Kung v Wichman

[2013] NZHC 2587

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-004214 [2013] NZHC 2587

UNDERThe Property Law Act 2007, Section 339 et seq

IN THE MATTER             of Lot 20 on Deposited Plan 349979, Certificate of Title Identifier 204541 (North Shore Registry)

BETWEEN  ALLAN KUNG Plaintiff

ANDELIJAAH WICHMAN First Defendant

DAVID ARTHUR FITTON Second Defendant

ASB BANK LIMITED Third Defendant

Hearing:                   4 October 2013

Appearances:           G J Thwaite for Plaintiff/Respondent

D Grove for the Second Defendant/Applicant

Judgment:                4 October 2013

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

04.10.13 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

A KUNG v E WICHMAN, D A FITTON AND ASB BANK LIMITED [2013] NZHC 2587 [4 October 2013]

[1]      The second defendant has applied to set aside the judgment obtained against him by the plaintiff.  He believes a miscarriage of justice will otherwise occur; that he was not aware the judgment was being brought against him and would otherwise have filed papers in opposition to the quantum sought.

[2]      The second defendant is a property investor and property advisor.

[3]      It is pleaded that with the assistance of the second defendant the plaintiff and first defendant agreed to purchase a property in Manurewa, Auckland owned by the second defendant’s family trust, for $475,000.  The purchase was to be funded by a loan in that amount to be secured by a mortgage over the plaintiff ’s residential home.

[4]      The purchase was subject to a property sharing agreement by which the second defendant was to pay $20,000 to the plaintiff and that the first defendant would live at the Manurewa property and be responsible for all loan repayments as well as outgoings on that property.   The agreement also provided that if the first defendant defaulted with loan repayments that the second defendant would acquire the first defendant’s interest in the land and would pay all outgoings and liabilities until the land was sold and then proceeds were divided between the plaintiff and the second defendant.

[5]      The second defendant covenanted to indemnify the plaintiff against any loss caused by any loan default of the first defendant.

[6]      Within months of taking occupation the first defendant ceased to occupy the land and it has subsequently been rented to tenants but at a cost insufficient to cover monthly installments on the loan secured over the plaintiff’s land.

[7]      Because  the  third  defendant  Bank  made  demand  in  connection  with  the plaintiff’s obligations to it, the plaintiff issues his proceeding claiming breaches of the property sharing agreement. Also orders were sought in connection with the sale of the land including the appointment of a solicitor and a real estate agent.

[8]      The proceeding was filed on 24 July 2012 and thereafter was served on the second defendant.   The matter had a first call in the summary judgment list on 5

September 2012.  Mr Thwaite appeared for the plaintiff and Mr Halse for the second defendant.   At the time of that call it was noted the first defendant had not been served.  Associate Judge Doogue made an order permitting substituted service upon the first defendant.  He then adjourned the matter for a further call on 31 October

2012.

[9]      On 2 October 2012 Mr Thwaite arranged for the filing of a memorandum signed by the plaintiff and the first defendant authorizing the sale of the land without reserve, and for the appointment of Mr Lockhart as solicitor to act for the sale, and the appointment of Barfoot and Thompson as real estate agent for the purpose of sale and that the proceeds of sale were to be held subject to further order of the Court or as agreed to in writing by the plaintiff and first defendant.

[10]     An order to that effect was sealed on 31 October 2012.

[11]     The  matter  was  called  on  6  November  2012  when  Mr  Thwaite  alone appeared.   Judge Abbott noted the matter had been listed to consider a possible variation to consent orders previously made.  Judge Abbott’s minute records that Mr Thwaite informed him there was no longer any need for a variation and that the parties (at least the plaintiff and second defendant actively, and the first defendant by default) were working on sale of the property in question.

[12]     It is recorded Mr Thwaite sought an adjournment to February 2013 to allow the sale process to take its course, before determining whether any further steps needed to be taken in the proceeding.

[13]     The matter was then adjourned for recall on 12 February 2013.

[14]     The next record of the Court is dated 18 April 2013 when Mr Thwaite alone appeared.  Judge Doogue’s minute of that date notes that an affidavit as to quantum of the summary judgment sought had been filed and that it included a provision for

legal  costs  claimed  at  $44,367  based  upon  a  clause  in  the  property  sharing agreement.

[15]     Judge Doogue recorded that notwithstanding the proceeding was undefended he considered the Court should make some enquiry into the reasonableness of the level of costs involved.  He made certain directions in that respect.

[16]     The second defendant’s set aside application was filed on 10 July 2013.  At first  call  was  scheduled  on  8 August  2013.    The  plaintiff’s  judgment  remains unsealed.

Considerations

[17]     The Court has read counsels’ submissions and has reviewed the affidavit evidence that has been filed.  It is clear from the affidavits of Mr Halse that he is somewhat disparaging of the actions of Mr Thwaite on behalf of the plaintiff.  It is clear from Mr Thwaite’s submissions and it can be implied from his actions as plaintiff’s counsel that he believed the second defendant was never serious about negotiating a settlement. That is why he said a Court’s decision was required.

[18]     Letters had passed between lawyers concerning settlement negotiations being undertaken.

[19]     The parties agreed, and it is clear for this purpose the proceedings were on a number of occasions adjourned because the plaintiff and second defendant were agreed upon a sale of the home albeit to another entity of the second defendant.  The negotiations then focussed upon what ought to be paid to the plaintiff as a measure of his losses.  Curiously these became unstuck in part because of the fees that Mr Thwaite intended to charge as authorised by the property sharing agreement.

[20]     In the end and without notice to the second defendant or his solicitor, the matter was called in the summary judgment list on 18 April as previously indicated.

[21]     That additional evidence as to quantum was provided by a seventh affidavit of the plaintiff.  It notes:

13.From the outset, Mr Thwaite tried to negotiate an arrangement with second   defendant   through   his   solicitor   Graeme   Halse   Esq. Throughout the process Mr Thwaite attempted to engage with Foy & Halse, so as to reach an agreed outcome. There was a false start with a prospective purchaser located by second defendant.   Eventually negotiations led to the second defendant buying the property.  The negotiations  included  Mr  Thwaite  attending  a  meeting  with  Mr Halse and second defendant.  Mr Halse was often slow to return a call or email, and Mr Thwaite had to leave messages on a number of occasions.

[22]     It is clear from the beginning that the parties wished to explore a commercial settlement without recourse to Court proceedings.  It is for that reason no papers in opposition were filed or served.

[23]     The proceedings were adjourned to enable that process to be completed. There were initial concerns about the calculations of gross and of net value.

[24]     Although it took longer than anticipated the property was sold and the net proceeds were paid to the plaintiff.

[25]     Counsel for the second defendant states that at no time prior to a judgment being obtained did the plaintiff provide particulars as to the quantum of the alleged claim, despite stating that the exercise was being undertaken.   Counsel submits in fact that despite saying that the reconciliation was being completed, there were no further communications with the second defendant’s solicitor.   Instead the plaintiff proceeded to obtain judgment.

[26]     It is clear that the amount for which judgment was obtained exceeds by far the amount being considered in the settlement range of the parties.  An accountant engaged  by the  second  defendant  estimates  the  plaintiff’s  losses  to  be  between

$1,400.05 and $4,648.80 but qualifies that estimate by concerns about the unavailability of relevant material.

[27]     Indeed since judgment was obtained Mr Thwaite has taken the view that he will not provide any of the affidavits filed in support of judgment quantum, because the defendants had taken no steps and had provided no address for service.

Conclusion

[28]     Each party had their own view of the actions of the other’s solicitor and concerning their perception of the other parties’ commitment to compromise.

[29]     But, it was clear there was a commitment to commercial negotiation and it is open to view that that commitment was cancelled unannounced on behalf of the plaintiff who then took advantage of the fact that the second defendant had not filed an address for service or a statement of defence.

[30]     There is no dispute as to liability but there is a significant dispute regarding quantum.   It could be viewed that the plaintiff ’s actions in obtaining judgment by default were an attempt to pre-empt and end commercial discussions.   Certainly a somewhat formal approach has been adopted on behalf of the plaintiff of requests since for those details submitted for the grant of judgment.

[31]     It is very unlikely the matter could have been resolved in the way it was but for the fact that the plaintiff without advice to the second defendant’s solicitors returned to Court for the purpose of getting his judgment.

[32]     Whilst the plaintiff may feel justified in what was done the Court’s view is that there may have been a breach by the plaintiff of an undertaking to commit to commercial negotiations when no clear notice was given to rescind that commitment before action was taken by the plaintiff in the manner described.

[33]     It is not the purpose of this judgment to review in detail the actions of the lawyers or what it was they expected of the other or to review their reasons for distrusting the commitment of the parties to negotiations.   The plaintiff says no offers were put on the table.  The second defendant says a sale of the property was achieved at a price agreed and that it was the plaintiff who had failed to provide sufficient particulars of the quantum of his claim.  The plaintiff has the proceeds of sale. The issues are just about adjustments and fees.

[34]     Really it does not matter whose fault it was.  Whilst there was no legal duty to advise the second defendant that judgment was being sought, the parties had an agreement to commit to negotiate in the context of which no warning was given that the plaintiff would seek judgment when he did.

Conclusion

[35]     The second defendant had a substantial ground of defence, he has explained the delay, and the plaintiff will not suffer irreparable injury if the judgment is set aside.

[36]     This is an appropriate case for judgment to be set aside as to quantum. Judgment as to liability will remain.

Judgment

[37]     Application to set aside judgment as to quantum only is granted.

[38]     Costs are reserved for determination in the resolution of all matters between the parties.

Other matters

[39]     The second defendant is to file and serve a statement of defence by 18

October 2013.

[40]     The proceeding is adjourned for call in the chambers list on 1 November

2013 at 2:15pm.

Associate Judge Christiansen