Landreth v Lagoon Valley Dairies Limited

[2018] NZHC 1286

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2017-425-000116

[2018] NZHC 1286

IN THE MATTER

of the Property Law Act 2007

BETWEEN

KIMBERLEY LEX LANDRETH, HAYLEY PAULINE LANDRETH and RUSSELL JAMES CASSIDY

Plaintiffs

AND

LAGOON VALLEY DAIRIES LIMITED

Defendant

Hearing:	30 May 2018 (Determined on the papers)
Counsel:	G A Paine for Plaintiffs JJYR Pierce for Defendant
Judgment:	1 June 2018

COSTS JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]    The plaintiffs’ application for summary judgment, and its substantive claim against the defendant, were resolved by a consent order made on 9 May 2018. This followed discussions with counsel prior to a scheduled fixture for the plaintiffs’ application for summary judgment. Costs were reserved. Counsel have been unable to agree on this issue so they have filed memoranda.

[2]    Counsel for each party delves into the merits of the case. To an extent, therefore, it is necessary to refer to the factual material and to express a view on it. This is in two categories.

[3]    The first is the correct interpretation of clause 20.1(e) of the agreement dated 6 March 2012 by which the plaintiffs sold the majority of their farm property to (as

LANDRETH v LAGOON VALLEY DAIRIES LTD [2018] NZHC 1286 [1 June 2018]

nominated) the defendant. Under the agreement the defendant purchased the plaintiffs’ property save for an area of approximately 8 hectares, known as the workshop block. As this area was not on a separate title, it was necessary for the contract to provide for a separate title to be obtained. The contract also provided for the plaintiffs to buy this piece of land in the event resource consent for this was not obtained. Pending this position being reached, the purchasers took title to the land and held it on an express trust for the defendant.

[4]    In the event, resource consent was not obtained, so the provisions relating to purchase of the legal estate in this area of land then applied. The process to be followed involved having the land valued, and the plaintiffs then buying it. Unfortunately, neither the plaintiffs nor the defendant followed the procedure required by the relevant clause of the agreement for sale and purchase:

… the Purchaser shall purchase the workshop block at a valuation to be agreed upon by the parties but in the event of them being unable to agree, then such value shall be set by a registered valuer if one can be agreed upon by the parties or by two registered valuers to be selected by each party and who shall appoint an umpire before embarking on their valuation and whose decision shall be final and binding on all parties. …

[5]    The parties were unable to agree on the value of the workshop block, or to the appointment of one valuer. It was therefore necessary for each party to follow the balance of the stipulated procedure. Neither did. Each party engaged a valuer but neither party ensured that that valuer conferred with the other valuer to appoint an umpire before embarking on his or her valuation.

[6]    The obligations of both the plaintiffs and the defendant under this clause were clear. These were:

(a)Each party was to appoint a valuer for the purposes of valuing the workshop block.

(b)Each valuer so appointed was to confer with the other and appoint an umpire before undertaking his or her valuation.

(c)By implication, both the plaintiffs and the defendant were to ensure their respective appointees did in fact appoint an umpire before undertaking the task of valuation.

[7]    The last of these steps did not occur. In my opinion, it is quite clear that both the plaintiffs and the defendant were in breach of their contractual obligations. Because the clause expressly imposes the obligation to appoint an umpire on the valuers, who are not parties to the contract, an implied term requiring each party to instruct its own valuer to confer with the other and appoint an umpire is obviously necessary to give the contract practical effect in accordance with achieving the outcome which was plainly intended.

[8]    Because neither valuer appointed an umpire before proceeding, and no agreement could be reached for an umpire to be appointed later, this proceeding ensued. In the prayer for relief, the plaintiffs claimed specific performance requiring the defendant to “require its valuer to appoint an umpire in conjunction with the valuer for the plaintiffs”. This was plainly a common sense and practical way of proceeding, as it would allow each party to retain its existing valuer and proceed to an outcome without incurring the expense of each party having to start again. However, this prayer would not have accorded with the precise terms of the contract. That is not to say, however, that the Court would not have made an order in those or other suitable terms had the matter proceeded to trial. The application for summary judgment is broadly in the same terms, seeking an order that judgment be entered against the defendant ordering it to specifically fulfil the contract by appointing an umpire. Again, this order would not accord exactly with the contract, but an order which gave effect to the intention of the parties at the time they contracted would have been open to the Court.

[9]    The defendant’s notice of opposition, however, is problematic also. It contains propositions which are plainly untenable. It says that because the plaintiffs did not apply for resource consent as required by clause 20.1(a) of the agreement, they had waived their right to exclude the workshop lot from the sale. There are two reasons for that proposition being without merit. First, the workshop block had already been excluded from the sale. The defendant did not buy it. It merely took title to the entire certificate of title, as trustee in respect of the workshop block portion of it. At no point

had it taken title to the equitable estate in the workshop block. It received only the legal estate.

[10]   The second difficulty with this pleading is that the contract expressly made provision for what would occur in the event of “the resource consent not being available by 31 March 2014”. I do not accept the contention in the notice of opposition that because the plaintiffs did not apply for resource consent, this clause did not apply.

[11]   A further shortcoming in the notice of opposition is in paragraph 3(e)(iv). It says that the engagement of valuers by each party, which did occur, was not a nomination pursuant to clause 20.1(e) of the agreement for sale and purchase. That is simply wrong. However, the defendant’s position is correct that simply appointing an umpire, as the plaintiffs sought, would not have complied with the contract for the reason I have set out. The defendant was correct in paragraph 3(e)(vi) and (vii) where it said that the appropriate process was for each party to nominate a valuer who would, in turn, appoint an umpire before embarking on the valuation, and that these steps must be completed before the appropriate sale price can be determined. So, while there were shortcomings in the pleadings for the plaintiffs, there also were in the pleadings of the defendant.

[12]   Analysis of the pleadings shows that by the time the case came for a summary judgment hearing there were three issues to be decided. The first was the correct interpretation of clause 20.1(e) of the agreement, and the second was the waiver issue. Although the precise orders sought would not have complied with the contract, it would have been open to the plaintiffs to seek a slightly amended order and, given the clear terms of clause 20.1(e), that is undoubtedly a suggestion that the Court would have been receptive to, or suggested itself.

[13]   So far as the second issue was concerned, it was utterly without merit, and no more need be said.

[14]   A third issue to be considered was the effective date for the valuation. The plaintiffs contended, wrongly, that the date should be current. The contract contemplated a process which would have had valuations undertaken straight after the

resource consent deadline of 31 March 2014. It is difficult to see any reason why either party should bear the effects of the ups and downs of the property market, such as they may be, over a period of nearly four years since these matters should have been properly attended to.

[15]   In the result, therefore, there were problems with the plaintiffs’ case in the exact terms of the orders sought and the date for valuation. There were problems with the defendant’s case also, in relation to the contention that the plaintiffs were not entitled to a remedy at all on the basis of waiver. The consent order settled all these matters.

[16]   In my opinion, it cannot be said that the plaintiffs are the successful party. The impasse has been broken and orders have been made for the exact terms of the contract to be followed, with a timetable for that to occur. However, this is not exactly as the plaintiffs sought, nor is the valuation date as they wished.

[17]   On the other hand, it cannot be said that the defendant succeeded either. By its meritless waiver argument, it sought to retain a block of land which it held on trust, as its own. No trustee can retain a trust asset just because a beneficiary is slow to ask for it.

[18]   If that were the end of the matter, I would direct that costs lie where they fall. However, counsel have put before me correspondence exchanged without prejudice save as to costs. It is necessary to consider whether that alters the position.

[19]   On 19 January 2017, the defendant’s solicitors wrote to the plaintiffs’ solicitor. They set out their interpretation of clause 20.1(e). That interpretation was correct and as I have recorded in this judgment. They noted that the procedure followed by the parties did not comply with the contract. They then proposed a settlement. The first term of the settlement was a process for valuation which accurately reflected the contractual obligations on each party. That offer would have resolved matters as long ago as January 2017 and all subsequent costs would have been avoided if it had been accepted. In my opinion this offer should have been accepted, and the fact that it was not should be considered in the context of assessing costs.

[20]My decision on costs is:

(a)There will be no award of costs to either party in respect of commencement of the proceeding by the plaintiffs or commencement of a defence by the defendant.

(b)There will be no costs in relation to the preparation and filing of the application for summary judgment or the preparation and filing of the opposition to summary judgment.

(c)The plaintiffs will pay to the defendant half the cost of preparation of written submissions for the summary judgment application, which amounts to 0.75 of a day. Acceptance of the proposal made in January would have avoided this work.

(d)Neither party will pay costs to the other in relation to appearance at the hearing or preparation of a bundle for the hearing.

(e)The plaintiffs will pay to the defendant four-tenths of a day in relation to the scheduled first case management conference which would not have been required had the case settled in January.

(f)There will be no other payments in relation to costs.

[21]   The notice of opposition was filed after the point at which the settlement offer of 19 January should have been accepted so the plaintiffs will pay to the defendant the filing fee on the notice of opposition, $110. There will be no other payments for disbursements.

J G Matthews Associate Judge

Solicitors:

Staley Cardoza, Dunedin

Gallaway Cook Allan, Dunedin