Jury v Police HC Napier CRI 2010-441-46

[2010] NZHC 2079

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV 2010-419-000368

BETWEEN  DJ PROPERTY TRUSTEES LIMITED Plaintiff

ANDBARRY RAYMOND COOK AND SHERRYL LOUISA COOK Defendants

Hearing:         19 November 2010

Counsel:         GL Wilkin for plaintiff

DK Wilson for defendants

Judgment:      19 November 2010 at 4:45pm

JUDGMENT OF ASSOCIATE JUDGE FAIRE [ on application for summary judgment]

This judgment was delivered by me on 19 November 2010 at 4:45pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Ryan Law, PO Box 104, Morrinsville

Whaley Garnett, 17 181, Auckland 1546

DJ PROPERTY TRUSTEES LTD V COOK HC HAM CIV 2010-419-000368 19 November 2010

The application

[1]      The plaintiff seeks summary judgment against the defendants in the sum of

$230,000 plus interest at 14 per cent per annum from 25 May 2009 until judgment.

[2]      The plaintiff says that it has lost $230,000 as a result of the defendants refusing to settle a sale and purchase contract.

The opposition

[3]      The defendants say they were entitled to refuse to settle the contract based on clause 30 of the contract.  That clause required the defendants’ solicitor to approve the contract as to form and content.   The defendants say their solicitor refused to approve the contract.  As a result they say the condition was not satisfied with the consequence that they were not required to settle the sale and purchase contract.

The court’s approach to a plaintiff’s summary judgment application

[4]      Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that a defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.  The obligations imposed by the rule have been examined by a number of authorities.

[5]      The correct approach to an application for summary judgment by a plaintiff was recently summarised in Krukzeiner v Hanover Finance Ltd[1]  where the court said:

[1] Krukziener v Hanover Finance Ltd [2008] NZCA 187 (CA) at [26].

The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11

PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence  or  assess  the  credibility  of  deponents.  But  it  need  not  accept

uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[6]       In Pemberton v Chappell[2] the court also commented on the position where a defence is not evident on a plaintiff’s pleading and said:

If a defence is not evident on the plaintiff's pleading I am of opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff's right to have his case proceed to judgment without tendentious delay and a defendant's right to put forward a real defence.

[2] Pemberton v Chappell [1987] 1 NZLR 1(CA) at 3.

[7]      That position was further reinforced in Australian Guarantee Corporation

(New Zealand) Ltd v McBeth[3] where the court said:

Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the  plaintiff's  verification stands  unchallenged  and ought  to  be  accepted unless it is patently wrong

[3] Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59.

[8]      Hypothetical  possibilities  in  vague  terms,  unsupported  by  any  positive assertion or corroborative documents advanced by defendants will not frustrate the obligation on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v Oremland.[4]

[4] SH Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986.

[9]      In Tilialo v Contractors Bonding Ltd[5] the court raised a caution and said:

The Courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories.  That does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.

[5] Tilialo v Contractors Bonding Ltd CA 50/93, 15 April 1994 (CA) at 6.

[10]     A court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan.[6]   However the court will not reject even dubious affidavit evidence, even though there must be suspicion as to the good faith of the deponent, if there is an essential core of complaint that supports a defence.   In essence, the inquiry is whether or not the person’s assertion passes the threshold of credibility: Pemberton v Chappell;[7] Orrell v Midas Interior Designs.[8]

[6] Eng Mee Yong v Letchumanan [1980] AC 331.

[7] Pemberton v Chappell, above n 2.

[8] Orrell v Midas Interior Designs (1991) 4 PRNZ 608 at 613.

[11]     In Tilialo v Contractors Bonding Ltd[9] it was observed:

[9] Tilialo v Contractors Bonding Ltd, above n 5, at 8.

Drawing the line between mere assertions of possible defences and material which sufficiently raises an arguable defence so that the defendant should not be denied the opportunity to employ interlocutory procedures and have a trial is a matter of judgment.  Views may well differ.

Background

[12]     The plaintiff is the owner of land situated at 396 Kuranui Road, Morrinsville. In 2008 the plaintiff was in the process of subdividing its land.   The defendants became  interested  in  one  of  the  blocks  of  land.    The  parties  entered  into  an agreement dated 13 April 2008 which provided for the defendants to purchase a block for a price $750,000 subject to a number of conditions. The property to be purchased now has a physical address known as 33 Dingle Road, Morrinsville.

[13]     The important terms of the agreement for the purposes of this dispute in summary are as follows:

a)        It provided for payment of a deposit of 10 per cent on it becoming unconditional;

b)Settlement and possession was to be given ten days after the date the plaintiff provides a search copy of a Certificate of Title;

c)        It  is  conditional  upon  the  defendants  obtaining  an  unconditional contract for the sale of their property by 30 September 2008;

d)It required the purchasers’ solicitor to approve the contract as to form and content; and

e)        It made provision for payment of interest for late settlement at the rate of 14 per cent per annum.

[14]     Clause 30 of the sale and purchase contract provides:

30.0     This agreement is conditional upon the approval of the Purchasers

Solicitor as to form and content.   Such approval to be given by

4.00 pm on 18 April 2008.

[15]     In late April and May 2008 correspondence took place between solicitors acting for the defendants and solicitors acting for the plaintiff.  The correspondence came to a head when solicitors for the defendants, on 24 June 2008, advised the plaintiff’s solicitors that they had formally disapproved the agreement.   The letter went on to explain as follows:

Our position is that the covenants relating to the use of the property and construction of the house should not apply to our clients lot which we note has an existing house erected on it.   The covenants you are proposing are more in line with vacant lots where the primary use of the lot is going to be residential. We list a few specific points of concern:

1.We do not think the existing house would comply with clause 2 of the covenants.

2.It is likely that there would be farm machinery and other equipment on site and our clients would not want the obligation of keeping this screened as required by clause 19.

3.“Neat and tidy” as contemplated by clause 22 would present possible difficulties of interpretation given the different nature of the lots.

4.There  is  no  time  limit  on  the  covenants  which  would  therefore operate  in  perpetuity.    We  expect  that  at  some  future  date  the property would be further subdivided and the covenants would potentially impact adversely.

We appreciate that your client has moved some way towards addressing our clients concerns but our clients do not wish to proceed further with the matter.  Our clients consider the agreement to be at an end.

[16]     Clause 27.1 of the agreement makes provision for the inclusion of covenants, including the covenants which are at issue in this proceeding.  Clause 27.1 provides:

27.      Restrictive covenants

27.1The Purchaser acknowledges that the property being sold herein is part of a residential subdivision.   To preserve the quality of construction in the subdivision and for the benefit of all other residential lots contained in the plan, the Purchaser agrees that the attached Schedule of Covenants shall be registered against the title to the land being sold herein either prior to settlement of this transaction or will be incorporated into the Memorandum of Transfer transferring the land to the Purchaser.

[17]     The covenants identified in the correspondence as the reason for refusing approval are:

a)       Not to permit or allow removal onto the Lot any existing or pre-built house which has previously been lived in;

b)Once construction of the dwelling has been substantially completed not to bring onto or allow to remain on the property any temporary dwelling, caravan, trade vehicle or other equipment or materials or machinery unless garaged or screened from sight from the access lot so as to preserve the amenities of the neighbourhood.

c)        To keep and maintain the Lot in a neat and tidy condition at all times.

Solicitors’ approval clauses

[18]     Counsel referred to a number of authorities.  In Boote v RT Shiels & Co Ltd[10]  it was held that the solicitor's approval could not be withheld capriciously or merely on the instructions of the client.   The purpose of the clause was to check that the conveyancing aspects of the transaction were satisfactory from the purchaser's point of view.  That statement of principle was confirmed in Provost Developments Ltd v Collingwood Towers Ltd.[11]     The Court of Appeal held that such clauses must be

interpreted in the context of the particular contract.  The court went further and said that the purpose of such clauses are to be found in the usual function of the solicitor who is asked to assess the legal implications of a contract for sale between the parties.

[10] Boote v RT Shiels &Co Ltd [1978] 1 NZLR 445 (CA) at 451 per Cooke J.

[11] Provost Developments Ltd v Collingwood Towers Ltd [1980] 2 NZLR 205 (CA).

[19]     Counsel’s submissions referred to two more recent decisions which applied the guidance given by the Court of Appeal, namely, Dashwood Vineyards Ltd v Hammond[12] and Mirams v Bruce.[13]|

[12] Dashwood Vineyards Ltd v Hammond HC Blenheim CP15/99, 21 July 2000 per Wild J. 

[13] Mirams v Bruce HC Hamilton CIV 2006-41-705, 14 June 2006 per Allan J.

[20]     It is not necessary, in this decision, that I analyse those decisions further. What is clear is that the clause needs to be interpreted in the context of the particular agreement.   The solicitor must give approval unless the solicitor finds a problem with the agreement that is within the area of expertise which one would expect the solicitor to advise on.  That may vary according to the kind of parties involved and the type of property being sold.   The solicitor’s function is limited to determining whether  approval  is  justified  in  respect  of  the  conveyancing  aspects  of  the transaction or the legal implications of the agreement.   Looking at the legal implications the solicitor will advise on the validity and the burden of the commitments entered into.  The solicitor cannot simply do what a client instructs. The solicitor must reach the decision independently and on a bona fide basis and must  not  be  motivated  by  any  collateral  consideration.    What  is  needed  is  an objective assessment of all the evidence relating to the circumstances at the time when refusal is given.   The reasons need not be given at the time.   Ordinarily, however, the court would expect a solicitor to give the essence of any reason or reasons for disapproval.  That is to avoid any question of afterthought.

[21]     There is, here, a dispute as to whether the solicitor for the defendants advised the solicitor for the plaintiff that the reason for refusing to approve the contract was because of the health of the defendant.   If, on final analysis, that proves to be the position then, of course, the solicitor’s failure to approve would not be binding. Such a conflict cannot be resolved on this application.  It is a matter for trial.

[22]     The defendants’ solicitor, Mr Garnett, in his affidavit expands on the reasons which are set out in his letter.

[23]     The four reasons given by the defendants’ solicitors for failing to approve the agreement focus on the covenants.   The covenants directly affect the title to the property.  The covenants have no time limits.  On their face they would appear to be effective in perpetuity.  It is arguable that these clauses all fall within the domain of matters which one would expect a solicitor to give advice on.  Whether, at the end of the day, that proves to be the case and whether it was the real reason for refusing to give approval are matters, in my judgment, that should, in fact, be determined at trial and not pursuant to the court’s summary jurisdiction.

[24]     Accordingly, I conclude that this is not an appropriate case where summary judgment should be entered.   Rather, the application should be dismissed and directions given for the filing of a statement of defence and other interlocutory matters to ensure that the matter is prepared for a hearing.

Orders

[25]     I order that:

a)        the application for summary judgment is dismissed;

b)a statement of defence to the statement of claim shall be filed and served by 13 December 2010;

c)       time is extended for the filing and service of third party notices and statements of claim pursuant to r 4.4(2) until 28 January 2011;

d)Any party seeking an interlocutory order or direction shall file and serve the appropriate application by 18 February 2011.  It shall have as its date of hearing the next conference which shall be at 10:50am on  15 March  2011.      Counsel  are  reminded  of  the  obligation  to

comply with rr7.19, 7.20, 7.24, 7.25, 7.26 and 7.29 of the High Court

Rules in respect of such application; and

e)       A telephone case management conference with counsel shall be held at  10:50am  on  15 March  2011.    The  following  matters  will  be addressed:

i)disposal of, or allocation of a fixture for, any outstanding interlocutory application;

ii)       the issues requiring resolution at trial;

iii)settlement and whether a mediation or a Judicial settlement conference should be ordered;

iv)trial duration, the fixing of the trial date and the making of any special trial directions that are required.   In respect of these matters counsel should have available the number of witnesses to  be  called  and  the  general  scope  of  the  evidence  to  be covered by them so that an accurate assessment can be made of trial duration.  In addition, counsel should be in a position to indicate if any order should be made in relation to the experts pursuant to r 9.44.

Because the issues requiring resolution at trial will be considered at the conference, memoranda shall be filed on a sequential basis so that the defendant has the opportunity of commenting upon the plaintiffs’ summary of the trial issues.    To achieve this the plaintiffs’ memorandum dealing with the above matters shall be filed and served by 7 March 2011 and the defendants’ memorandum dealing with  the above matters and, in particular, commenting upon, conceding or adding to the list of issues shall be filed and served by 11 March

2011.

Costs

[26]     In line with the approached adopted in NZI Bank Ltd v Philpott[14] I reserve the question of costs and disbursements.

[14] NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).

JA Faire

Associate Judge