintiff pleads that the cheques tendered in payment of the
2007 agreement were presented by the second defendant. The plaintiff pleads that neither defendant has carried out the obligations of their respective agreements. The plaintiff seeks orders for specific performance or in the alternative an enquiry into damages.
[5] Separate statements of defence have been filed on behalf of each defendant. For present purposes we are not concerned with the second defendant for only Mr Crighton has filed a strike out/summary judgment application.
Mr Crighton’s statement of defence
[6] In it he:
(a)Denies knowledge of any cheque paid pursuant to the 2006 agreement.
(b) Denies the plaintiff had a right to purchase any shares in the company.
(c)Denies he has any obligations to the plaintiff under the 2006 agreement.
Mr Crighton’s affirmative defence
[7] He says he did not own any shares in the company he having transferred the shares to the second defendant on 19 May 2006 but if the 2006 agreement was valid it was superseded in its entirety by the 2007 agreement because:
1. The subject matter of the 2007 agreement is the same as the
2006 agreement.
2.Clause 17 of the 2007 agreement provides that all prior agreements of the parties were superseded.
3.That the plaintiff’s Mr Taylor was at all times the general manager of the second defendant and breached a relationship of trust and confidence and fiduciary duty owed to Mr Crighton.
4.If the 2006 agreement is valid and enforceable then the plaintiff provided no consideration to (did not pay) Mr Crighton.
Mr Crighton’s counterclaim
[8] He seeks a declaration that all property obtained by the plaintiff through the
2006 agreement is held on constructive trust for him or for the second defendant. He also seeks an order requiring the plaintiff to transfer legal ownership of the shares in
the company and all other property obtained from the 2006 agreements to him and or the second defendant.
The 2006 agreement
[9] It records the company comprises 10,000 fully paid ordinary shares issued at
$1.00. It notes Mr Crighton is the owner of those shares and records his agreement to sell 5,000 shares to the plaintiff.
[10] Settlement date is noted as 3 April 2006. The share purchase price is described as “the sum of $155,156.25 comprising $140,000 for a one half share of the capital assets and $10,156.25 being a one half share of the ITM membership joining fee and $5,000 for the shares.
[11] At settlement Mr Taylor was to be appointed a director of the company. Mr Crighton warranted (by clause 6 of the agreement) that he was the legal and beneficial owner of the shares in the company.
[12] By clause 17 the agreement provided:
This agreement (and any schedules to it) constitutes the entire agreement between the parties and supersedes all prior agreements, understandings, negotiations, representations, and discussions, whether oral or written, of the parties. The vendor makes the representations and warranties set forth in clause 6 and no others. Any and all implied warranties are expressly excluded. No supplement, modification, or waiver of this agreement is binding unless in writing and signed by the parties...
[13] By clause 18 the agreement provided:
The purchaser or its nominee shall have the right to purchase the shareholding of the vendor in three years from the commencement of trading at valuation (excluding goodwill) by a single valuer...
[14] The agreement was apparently signed by Mr Crighton.
The 2007 agreement
[15] It notes the company comprises 10,000 fully paid shares issued at $1.00; that the second defendant is the beneficial owner of all of those shares; and the second defendant has agreed to sell half of those shares to the plaintiff.
[16] The share purchase price is described as:
The sum of $5,000 for the said shares and $191,718 as an advance to repay
50 per cent of the advance of $383,436 made by (the second defendant).
[17] By clause 6 the second defendant warranted it was the legal and beneficial owner of the shares in the capital of the company.
[18] The 2007 agreement contains the same clause 17 as did the 2006 agreement.
[19] Clause 18 was different in that it provided the purchaser or its nominee with the right to purchase the shareholding of the vendor on 13 March 2009 at valuation (excluding goodwill) by a single valuer...
[20] The agreement was apparently signed by Mr Crighton.
Strike out application
[21] Rule 15.1 applies:
(1) The Court may strikeout all or part of a pleading if it –
(a)Discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleadings; or
...
(c) Is frivolous or vexatious; or
...
[22] For the purpose of a strike out application, pleaded facts are assumed to be true. Normally the Court will not consider evidence inconsistent with the pleading, for a strike out application is dealt with on the footing that the pleaded facts can be
proved; but there may be a case where essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought to be allowed to proceed further: A-G v McVeagh [1].
[1] [1995] 1 NZLR 558, 566
[23] The Court is entitled to receive affidavit evidence, and will do so in a proper case, but is generally limited to facts that are not disputed: Yarrow v Yarrow [2].
[2] HC Palmerston North, CIV 2008-443-072, 14 August 2009, Abbot AJ
[24] The grounds pleaded for strike out are:
(a)That the 2006 agreement was expressly superseded by the 2007 agreement; and
(b)That the 2007 agreement was intended to replace the 2006 agreement given it was for precisely the same subject matter.
(c) No consideration was paid in relation to the first contract; and
(d) Mr Crighton had transferred his shares to the second defendant on 19
May 2006 and therefore the 2006 agreement can be of no affect as the shares of the company were not owned by Mr Crighton.
[25] Mr Crighton’s son Euan Crighton has sworn an affidavit in support of Mr Crighton’s applications. Mr Taylor has filed an affidavit for the plaintiff in response. Each exhibits a copy of the 2006 agreement but that attached to Euan Crighton’s affidavit is dated 12 July 2006 whilst that attached to Mr Taylor’s affidavit is dated
21 August 2006. Nothing of consequence flows from this difference.
[26] Submissions on the strike out on behalf of Mr Crighton place considerable reliance upon the affidavit evidence filed. Of course the focus of a strike out application should be the pleadings but some reliance may in limited circumstances be made upon available affidavit evidence. In this case that evidence is useful for it exhibits copies of both agreements from which similarities and for that matter differences can readily be identified.
[27] Mr Haig submits that the background to the 2007 agreement is on identical terms to the background of the 2006 agreement because in each the vendor agrees to sell 5,000 shares in the company to the plaintiff. There is a difference in each regarding the share price payable. Both agreements contain an option to purchase the balance of the company’s shares (clause 18), although the 2007 agreement enables the exercise of that right within a shorter period of time.
[28] Each agreement contains the same clause 17 which provides that it supersedes all prior agreements.
[29] There is no dispute about these things. Perhaps the only disputed fact concerns which party instructed the firm of solicitors that drafted both agreements. The plaintiff alleges they were drafted on behalf of the defendants. A partner of the solicitors firm concerned swore an affidavit stating he understood a former consultant at his firm in fact drafted the agreements for the plaintiff on Mr Taylor’s instructions.
[30] Addressing pleading concerns Mr Haig submits that the plaintiff’s cause of action against Mr Crighton is for specific performance of the 2006 agreement, or for an enquiry as to damages, interest and costs. He submits that to obtain specific performance, there must be a contract in existence. He says there are three discrete elements in the factual setting which shows there was no contract in existence and/or it was unenforceable.
(a) The 2006 agreement was expressly (or impliedly by operation)
superseded (terminated) by the 2007 agreement;
(b) No consideration passed from the plaintiff to Mr Crighton;
(c) Mr Crighton did not own the shares allegedly sold to the plaintiff.
[31] Mr Haig discounts the plaintiff claims that because the 2007 agreement was between the plaintiff and the second defendant (not Mr Crighton) clause 17 of that agreement could not operate to terminate the 2006 agreement. Mr Haig submits that
a literal interpretation is artificial; that the intention of the plaintiff was clear. He submits “there can be no doubt that the 2007 agreement was intended to replace the
2006 agreement given it was for precisely the same subject matter. The only substantive difference was what the plaintiff agreed to pay, and did pay a higher price ($196,718 compared with $155,156.25).
[32] Mr Haig surmises that if the plaintiff ever intended to rely on the 2006 agreement then it would not by the 2007 agreement have agreed to pay a higher price. Therefore, the difference in price is a fact which supports Mr Crighton’s position. Nor, does Mr Taylor explain why he entered into the 2007 agreement and paid the higher price. It is to be assumed, reasonably Mr Haig says, that at some point Mr Taylor realised Mr Crighton did not own the shares in the company and a new agreement was necessary to put his plan to affect. He submits the omission of the ITM joining fee in the 2007 agreement is irrelevant because “it doubtless would have been included in the total $383,436 advance from the second defendant to the company”. Further, in essence, because the same parties signed both agreements they would have understood that the 2007 agreement superseded the earlier agreement. In that case nothing remains of the former which is enforceable. Given the 2007 agreement related to precisely the same subject matter it is wholly inconsistent with the continuing operation of the 2006 agreement. Therefore it must have extinguished the earlier agreement.
[33] The plaintiff denies it has not paid consideration under the 2006 agreement, despite acknowledging no money changed hands following the plaintiff’s cheque being tendered. Mr Haig submits no consideration was provided rendering the agreement unenforceable and incapable of specific performance. But, even if the plaintiff did pay a consideration Mr Crighton could not provide the shares in the company because he was not the owner of those at the time. Therefore Mr Haig submits the 2006 agreement would be unenforceable for lack of consideration from the seller.
[34] Of the plaintiff’s claim, in the alternative, for an enquiry as to damages Mr Haig submits damages cannot arise from a contract that has been terminated by its supersession by a later agreement. Further, to obtain damages the plaintiff must
prove a loss from Mr Crighton’s alleged breach of contract. But, the plaintiff’s statement of claim does not plead any loss arose. Although in its opposition the plaintiff purports to rely on breaches of warranties in the 2006 agreement to claim damages, it has not pleaded this in its claim. Also, any attempt by the plaintiff to replead would run afoul of an estoppel argument because the plaintiff having paid a higher price by the 2007 agreement could not argue it suffered loss arising from not having the opportunity to proceed with the 2006 agreement.
Considerations
[35] In my judgment the application for strike out or in the alternative for summary judgment must fail. In short, I accept Ms Heaton’s submission that assumptions about whether or not the 2007 agreement superseded the 2006 agreement cannot reliably be assumed on the basis of the evidence presently available to the Court. It may be, as Mr Haig submits, that the 2007 agreement impliedly superseded the 2006 agreement. But, it cannot be said, on the basis of the evidence available, that “it must have been intended”. Obviously it cannot be claimed that the later agreement “expressly superseded” the earlier agreement because in each the vendor is a different person. It follows that if it had of been intended that the later agreement replaced the earlier then that could easily have been provided for in clause 17, but it was not. The factual matrix may, as Ms Heaton submits, subsequently indicate that that was the intention of the parties, but that is not before the Court on a strike out application. A determination needs to be made on the basis of “actual facts found at trial, not on hypothetical facts assumed
(possibly wrongly) to be true for the purpose of a strikeout” [3].
[3] Couch v Attorney-General [2008] NZSC 45 at para [33]
[36] The defendants claim no consideration was paid. But it cannot be claimed that because a cheque was not banked and that there was no consideration. Clearly the purchaser in that situation was ready, willing and able to pay.
[37] The fact that Mr Crighton did not own the shares when he agreed to sell them, suggests a need for further enquiry. Before they were transferred from Mr Crighton’s ownership on 19 May 2006 he and through his solicitors conducted
correspondent finalising terms for the transfer of those shares. It is a matter of curiosity then why he purported to sell them when they were not his.
[38] There seems no reason why, a breach of warranty claim could not arise and now be pleaded in connection with Mr Crighton’s agreement to sell shares he did not own, although by the 2006 agreement (clause 6) he warranted he was the owner of those shares. A claim for breach of warranty could assert loss in a period before the
2007 agreement in connection with share dividends that might have been payable, or because Mr Taylor was not, as it was agreed he would be, appointed a director and that losses flowed because he was barred from decision making processes.
[39] In short although the 2007 agreement may impliedly or by operation have superseded the 2006 agreement, losses may flow nonetheless under the 2006 agreement.
[40] Strikes out applications are, in general terms about pleadings whilst summary judgment applications involve an assessment of evidence. In this case the defendant’s summary judgment evidence assumes the responsibility of showing the case against them cannot succeed. In my judgment, it is clear from the evidence provided in support of the summary judgment application that the Court will have to assume too much to safely conclude that none of the plaintiff’s causes of action can succeed. Also, as earlier noted, significance may well attach to the fact of on whose behalf the relevant documents were drafted. If it was on behalf of the defendants then the doctrine of contra proferentem will apply. If the documents were prepared on the instruction of Mr Taylor then a different approach is needed.
[41] Finally the submission advanced on behalf of Mr Crighton referred to his age, now 91. It was submitted he was in poor health and that there would be a significant serious risk to his health and life if required to give evidence in the proceeding. However, that submission was not supported by evidence, even from his son Euan. The Court is not prepared to assume there is evidence of risk or disability because of Mr Crighton’s present age. As commented to counsel in the course of this hearing, a Judge sitting in the United States Supreme Court is presently aged in his early 90s.
Result
[42] The application for strike out/summary judgment is dismissed.
[43] Costs are awarded to the plaintiff on a category 2B basis together with disbursements approved by the Registrar. Those shall include the reasonable travel costs of counsel.
Associate Judge Christiansen
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