Kerr v Lee
[2014] NZHC 340
•28 February 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV2013-404-003352 [2014] NZHC 340
BETWEEN LORNA JEAN KERR and GARY ALLAN KERR
Plaintiffs
AND SEUNG-HOON LEE and KYUNG-HEE LEE NOH
Defendants
Hearing: 23 October 2013
Appearances: R B Stewart QC for plaintiffs
C C Mansell for defendants
Judgment: 28 February 2014
JUDGMENT OF ASSOCIATE JUDGE ABBOTT
This judgment was delivered by me on 28 February 2014 at 5.15pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors:
Kevin McDonald & Associates
Martelli McKegg
KERR and KERR v LEE and NOH [2014] NZHC 340 [28 February 2014]
[1] This dispute arises out of an agreement for sale and purchase of a residential property. At material times the plaintiffs were the owners of the property. They entered into an agreement to sell it to the defendants.
[2] Under the agreement the defendant purchasers were required to pay a deposit of $100,000 when the agreement became unconditional. They have not paid it. The agreement has come to an end. The plaintiff vendors now sue for the deposit. The defendants’ liability to pay it depends on whether they bought the agreement to an end because a condition (sale of their existing property) could not be met, or whether the plaintiffs subsequently cancelled it after the defendants failed to comply with a settlement notice.
[3] The critical issue, therefore, is whether the agreement became unconditional. This in turn depends on whether the defendants did all that was reasonably necessary to enable the condition to be fulfilled.
[4] The plaintiffs have applied for summary judgment both for the amount of the deposit and for contractual interest from settlement date. They claim that they have a clear case for saying that the defendants failed to take all necessary steps to enable a sale of their property to occur.
[5] The defendants oppose summary judgment. They say that they have a fairly arguable defence that they took all steps required of them.
[6] For the reasons I will now give, I find that the defendants do not have an arguable defence, save in respect of the claim for interest.
Background
[7] The following background facts are not in dispute.
[8] At all material times the plaintiffs owned a five hectare property in Chamberlain Road, Massey. In early 2007 they listed the property for sale with the real estate agents Barfoot & Thompson.
[9] The defendants owned a property at 22 Northboro Road, Takapuna, (the Takapuna property) but were looking to move to a lifestyle property in the Massey area. They saw an advertisement for the plaintiffs’ property, and contacted the agent who was handling the listing, a Mr Chang. After discussions with Mr Chang as to what they might obtain for the Takapuna property, and negotiations on price with the plaintiffs, they entered into an agreement on 20 April 2007 to buy the plaintiffs’ property for $1,800.000.
[10] The agreement is subject to two conditions (both inserted for their benefit as purchasers), added to the standard form agreement of the Real Estate Institute of New Zealand – Auckland District Law Society, 7th edition:
(a) clause 14.0 which gave the purchasers 20 working days to undertake a due diligence investigation; and
(b)clause 17.0, making the agreement conditional on the defendants entering into an unconditional contract for the sale of their Takapuna property by 7 July 2007.
[11] Clause 14.0 is not relevant (that condition was satisfied). Clause 17.0 reads:
Cond on Sale of Purchasers Property
This agreement is conditional upon the Purchaser entering into a contract for
the sale of the Purchaser’s property at 22 Northboro Rd Takapuna for
$950,000 (or such lesser amount as the Purchaser shall accept) and otherwise on terms and conditions satisfactory to the purchaser which contract is
unconditional as at 7/7/07 (insert date). The purchaser is to notify the
Vendor or the Vendor’s solicitor by 4pm on the said date that this condition
has been satisfied or the agreement will be at an end. This condition is inserted for the sole benefit of the Purchaser.
[12] Clause 8.7(2) of the agreement (one of the standard terms) provides:
The party or parties for whose benefit the condition has been inserted must do all things that may reasonably be necessary to enable the condition to be fulfilled by the date for fulfilment.
[13] The agreement also provides for:
(a) a deposit of $100,000, to be paid to Barfoot & Thompson when the agreement became unconditional; and
(b) a settlement date of 15 August 2007.
[14] It is common ground that the defendants did not list the Takapuna property for sale.
[15] On 11 July 2007 the defendant solicitors informed the plaintiffs’ agent that the condition as to sale of the defendants’ property was not able to be satisfied, and stated:
we confirm that the sale and purchase for the above property has been duly cancelled.
[16] On 14 August 2007 (the day before the date of settlement in the agreement) the plaintiffs’ solicitors wrote back to the defendants’ solicitors contending that the defendants were obliged to settle as they had not listed the property for sale or taken any other steps to sell.
[17] The defendants did not settle on 15 August 2007, but through their solicitors subsequently reiterated their position that the agreement had been properly terminated. In response to that the plaintiffs, on 8 October 2007, requested particulars of all steps taken to sell the property. The defendants had not replied to that request by 24 October 2007, and on that date the plaintiffs served a settlement notice. Two days later the purchasers solicitors responded to the request for particulars of steps taken to sell, as follows:
Thank you for your fax dated 8 October 2007. Our client advises as follows:
1.On the agreement between our respective clients our client made it clear that he required $950,000 for the sale of his existing house to purchase the above property.
2. Our client obtained a valuation and also contacted many agents but
their quotation was a lot lower than our client’s expectation.
3.To increase the house value, our client also did a substantial renovation on his existing house but still the house value was below
$950,000.
We understand that our client acted reasonably and took appropriate steps to fulfil the condition.
In this circumstance we believe that this agreement was properly terminated.
[18] The purchasers did not respond to the settlement notice, but on 2 November
2007 asked if the plaintiffs were interested in selling at a slightly reduced purchase price. The plaintiffs did not respond to that invitation. Instead, on 12 November
2007 they cancelled the agreement for failure to settle.
[19] There were no further steps of any significance until 20 May 2008, when the plaintiffs made demand on the defendants for the deposit, together with interest at the rate stated in the agreement (14 per cent per annum) from 15 August 2007 to 12
November 2007. The plaintiffs did not take any further steps until commencing this proceeding in July 2013.
The respective arguments and issues arising
[20] The plaintiffs say that the defendants did not comply with clause 8.7(2) in the agreement (requiring them to do all things that were reasonably necessary to effect a sale of the Takapuna property) and cannot therefore rely on non-fulfilment of the condition in clause 17.0 to cancel the agreement. They say that the primary facts are not in dispute, and the explanations provided by the defendants do not provide an arguable case for satisfying clause 8.7(2). They say that the Court has all the information it needs to make a finding on the allegation in their claim that the defendants failed to do all things reasonably necessary to enable the condition to be fulfilled by the agreed date.
[21] The defendants oppose summary judgment. They say:
(a) they did take all reasonably necessary steps, as required by clause
8.7(2), so that the agreement came to an end when they did not have a sale of the Takapuna property by the agreed date;
(b)whether they did do all things reasonable to obtain a sale of their Takapuna property requires determination of disputed facts, and an assessment of all material evidence, that can only properly be done in the course of a full trial; and
(c) they have other grounds of defence based on alleged representations by the plaintiffs’ agent as to the possibility of obtaining the necessary sale price for their own property, and as to an agreement by the plaintiffs that they would not pursue a claim, and the disputes over these matters also make summary judgment inappropriate.
[22] The questions that the Court will need to decide is whether the plaintiffs have shown that the defendants did not do all things reasonably necessary to enable the condition in respect of sale of their own property to be fulfilled, whether this question can be determined properly on a summary judgment application, and whether the defendants have established a sufficient legal and evidential basis for an arguable defence on their other grounds.
The principles for summary judgment
[23] The principles that the Court applies when determining an application for summary judgment are not in contest. They can be found in the decision of the Court of Appeal in Pemberton v Chappell,1 and have been re-stated recently in the following succinct statement of the Court of Appeal in Krukziener v Hanover Finance Ltd:2
[26] The principles are well settled. 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. 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. 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. In the end the Court’s assessment of the evidence is a
1 Pemberton v Chappell [1987] 1 NZLR 1, particularly at 3 – 4.
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] per Miller J (citations omitted).
matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.
Have the plaintiffs shown that there is no arguable defence under clause 8.7(2)?
The legal test for the application of clause 8.7(2)
[24] The defendants’ case is predicated upon their entitlement to cancel the agreement because the condition in clause 17 was not satisfied. There can be no argument that if they were not entitled to cancel they are in breach of the agreement, by reason of their failure to comply with the settlement notice. The plaintiffs’ case is that the defendants are not entitled to rely on clause 17 because they did not comply with clause 8.7(2). It was common ground that the defendants can only rely on clause 17 if they have met their obligations under clause 8.7(2).
[25] The Court of Appeal considered the application of clause 8.7(2) in a similar case in Mana v Fleming. It found: 3
The starting point in determining the meaning of cl 8.7(2) in this context is the obligation to “do all things”. It imposes an affirmative duty on the purchaser to act or take positive steps. They are the things “reasonably necessary” to enable fulfilment of the particular condition, where time is expressly of the essence, by its due date.
...[The use of the word “all”] places a burden on purchasers to “do all things”, which is commensurate with the benefit they acquire through inclusion of a special condition. As a consequence, the purchasers will be in breach if there is something which was reasonably necessary but which was not done even though other necessary things were done. A thing is “necessary” in this context if it is required to bring about the stipulated result within the agreed period...
3 Mana v Fleming [2007] NZCA 324, (2007) 8 NZCPR 469 at [30]-[34] per Harrison J (citations omitted). The defendants in this case also claimed that they were entitled to cancel under a condition that the defendants had to enter into an agreement for the sale of their existing property by an agreed date, and the plaintiff vendors alleged that the defendants failed to do all things reasonably necessary to enable fulfilment of that condition.
[32] The word “reasonably” introduces a qualitative or relative measure of what is necessary; its effect is to modify the obligation by reference to what is reasonable in the circumstances. The necessary things must be rational or in accord with reason, eliminating things which it would be unreasonable to require to be done in the circumstances...
[33] The word “reasonably” must import an objective standard, and performance is to be measured by applying that standard to the relevant facts and circumstances
…The Court is the arbiter of what is reasonably necessary in any case, viewed from
the purchaser’s perspective …
[34] It is sufficient for the vendor to prove that the purchasers failed to do all things which may be reasonably necessary to satisfy the condition in order to establish a material breach of the agreement. The vendor does not have to go further and establish that the proper performance of cl 8.7(2) would have enabled the purchasers to enter into an acceptable agreement as provided by the special condition, cl 15. Proof of a causal connection is unnecessary in order to prove an actionable breach.
The defendants’ (undisputed) evidence as to the steps taken to fulfil clause 17
[26] The defendants have given evidence in support of their opposition, and have also provided supporting evidence in affidavits by a real estate agent who they approached about the sale of their Takapuna property, and by a colleague of the first- named defendant. The gist of this evidence (which is largely undisputed at this stage) is:
(a) They liked the plaintiffs’ property, but were uncertain whether they could afford it. In the course of their discussions with Mr Chang they explained the need to sell their Takapuna property for $950,000 to be able to purchase the plaintiffs’ property for $1,800,000, and that they had a concern because the government valuation for the Takapuna property was only $670,000. Mr Chang informed them that a government valuation did not reflect the real value of a property, and that $950,000 was possible, or even $1,000,000 if the defendants undertook renovations. Mr Chang told them that if they were
concerned, they could make the agreement conditional on selling the
Takapuna property for $950,000. They proceeded on that basis.
(b)As part of this process they approached another real estate agent, Jeong Seok, and asked for an appraisal of the Takapuna property. Mr Seok visited the property, and put the value in the late $700,000 to early $800,000. He suggested an asking price in the mid $800,000. When the defendant Seng Hoon Lee told him that he needed $950,000 from the sale, Mr Seok told Mr Lee he would need to renovate the
property to achieve that sum4.
(c) They undertook renovation work promptly, expending between
$25,000 and $35,0005 as well as undertaking a lot of the labour themselves. They completed their work in mid-May 2007.
(d)Whilst the renovation was underway, Mr Leo Jeong, an associate of Mr Lee, learnt that the defendants were trying to sell the property. He says that he was keen to purchase it, but was uncertain as to its value. After visiting the property three times, he entered into an agreement with the defendants to buy it for $910,000, subject to obtaining a
satisfactory valuation by 29 June 20076. That agreement was stated to
be conditional upon the result of a valuation (to be obtained by 29
June 2007). The defendants decided that this was the best offer that they could get. They decided not to list the property for a back-up offer, as it was better to put what they would incur on advertising costs towards the purchase price of the Massey property. That agreement did not become unconditional. Mr Leong obtained a valuation of $840,000. He wrote to the defendants on 22 June 2007 to tell them the condition was not satisfied, but that he was prepared to
buy it at valuation ($840,000).
4 It is not clear from the evidence whether this appraisal was undertaken before or after the
defendants entered into the agreement for the plaintiffs’ property.
5 There is a dispute as to what work was done, and its value.
6 The plaintiffs have raised issues about this agreement (see below) – but their counsel accepted in the hearing that the court could not resolve those issues in this summary judgment application.
(e) They obtained another appraisal from another real estate agent in the period that Mr Leong was looking at the property. That appraisal was similar to Mr Seok’s.
(f) On 6 June 2007 (after the renovation work was completed) they asked a registered valuer to view the property, and were told it had a value of $825,000 (they later had the valuer provide a written valuation to this effect, after the plaintiffs said they were going to seek summary judgment).
(g)They also asked Mr Seok to reappraise the property after Mr Leong cancelled his agreement. Mr Seok told them a sale price of mid
$800,000 was realistic. They asked Mr Seok to list for $950,000 nonetheless. Mr Seok told them it was not worth his while to do so as it was virtually impossible to sell at that price within the short timeframe.
Disputed evidence
[27] Up until the point that Mr Leong cancelled his conditional agreement on the Takapuna property, the plaintiffs do not contest the defendants’ evidence (they have no direct knowledge of those matters and have not obtained any evidence from Mr Chang). However, they strongly dispute the defendants’ evidence about what happened from that point until the defendants purported to cancel.
[28] The defendants say that after Mr Leong told them that he was not proceeding with the Takapuna property they met the plaintiffs to discuss ways in which they could still proceed with the purchase of the Massey property. Although they cannot state a specific date, they say this was in the last week of June 2007. They say they told the plaintiffs of the other agreement, and Mr Leong’s further offer. They say that they asked the plaintiffs to reduce the purchase price by $100,000 (presumably so as to allow them to accept Mr Leong’s offer at $840,000), or alternatively to take another property they owned as payment. They say the plaintiffs rejected both offers, and told them they had a back up offer of $1,800,000, and that it was better to end the present agreement if the condition was not satisfied by 7 July 2007. The
defendants say that they consulted their solicitor and asked the solicitor to put the
$1,700,000 offer in writing, and that they made notes of that meeting.
[29] Although this does not bear upon the steps that they took to fulfil their obligation under cl 8.7(2), they say that they again met with the plaintiffs, after the plaintiffs had informed them in late September 2007 that they intended issuing summary judgment proceedings, and at that point the plaintiffs agreed that they would not do so.
[30] The plaintiffs deny any meeting with the defendants in late June/early July
2007, or after they had told the defendants they were intending to seek summary judgment. They accept that the defendants did contact them before 7 July 2007 about reducing the sale price to $1,700,000 and say that they told the defendants that their bottom line was the agreed price of $1,800,000. They say that they never discussed any extension to the date for fulfilment of the condition, and deny saying that they had a back up offer (which they did not) or that they suggested it was best for everyone if the agreement ended if the condition was not fulfilled by the due date. They also deny that the defendants put a proposal to them that they take another property in payment. They say that they did not receive any correspondence from the defendants as a consequence of that contact, and did not learn of the private sale to Mr Leong until they received the defendants’ affidavit in opposition.
[31] Although they deny meeting the defendants after their solicitors gave notice of their intention to seek summary judgment, they recall Mr Lee telephoning Mrs Kerr at that point, to offer $1,700,000.7 The plaintiffs say that Mrs Kerr told him that the property was not for sale at that price, and deny that she told him that they would not pursue summary judgment (pointing out that that would make no sense given that they had just instructed their solicitors to write in those terms). They say
that was the last direct communication.
7 This offer was also put in a letter from the defendants’ solicitor dated 2 November 2007.
Discussion
[32] Counsel for the plaintiffs based their case on the submission that it was not arguable that the defendants had taken all steps reasonably necessary, given that it was incontestable that the defendants had not listed the property with any agent, nor advertised it or marketed it in any way (there was no advertising in newspapers, by signs on the property, or even through the internet). He submitted that these were steps that the defendants could and should have taken, and on an objective assessment were reasonably necessary to enable the condition in clause 17 to be met.
[33] Counsel acknowledged that there were disputes on several matters (for example whether the parties met in late June 2007, or again later that year, and whether any agreements were reached at those meetings). In particular he reviewed the evidence as to what steps were taken, and pointed out a number of significant discrepancies between statements made by the defendants’ solicitors in correspondence in 20078 and Mr Lee’s affidavit on this application. I did not understand him to go so far as to submit that the Court should take a robust view and reject the evidence, particularly in relation to the private sale agreement with Mr
Jeong, and the alleged meeting between the parties in late June 2007. Instead he said that it was not necessary to resolve those disputes as there was a clear case of breach of clause 8.7(2) on the basis of the undisputed facts. He submitted that the fact that the defendants may have done some things that were reasonably necessary (approaching agents and undertaking some renovation) did not assist them as the test was whether they had done all things that were reasonably necessary.
[34] I accept that there are some significant discrepancies between the defendants’ statements in 2007 and their evidence now, but there is sufficient support in the affidavits before the Court, at least in respect of the agreement with Mr Jeong, for the defendants’ case that it was a step taken by them in fulfilment of clause 8.7(2) for the purpose of this application. The critical inquiry, however, is not whether those
steps were taken but rather the significance of the steps that were not taken.
8 In which the only matters advanced as steps taken to fulfil clause 8.7(2) were the renovations, and the appraisals and valuation from which the defendants formed the view that their expectation of $950,000 would not be met: refer paragraph [17] above.
[35] Counsel for the defendants focused her argument on the objective assessment that the Court has to undertake under clause 8.7(2). She pointed out that the test (as stated in Mana) required that this be done from the purchaser’s perspective, and submitted that the assessment of what was reasonably necessary had to be determined in the context of the ultimate goal, namely achieving an acceptable agreement within the agreed time. She pointed out that in Mana all relevant matters had been explored at trial. She argued that the Court needed to hear from the defendants on the steps they took, and the reasons they did not list or advertise the property, before making its assessment, and submitted that it was at least arguable that those two steps were not reasonably necessary in the circumstances of this case. She identified the significant circumstances as:
(a) The defendants were advised by the plaintiffs’ agent (Mr Chang) that it was possible that they could get their target price for their Takapuna property if they made renovations.
(b)They received similar advice from Mr Seok. They followed that advice and undertook renovations.
(c) They obtained appraisals from two agents, and a view on price from a valuer.
(d) They secured a conditional agreement at an acceptable price. (e) They obtained a valuation that supported their view on price.
(f) They presented alternatives to the plaintiffs when their conditional agreement did not proceed.
[36] Counsel also submitted that the defendants should be given an opportunity to respond to factual matters that were raised only in the plaintiffs’ submissions, being a suggestion that they could have put a sign up outside the property, and could have used the internet to market the property.
[37] The plaintiffs can establish that the defendants are in breach of clause 8.7(2) if they prove that they did not take steps that were reasonably necessary, even if the defendants took other steps that were also necessary. Applying the test in Mana, the plaintiffs need to persuade the Court that steps that were not taken were required to bring about the stipulated result within the agreed period (that is, by 7 July 2007), and that it was reasonable for the defendants to have taken them, judged in the circumstances of the case. In other words, that listing and advertising or other marketing was reasonably necessary to achieving the objective of clause 17 (putting themselves in the best position to obtain an acceptable agreement on the Takapuna property). However, the plaintiffs do not have to prove that those steps would have resulted in an acceptable agreement by 7 July 2007, but merely that they were reasonably necessary steps towards that objective. The question that I have to decide is whether the answer to that question is self evident as the plaintiffs contend (in which case summary judgment is appropriate) or whether it can only be reached properly after making findings at trial on the defendants’ reasons for not taking either step.
[38] Counsel for the plaintiffs submitted that as the defendants had set the target price, a heavier burden should be placed on them to take steps to achieve that outcome: he said that anything less was simply giving them an option on the Massey property.9 However, that overlooks the defendants’ evidence that they put the target figure into the agreement on the advice of Mr Chang that it was an achievable sale price, particularly if the property was renovated.
[39] I take as my starting point that generally, both listing and appropriate advertising and marketing are reasonably necessary steps. Mana is authority for that view. I turn now to consider whether the decision to renovate, and the agreement with Mr Jeong could change the assessment in this case.
[40] For the purpose of the present application I consider that there must be an argument that it was reasonable to defer listing and advertising until renovations
9 Referring to Arcadia Homes Ltd (In Liq) v More To This Life Ltd [2013] NZCA 286; [2013] ANZ ConvR 13-020. .
were undertaken (particularly as it turns out that they were able to be undertaken very promptly).
[41] The defendants have a greater difficulty, however, in the fact that they did not list and advertise the property immediately once renovations were complete:
(a) The evidence is not clear as to when Mr Jeong first expressed interest, nor when the parties settled on the price for their private agreement, but a mid-May 2007 completion date for renovations left a two week window before the Jeong agreement was signed.
(b)The defendants knew that they had a limited time in which to take steps to sell. If they had listed, and started advertising, in mid-May
2007 (an achievable step given that this was some three weeks after signing the agreement on the Massey property), there would have been some seven weeks in which to establish market interest. It was clearly too late to list and market the property for a sale by 7 July
2007 after Mr Jeong cancelled his agreement.
(c) It is significant that the defendants have not explained why they did not list, or start advertising, immediately on completion of the renovations (other than by implication from their reference to the negotiations with Mr Jeong). On their own evidence they had Mr Seok’s appraisal shortly after entering into the agreement with the plaintiffs, and in light of that appraisal they must have known by the time they signed the agreement with Mr Jeong, that there was a real likelihood that the valuation of the property would not be satisfactory to Mr Jeong.
(d)There was nothing to prevent them listing or advertising on the basis of inviting offers so as to test the market.
(e) I find merit in the plaintiffs’ view that at an early stage the defendants came to the opinion that they did not need to go beyond the interest
shown by Mr Jeong and focused more on finding ways to make up the difference if that agreement proceeded, than on obtaining an acceptable agreement from all potentially interested sources.
[42] It is also significant that the defendants did not take legal advice as to the steps that they should take to satisfy clause 8.7(2).
[43] As the party seeking to take the benefit of clause 17, the defendants must satisfy the test under clause 8.7(2). For the purpose of a summary judgment application, they must establish a sufficient evidential basis for their claim to have met that test. They have not done so on the evidence before the Court. This takes me to their counsel’s argument that this matter cannot be determined on a summary judgment application.
Is the matter suitable for summary judgment?
[44] In her written submissions, counsel for the defendants argued that the plaintiffs’ claim cannot be determined in this application because there are disputes of material fact and that the Court cannot make a proper assessment without hearing from the defendants. In her oral submissions, counsel focussed more on the latter argument.
[45] I am not persuaded that there are any disputes on material facts, given that the disputes are in relation to what the defendants did, rather than what they did not do. This point turns, therefore, on whether the Court needs to hear further from the defendants to be able to make a proper assessment on the need for listing and advertising, particularly as the test requires that this be done from the purchaser’s perspective. I do not see that the Court needs to hear further from the defendants on this. Their view is before the Court, namely that neither step was reasonably necessary given the need for renovations and first the interest expressed by Mr Jeong and then the agreement reached with him (accepting, for the purpose of this application, that they will prove these matters). On an objective assessment, and taking that perspective into account, I find that listing and advertising were reasonably necessary steps towards fulfilment of clause 17.
Do the defendants have other arguable grounds of defence?
[46] Counsel for the defendants submitted that summary judgment was also inappropriate because the defendants have other available defences, namely:
(a) The plaintiffs agreed to termination in late June 2007.
(b) The plaintiffs agreed not to sue them in late October 2007. (c) The plaintiffs have not proved loss.
(d)The plaintiffs have delayed bringing their proceeding and it would be inequitable to allow them to claim contractual interest.
(e) They were induced to enter into the agreement by representations of
Mr Chang, as the plaintiffs’ agent.
[47] Although these matters were not raised in the notice of opposition, I accept
that they have been raised in the defendants’ evidence and need to be dealt with.
[48] The most significant additional ground of defence is the allegation that the parties met at the end of June 2007 and came to an agreement to terminate the agreement. I do not accept that this provides the defendants with an arguable defence for two reasons. First, the defendants’ own evidence does not support the claim that there was an agreement. Mr Lee’s evidence is that the plaintiffs “suggested that it would be best for everyone” to terminate the agreement if the condition was not fulfilled by 7 July 2007. This is not the language of an agreement. Secondly, the assertion is inconsistent with contemporary documents:
(a) The defendants say they instructed their solicitor to write to the plaintiffs immediately after the meeting. The correspondence produced in support of that statement is a letter dated 2 November
2007. It does not refer to any agreement to terminate.
(b)The defendants contend that they made notes in the meeting with their solicitor. The notes that they attached were written on the cover page of a copy of the High Court judgment in Mana). It can be inferred that the solicitor provided them with that decision. There would be no call to do so as at the end of June 2007 if there was an agreement with the plaintiffs. It is probable that those notes were made when the defendants consulted their solicitor after receiving the letter warning of the issue of summary judgment proceedings (dated 21 September
2007). I infer that that meeting was a precursor to the defendants’
solicitors’ letter of 26 October 2007.10
(c) There is no evidence from the defendants’ solicitors to support either a meeting at the end of June 2007, or an instruction to the solicitors that there was an agreement.
(d) The plaintiffs’ solicitors wrote to the defendants’ solicitors on 14
August 2007 referring to the advice from the defendants solicitors on
11 July 2007 that the agreement “ha[d] been duly cancelled”, noted that this was on the basis that clause 17 had not been satisfied, said that their instructions were that the defendants had not listed the property or taken any other steps to attempt to sell it, stated that they considered the agreement to be unconditional, and called on the defendants to settle. They would hardly have written in these terms if the plaintiffs agreed that the agreement could be terminated.
(e) The defendants’ solicitors wrote to the plaintiffs’ solicitors on 28
September 2007 to clarify the basis on which the defendants had cancelled (non-fulfilment of clause 17), and again on 26 October 2007 and 2 November 2007 (following the plaintiffs’ request for advice as to steps taken to fulfil clause 8.7(2)), but did not mention either the agreement with Mr Jeong or the alleged meeting and agreement at the
end of June 2007.
10 See paragraph [17] above.
[49] I find that there is no credible evidence advanced to support an agreement in late June 2007 to terminate the agreement on the Massey property.
[50] I similarly find that there is no credible basis for the defendants’ allegation that there was an agreement reached, following the defendants’ receipt of the letter warning of summary judgment proceedings, that the plaintiffs would not sue. The summary judgment letter was sent on 21 September 2007. It is not credible that the plaintiffs would have entered into such an agreement shortly after giving their solicitors such instructions without informing their solicitors (all subsequent correspondence by the plaintiffs’ solicitors speaks only of performance of the agreement or cancellation for failure to settle in accordance with the settlement notice). Again I note that the defendants’ solicitors wrote to the plaintiffs’ solicitors on three occasions (28 September 2007, 26 October 2007 and 2 November 2007) without mentioning any agreement not to sue.
[51] The next ground advanced was that the plaintiffs have not proved any loss. This might have had some merit if the plaintiffs were suing for damages for breach of contract. However, the plaintiffs have sued for the deposit, together with interest. The deposit became due once the agreement became unconditional. The agreement became unconditional when the defendants lost the right to rely on clause 17 (7 July
2007 at the latest). The plaintiffs are now entitled to the deposit as a debt due.11
[52] The next ground advanced was that the plaintiffs have delayed in bringing this proceeding, and it would be inequitable to award contractual damages. At the start of the hearing, counsel for the plaintiffs sought, and was granted leave, to amend the prayer for relief so as to claim interest under the Judicature Act 1908 as an alternative to contractual interest. There are two potential answers to the defendants’ case on this point. First, the plaintiffs made formal demand for payment of the deposit in May 2008. The defendants chose to ignore that demand. Secondly, the Court has a discretion in any event, to award interest under the Judicature Act
1908. However, at the very least, interest should be payable from the date of issue of
the proceedings.
11 D W McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at 7.10(a); Pendergrast v
Chapman [1988] 2 NZLR 177 at179.
[53] The last ground of defence advanced was that the defendants were induced to enter into the agreement by representations as to the value they would receive for their Takapuna property. I find nothing in this ground. It was not advanced until the defendants filed their opposition to this application, and even then, it was not specified as one of the grounds of opposition. The defendants’ evidence on the point is vague at best, and does not spell out how any statement by Mr Chang is actionable.
Decision
[54] I am satisfied that the defendants do not have an arguable defence to the plaintiffs’ claim to the deposit. There is a slight but sufficient argument available to the defendants in respect of the claim to contractual interest. I consider it appropriate to award interest under the Judicature Act 1908 from the time of issue of the proceedings, and reserve the plaintiffs’ claim in respect of contractual interest for determination in the ordinary course, if the plaintiffs wish to pursue that claim.
[55] I enter summary judgment for the plaintiffs against the defendants for the sum of $100,000, together with interest on that sum at the prevailing rate under the Judicature Act 1908 from the date of issue of this proceeding.
[56] Counsel for the plaintiffs is to advise the Court and the defendants within 10 working days whether the plaintiffs intend to pursue the claim for contractual interest. If so, the defendants are to file a statement of defence within a further twenty working days.
[57] Counsel did not address me on costs. As the successful party, the plaintiffs are entitled to costs. I see no reason to award other than on a standard 2B basis, together with disbursements. If the plaintiffs wish to seek costs on any other basis, they are to file and serve a memorandum within 10 working days setting out the
basis on which costs are sought. If they do not do so, they are entitled to enter judgment for costs on a scale 2B basis together with disbursements as fixed by the
Registrar.
Associate Judge Abbott
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