Johnstone v R B Road 391 Ltd
[2011] NZCA 393
•17 August 2011
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA493/2010 CA430/2011 [2011] NZCA 393 |
| BETWEEN MALCOLM ALEXANDER JOHNSTONE, HEATHER PATRICIA JOHNSTONE AND HARTS GAULD TRUSTEES LIMITED (AS TRUSTEES OF THE JOHNSTONE INVESTMENT TRUST) AND JMAT HOLDINGS LIMITED |
| AND R B ROAD 391 LIMITED |
| AND HESKETH HENRY |
| Hearing: 27 July 2011 |
| Court: O'Regan P, Heath and Lang JJ |
| Counsel: G J Kohler for Appellants |
| Judgment: 17 August 2011 at 11.30 am |
JUDGMENT OF THE COURT
AR B Road’s application for leave to adduce additional evidence is granted.
BThe appeals against the liability and quantum judgments of 6 July 2010 and 28 June 2011 are allowed. The orders made by the High Court on 28 June 2011 are set aside.
C In lieu of the orders made in the High Court:
(a)The application for summary judgment on the deposit made by the Johnstone interests in CIV-2009-404-2126 is dismissed.
(b)R B Road’s application for summary judgment for liability and damages in CIV-2009-404-7048 for wrongful cancellation of the agreement is dismissed.
(c)Both CIV-2009-404-2126 and CIV-2009-404-7048 are remitted to the High Court for a case management conference before an Associate Judge, on a date to be fixed by the Registrar, so that timetabling directions may be made for trial.
DCosts are awarded in favour of the appellants against the first respondent, in this Court, on a Band A basis for a standard appeal, plus usual disbursements.
ECosts in the High Court are reserved, for determination after trial.
____________________________________________________________________
REASONS OF THE COURT
(Given by Heath J)
Introduction
On or about 22 April 2008, the trustees of the Johnstone Investment Trust and JMAT Holdings Ltd (the Johnstone interests) entered into an agreement to purchase a property, known as Lot 4, 391 Rosebank Road, Avondale, (Lot 4) from R B Road 391 Ltd (R B Road). The agreement contained a condition subsequent (cl 15.1) that required vendor and purchaser “both acting reasonably” to be satisfied with terms and conditions to attach to a subdivision consent to be granted by the Auckland City Council (the Council), in respect of a proposed subdivision. In determining whether one or other of the parties was “satisfied”, the clause required “the conditions of consent that the [Council] is likely or could reasonably have been anticipated to impose in giving subdivision consent”, as at the date of the agreement, to be taken into account.[1] On 25 March 2009, the Johnstone interests purported to avoid the contract on the grounds that they were not “satisfied” in terms of cl 15.1.
[1] Clause 15.1 is set out at [16] below.
Having purported to cancel the agreement, the Johnstone interests issued summary judgment proceedings in a District Court to recover the deposit paid to R B Road’s solicitors, Hesketh Henry. Not long afterwards, R B Road issued its own summary judgment proceedings in the High Court, in which it sought specific performance of the agreement, or damages to be quantified before trial. Sensibly, the District Court proceeding was transferred to be heard together with the High Court application.
The cross-applications were determined in two judgments delivered in the High Court at Auckland, on 6 July 2010 (liability) and 28 June 2011 (quantum) respectively.[2] As a result of the two decisions, judgment was entered in favour of R B Road against the Johnstone interests in the sum of $525,365.51, plus interest, costs and disbursements.[3] The Johnstone interests appeal against both judgments.
Application to adduce new evidence on appeal
[2]R B Road 391 Ltd v Johnstone HC Auckland CIV-2009-404-7048, 6 July 2010 (“Liability judgment”); R B Road Ltd v Johnstone HC Auckland CIV-2009-404-7048, 28 June 2011 (“Quantum judgment”).
[3] See [28] below.
R B Road sought leave to adduce new evidence on appeal in the form of an affidavit from Mr Yarnton, a property valuer and adviser. The purpose of the affidavit is to verify on oath a valuation report tendered by another deponent as an exhibit to an affidavit in the summary judgment proceedings.
While the Johnstone interests opposed the application, we see no prejudice to them. Leave to adduce the additional evidence is granted.
Procedural background
A messy procedural background to the appeals requires some explanation.
The cross applications for summary judgment came before Associate Judge Christiansen on 5 July 2010. The Judge signed a reserved judgment granting R B Road’s application for specific performance at 2.15pm on 6 July 2010, for delivery through the Registrar at 4.00pm. However, at 2.18pm, counsel for R B Road provided a memorandum indicating that the company had entered into a contract for the sale of the land in issue and no longer sought summary judgment for specific performance. Instead, its claim was refocused on damages. Counsel’s memorandum was not referred to counsel for the Johnstone interests for comment.
Notwithstanding receipt of that memorandum, Judge Christiansen delivered his intended judgment, with an addendum. The Judge recorded that R B Road’s position was that it had “accepted a wrongful repudiation by [the Johnstone interests and intended to] amend its statement of claim to seek damages in place of specific performance”.
Although the substantive part of the judgment records an order for specific performance, the Associate Judge concluded his addendum in these terms:
[57] It follows in the outcome of my judgment:
(a)The defendants have not validly avoided the agreement on the basis claimed by them;
(b)The order for specific performance referred to in para [53] of my judgment is cancelled;
(c) The Court awaits details of the plaintiff’s amended claim.
Judgment was not entered for liability. The Johnstone interests’ application for summary judgment was not formally dismissed. Nor was R B Road’s application for summary judgment adjourned, for further consideration.
On 30 July 2010 the Johnstone interests appealed against Judge Christiansen’s decision, claiming that the Judge had erred in his interpretation of cl 15.1. The specific terms on which the judgment was appealed were set out in the Notice of Appeal:
...
1. What are the specific grounds of your appeal?
The Learned Associate Judge erred in finding that the First Respondent was entitled to summary judgment in relation to its claim against us, both in respect of the initial order for specific performance and in respect of the subsequent finding to the effect that the Appellants had not validly avoided the agreement. In particular the Learned Associate Judge erred in failing to find, firstly, that the First Respondent’s application for summary judgment should be dismissed and, secondly, that the Appellants were entitled to summary judgment against the Second Defendant in relation to our claim for return of the deposit paid.
...
A further hearing took place before Judge Christiansen on 30 August 2010, at which various jurisdictional issues were raised by Mr Kohler, on behalf of the Johnstone interests. In the course of a judgment delivered on 31 August 2010, Judge Christiansen ruled against those jurisdictional challenges.[4] He held that the High Court had not become functus officio on the summary judgment claim and that the Court could entertain a second application for summary judgment, either as an amended application or a fresh application. Timetabling orders were made to enable the quantum aspect of the summary judgment application to be determined on 6 December 2010. No application for leave to amend either the summary application or the claim was made and no leave was granted.
[4] R B Road 391 Ltd v Johnstone HC Auckland CIV-2009-404-7048, 31 August 2010.
Quantum was determined by Associate Judge Abbott in a judgment delivered on 28 June 2011. As Judge Christiansen had previously declined to stay the proceeding pending appeal of his first judgment, both parties agreed that the quantum issue would be resolved first, so that appeal points in relation to both liability and quantum could be pursued together, if necessary.
Relevant facts
On 22 April 2008, the Johnstone interests agreed to buy Lot 4. The area acquired was subject to final measurement and was part of an intended subdivision. The purchase price was $1,200,000. The Johnstone interests paid a deposit of $120,000 into a trust account of Hesketh Henry, the solicitors for R B Road. Hesketh Henry was joined as a party to the initial summary judgment application in the District Court, as a stakeholder in respect of the deposit claimed. The firm abides the decision of the Court.
The agreement contemplated the completion of a subdivision. Possession of Lot 4 was to be given and taken seven days after a new certificate of title for that lot issued. The general nature of the proposed development was fluid. Clauses 16.1–16.4 of the agreement provided:
16.1The subdivision by the Vendor of its land at 391 Rosebank Road is an evolving concept which the Vendor proposes to develop in stages and over time. The concept of the 391 Rosebank Road project and its development is subject to change at any time for whatever reason and without notice to the Purchaser.
16.2The Purchaser acknowledges that the Vendor reserves the right at any time without limitation and at its sole discretion to not commence, to start, to stop, to restart and to change any aspect of the development of the 391 Rosebank Road subdivision or any part thereof.
16.3The Purchaser disclaims any liability on the part of the Vendor to the Purchaser in respect of anything, and of the consequences of anything, done or omitted to be done, by the Purchaser in reliance on the development of the 391 Rosebank Road subdivision or any part of it.
16.4The Purchaser is not entitled to avoid this agreement or any of its provisions or claim any compensation, damages, right of set off or any other right or remedy under this agreement or otherwise at law or in equity in respect of any of the matters referred to in clauses 16.2 and 16.3.
Because, as at 22 April 2008, resource consent had not been given to the subdivision, it was necessary for R B Road and the Johnstone interests to establish a mechanism to deal with any conditions that might be imposed. Such conditions had the potential to change the nature or extent of the developer’s expectations, in relation to the work to be undertaken on the site. At worst, the Council could impose onerous conditions which could have increased the cost of subdivision significantly or made the development too risky to undertake.
The parties’ agreement on this issue is contained in cl 15.1 of the agreement:
This agreement is conditional upon the Vendor and Purchaser, both acting reasonably and (having taking [sic] into account, as at the date of this agreement, the conditions of consent that the Auckland City Council is likely or could reasonably have been anticipated to impose in giving subdivision consent) being satisfied with the terms and conditions attaching to the subdivision consent issued by the Auckland City Council subdivision referred to in clauses 16 and 17. The condition date for satisfaction of this condition is the date seven (7) days after the date that the Purchaser receives a copy of the subdivision consent.
Clause 15.1 was for the benefit of both parties and gave either an ability to elect not to proceed with the contract. While, from the Johnstone interests’ perspective, concerns were focussed on costs and risks attaching to the development of Lot 4, the conditions might also have impacted more generally on development work to be undertaken on contiguous land by R B Road.
Subsequently, draft subdivisional resource consent conditions were issued by the Council. A copy of those draft conditions was forwarded by R B Road to the Johnstone interests on 25 February 2009. The draft conditions contained two clauses (cl 7.11 and 7.12) that were ultimately confirmed,[5] as well as an additional provision (cl 7.13) dealing with a Consent Notice required by s 221 of the Resource Management Act 1991. The proposed cl 7.13 intended that the Consent Notice to be registered against Lot 4 should record conditions related to geotechnical and contamination concerns. The “contamination” part of draft cl 7.13 (deleted from the final version) stated:
Contamination
The consent holder shall prior to any soil excavation or construction at the site undertake a site contamination investigation in accordance with the Contaminated Land Management Guideline No. 5: Site Investigation and Analysis of Soils, Ministry for Environment 2004 and provide a site contamination assessment report with the testing results to the satisfaction of Council’s Resource Consent Monitoring Leader.
[5] In all material respects, in the terms set out at [20] below.
On receipt of the draft, the Johnstone interests requested R B Road to provide all reports and other documents to which reference had been made in the draft conditions. For present purposes the documents provided included a report prepared by Tonkin & Taylor Ltd (civil engineers) to R B Road dated November 2008 and an internal memorandum (apparently) prepared by Mr Teagle, an engineer working for the Council, dated 18 February 2009.
The Council made a decision on the final terms of the resource consent on 11 March 2009. A copy of the resource consent was forwarded to R B Road’s agent on 12 March 2009. Save for the deletion of the draft cl 7.13, the “contamination” conditions reflected those previously provided. Relevantly, cl 7.11 and 7.12 provided:
Contamination
7.11The consent holder shall ensure all materials excavated from the site are to be disposed of in a licensed facility and provide evidence of disposal to the council following completion of the excavation.
7.12If evidence of contamination is discovered during removal of paving and/or earthworks the consent holder shall immediately cease the works and notify the Resource Consent Monitoring Leader, Regulatory Services, and provide a site contamination report and a remediation action plan to the satisfaction of the Resource Consents Monitoring Leader, Regulatory Services, Auckland City Council.
On 18 March 2009, the Johnstone interests sought an extension of the seven day period to which cl 15.1 referred. The seven days ran from the time at which a copy of the subdivision consent was provided. Agreement was reached to extend that time to 25 March 2009.
On 20 March 2009, the solicitors for the Johnstone interests wrote to those representing R B Road in relation to the proposed resource consent conditions. They advised that while the Johnstone interests were “aware of some challenging geotechnical conditions on the site”, they were not “until the release of information by [R B Road] aware of any contamination issues ...”. The solicitors stated that the Johnstone interests “would not be acting unreasonably in insisting upon Lot 4 being delivered to the purchaser in an uncontaminated state”. The solicitors concluded by conveying their instructions that cl 15.1 could not be satisfied “unless and until the vendor, at its own cost, is able on settlement to deliver up an independently certified uncontaminated site”.
The solicitors for R B Road responded on 24 March 2009:
RB ROAD 391 LIMITED – 391 ROSEBANK ROAD SUBDIVISION – JMAT HOLDINGS LIMITED AND JOHNSTONE INVESTMENT TRUST
Thank you for your email of 20 March 2009.
Under clause 15.1, the agreement is conditional on your client, acting reasonably and having taken into account, as at the date of the agreement, the conditions of consent the Auckland City Council is likely or could reasonably have been anticipated to impose being satisfied with the terms and conditions attaching to the subdivision consent.
It was well known at the date of the agreement that all properties in the Auckland district which have been previously used for horticultural purposes were subject to the same condition relating to disposal of any contaminated material which may be found on site. Your client, in particular, would have been well aware of this as we understand Mr Johnstone was involved in the development of the adjacent property and owns other properties in the area.
Accordingly, our client considers that your client is not entitled to withhold consent to that condition in the subdivision consent as it would have been anticipated that the Auckland City Council is likely or could reasonably have been anticipated to impose that condition.
Please therefore confirm as soon as possible that the condition contained in clause 15.1 is satisfied.
On 25 March 2009, the solicitors for the Johnstone interests purported to terminate the agreement. In a letter to R B Road’s solicitors they said:
We refer to your e-mail of 24 March 2009 upon which we have taken our clients instructions.
The Council conditions relating to remediation refer not in our client’s view, to contamination through horticultural uses (of which our clients advise they have no knowledge anyway), but through landfill operations which have produced a different type of contamination which they are not prepared to accept.
Accordingly, pursuant to clause 15.1 of the Agreement, our client is not satisfied with the conditions of consent and therefore the agreement is at an end.
Please arrange for the deposit to be refunded.
The “liability” judgment
Judge Christiansen rejected the Johnstone interests’ claim that they were entitled to rely on cl 15.1 to avoid the contract. The Judge accepted R B Road’s submission that, if the conditions were of a type that the Johnstone interests could have expected, it mattered not whether they were onerous. In other words, the Johnstone interests could not be excused from contractual obligations purely on the grounds that they considered that the conditions imposed were too onerous. The Judge took the view that an objective assessment of the nature of the condition was required, bearing in mind that if there were any “significant issues concerning fact” the Court ought not to grant summary judgment.
The critical issue was whether the Associate Judge could enter judgment given Mr Johnstone’s evidence that he had never encountered “contamination” conditions of this type, notwithstanding his involvement in similar developments in the Rosebank Road area.[6]
[6] See [36]–[38] below.
On that issue, Judge Christiansen said:
[48] Clauses 7.11 and 7.12 do not refer to the existence of contamination. Nor do they impose any remedial obligations. The defendants had no reason to believe that [the Council] would refuse permission to allow topsoil to be removed to the foreshore as indeed the defendants had been allowed do with their adjacent development property. Also the acceptable evidence is that a relatively small portion only of the excavated material from Lot 4 would be used for foreshore enhancement. The rest of the excavated material would have to be carted for disposal at a facility. Tonkin & Taylor’s report identified that this might have to occur at a managed landfill facility: i.e. one able to receive contaminated soils; a facility where it would be more costly to dispose of landfill. But, that indication from Tonkin & Taylor was not adopted by the [Council’s] resource consent conditions. Clause 7.11 refers to disposal of excavated material to a ‘licensed facility’. Such facilities are authorised to receive clean materials. It must always have been in the defendant’s contemplation that the excess excavated materials from Lot 4 would have to be taken for disposal at a licensed facility. Clause 7.12 deals with the discovery of evidence of contamination in the course of earthworks. But, and I accept Mr Sherlock’s submission [for R B Road] on the point that clause 7.12 provides no more or less than is adopted by the backup position provided by the Resource Management Act 1991 to outline a process to deal with an unanticipated event.
...
[50] ... The Court should for present purposes accept Mr Johnstone’s statements that he has not encountered the like previously. But that does not of itself create a dispute of fact for trial determination. Rather, I prefer the submission of Mr Sherlock that it is still incumbent upon the defendants to show those conditions provided undue or onerous obligations upon them because if in the actual circumstances of the case the conditions added no burden then it is not open to the defendants to say that they are reasonably dissatisfied with the conditions.
The “quantum” judgment
In his judgment on damages, Judge Abbott concluded that it was appropriate to determine quantum of damages in accordance with cl 9.4 of the agreement for sale and purchase. He entered judgment for the amounts claimed as set out below,[7] plus interest, costs and disbursements:
The damages sought are all prima facie available under clause 9.4. They comprise:
a)$408,000, being the difference between the purchase price under the agreement with the defendants and the purchase price under the re-sale agreement, less $60,000 paid by way of deposit;
b)$151,478.07, being interest payable for late settlement at the contractual rate of 15 per cent per annum from the date of the defendant’s failure to comply with the plaintiff’s settlement notice up to the date of settlement under the re-sale agreement; and
c)$16,753, being marketing costs, concept design costs and legal fees incurred in relation to the re-sale agreement, or claimed pursuant to cl 4.9(3)(b) of the agreement; and
d)$9134.44, being the cost of rates and maintenance expenses in respect of the property from date of expiry of the settlement notice to date of settlement of the re-sale agreement, pursuant to cl 9.4(3)(c) of the agreement.
Analysis
[7] Quantum judgment at [39].
To establish an entitlement to summary judgment for liability, it was necessary for R B Road to satisfy the Court that the Johnstone interests had no defence to its claim.[8] No onus lies on a defendant to show that a fairly arguable defence exists. But where the plaintiff's evidence on its face entitles the plaintiff to judgment, the defendant will need to raise an evidential foundation for a defence.
[8] High Court Rules, r 12.2(1).
In deciding whether to enter summary judgment, a balanced approach is required. While courts must endeavour to ensure that the purpose of the “summary” procedure is not thwarted by taking too cautious an approach to affidavits that might be inherently unreliable, proper care should be taken to ensure that a defendant’s right to a trial on disputed facts is not undermined.[9]
[9]See Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3–4 per Somers J and 8 per Hillyer J; Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA) at 85–86 and Lindale Financial Services Ltd v Colonial Mutual Life Assurance Society Ltd (1998) 12 PRNZ 320 (CA) at 324.
Against that background we consider the evidence adduced in support of and in opposition to the summary judgment on liability. The issue turns on conflicts between the evidence of Mr Brown, a person responsible for managing the affairs of the Rosebank Trust (of which R B Road is trustee) and Mr Malcolm Johnstone, a qualified civil engineer and representative of the Johnstone interests. The issues we discuss are limited to those going directly to the ability of the Johnstone interests to cancel the agreement for sale and purchase, on the basis that they were not “satisfied” of the resource consent conditions in respect of contamination issues.
As is clear from the correspondence leading up to cancellation,[10] the focus was on the contamination provisions of the resource consent, cls 7.11 and 7.12. Mr Brown’s evidence suggests that these are conditions that ought reasonably to have been anticipated, meaning that the Johnstone interests were not acting reasonably in expressing dissatisfaction with those requirements. Judge Christiansen accepted that view.[11]
[10] Summarised at [21]–[24] above.
[11] Liability judgment at [50].
Mr Brown gave extensive reasons for asserting that the conditions could have been anticipated as at 22 April 2008. In particular:
(a)Any Land Information Memorandum (LIM) obtained by purchasers in respect of 391 Rosebank Road would have shown that the site was identified on the Auckland City Council’s Register of Contaminated Sites and that a “contamination risk assessment report” would have been required with any resource consent or building consent application.
(b)The land to which Mr Johnstone referred as having been the subject of earlier development by the Johnstone interests was also on the Register of Contaminated Sites. Mr Brown referred to correspondence between the Council and JMAT Holdings Ltd on 16 November 2004 and 8 February 2005, concerning the possibility of residual contaminants in soils by virtue of past horticultural land use.
(c)The requirement expressed in cl 7.12 of the resource consent could be expected as part of any consent pertaining to the subdivision of land entered on the Register of Contaminated Sites.
In his affidavit, Mr Brown deposed that the inclusion of cl 7.11 was “in no way surprising or unusually onerous” because:
i.The land in question in this case falls within Part 5 B – coastal property – of the currently operative City of Auckland District Plan.
ii.In relation to land falling within Part 5 B, Part 5 B.7.3 (“Earthworks”) provides that earthworks are only a permitted activity where they do not exceed 5m³ in volume in any one site or in any one earthworks operation, though “these figures may be exceeded where the earthworks are part of .... a sub-division which has been granted a resource consent”. (Annexed hereto and marked “K” is a copy of part 5 B7.3 as just referred to).
iii.The fact of a landfill site being “licenced” simply means that that site is authorised to accept landfill and does not by itself mean that the site has authority to accept anything other than “clean” fill. Within the Auckland isthmus there is now little or no lawful ability to dispose of excavated material at a location which is not licenced for that purpose. At the same time, it is true that the third bullet point within paragraph 5.2 of Tonkin & Taylor’s November 2008 report did state that “Fill material and topsoil exceed the ARC default cleanfill guidelines but would be suitable for disposal at Greenmount as managed fill ...”, that sentence being in contrast to the previous sentence which noted that “Soil sampling results indicate that natural soils would be suitable for disposal as cleanfill”. However, the suggestion by Tonkin & Taylor that fill previously placed on the subject property might need to be disposed of “at Greenmount as managed fill” was not carried through to the actual Resource Consent condition 7.11 – a point which could readily be observed by the purchasers. In addition, I believe that Mr Johnstone, with his background in earthmoving, would readily have appreciated the distinction between disposal at a licenced landfill site and disposed “as managed fill”.
Annexed and marked “L” are copies of the following items which provide guidance as to the distinction between a licenced landfill site and a managed fill site:
A.Entry from the Auckland Regional Council website headed “Pollution Management – Contaminated Land – Cleanfill, Landfill and Managed Fill Sites”;
B.The cover page, contents pages, Chapter 1 (“Introduction”), Chapter 2 (“What is a Cleanfill?”) and the first four pages of Chapter 3 (“Regulatory and Legislative Setting”) of “A Guide to the Management of Cleanfills” published by the Ministry for the Environment in 2002.
Mr Brown deposed that the Tonkin & Taylor report of November 2008 had been overtaken by the Council’s own assessment that there were no health concerns arising from contamination to the site. He referred to the internal memorandum prepared by Mr Teagle, in which reference was made to an opinion to that effect from Mr Naidoo, an environmental health specialist within the Council.
In contrast, Mr Johnstone’s evidence, if accepted at trial, would demonstrate that he had no knowledge of contamination conditions of this type being imposed, even though he had been involved in many other developments in the area of Rosebank Road. He referred in particular to properties in which he had interests situated at 20-40 Copsey Place, 642 Rosebank Road and 699 Rosebank Road. Mr Johnstone avers that no conditions of the type set out in cls 7.11 and 7.12 had been included in a resource consent in respect of such properties.
Mr Johnstone’s evidence is that:
36.[The Johnstone interests] objected to clauses 7.11 and 7.12 of the Plaintiff’s subdivision or Resource Consent on the basis of:
(a)As experienced landowners in the area, we had never had to deal with any matters of contamination before;
(b)I was aware of some earlier publicity surrounding blanket classification by Auckland City who referred to the possibility of horticultural contamination on the Rosebank Peninsula but in my practical experience it had not been a matter that Council had required me to address at any stage;
(c)At no time in the work that was carried out at Copsey Place was I required to test for or deal with any horticultural or other soil contamination issues.
(d)Our specific objections to clauses 7.11 and 7.12 were based on the content of the Tonkin and Taylor report which made reference to nickel contamination at a level that triggered a remedial action pursuant to clause 7.11 and 7.12. More specifically, the Tonkin and Taylor report stated that fill material and topsoil had to be disposed of at Greenmount (a specialist landfill facility that has been licensed to accept hazardous waste), at a cost of $450.00 per truck and trailer unit. This rate for tipping fees is significantly higher than tip fees at a clean-fill facility.
In response to Mr Brown’s affidavit, Mr Johnstone deposed that:
(a)He did not obtain a LIM report for 391 Rosebank Road as the purchase was for “a piece of bare land yet to be subdivided”. Based on his knowledge of the particular piece of land, Mr Johnstone says that he “assumed [he] would be taking possession of a new parcel of un-cleared un-contaminated land engineered with new services and access”.
(b)In relation to Mr Brown’s contention that cls 7.11 and 7.12 were of a type that would be expected, Mr Johnstone stated that:
... In my experience contamination issues are extremely rare and have significant adverse cost consequences for developers which they are anxious to avoid. ...
Mr Johnstone also referred to his intention to use topsoil excavated from Lot 4 to assist with enhancement of the foreshore reserve area. His concern was that the requirement to cart all excavated materials to a licensed landfill site would prevent that process from occurring in the development. However, we accept Mr Sherlock’s submission, for R B Road, that such permission could not have been expected, in the context of a resource consent. In any event, it was not something on which the Johnstone interests relied specifically in purporting to cancel the agreement.[12]
[12] See [24] above.
On liability, the short point is whether Mr Johnstone’s evidence can be dismissed out of hand. While the Associate Judge took a more nuanced approach,[13] it was not open to enter summary judgment if Mr Johnstone’s evidence raised a trial issue.
[13] Liability judgment at [48].
Mr Johnstone’s evidence cannot be rejected on the basis that it is inherently unreliable, even though he has a number of serious questions to answer in cross-examination based on the evidence adduced by R B Road. In particular, given the deletion of the “contamination” provision in draft cl 7.13,[14] it will be incumbent on Mr Johnstone to explain why cancellation was justified when no express reference is made to contamination in cl 7.11 and 7.12 of the conditions. However, for present purposes, in the absence of independent evidence that gainsays that given by Mr Johnstone about the novelty of the conditions, the issues raised by Mr Johnstone are sufficient to deny R B Road summary judgment on liability. We put the point no higher than that.
[14] Set out at [18] above.
It follows, in our view, that Judge Christiansen erred in holding that the arguments based on reasonable cancellation of the contract could not succeed at trial. Contrary to the Associate Judge’s view, it was R B Road’s obligation to exclude the possibility of a fairly arguable defence. It bore the burden of proof in that regard.[15] The summary judgment application did not turn on a pure question of contractual interpretation. Rather, it was one involving mixed questions of fact and interpretation that requires contextual, primary and expert evidence to be considered and weighed before any judgment on whether the contract was properly cancelled can safely be made.
[15] At [50]; set out at [27] above.
On that basis, all questions of liability and quantum remain at large for trial. While the procedural issues raised by Mr Kohler fall away, we offer some comments on them.
As to procedure, it is unfortunate that the Associate Judge did not provide an opportunity for counsel to be heard before releasing his judgment of 6 July 2010 through the Registrar. It is possible that the Judge considered he had no power to delay release of a signed judgment. If so, with respect, he was mistaken. The judgment had not been delivered and, even if it had, there remained an ability to recall an unsealed judgment issued in ignorance of the stance apparent from counsel for R B Road’s memorandum filed at 2.18pm on 6 July 2010. Had the Judge taken the course of hearing from counsel, it is likely that many of the procedural issues could have been avoided through the formal adjournment of the summary judgment application for determination of quantum and the consequential reservation of leave for the application and the Statement of Claim to be amended to particularise adequately the damages claim.
So far as quantum is concerned, the only issue raised before us was one of mitigation. It may assist the parties if we express the view that we see few difficulties in the way of determining damages. Given the likely state of the market, the difference between the price paid by the ultimate purchaser and that for which the Johnstone interests contracted might readily be explained. While that now remains an issue for trial, the Johnstone interests will need to bear in mind that the real trial issue appears to be focussed on liability.
Result
We allow the appeals against the judgments of 6 July 2010 and 28 June 2011. We set aside the orders made on 28 June 2011.
In lieu of those made in the High Court, we make the following orders:
(a)The application for summary judgment on the deposit made by the Johnstone interests in CIV-2009-404-2126 is dismissed.
(b)R B Road’s application for summary judgment for liability and damages in CIV-2009-404-7048 for wrongful cancellation of the agreement is dismissed.
(c)Both CIV-2009-404-2126 and CIV-2009-404-7048 are remitted to the High Court for a case management conference before an Associate Judge, on a date to be fixed by the Registrar, so that timetabling directions may be made for trial.
In this Court, costs are awarded in favour of the Johnstone interests against R B Road on a Band A basis for a standard appeal, plus usual disbursements. In accordance with the practice set out in NZI Bank Ltd v Philpott,[16] the costs of R B Road in the High Court are reserved, for determination after trial.
[16] NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA) at 405–406.
Solicitors:
Dawsons, Auckland for Appellants
Hesketh Henry, Auckland for Respondents
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