KS Gardens Limited v Her Majesty the Queen in right of the Government of New Zealand
[2021] NZHC 453
•10 March 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2020-409-352
[2021] NZHC 453
BETWEEN KS GARDENS LIMITED
Plaintiff
AND
HER MAJESTY THE QUEEN IN RIGHT OF THE GOVERNMENT OF
NEW ZEALAND
Defendant
Hearing: 4 February 2021 Appearances:
A Riches and J Manson for plaintiff/respondent
H Ebersohn and K Gaskell for defendant/applicant
Judgment:
10 March 2021
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
This judgment was delivered by me on 10 March 2021 at 4.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
KS GARDENS LIMITED v HER MAJESTY THE QUEEN IN RIGHT OF THE GOVERNMENT OF NEW ZEALAND [2021] NZHC 453 [10 March 2021]
TABLE OF CONTENTS
Introduction [1]
The interlocutory application [3]
Background [5]
Summary judgment principles [19]
The plaintiff’s case [21]
Express contractual terms [27]
Implied contractual terms [33]
Estoppel [65]
The Crown’s actions [69]
Loss [75]
Conclusion [81]
Costs [83]
Introduction
[1] This case concerns the proper interpretation of an agreement between the plaintiff, KS Gardens Ltd (KSG), and the Crown, through the Department of Land Information, whereby KSG sold and the Crown purchased land in Christchurch damaged by the Christchurch earthquakes.
[2] In the agreement KSG assigned to the Crown its claim against the Earthquake Commission (EQC). The central issue is whether the Crown had any obligation to pursue that claim. KSG says that it did. The Crown denies this.
The interlocutory application
[3] Before the Court for immediate determination is an application by the Crown for summary judgment pursuant to pt 12 of the High Court Rules 2016.
[4] The Crown has also applied for an order striking out the claim pursuant to r 15.1(1)(a). However, during the course of the hearing Mr Ebersohn made it clear that the primary application was one for summary judgment. I deal with the case on that basis.
Background
[5]The factual background is not controversial and can be summarised briefly.
[6] KSG operated a retirement village. It owned 123 residential titles across approximately 10 acres of land in Christchurch. Both the land and the improvements thereon were seriously damaged in the Christchurch earthquakes in late 2010 and early 2011.
[7] The property was zoned red, meaning that it was not suitable for rebuilding in the foreseeable future.
[8] The Crown offered to buy land so zoned. Owners had various options. The documentation describing the offers made by the Crown to KSG is before the Court but it is unnecessary to refer to this as neither party places any emphasis on pre-contractual exchanges.
[9]In due course, KSG agreed to sell its property to the Crown.
[10] This was a major transaction, and KSG and the Crown were both in receipt of whatever advice and assistance they needed.
[11] The agreement for sale and purchase was dated 15 January 2013 and settled shortly thereafter. It was in the Real Estate Institute standard form (8th ed, 2006), ubiquitous throughout the country and with which all property lawyers are familiar.
[12] Essentially, KSG agreed to sell and the Crown agreed to purchase the former’s property for the pre-earthquake, unimproved, rateable land value of $10,897,000. KSG retained its claim against its insurers in respect of damage to improvements but assigned to the Crown its claim against EQC in respect of damage to the land.
[13]A small number of special conditions featured in argument.
[14] Special Condition 18 is a definitions provision. There are definitions of the terms “Benefits”, “Claim” and “Further Claim”. They are as follows:
“Benefits” means all of the rights and remedies of the Vendor in respect of:
(a)To the extent allowed by law, the Claims or Further Claims, as applicable, including without limitation:
(i)the right to pursue any Claim or Further Claim against EQC;
(ii)the proceeds of any Claim or Further Claim and, where the Property is in a unit title development, the right to receive the Vendor’s share of such proceeds from the Body Corporate;
(iii)the power to give good discharge in respect of the Claim or Further Claim; and
(b)any other actual or potential claim in respect of loss or damage to the Property (land or fixtures) arising from any Event which is not subject to a right of subrogation of EQC under the EQC Cover of the Private Insurer under a Policy.
…
“Claim” means claims described in Schedule 5 (to the extent of the Vendor’s interest in those claims), to the extent that such claims relate to damage and/or loss to the Land in respect of any Event.
“Further claim” means any other claim made (including any claim made in accordance with clause 25.1 or 25.2, as applicable under the EQC Cover, to the extent that such claims relate to damage and/or loss to the Land.
[15] Special Condition 23 is headed “RISK AND INSURANCE”. Clauses 23.2 and 23.3 are in the following terms:
23.2Assignment of Benefits: In consideration of the Purchaser entering into this Agreement, the Vendor absolutely assigns to the Purchaser under section 50 of the Property Law 2007:
(a)with effect on the date this Agreement becomes unconditional, all of the Vendor’s interest in the Benefits in respect of Claims; and
(b)with effect on the latter of the date on which any Further Claim is lodged (including in accordance with clause 25.1 and 25.2, if applicable), and the date this Agreement becomes unconditional, all of the Vendor’s interest in the Benefits in respect of that Further Claim,
and, for the avoidance of doubt, the Vendor shall have no further rights to, or interest in, the Benefits of Claims and Further Claims.
23.3Vendor assistance: The Vendor shall, within any reasonable timeframe required by the Purchaser, do all things reasonably requested by the Purchaser to allow the Purchaser:
(a)to receive the full benefit of this Agreement; and
(b)to receive the full benefit and enjoyment of the Benefits, including by providing such further assignments of claims and/or the proceeds of claims as the Purchaser may reasonably require.
[16] Special Condition 26 is headed “EQC PURCHASE PRICE TOP-UP”. Clauses 26.1 and 26.2 provide:
26.1Top up: If, following the Settlement date, EQC pays to the Purchaser an amount in settlement of the Claims and/or Further Claims that is greater than the Purchase price, the Purchaser shall, within a reasonable period following EQC’s payment of that amount, pay to the Vendor, as an additional purchase price, the difference between the Purchase price and that amount. All amounts referred to in this clause
26.1 are inclusive of GST.
26.2No duty imposed: Nothing in clause 26.1 shall have the effect of imposing on the Purchaser any duty whatsoever to seek, or an expectation that the Purchaser will seek, to recover any particular amount from the EQC and, for the avoidance of doubt, the parties acknowledge that the Purchaser has an unfettered discretion as to how it will pursue the Claims and/or Further Claims and may settle Claims and Further Claims with EQC at its sole and unfettered discretion.
[17]Special Conditions 29 is headed “GENERAL”. Clause 29.3 provides:
29.3Further Assistance: Each party shall make all applications, execute all documents and do or procure all other acts and things reasonably required to implement and to carry out its obligations under, and the intention of, this Agreement.
[18]It will be necessary to return to these provisions.
Summary judgment principles
[19] Counsel were on common ground as to the principles that apply to summary judgment applications under pt 12 of the High Court Rules. The leading case is Kruikziener v Hanover Finance Ltd where the Court of Appeal said:1
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: 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 not consistent 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).
Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.
[20] Whilst that case was focussed on plaintiffs’ applications for summary judgment, the same principles apply when it comes to defendants’ applications, so that the defendant, as the applicant, has the burden of establishing that the plaintiff’s case cannot succeed on any pleaded cause of action. In the end, the Court must be left with no serious doubt that the plaintiff’s case is unsound. On a summary judgment application the Court may determine even complex legal issues. If however there are disputes of fact which are incapable of being resolved, or cannot fairly be resolved, on affidavit evidence, then summary judgment will not be appropriate.2 However, even in a summary judgment application the Court is not obliged to accept evidence that is inherently incredible, and is entitled to take a robust approach to such issues.3
1 Kruikziener v Hanover Finance [2008] NZCA 187 at [26]–[27].
2 See Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [62].
3 Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14 citing Eng Mee Yong v Letchumanan [1980] AC 331 at 341.
The plaintiff’s case
[21]The plaintiff’s first cause of action alleges breach of contract.
[22]The plaintiff pleads that cl 29.3 of the contract expressly obliged the Crown to:
132.1Pursue the existing EQC claims on behalf of the vendor with reasonable diligence.
132.2Provide to EQC any available documentation required to advance the defendants [sic] EQC claim and obtain the best settlement reasonably obtainable price [sic].
[23] Separately, the plaintiff pleads that the contract also contained certain implied terms:
133.1The purchaser shall pursue the existing EQC claims on behalf of the vendor with reasonable diligence.
133.2While the purchaser has no duty to recover any particular amount from the EQC it will obtain from the EQC its best reasonably obtainable price.
133.3In considering any settlement, course of action or decision to abandon its EQC claim it shall have regard to the interests of the vendor and its entitlement to a top-up payment pursuant to clause 26.1.
133.4The purchaser shall not simply discontinue the EQC claim.
[24] The plaintiff’s second cause of action seeks to raise an estoppel. Essentially the plaintiff says that by entering into the contract the Crown is estopped from denying the same obligations as are alleged to be express or implied terms of the same.
[25] The plaintiff alleges that, in breach of its obligations, the Crown has failed to pursue the claim, and indeed has abandoned it.
[26] This, the plaintiff says, has caused it loss which it calculates at over $7m, effectively the difference between the sale and purchase price under the contract and the alleged value of its claim against EQC.
Express contractual terms
[27] The first limb of the plaintiff’s first (contractual) cause of action appears to me to be misconceived.
[28]It is based on the premise that:
131.The intention of the agreement was that the Crown would advance the plaintiff’s EQC claim and pay any surplus pursuant to clause 26.1.
[29] The first component of that pleading begs the essential issue in the case. The second component (from the word “and”) adds nothing. It appears to me to be less a pleading as to the express terms of the contract than an assertion as to the parties’ intentions directed at laying a foundation for an argument as to its interpretation.
[30]In any event, the pleadings continue with an assertion that cl 29.3:
… required the defendant to:
132.1Pursue the existing EQC claims on behalf of the vendor with reasonable diligence.
132.2Provide EQC any available documentation required to advance the [defendant’s] EQC claim and obtain the best … reasonably obtainable price.
[31] Clause 29.3 says nothing of the sort. It is a standard clause commonly found in commercial contracts so as to provide the parties with a basis for insisting that other parties take whatever formal steps are necessary to give effect to the agreement. It is entirely silent as to substantive rights and obligations.
[32]In my view, this limb of KSG’s claim cannot succeed.
Implied contractual terms
[33] That brings me to the second limb of KSG’s first cause of action, based on the implied terms propounded by it.
[34] The law concerning when terms will be implied into contractual arrangements has been in a state of flux over recent years. The correct approach in New Zealand is
currently uncertain.4 Much – if not all – of this uncertainty stems from whether the same principles that apply to the interpretation of express contractual terms should apply to the implication of terms.5 Essentially, the relationship between interpretation and implication is at play.
[35] The classic authority is BP Refinery (Westernport) Proprietary Ltd v Shire of Hastings in which the Privy Council said:6
For a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) It must not contradict any express term of the contract.
[36] Both in the United Kingdom and in New Zealand the courts have expressed reservations relating to the application of the BP Refinery test.7
[37] However, the United Kingdom Supreme Court recently revisited Attorney-General of Belize v Belize Telecom Ltd in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd.8 There, the Court suggested that the BP Refinery test — that is the orthodox approach — is still an appropriate one. Certainly, the BP Refinery test has been the most commonly cited in New Zealand.9
[38]In any event, and as Kós P said in Ward Equipment Ltd v Preston:10
In New Zealand for the foreseeable future the conditions nominated in BP Refinery — best viewed as guidelines — will remain a prominent part of analysis where the construction advanced by a litigant involves a sufficiently substantial change to the express contractual words as to trigger the implication of a term.
4 See Ward Equipment Ltd v Preston [2017] NZCA 444, [2018] NZCCLR 15 at [46]-[47].
5 At [36].
6 BP Refinery (Westernport) Proprietary Ltd v Shire of Hastings (1977) 180 CLR 266 (PC).
7 See Attorney-General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1WLR 1988 at [20]–[27] per Lord Hoftman and Hickman v Turn and Wave Ltd [2011] NZCA 100, [2011] 3NZLR 318 at [247]–[248].
8 Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UK SC 72, [2016] AC 742 at [3] per Lord Neuberger, [59] per Lord Carnwath and [77] per Lord Clarke.
9 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at [6.4.4].
10 Ward Equipment Ltd v Preston, above n 4, at [94].
[39] Mr Riches’ starting point was that unless the Court is prepared to imply into the contract the terms pleaded in the statement of claim at paragraph 133 (and quoted at [23] above), clause 26.1 would be of no value. In other words, the plaintiff says that unless it can insist on the Crown pursuing the chose in action against EQC, the right it has to a top-up in the event that the sale and purchase price is exceeded by the amount recovered is entirely undermined.
[40] As Mr Ebersohn submitted, there is an equally respectable argument that what was happening in this contractual arrangement was that KSG was divesting itself of a risk — the Crown would contend an inevitability — that the pre-earthquake, unimproved, rating value of the land was higher than the value of the claim against EQC. In consideration of that KSG was foregoing the right itself to pursue recovery against EQC over and above the sale and purchase price. Seen in that light Mr Ebersohn submitted cl 26.1 was included in the contractual arrangements by the Crown with landowners to meet the very unlikely situation in which the value of the landowner vendor’s claim against EQC turned out to be higher than the pre-earthquake, unimproved, rateable land value.
[41] That, Mr Ebersohn submitted, was evident from the terms of cl 26.2 in which he submitted the parties clearly agreed that KSG was relinquishing all rights in relation to its claim and conferring on the Crown an absolute discretion in relation to the same.
[42] Against the background of those competing submissions as to the objective intention of the parties it is necessary to look at the key provisions in the contract.
[43] In cl 23 KSG assigned to the Crown “absolutely” its interest in the “Benefits” in respect of “Claims” and “Further Claims”. The terms “Claim” and “Further Claim” are defined so as to include any existing or future claim in respect of damage to the land against EQC. The term “Benefits” is defined so as to include all rights in respect of “Claims” or “Future Claims”. On its face, then, in cl 23, KSG bargained away any interest at all in the claim against EQC.
[44] As Mr Riches contends, cl 23 must be read in the light of cl 26. Clause 26.1 provides that in the event of the Crown receiving from EQC, in relation to damage to
the land, an amount in excess of the purchase price under the contract, the Crown must account to KSG in respect of that amount. Clause 26.1 is in turn subject to 26.2. This provides that cl 26.1 is not to be interpreted as having the effect of imposing on the Crown any duty to seek, or an expectation that the Crown will seek, to recover any particular amount from the EQC and, for the avoidance of doubt, the parties acknowledge that the Crown has an unfettered discretion as to how it will pursue the Claims or Further Claims and may settle Claims or Further Claims with EQC at its sole and unfettered discretion.
[45] It appears to me that the drafter of cl 26.2 has attempted to make it very clear that the Crown is not, by entering into an agreement including cl 26.1, assuming any responsibility to pursue a claim and to put beyond any doubt that the Crown is not undertaking any responsibility to do so.
[46] Mr Riches submitted that properly interpreted 26.2 reserved to the Crown an absolute entitlement to determine how but not whether to pursue the claim against EQC. As I understood his argument it picked up on the fact that the clause refers to the Crown having no obligation to recover any particular amount and having an unfettered discretion as to how it will pursue any claims that may exist.
[47] Standing back from the matter it seems to me to be clear that the objective intention of these parties as it emerges from the agreement as a whole and the clauses to which I have referred was that in consideration of the Crown acquiring the property and assuming the risk in relation to what recovery could be obtained in relation to damage to the land, KSG was prepared to settle for the purchase price in order to at least secure the most recent rating valuation for the property. Of course it may well have hoped that a payment greater than the purchase price might have been secured from EQC, but, whatever KSG’s hopes may have been in that regard, I am satisfied that the contract did not impose upon the Crown an obligation to pursue the claim against EQC. On the contrary, the contract expressly entitled it not to do so.
[48] It is also necessary to stand back from the agreement itself and have regard to the context that lead to the parties entering into their agreement in the first place.11
[49] KSG’s land and improvements had been seriously damaged by the earthquakes. As a result, the company’s business, like that of many others, was threatened. It faced real uncertainty as to whether it would be able to sell the property and if so its value. There must also have been some level of uncertainty surrounding the likely recovery in respect of damage to the land. To an extent at least, those issues were brought about by the zoning imposed on the land. In that environment, the Crown offered to acquire the land at the most recent (2007) rating valuation. Whilst that may not have been the value that KSG would have put on the land immediately prior to the earthquakes, and would certainly come nowhere near the value that it might have expected to generate from its sale as part of its business as a going concern, it would at least provide it with a secure return and shift the risk that it was facing on to the Crown. It is not entirely irrelevant in considering this to observe that cl 23 pursuant to which KSG assigned its chose in action followed the heading “Risk and Insurance”.
[50] As Mr Ebersohn submitted, what was happening here was that KSG was accepting a certain price pegged to a pre-earthquake valuation which was accepted by both parties as being something less than the pre-earthquake fair market value in order to avoid the risk it was facing.
[51] Seen in that light it is by no means surprising that the Crown was not prepared to assume any obligation to pursue the claim (and the costs associated with pursuing perhaps thousands of such claims).
[52] Viewed against that background it appears to me that whilst cl 26.1 was intended to address the situation where the Crown, exercising its discretion as to whether or not, and if so how, to pursue the claim against EQC, managed to recover more than the purchase price, Clause 26.2 was clearly inserted to make it as clear as possible that the Crown was not obliged to pursue that claim.
11 See for example Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [23] per Tipping J; Firm PI 1 Ltd v Zurich Australian Insurance Ltd T/A Zurich New Zealand [2014] NZSC 147 at [60]-[61].
[53] I see no incongruity with that interpretation of the contract and accordingly I do not accept that on that basis alone it is necessary to imply terms of the type propounded by KSG to give the contract business efficacy, or that an objective bystander would regard such terms as going without saying.
[54] In any event, it is elementary that the law will not imply a term into a contract if it is inconsistent with the express terms of the contract,12 and on my interpretation of the contract as a whole I cannot see that a clause imposing an obligation on the Crown to pursue a claim could be implied into this contract without doing serious violence to the language of that clause.
[55] I am also mindful of a recent observation of Sir Andrew Tipping where, in the course of advocating for a “blended test” for the implication of terms, he noted:13
Parties seek the implication of a term when its implication is to their contractual advantage. It will almost always be to their counterparty’s disadvantage. The strategy is often to seek an implied term as an alternative to interpretation. Without the term the contract does not work as the proponent of the term would like. But to imply the proposed term the court has to be sure the counter party must also have intended the proposed term to govern the situation that has arisen.
[56] It cannot sensibly be said that the Crown intended the plaintiff’s proposed term to govern the situation that has arisen.
[57] In short, I do not accept the submission advanced on behalf of KSG that a term requiring the Crown to pursue a claim arises expressly from the language of this contract or can be implied into it.
[58] A related issue is the nature of the Crown’s discretion under cl 26.2. The plaintiff submitted that in exercising this discretion the Crown must act within limits imposed by the common law. Those limits have been discussed at length both in and
12 BP Refinery (Western Port) Proprietary Ltd v Shire of Hastings, above n 6, at 283.
13 Rt Hon. Sir Andrew Tipping “Implication of contractual terms: a single blended test of “obvious necessity”” [2021] NZLJ 2 at 6.
out of the courts, notably in Abu Dhabi National Tanker Co v Product Star Shipping Co Ltd where Leggatt LJ said:14
Where A and B contract with one another to confer a discretion on A, that does not render B subject to A's uninhibited whim.
[59] The common law has developed a default position relating to the exercise of unilateral contractual powers that holds:15
Where a contract confers a discretionary power on one party, that party must not exercise the discretion arbitrarily, capriciously, or in bad faith, or unreasonably in the sense that no reasonable contracting party could have so acted.
[60] The well known public law formula for assessing unreasonableness from Associated Provincial Picture Houses Ltd v Wednesbury Corporation has become the standard by which contractual discretions are assessed.16 It has become part of contract law doctrine. The United Kingdom Supreme Court’s decision in Braganza v BP Shipping Limited essentially confirmed the role “Wednesbury unreasonableness” now plays in contract law.17
[61] Although it is not necessary in this context to address the appropriateness of a public law principle such as Wednesbury unreasonableness informing contractual doctrine, I would question the utility of importing a principle that, in the context in which it was originally developed, was probably on its last legs. However, in any event, I am not convinced the discretion here was exercised unreasonably, arbitrarily, capriciously or in bad faith. The steps taken by the Crown (discussed below) to advance the claim against EQC point rather to the discretion being exercised reasonably, and the plaintiff put in no evidence that goes to establishing unreasonableness.
14 Abu Dhabi National Tanker Co v Product Star Shipping Co Ltd (No 2) [1993] 1 Lloyd's Rep 397 (CA) at 404 per Leggatt LJ. See also Stephen Kós “Constraints on the Exercise of Contractual Powers” (2011) 42 VUWLR 17 and the cases referred.
15 Stephen Kós “Constraints on the Exercise of Contractual Powers”, above n 14, at 20.
16 Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 (CA).
17 Braganza v BP Shipping Limited [2015] UKSC 17.
[62] Nor can I see how the nature of the discretion, and what the plaintiff says is the “effective abandonment” of the claim amounts to an ouster of the bargain contained in cl 26.1.
[63] The conferral of a broad discretionary power in a contract does not automatically render the contract illusory. How that power is used and the context in which it is used may render a contract illusory, but its mere presence does not. The Court should not ignore, indeed it should focus on, what has occurred — in this context steps taken to advance the claim by the Crown — rather than focus purely on the nature of the promise or clause in isolation.
[64] Further, there will usually be implied constraints controlling the extent to which the power may be exercised,18 meaning there will rarely be such a thing as a truly unfettered discretion. Parties can of course expressly negate the application of the default rule in clear language,19 which arguably the parties have done by agreeing that “the Purchaser has an unfettered discretion as to how it will pursue the Claims”; although I doubt the Crown has intentionally negated a rule that requires it to exercise its discretion reasonably.
Estoppel
[65] KSG’s second cause of action based on estoppel appears to me to be founded on a logical fallacy.
[66]KSG pleads:
138.The top-up payment entitlement contained within clause 26.1 was for the benefit of the plaintiff.
139.In entering clause 26.1 of the agreement, the defendant represented to the plaintiff that it would continue to advance the EQC claim.
[67] If, as I have concluded, the agreement does not contain an express obligation on the Crown to pursue the EQC claim, and such an obligation cannot be implied into the agreement, then it appears to me to be profoundly illogical to contend that by
18 See Stephen Kós “Constraints on the Exercise of Contractual Powers”, above n 14, at 19.
19 At 34.
entering into the contract — more particularly by entering into the contract which included cl 26.1 — it represented to KSG that it was assuming such an obligation. That contention does not make sense and cannot be right.
[68] Although that is enough to dispose of the case, there is a further point concerning KSG’s allegation of breach.
The Crown’s actions
[69] As already said, KSG’s case is that the Crown assumed a contractual obligation to pursue the claim against EQC, and that the Crown breached that obligation by not pursuing the claim and abandoning it.
[70] In response to the alleged breach, the Crown has put in affidavit evidence from Mr Gerome Sheppard who is the Deputy Chief Executive of Crown Property at LINZ. Mr Sheppard gives a very detailed account of the steps taken by LINZ to advance the claim against EQC commencing immediately after the execution of the sale and purchase agreement and concluding in the first half of 2019. The purpose of this evidence is of course to demonstrate that the Crown has in fact pursued the claim.
[71] Whilst Mr Riches’ submissions criticised the Crown’s actions, suggesting that more could have been done to pursue the claim, he did not take the argument so far as to attempt identify what further steps KSG says the Crown should have but has not taken.
[72] Given that the Crown can undoubtedly demonstrate that it has taken steps over approximately six years to pursue the claim, it is not immediately obvious to me that it is open to KSG to argue that those steps are inadequate.
[73] KSG alleges that the Crown has abandoned the claim and identifies as the foundation for that allegation the agreement between the Crown and the local authority for the sale of the land entered into in September 2019. Mr Sheppard’s evidence demonstrates conclusively that in that agreement the Crown did not abandon the claim.
[74] It seems to me that KSG’s allegation of breach in the end goes no further than suggesting that the Crown might have pursued the claim with greater vigour. That may be so. But it does not take KSG’s claim very far.
Loss
[75] There is a final dimension to the case which goes to the issue of whether KSG can — or could ever — establish any loss.
[76] It will be recalled that KSG’s pleaded loss is effectively the difference between the sale and purchase price of the land and the alleged value of the claim against EQC.
[77] Mr Ebersohn submitted that there is a fundamental flaw with that approach because the EQC Act limits liability. He made a careful analysis of the legislation and the scope of potential recovery, essentially demonstrating that KSG’s loss would be properly calculated at a figure several factors below the value of the claim that KSG itself puts on it.
[78] In further support of this argument Mr Ebersohn refers to Mr Sheppard’s evidence which is that for 98 per cent of parties who have sold their land to the Crown on the same terms as KSG the payments received from EQC are below 50 per cent of the purchase price paid by the Crown for the land and that for the 123 titles that make up the plaintiff’s former land, the average payment received from EQC is approximately 35.3 per cent of the purchase price paid by the defendant.
[79] Mr Ebersohn’s analysis of the EQC Act and its proper application here is not accepted by Mr Riches and accordingly KSG does not accept the relevance of Mr Sheppard’s evidence on this point.
[80] Whilst I would not have been prepared to enter summary judgment in this case on the strength of this analysis alone, it appears to me that the prospect of KSG recovering more than the sale and purchase price would in any event be vanishingly small.
Conclusion
[81] For those reasons, I am left in no doubt that the plaintiff cannot succeed on either of its two causes of actions.
[82] The proper course is therefore to enter summary judgment for the defendant and I do so.
Costs
[83]I reserve costs, not having heard from counsel in relation to these.
[84] If counsel are unable to agree on costs, as I would expect them to do, they may file memoranda in the usual way.
Associate Judge Johnston
Solicitors:
Saunders & Co, Christchurch for plaintiff Crown Law, Wellington for defendant
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