JUNIOR FARMS LIMITED Appellant AND ORMISTON PARK ESTATE LIMITED

[2001] NZCA 450

IN THE COURT OF APPEAL OF NEW ZEALAND  CA209/01

BETWEEN      JUNIOR FARMS LIMITED

Appellant

ANDORMISTON PARK ESTATE LIMITED

Respondent

Hearing:  3 December 2001

Coram:Blanchard J Robertson J Gendall J

Appearances:             G M Harrison for Appellant

B O’Callahan for Respondent

Judgment:                 13 December 2001

JUDGMENT OF THE COURT DELIVERED BY BLANCHARD J

[1]                  This is an appeal from a judgment of Master Gambrill delivered at Auckland on 10 August 2001 in which she granted the summary judgment application of the fifth defendant, now respondent in this Court, Ormiston Park Estate Ltd. The plaintiff, Junior Farms Ltd, appeals.

The factual material

[2]                  Junior was the owner of an area of land at Ormiston Road, East Tamaki, Auckland. Part of the land was suitable for industrial purposes. The balance, known as the floodplain area, was subject to the flooding of a stream which passes through the property. Junior was contemplating selling the floodplain area to the local

authority, the Manukau City Council. There was apparently uncertainty as to the exact size of the floodplain area, and hence the rest of the land. The land was in two certificates of title (CT’s 755/164 and 766/11), both limited as to parcels. The boundaries of the two certificates of title did not accord with any division into industrial and floodplain areas.

[3]                  According to Junior’s second amended statement of claim, in September 1994 Junior was advised by its real estate agent that a company known as Accent Management Ltd “on behalf of Foodlands Limited” required 50 acres of industrial land at the rate of $12.50 per square metre “plus stock and farm buildings.” Junior agreed to sell fifty acres of the land to Hampton Securities Ltd, the seventh defendant, as nominee of Accent.

[4]                  In an affidavit, Mr Plumley, the governing director of Junior, put the matter a little differently. He deposed that:

After the zoning of the land changed from Rural to Industrial, I received an approach from representatives of Hampton Securities Ltd (“Hampton Securities”) who wished to purchase both titles from Junior Farms and to on-sell 50 acres of that part of the land fronting Ormiston Road to Farmers Deka Ltd (“Farmers”). At that time, the land was subject to parcels and as Farmers wished to acquire the front portion of both titles a subdivision of the land was necessary.

Farmers Deka Ltd is a subsidiary of Foodlands.

[5]                  It was apparently not the wish of Junior to carry out the work necessary to re- survey the land and to create more appropriate new certificates of title. Two agreements were therefore entered into between Junior and Hampton on 9 November 1994. Under the first of them, Junior agreed to sell the whole of the land in the two existing certificates of title to Hampton for $2,679,000. Under the second, Hampton agreed to sell to Junior 14 hectares “being part of CT 755/164 as per the attached plan edged green” for $100. The attached plan was a diagram drawn on an aerial photograph. It did not include any reference to areas or measurements. The area edged green in fact included some land from CT 766/11 which was intended to be part of the 14 hectares. Nothing turns on that point.

[6]                  In his affidavit, Mr Plumley also deposed that at the time these two agreements were entered into it was not known where “the boundary dividing the front area from the rear” would lie. Consequently, he said, Junior and Hampton “entered into a collateral agreement whereby a formula for compensating Junior for land ultimately acquired by Hampton Securities and then Farmers Deka was set out”. The document to which Mr Plumley was referring is an undated letter on Hampton’s letterhead which reads:

Harold Plumley Jnr. Junior Farms Limited Ormiston Road

Junior Farms Limited (“JFL”) to Hampton Securities Limited (“HSL”)

Further to conversations with Mr Bruce Stenning of Cavendish Real Estate we confirm the following:

1.The final purchase price for the land in the agreement between JFL and HSL (“Agreement”) will be calculated at $12.50 per [square] metre. It is understood that there is approximately 50 acres.

2.Upon the Manukau City Council finalising the area of the floodplain it wishes to purchase, the boundaries and land size of the land subject to the Agreement may be  defined.  The final purchase price for the land can then be calculated in accordance with the formula detailed in paragraph 1 above.

3.The price for the dairy cows will be set as per clauses 15.1 and

15.2 of the Agreement.

It is understood that JFL and HSL will then settle the Agreement for the consideration mentioned in the Agreement and any adjustments required will be made as pertinent information comes to hand.

Please acknowledge your acceptance of these terms on the duplicate copy of this letter.

[7]                  This letter was signed by Mr C Verissimo on behalf of Hampton and by     Mr Plumley on behalf of Junior. In another affidavit, Mr Plumley said that the letter was presented to him “at the time when the agreement for sale and purchase was dated on or about 9 November 1994 and I signed it”.

[8]Mr Plumley has also deposed:

Furthermore, it was understood by all parties when this complicated transaction was entered into that because the land was limited as to parcels, and because a subdivision was required, that Junior Farms would have to be compensated for any discrepancy in the land ultimately acquired on behalf of Farmers Deka. That accounted  for the collateral compensation agreement which Hampton Securities now endeavours to avoid. Through me, Junior Farms only ever agreed to selling 50 acres of land. It was implicit in the entire transaction that once all of the conveyancing legalities had been completed, Junior Farms would have transferred back to it all remaining land except the 50 acres, or be compensated by a monetary payment if that transfer back could not be effected.

[9]                  Agreements were signed between Hampton and Farmers Deka on 10 October 1994. For reasons extraneous to this judgment, they were replaced on 22 November 1994 by agreements between Hampton and Ormiston, a subsidiary of Farmers Deka, with Ormiston’s performance guaranteed by Farmers Deka. The first agreement was for the sale of the whole of the land by Hampton to Ormiston for $4 million. The second was for sale by Ormiston to Hampton of the land shown on the diagram edged green for $100. Clearly the second agreement was entered into to enable Ormiston to put Hampton in a position to complete Hampton’s like agreement with Junior.

[10]              Mr O’Connell, then a senior executive of Farmers Deka, has sworn an affidavit in which he said that Farmers asked for and were provided with details of the agreement between Junior and Hampton, i.e the agreement by which Junior sold to Hampton and the letter. He continues:

I and the Farmers Board appreciated that there was a contingent liability by Hampton Securities Limited to Junior Farms Limited, of which we were not prepared to assume the risk, as the purchase price we were paying for the non-floodplain land was considerably more than Hampton Securities Limited was paying Junior Farms Limited. We were not prepared to risk having to pay any more for the land minus the floodplain whatever the final areas were.

[11]              Mr O’Connell also stated that he had now been told that Hampton was contending that the letter was not part of the agreement between Junior and Hampton. But, Mr O’Connell said, that was not what he understood to be the

situation. “Farmers certainly understood that there was a contingent risk with Hampton Securities Limited and my recollection is that this was known by all the parties involved”. It was because of seeing the letter that Farmers “backed off the idea of buying the shares in Hampton Securities Limited and bought the land from Hampton Securities Limited instead”. The affidavit continues:

Farmers paid a (high) fixed price and took the risk of the final area surveyed being under or over. Hampton Securities Limited bought from Junior Farms Limited at a much lower price and I believe agreed to pay an area adjustment to Junior Farms Limited based on the agreed

$12.50 per m² as set out in [the letter].

[12]              In due course Ormiston’s surveyors prepared a plan dividing the land into three lots. Lot 1, taking in the entire road frontage, has an area of 23.9840 hectares.  It is now comprised in CT 115C/207. Lots 2 and 3, divided by an internal road, aggregate 13.0695 hectares. Lot 1 is now vested in Ormiston’s name. A caveat lodged by Junior has been removed by Court order. Lots 2 and 3 were transferred by Ormiston to Hampton and by Hampton to Junior. We were told from the Bar that Junior has now sold them to the Manukau City Council.

The claims

[13]              Junior has brought claims against both Hampton and Ormiston, as well as against its real estate agent and two firms of solicitors who acted for it at various stages.

[14]              Junior’s claim against Hampton is for $266,413 plus GST. The pleading against Hampton includes the following paragraph:

The net area acquired by [Ormiston] for CT 115C/207 was 22.3652 hectares which at $12.50 per square meter [sic] provides a value of

$2,795,650. Fifty acres (20.2339 hectares) at $12.50 per square metre provides a value of $2,529,237. The difference between the  two values is $266,413 and is the compensation payable to the plaintiff by Hampton pursuant to the collateral agreement.

Plainly this asserts as against Hampton that the arrangements in the letter were part of the bargain. The slightly lower area given in relation to CT 115C/207 appears to

result from the inclusion in the certificate of title of a small area purchased from a third party.

[15]              In its statement of claim against Hampton, Junior has pleaded that it was transferring only 50 acres of land to Hampton with the remainder to be re-transferred to Junior after the Manukau City Council determined how much floodplain land it wished to acquire “and, in the event that [Ormiston] obtained more than 50 acres, [Junior] would be compensated by [Hampton]”.

[16]              Against Ormiston it is alleged that it knew of the terms of the contracts between Junior and Hampton and was aware that Hampton was purchasing 50 acres only, with the balance of the land to be re-conveyed after completion of the subdivision. It is further alleged that Ormiston’s purchase price of $4 million was calculated on the basis of purchasing only 50 acres. A claim is made for $1,704,500 calculated at the rate of $80 per square metre, which is apparently an assessment of the market value for land fronting onto Ormiston Road.

Discussion

[17]              It is for a defendant seeking summary judgment to show that on the balance of probabilities the claim against the defendant cannot succeed (Westpac Banking Corp v M M Kembla New Zealand Limited [2001] 2 NZLR 298 at para [61]). In Kembla it was said that usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claims. But summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits.

[18]              Although there was initially some contest between counsel over whether the statement of claim against Ormiston revealed any cause of action known to New Zealand law, Mr O’Callahan accepted that Junior could formulate a pleading alleging that Hampton took the land from Junior subject to an obligation, enforceable by constructive trust, to transfer back to Junior all the excess over 50 acres after completion of deposit of an appropriate plan of subdivision. In turn, it could be

pleaded, Ormiston knowingly took the land from Hampton subject to the same obligation in respect of the excess land. Mr O’Callahan referred to  the indefeasibility provisions of the Land Transfer Act 1952 but accepted that a pleading could be constructed in a manner which would enable an in personam claim to be made by Junior against Ormiston on this basis. Where specific enforcement was impracticable, a claim for compensation could replace it. It is accepted that the appellant is now confined to a monetary claim.

[19]              Mr Harrison, for the appellant, agreed that the present pleading would require some amendment along these lines. We consider that a defendant’s summary judgment application, like a striking out application, should not be granted where a cause of action could be revealed by appropriate re-pleading. In the present instance, however, the determinative question is whether, even if re-formulated, Junior’s case against Ormiston is sustainable upon the factual material in the affidavits before the Court.

[20]              The position taken by Ormiston, which the Master accepted, is that whatever the true position between Junior and Hampton, Ormiston dealt only with Hampton.  It is common ground that there were no dealings directly with Junior or any agent of Junior. It is uncontested that Ormiston understood that the arrangement between Junior and Hampton included the letter providing for Hampton to compensate Junior at an agreed rate per square metre for any excess over 50 acres when the floodplain area had been established. In other words, under the letter, which Ormiston believed to be part of the bargain, Hampton was entitled to retain the excess and pay compensation. Thus Hampton would be entitled to sell everything outside the floodplain to Ormiston. Mr O’Connell’s evidence is that Farmers Deka was  prepared to pay a substantially higher fixed price and to take the risk that the final area calculation might be either more or less than 50 acres. There is no suggestion that there were any terms as between Hampton and Ormiston comparable with those in the letter between Junior and Hampton. In other words, there was an adjusting price payable by Hampton to Junior but a fixed price payable by Ormiston to Hampton.

[21]              Junior has claimed against Hampton only on the basis of the letter. It has asserted both in its pleadings and through Mr Plumley’s affidavits that the letter is part of the agreement with Hampton. The meaning of that letter is, we think, very clear. The area to be kept by Hampton is thought to be 50 acres but if, as a result of the fixing of the floodplain area, the balance of the land turns out to be more than 50 acres, there is to be an upwards adjustment of the price by $12.50 per square metre. The letter does not contemplate a re-transfer of more than the area of the floodplain. It would have been a most unlikely arrangement for Junior to reclaim a lot of (then) indeterminate size and shape between the lot to be retained by Hampton and the floodplain with no apparent provision for road access. It is to be noted that in his affidavit about the letter, which he called a collateral agreement, Mr Plumley spoke of “the boundary dividing the front area from the rear” without qualifying that to refer to any other boundary. Furthermore, when consenting to deposit of a plan to enable the floodplain lots to be re-transferred, Junior made no mention of any other lot. Nor did it request re-transfer of more than the floodplain in return for payment  of $100.

[22]              Mr Harrison explained to us that Junior now contends that, as a result of the discovery that the actual area of the industrial land was greater than had been estimated, Junior is entitled to receive back a five acre lot on the valuable road frontage. But there is nothing about that at all in the agreements or the letter, nor have we found anything in the evidence to that effect. Indeed the notion is contradicted in Mr Plumley’s affidavit in which he speaks of Farmers Deka wishing to acquire “the front portion of both titles”. It would also be impossible to determine how much frontage would be retained by Ormiston.

[23]              Mr Harrison also indicated that Junior might now wish to plead its case against Hampton on an alternative basis corresponding to its present claim against Ormiston. By denying the applicability of the letter, Hampton may have encouraged the contemplation of such a move, which has apparently never been suggested on behalf of Junior at any earlier stage of proceedings. It appears that, in reality, Junior’s case against Hampton rests on the letter and is supported by the evidence of Mr O’Connell about what he was told by Hampton. In such circumstances it would be entirely inconsistent for Junior to take a different stance as against Ormiston. It

cannot say that there was a side letter with Hampton which Ormiston knew about and at the same time deny that Ormiston was entitled to deal with Hampton on the basis of its understanding of that letter.

[24]              On the evidence before the Court, Junior’s claim against Ormiston is improbable and cannot succeed. We are consequently of the view that the Master rightly granted Ormiston’s application for summary judgment.

Result

[25]              The appeal is dismissed with costs to Ormiston in the sum of $5,000 together with its reasonable expenses, including travel and accommodation costs of counsel, to be fixed by the Registrar if they cannot be agreed.

Solicitors:

Martelli McKegg Wells & Cormack, Auckland for Appellant Carter & Partners, Auckland for Respondent