Jordan v Whitney Mews Ltd
[2013] NZHC 1777
•15 July 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-3244 [2013] NZHC 1777
BETWEEN MELISSA KAY JORDAN and JAMES CAMERON WALLACE SCOTT
First Plaintiffs
ALDEN BLEWDEN Second Plaintiff
DEIDRE LEANNE BUTLER Third Plaintiff
MICHAEL BRENT HENDERSON and MARGARET LORRAINE HENDERSON Fourth Plaintiffs
ANDWHITNEY MEWS LTD Defendant
Hearing: 11 July 2013
Counsel: PJ Davey for Plaintiffs
DJ Chisholm QC for Defendant
Judgment: 15 July 2013
JUDGMENT OF BREWER J
This judgment was delivered by me on 15 July 2013 at 4:45 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors: Harmans Lawyers (Christchurch) for Plaintiffs
Sargent Lawyers (Auckland) for Defendant
JORDAN & SCOTT and ORS v WHITNEY MEWS LTD [2013] NZHC 1777 [15 July 2013]
Introduction
[1] The first plaintiffs and the third plaintiff (the applicants) apply for interlocutory orders of injunction. They seek to restrain the defendant from selling to others, or dealing adversely with, dwelling units which they contend the defendant is obliged to sell to them.
Background
[2] The statement of claim was filed on 24 June 2013. There are four plaintiffs. All contracted with the defendant to purchase units to be constructed at 167 Whitney Street, Blockhouse Bay, Auckland. The purchase prices ranged from $465,000 to
$490,000. The agreements for sale and purchase, identical in this respect, were conditional on the defendant achieving the deposit of the unit title plan and the certificates of title by 22 December 2012. The defendant could, at its sole discretion, extend the time to complete this condition for a period not exceeding six months.1
The condition is expressed to be for the sole benefit of the defendant.2
[3] In order to fulfil this condition the defendant had to gain the necessary consents to construct the units, implement the consents and carry out the legal work required to obtain the certificates of title for the units.3
[4] Clause 20.1 required the defendant to proceed with and complete the construction of the units with all due diligence, application and speed (subject to delays beyond the control of the defendant and the requirements of the Auckland Council).
[5] In June 2012, the defendant exercised its right under clause 18.1 to extend the time to complete the condition by three months. The deadline went from
22 December 2012 to 31 March 2013.
[6] The defendant did not achieve the deposit of the unit title plan and obtain certificates of title for the units by the extended deadline. On 16 April 2013, the
1 Clause 18.1.
2 Clause 18.2.
3 Clause 19.2.
defendant terminated the plaintiffs’ agreements. It put the units back on the market for $635,000 each. It has now contracted to sell, conditionally or unconditionally, all of the plaintiffs’ units.
[7] The plaintiffs claim that the defendant breached its agreements with them by failing to use the necessary diligence to achieve completion by the 31 March 2013 deadline. Alternatively, the plaintiffs claim that through various representations the defendant is estopped from relying upon clause 18 or has otherwise waived the benefit of that provision.
[8] The main remedy sought is specific performance.
Interlocutory injunction
[9] The applicants seek the following orders:4
(a) Granting an injunction restraining the defendant and any of its employees, officers or agents from taking any steps to transfer, charge or otherwise enter into any further transaction that affects the estate or interest of unit 23 at “Whitney Mews”, 167 Whitney Street, Blockhouse Bay, Auckland, more particularly described in the sale and purchase agreement between the first plaintiffs and the defendant dated 13 December 2011 until further order of the Court;
(b) Granting an injunction restraining the defendant and any of its employees, officers or agents from taking any steps to transfer, charge or otherwise enter into any further transaction that affects the estate or interest of unit 25 at “Whitney Mews”, 167 Whitney Street, Blockhouse Bay, Auckland, more particularly described in the sale and purchase agreement between the third plaintiff and the defendant dated 16 November 2011 until further order of the Court.
The law
[10] The law relating to granting an interlocutory injunction is well settled. Its purpose is to protect plaintiffs against injury by violation of their rights for which they could not be adequately compensated in damages recoverable in the action if the case were resolved in their favour at the trial. A plaintiff’s need for such protection must be weighed against a defendant’s need to be protected against injury
resulting from being prevented from exercising legal rights for which the defendant
4 Due to the evolving factual situation regarding the sale of their units by the defendant, the orders now sought are slightly amended from those in the Notice of Application.
could not be adequately compensated under the plaintiff’s undertaking in damages if the case were resolved in the defendant’s favour at the trial. The Court must weigh one need against another and determine where the balance of convenience lies.5
[11] A two-stage approach is required. I must decide whether there is a serious question to be tried in the proceeding and, if there is, where the balance of convenience lies. Within the latter examination will be a focus on the adequacy of damages as a remedy available to the applicants.
Serious question to be tried
[12] The first cause of action is breach of contract. The plaintiffs will seek to prove a matrix of facts to found their contention that the defendant could, with the diligence required of it, have fulfilled its obligations by 31 March 2013. The defendant will argue that factors beyond its control prevented it from doing so:6
The reasons for the time taken to complete the development and issue of titles for stage 2 are summarised in paragraphs 21-27 of Mr Knight’s affidavit and paragraphs 8-26 and Exhibit C (drawdown bundle pg 151) of Mr Matthews’ affidavit. They include:
(a) Bad weather.
(b) Contractors’ labour shortages.
(c) Dispute between contractor and sub-contractor.
(d) Faults in previous work undertaken by the previous developer and the original developer’s “as built” drawings requiring additional work.
(e) Geotechnical issues.
[13] I cannot, on the material in the affidavits, come to a firm view on the strength
of the plaintiffs’ argument. However, I note that titles for the units issued on 9 July
2013 – some three months and one week after the 31 March 2013 deadline. The affidavits filed on behalf of the defendant do not suggest that the construction and legal completion processes met an immovable obstacle. The inference to be drawn
from them is that overall progress was slower than needed to meet the deadline.
5 American Cyanamid Co v Ethicon Ltd [1975] AC 396, per Lord Diplock.
6 Defendant’s submissions in opposition to the first and third plaintiffs’ application for injunction
dated 11 July 2013, at para 2.4.
[14] The plaintiffs instructed a consulting engineer, Mr Luxford, to investigate the construction process. It is evident from his affidavit that he is experienced and expert in this field. His opinion is that there were significant and unwarranted delays. This is not accepted by (in particular) the defendant’s project manager, Mr Matthews, and it is clear that there will be significant factual issues to be resolved.
[15] However, from a legal point of view, it will not be sufficient for the defendant to point to lackadaisical construction and approvals progress. There was a deadline to be met. The defendant’s affidavits do not point to an appreciation that the deadline had to be met, if reasonably possible. There is no evidence of, for example, concurrent activity designed to speed up the process of obtaining the titles. There is no evidence of active management of the construction and legal processes aimed at accelerating a lagging schedule. There is no evidence of additional resources being committed to the project, or even being considered for committal.
[16] Finally, I feel entitled to give some weight to the fact that the defendant is seeking to profit from its failure to meet the deadline. It had an obvious motive not to take a firm grip of the project once it became clear that it would profit by not doing so.
[17] In these circumstances, I find that there is a serious question to be tried on the breach of contract cause of action.
[18] I am not, however, satisfied that there is a serious question to be tried on the alternative cause of action of estoppel/waiver.
[19] The plaintiffs rely on communications pleaded in the statement of claim:7
15.By email dated 30 January 2013 the defendant’s agent, Alastair Matthews advised the plaintiffs’ agent, Penne Small of Propellor Property Investments Limited that the Units were currently undergoing defects rectification and that it was anticipated that certificates of titles would be obtained by mid to late March 2013.
16.On or about 22 February 2012 Mr Matthews as agent for the defendant verbally advised Ms Small that the expected completion date was now the end of April 2013 and that he would contact her approximately one month before settlement of the Units was due.
17.By email dated 15 March 2013 Mr Matthews as agent for the defendant advised the third plaintiff that she would be able to access Unit 25 upon completion of the units due in early April.
18.On or about 4 April 2013 Mr Matthews as agent for the defendant verbally advised Ms Small that settlement was approximately four to six weeks away.
[20] On the evidence in the affidavits, it would be difficult to argue that Mr Matthews was the agent for the defendant, or had ostensible authority to make changes to the contractual obligations of the defendant. The affidavits of Mr Matthews and Mr Knight (a director of the defendant) make it clear that he neither had authority to alter contracts nor purported to do so.
[21] There is also an issue as to whether Propellor Property Investments was in an agency relationship with the plaintiffs. The evidence is that this company was in fact the defendant’s selling agent.
[22] Further, it is hard to see that the communications by Mr Matthews could amount to a waiver of particular contractual conditions. There is no unequivocal representation that legal rights would not be relied on.8
[23] Finally, the affidavits of the applicants do not record actions in reliance upon Mr Matthews’ comments (assuming them to be sufficiently specific) that would assist with the estoppel allegation.
Balance of convenience
[24] The defendant’s argument is that damages is a proper remedy for the applicants if they were to succeed. The defendant has offered to the applicants the choice of either paying the higher price for their units or permitting them to be sold for the higher price. In either case, the difference between the contracted price and
the higher sale price would be placed in a trust account pending resolution of the substantive proceeding.
[25] Mr Chisholm QC, counsel for the defendant, has undertaken on behalf of his client that this offer can be relied upon by the Court in considering the balance of convenience.
[26] Only the second of these options, however, is now available to the first plaintiffs. There is an unconditional sale agreement for their unit entered into between the defendant and a third party.
[27] The defendant submits that if I were to grant the interim injunction then it would be open to suit by the purchaser of the first plaintiffs’ unit. Further, it is now paying interest at 19% on the sum of the sale prices of both units and this would continue until the case is resolved. The units themselves would require upkeep over the period of the proceeding.
[28] The applicants, on the other hand, say that if they succeed in their claim then they are entitled to specific performance. Contracts for the sale and purchase of land are not treated in the same way as ordinary commercial contracts. There is an established line of cases to the effect that land is unique and damages not usually a
proper remedy for being deprived of it.9
[29] The defendant points to authority that land bought for commercial purposes does not necessarily fall within this doctrine.10 The defendant argues that the applicants purchased the units as investments. They were not purchased as family
homes.
9 See, for example, Loan Investment Corporation of Australasia v Bonner [1970] NZLR 724 (PC)
at 735.
10 Stewart v Kaipara Consultants [2000] 3 NZLR 55 (CA); Welsh v Gatchell [2009] 1 NZLR 241 – although in the latter case, Miller J at [80] gave as “the established position in New Zealand” that specific performance is the normal remedy.
[30] The applicants’ affidavits address this point. Ms Jordan, one of the first plaintiffs, deposes:11
In the short-term our intention has been to purchase this unit as an investment. However, I am the major breadwinner in our family and my role may be coming to an end due to legislative changes. We are considering moving to Auckland for employment opportunities for myself and for tertiary education opportunities for my eldest child, in which case we want to be able to use the unit as our long-term family home.
[31] Ms Jordan elaborates on this in her reply affidavit of 9 July 2013, emphasising that the contract was entered into against an identified prospect that the unit might become the first plaintiffs’ family home.
[32] The third plaintiff, Ms Butler, deposes:12
I have been looking forward to proceeding with the purchase of Unit 25 after such a long wait for it to be completed. Although the unit will be initially rented, this is a strategic purchase for me. The location of the unit in Blockhouse Bay is right by close friends and so it has appeal for potential in the future to live near them. I also have twin teenage daughters who will be going to university in a few years. The unit provides a potential home for them which will be close to their “aunty” (my close friend) if they choose to study in Auckland. It is also an investment in the Auckland property market in which I purposely invested.
[33] Ms Butler also filed a reply affidavit sworn on 9 July 2013. In it she sets out her personal situation and emphasises the part that having a potential home in this location in Auckland played in her decision to contract to purchase her unit.
[34] The defendant argues further that the plaintiffs delayed in bringing their proceeding and the applicants delayed in bringing their application. Some 10 weeks elapsed from the purported cancellation of the agreements to the issuing of proceedings. It was in that time that agreements for sale and purchase were entered
into between the defendant and third parties.
11 Affidavit of Melissa Kaye Jordan in support of application for interim injunction, sworn 28 June
2013, at para 10.
12 Affidavit of Deidre Leanne Butler in support of application for interlocutory injunction, sworn
26 June 2013, at para 24.
Analysis
[35] The applicants sue for specific performance. That is an equitable remedy usually available where a purchaser seeks to retain the benefit of an interest in land acquired through an agreement for sale and purchase.
[36] Damages is not usually considered an appropriate remedy for being deprived of an interest in land. In a situation where a purchaser has contracted to buy land only as an investment then the Court might, in appropriate circumstances, exercise its discretion not to order specific performance but instead grant an alternative remedy. But in this case the evidence is that each applicant had personal, if contingent, reasons for acquiring the interests in land for which they contracted.
[37] If I decline the application then the applicants, for all practical purposes, lose the ability to seek specific performance. The defendant will settle its agreement with the purchaser of the first plaintiffs’ unit and will sell the third plaintiff’s unit.13
[38] I do not accept the defendant’s argument that the delay in issuing proceedings
and bringing this application should weigh in the balance against the applicants:
(a) The defendant must have known that cancelling the agreements and re-listing the units put them at risk of litigation.
(b) The plaintiffs’ lawyers advised the defendant promptly that the
cancellations were not accepted.
(c) So far as the first plaintiffs’ unit is concerned, the defendant had the option of cancelling the agreement with the third party purchaser after the proceeding had been commenced. Instead, it extended twice the time that the third party purchaser had to confirm finance. Even after this application had been filed it did not cancel the contract on 3 July
2013, the expiry of the second extension.
13 It has not said otherwise and it appears there is a ready market.
(d)So far as the third plaintiff’s unit is concerned, the agreement for sale and purchase is conditional and the defendant can bring it to an end if it chooses.
(e) The plaintiffs could not issue proceedings before they investigated the factual background. This required obtaining expert assistance. The proceeding was commenced 10 days after the defendant commenced advertising the units and this application was made eight days later. I do not find this to be unreasonable in the circumstances.
[39] On the other hand, the defendant’s interest is certainly able to be met by damages. The defendant holds the applicants’ deposits ($49,000 and $46,800 respectively) and their affidavits establish that they would have the ability to pay damages to the extent revealed by the pleadings and the affidavits.
[40] I find that the balance of convenience favours the applicants.
Decision
[41] I grant the application. I make orders by way of interlocutory injunction:
(a) Restraining the defendant and any of its employees, officers or agents from taking any steps to transfer, charge or otherwise enter into any further transaction that affects the estate or interest of unit 23 at “Whitney Mews”, 167 Whitney Street, Blockhouse Bay, Auckland, more particularly described in the sale and purchase agreement between the first plaintiffs and the defendant dated 13 December 2011 until further order of the Court;
(b) Restraining the defendant and any of its employees, officers or agents from taking any steps to transfer, charge or otherwise enter into any further transaction that affects the estate or interest of unit 25 at “Whitney Mews”, 167 Whitney Street, Blockhouse Bay, Auckland, more particularly described in the sale and purchase agreement between the third plaintiff and the defendant dated 16 November 2011 until further order of the Court.
[42] The applicants are entitled to costs on a 2B basis. They may apply to the
Registrar to fix them.
Brewer J
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