Ludlow v Minter Ellison Rudd Watts HC Auckland CIV2007-404-249
[2007] NZHC 2085
•31 August 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV2007-404-249
BETWEEN TREVOR ALLAN LUDLOW AND CAROL ANNE BRAITHWAITE Plaintiffs
ANDMINTER ELLISON RUDD WATTS First Defendant
ANDDENARAU INVESTMENTS LIMITED Second Defendant
Hearing: 20 June 2007
Appearances: M J Tingey and E F Elliott for Plaintiffs
P G Skelton for First and Second Defendants
Judgment: 31 August 2007 at 3.15 pm
JUDGMENT OF ASSOCIATE JUDGE H SARGISSON
In accordance with r 540(4) High Court Rules
I direct the Registrar to endorse this judgment with a delivery time of 3.15 pm on 31 August 2007
Solicitors:
Bell Gully, PO Box 4199, Auckland
Anderson Creagh Lai, PO Box 106-740, Auckland 1143
Minter Ellison Rudd Watts, PO Box 3798, Auckland
TA LUDLOW AND CA BRAITHWAITE V MINTER ELLISON RUDD WATTS AND ANOR HC AK CIV2007-404-249 31 August 2007
[1] The plaintiffs, Trevor Allan Ludlow and Carol Anne Braithwaite, seek by summary judgment, the return of deposits amounting to NZ$242,500.00 paid by them and held by the first defendant, Minter Ellison Rudd Watts, as stakeholder, or damages in the same sum from the second defendants, Denarau Investments Limited. They also seek interest, and a costs order.
[2] The plaintiffs’ claim relates to four properties in Fiji that they agreed to purchase from Denarau Investments. The basis of the claim is that they elected to cancel the relevant agreements for sale and purchase as Denarau Investments repudiated its obligations under the agreements, and that they gave notice of cancellation accordingly. They say they are therefore entitled to the return of the deposits. They contend that the defendants have no defence to the claim.
[3] Denarau Investments opposes an order for summary judgment. It does not take issue with the plaintiffs’ entitlement to the return of their deposits in the event that the Court finds that it did repudiate the agreements. However, it says it has a genuinely arguable defence that it did not repudiate the agreements and that its defence cannot be determined by way of summary judgment and should go to trial. It says in these circumstances, it would be unsafe to treat the plaintiffs’ notice of cancellation as valid cancellation.
[4] Minter Ellison’s position is that it is merely the stakeholder holding the deposit monies and that it will abide the Court’s decision. It wishes to be heard only in relation to costs, should costs against it be in issue.
Issues
[5] There are two primary issues for decision. First, whether Mr Ludlow and Ms Braithwaite have provided sufficient evidence to prove, on a prima facie basis, their assertion Denarau Investments repudiated the agreements for sale and purchase, by letter dated 20 October 2006. Secondly, whether they have demonstrated that the factors Denarau Investments has raised to challenge that assertion do not give rise to any arguable issues worthy of trial.
[6] It is common ground that if the plaintiffs have met these tests, then they will be entitled to have their letter of cancellation dated 7 November 2006, treated as valid cancellation and to the orders that they seek.
Background
[7] In August 2004, Mr Ludlow and Ms Braithwaite entered into four written agreements with Denerau Investments, the developer of the Fiji Beach Resort and Spa at Denerau Island in Fiji. The agreements were essentially in identical terms, and each one provided for the grant of a title lease, and the construction of a villa and the sale of associated fittings, furnishings and equipment, at Stage 2 of the resort.
[8] The particular villas Mr Ludlow and Ms Braithwaite purchased were villas,
51C, 52B, 66A and 66B.
[9] Given the limited matters in issue it is not necessary to set out the terms of the agreements in detail. Suffice it to note that each agreement included terms that:
a) Required Mr Ludlow and Ms Braithwaite to pay a deposit to Minter Ellison, as stakeholder, and Minter Ellison, as stakeholder, to hold the deposit and the net interest earned on the deposit in trust for Denarau Investments and Mr Ludlow and Ms Braithwaite.
b)Provided for the deposits to be paid back to Mr Ludlow and Ms Braithwaite together with the net interest, unless Denarau Investments became entitled to the deposits and/or to require settlement under the provisions of the agreement.
c) Afforded to Denarau Investments a right to decide it would not proceed with Stage 2 and to cancel all agreements relating to Stage 2. The relevant clause is clause 2.2 and it states:
Cancellation by Denarau Investments: If Denarau Investments for a reason determines (in its sole discretion) not to proceed with the Project as a whole, or any Stage of the Project which includes the villa to be constructed for the
Purchaser, it may cancel the Sale Agreements by giving written notice to the Purchaser, upon which the provisions of Clause 3.2 shall apply.
[10] Clause 3.2 provided, in the event of cancellation by Denarau Investments, for the return of deposit monies plus certain interest, but it ruled out claims for damages.
[11] Under the agreements, Denarau Investments also had the right to decide on the substitution of any finish, fitting or fixture of equivalent quality to that specified in the construction details, in which case there would be no adjustment to the sale price or liability for compensation.
[12] Mr Ludlow and Ms Braithwaite paid the four deposits totalling
NZ$242,500.00 to Minter Ellison.
[13] Denarau Investments encountered difficulties with mounting costs. On or about 20 October 2006 it wrote to Mr Ludlow and Ms Braithwaite. It sent four essentially identical letters, one for each villa property, informing them it was not prepared to complete the Stage 2 villas unless it could at least match the level of quality achieved in the completion of Stage 1. It said it could not do this at the contract price, and it raised the need for substantial price increases as follows:
a) Villa 51C – NZ$235,000.00, resulting in an increase in the purchase price of $NZ550,000.00 to $NZ785,000.00.
b) Villa 52B – NZ$210,000.00, increasing the purchase price from
NZ$550,000.00 to NZ$760,000.00.
c) Villa 66A – NZ$210,000.00, being an increase in the purchase price of NZ$765,000.00 to NZ$975,000.00.
d)Villa 66B – NZ$210,000.00, being an increase in the purchase price of NZ$765,000.00 to NZ$975,000.00.
[14] The total proposed increase for the four villas was NZ$875,000.00, taking the overall purchase price from NZ$2,640,000.00 to NZ$3,515,000.00.
[15] The text of the letter for Villa 51C, which was repeated in the other letters with the necessary amendments as to price and valuation, stated:
I am writing to inform you of an important issue that has arisen, which involves your Villa and to ask for your understanding and co-operation.
The standard and amenity of the Stage 1 villas of the Fiji Beach Resort and Spa have surpassed everyone’s expectations and have set new bench marks for resorts at Denarau Investments Island and in Fiji generally.
However, during our recent negotiations for the construction of Stage 2 we have come to the unfortunate realisation that it has become cost prohibitive to complete the Stage 2 villas to the standard and quality of Stage 1. This is due to the booming Fiji economy and the resulting demand on local resources which is having a significant inflationary impact on costs associated with construction. We also need to allow for cost increases through to completion of your Villa, projected around March 2008.
We have limited choices available to us, if we are to proceed with Stage
2. We can:
• Compromise the standards, quality and size of the Stage 2 villas;
• Cancel Stage 2 of the Resort altogether; or
• Obtain your agreement to an increase in the sale price of your Villa and so retain the Stage 2 concept standards and quality.
There has been much debate and heartache as to the best way to resolve this issue without involving you, our valued purchaser, however we have no other realistic alternative.
Denarau Investments is not prepared to complete the Stage 2 villas unless we can at least match the level of quality achieved in the completion of Stage 1. We also feel that it would be a great disservice to our existing villa owners in Stage 1, the project and yourself to compromise on standard and quality.
To not proceed with Stage 2 (while fully within Denarau Investments rights under the provision of your Sale Agreement – see clause 2.2.) would be very disappointing for everybody involved in the project.
To complete the Resort to the standards achieved in Stage 1, we seek your agreement to an increase in the sale price of the Villa you have contracted to purchase. To facilitate this, Denarau Investments proposes that you offer to vary your Sale Agreement so that the sale price of your Villa is increased by $235,000.00 from $550,000.00 to
$785,000.00. We estimate the current market value of your Villa to be
$1,060,000.00. After increasing your sale price as above this will provide you with a capital appreciation for your Villa.
In recognition of your commitment to the project, and agreement to the increase in the sale price of your Villa, Deanrau Investments proposes to:
• Accept that it is not necessary that you increase your deposit to 10% of the new purchase price – the existing deposit of $55,000.00 is all that is required to be paid until completion and settlement of the Villa; and
• Waive the requirement for payment of the second 5% deposit due on the
Villa being closed in.
Please refer to the attached Addendum to the Sale Agreement for your
Villa which sets out the proposed increased sale price and terms.
We have discussed the above proposal with our financiers who have provided “approval in principle”, subject to their director’s approval and a successful conversion of existing Stage 2 sales to the revised prices as proposed by Denarau Investments.
Please sign the attached Addendum to the Sale Agreement and return it to us in the enclosed pre-addressed envelope and retain the copy for your records. Please do this by no later than Monday 30 October 2006.
Once this process has been completed and after consultation with financiers, we will advise you of the outcome.
Thank you for being a dedicated purchaser of the Hilton Fiji Stage 2 Villas and for your kind understanding in these difficult circumstances. I truly regret having to write this letter to you, but unfortunately I have no other alternative. I am more than happy for you to call me to discuss this. Phone .
. .
[Emphasis added]
[16] Denarau Investments attached to each letter a document called an “Addendum to Sale Agreement”. The addendum incorporated an irrevocable offer that Mr Ludlow and Ms Braithwaite were invited to make in order to vary the agreement for sale and purchase. The terms of the offers provided for the increase to the sale price that Denarau Investments required. They also provided for the deletion of clause 2.2 of the agreement.
[17] Mr Ludlow and Ms Braithwaite were wary of taking up the invitation and did not sign the addenda as Denarau Investments requested. On 30 October 2006 they met with Mr Mahon, the director of Denarau Investments. They provided him with a letter stating that they required additional information (including valuations and a copy of a quantity surveyor’s report) so that they could make a “qualified decision” to commit additional funds.
[18] There is no dispute that at the meeting Mr Mahon indicated that he left it to Mr Ludlow and Ms Braithwaite to decide whether or not to accept the increase in the purchase price of the villas. What is disputed is Mr Ludlow’s evidence that Mr Mahon made clear that if they did not agree to the increase, Denarau Investments would not perform its obligations under the agreements. Mr Mahon disputes making such a statement.
[19] However, Mr Mahon wrote subsequently to Mr Ludlow and Ms Braithwaite by letter dated 1 November 2006. The letter did not change or qualify the position Denarau Investments set out in its earlier letter of 20 October. It states:
Fiji beach resort and spa – Denarau Investments Island, Fiji
Thank you for your letter of 30 October 2006 and taking the time to meet with me to discuss your concerns.
As we have discussed your concerns, I now leave it to you to make a decision as to whether or not you will sign and return the addendum.
[20] On or about 7 November 2006 Mr Ludlow and Ms Braithwaite wrote to
Minter Ellison and Denarau Investments to cancel the agreements. The letter states:
Re: Deposits on apartments 66A, 66B, 51C and 52B Fiji Beach Resort and
Spa.
Dear Neville,
Further to our telephone conversation this afternoon.
Please accept this letter as formal notice that we wish to cancel the purchase of the above Apartments, and would like our deposits returned to the below account, as soon as possible. We would like to take this opportunity to wish you and your team, all the best with this exciting development.
[21] The letter, signed by Mr Ludlow and Ms Braithwaite, provided account details at their BNZ bank account.
[22] There is some dispute as to subsequent events. Mr Ludlow and Ms Braithwaite say that on or about 18 November 2006, Mr Mahon agreed orally that the agreements were cancelled and that the deposits would be returned. They say this was on the proviso that it was confirmed in writing that return of the deposits was in full and final settlement of any claim against Denarau Investments. Mr Mahon
disputes there was any such oral agreement and says what was agreed was that he would speak to Denarau Investments’ financier to determine whether it would agree to the cancellation. Mr Mahon says that he told Mr Ludlow several times he could not cancel the agreement without the express approval of the financier. This contrasts with Mr Ludlow’s evidence that he did not know of Denarau Investments’ financier until after the agreement was cancelled.
[23] In any event, Mr Ludlow and Ms Braithwaite sent a letter to Denarau
Investments on 18 November 2006 which stated:
Re: Deposits on apartments 66A, 66B, 51C and 52B Fiji Beach Resort and
Spa.
Dear Neville,
Further to our recent telephone conversations, and mail correspondence.
I can confirm that on the receipt of the repayment of the deposits, and the accrued interest, on the above developments. We would regard this as settlement in full and final settlement of yours, and your companies legal obligations,
Please note a change in the Bank Account we wish the funds to be lodged into. The details of which are below.
[24] The letter gave the new account details.
[25] Mr Mahon deposes that, having received the letter, he spoke to Denarau Investments’ financier, Strategic. He says that Strategic refused to agree to the cancellation of the agreements.
[26] On or about 18 December 2006, the solicitors for Mr Ludlow and Ms Braithwaite demanded in writing to Minter Ellison and the solicitors for Denarau Investments, the immediate return of the deposits.
[27] The deposits were not returned and Denarau Investments continues to refuse to agree to the return of the deposits. It maintains that it is entitled to hold Mr Ludlow and Ms Braithwaite to the agreements for sale and purchase, on the original terms. Minter Ellison’s position has been not to return the deposits as it is merely
the stakeholder caught in the middle of the dispute between Mr Ludlow and Ms
Braithwaite and Denarau Investments.
[28] Mr Ludlow and Ms Braithwaite have therefore commenced this proceeding. Their statement of claim advances a single cause of action based on repudiation and cancellation, in accordance with s 7(2) of the Contractual Remedies Act 1979. Essentially, they plead that:
a) Denarau Investments’ letter of 20 October 2006 amounted to a repudiation of the agreements because the letter made clear that Denarau Investments was not prepared to complete the Stage 2 villas unless it could at least match the level of quality achieved in the completion of Stage 1 which it could not do at the contract price and that it required the plaintiffs to pay increased sale prices for the villas; and
b)By their own letter of 7 November 2006, they elected to cancel the agreements as a result of the repudiation and are entitled to the return of their deposits.
The summary judgment application – respective positions
[29] Mr Ludlow and Ms Braithwaite contend they have met the necessary thresholds for summary judgment on their claim. They acknowledge that there are some disputed facts. However, it is their position that the disputed facts are not material as there can be no doubt that Denarau Investments, by its letter of 20
October, repudiated the agreements and that accordingly, they were entitled to send their letter of cancellation. They say that in these circumstances, it is clear that Minter Ellison and Denarau Investments have no defence to their claim and that there are no disputed issues of material fact or other reasons requiring a full hearing of all the evidence.
[30] While Denarau Investments does not dispute that the letter that Mr Ludlow and Ms Braithwaite sent on 7 November 2006 was intended to be notice of
cancellation, it does not accept that its letter of 20 October was a repudiation of the agreements. It raises several reasons.
[31] First, that the letter of 20 October merely advises of present issues and suggests possible solutions, but does not make any decision or unequivocal statement about Denerau Investments’ own intentions. Further, that it was carefully worded to ensure that the parties remained bound to the agreements while the company explored the options before deciding whether or not to exercise its contractual right to cancel Stage 2 under clause 2.2.
[32] Secondly, that Denerau Investments’ right of cancellation under clause 2.2 rendered it inherently unlikely that it would have intended to repudiate the agreements and thereby leave itself open to Mr Ludlow’s and Ms Braithwaite’s cancelling and claiming damages.
[33] Thirdly, that it is necessary when considering whether an intention not to perform has been proved, to consider the attendant circumstances, the motives which prompted the letter, and the relevant factual matrix. Denerau Investments raised as relevant factors that it wrote similar letters to all purchasers of villas in Stage 2; that there was a significant increase in the cost of construction in Fiji after the agreements were signed; that it had made a major investment in Stage 1 and in the preparatory work and infrastructure for Stage 2; and that it had taken care to ensure that the parties remained bound while it explored its options.
[34] Denarau Investments also raised conflicts in the evidence concerning discussions that took place after 20 October.
Summary judgment principles
[35] Rule 136 (1) states:
136Judgment where there is no defence or where no cause of action can succeed.
(1)The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence
to the claim in the statement of claim or to a particular part of any such claim.
[36] The outstanding feature of the rule is that the onus of establishing there is no defence is cast on the plaintiff. The concept of no defence is described as “the absence of any real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1, 3.
[37] It is for the plaintiff to adduce sufficient evidence to prove its claim. If it does so, there is an evidential onus on the defendant to provide a foundation for any defences that are raised and in order to defeat a plaintiff’s application for summary judgment, the defendant must provide sufficient particulars to show that there is an issue worthy of trial. However, once the defendant has provided an evidential foundation for the defence, the onus is on the plaintiff to show that the defence is not genuinely arguable: Pemberton v Chappell at 3.
[38] The importance of the plaintiff’s overall onus cannot be over emphasised. In this respect, it is worth mentioning the Privy Council’s recent decision in Jones v Attorney General [2004] 1 NZLR 433 approving a passage from Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) wherein Elias CJ said:
[62]An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded by the affidavit. It may also be inappropriate where the ultimate determination depends on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated proceedings and affidavit evidence will sufficiently expose the facts and legal issues ...
[63]Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary judgment procedure the sufficiency of the proof of the plaintiff’s claim. …
[39] The decision makes clear how important it is that the plaintiff provides sufficient proof of its claim.
[40] The onus is the normal civil standard – the balance of probabilities: Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [61].
Discussion
[41] Section 7(2) of the Contractual Remedies Act states:
(2)Subject to this Act, a party to a contract may cancel it, if, by words or conduct, another party repudiates the contract by making it clear that he does not intend to perform his obligations under it or, as the case may be, to complete such performance.
[Emphasis added]
[42] Repudiation may therefore occur before the obligations contemplated are carried out, or it may occur during the course of carrying out the contract.
[43] The general principle was stated by McMullen J in Starlight Enterprises
Limited v Lapco Enterprises Limited [1979] 2 NZLR 744 (CA) at 748:
The test, to be applied in any case where it is said that one party has repudiated by words or conduct his obligation under a contract so as to entitle the other to rescind [the then equivalent of cancellation], is whether the party said to be repudiating has acted in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part of the contract. If it is of that kind it may amount to a repudiation of the contract entitling the other party to rescind.
[44] The above statement of principle was approved by Hammond J in the Edge
Buying Group (Queenstown 2000) Limited v Coca-Cola Amital (NZ) Limited CA
145/02, 25 November 2002.
[45] The test is objective and is satisfied by an intention only to perform in a manner substantially inconsistent with the agreements: see Betham v Margetts [1996] 2 NZLR 708 where Fisher J stated at 711:
The question is whether in all the circumstances the communication should be regarded as an irrevocable indication that the party concerned would take no further steps to perform his or her obligations under the contract or alternatively that he or she would perform it only in a manner substantially inconsistent with the obligations which the contract imposed. If that were the objectively determined meaning of the communication it matters not
what the party making it intended or wanted ... It would be different if there were a mere misrepresentation or legal error with opportunity for correction before due date for performance ...
[46] Whether what is relied on amounts to repudiation is a question of fact and must be determined objectively in all the circumstances.
[47] I accept Mr Tingey’s submission that, viewed objectively, Denarau Investments’ letter of 20 October made quite clear it did not intend to perform its obligations under the agreements and that on a prima facie basis, its conduct amounted to repudiation. I also accept that the plaintiffs have demonstrated that the factors raised to challenge the intention to repudiate, do not give rise to any arguable issues worthy of trial.
[48] My reasons follow.
The 20 October letter
[49] The letter of 20 October 2006 purports to list Denarau Investments’ three choices to complete Stage 2. One was cancellation of Stage 2 in its entirety under Clause 2.2 and therefore was not a choice for completion at all. Another was to complete to a lesser standard than the standard set for Stage 1, which the letter rejected as a resolution. The letter made clear that Denarau Investments was not prepared to complete the Stage 2 villas unless it could at least match the level of quality achieved in the completion of Stage 1 but that it had become cost prohibitive to complete the Stage 2 villas to that standard. That was a clear indication that Denarau Investments did not intend to build at the contracted prices. The third raised as an option completing the Stage 2 villas to the standard achieved in Stage 1, but at increased prices.
[50] The third choice was explained in more detail later in the letter. Essentially, Denarau Investments would consider completing the Stage 2 villas if all the Stage 2 buyers would promise to pay more so that Denarau Investments could achieve “a successful conversion of existing Stage 2 sales to the revised prices” it proposed. If the conversion should be successful, then Denarau Investments would then put its
proposal to build Stage 2 in accordance with the successful conversion to its financiers for approval.
[51] For the purpose of the conversion, Denarau Investments required the plaintiffs, by signing the addendum to the letter, to make an irrevocable offer to pay the increased sale prices that it would be free to accept or reject. In this last respect the letter can be viewed properly as not making a decision, but the matter for decision was whether to proceed if there was a successful conversion to the new parties. It makes abundantly clear that proceeding with Stage 2 at the prices provided for under the agreements was no longer an option. That decision had been made. The clear message was that it would not be building the Stage 2 villas at the contract prices and that there was no realistic alternative for completing Stage 2 other than to seek support of its Stage 2 buyers in this way. The net effect of the letter was to make clear that the third choice was the only one that Denarau Investments was prepared to consider for the completion of Stage 2.
[52] I also accept Mr Tingey’s submission that there is no hint of a suggestion in the October letter that indicates otherwise. There is nothing to suggest Denarau Investments would perform or change its position if Mr Ludlow and Ms Braithwaite did not agree. The letter, read in its totality, demonstrated a clear intention by Denarau Investments not to perform its obligations under the agreement.
[53] It follows that I do not accept Mr Skelton’s submission that the letter of 20
October is properly viewed as an invitation to negotiate and that it left open the possibility that Denarau Investments would honour the four agreements it had with Mr Ludlow and Ms Braithwaite. A reasonable person would conclude from the letter that Denarau Investments did not intend to perform the contract in a manner substantially consistent with its obligations, and that it would only consider performing at substantially increased prices.
[54] I also do not overlook the reliance Mr Skelton placed on the facts of Starlight Enterprises in support of Denarau Investments’ position, but I do not accept that they are helpful to his argument.
[55] In that case the supplier wrote to the buyer to say that the price of the goods would be increased for the remainder of the contract. The supplier proposed to continue to perform, and offered to step up production to avoid further price increases. The buyer took this as repudiation and purported to cancel without pointing out that the supplier had no contractual right to increase the price, which might have prompted the supplier to review its stance. As the supplier’s letter did not show an unequivocal intention not to perform there was no repudiation.
[56] I accept that Mr Tingey’s analysis is correct. He characterised Starlight Enterprises as a narrow exception for mistaken interpretation of one’s contractual rights. I agree with this submission. In Starlight Enterprises it was apparent from the evidence that the supplier had wrongly thought that it was entitled under the contract to increase the price of the goods. Here the 20 October letter makes clear that Denarau Investments was aware that it could not unilaterally increase the price of the villas. It understood that it needed Mr Ludlow and Ms Braithwaite’s agreement in order to vary the contract. The letter of 20 October notes that one option is to “obtain agreement in the increase of the sale price of your villa”. The letter also says:
To complete the resort to the standards achieved in stage 1 we seek your agreement to increase the sale price with the villa you have contracted to purchase.
[57] Denarau Investments’ conduct cannot therefore be explained as a mistaken interpretation of the contract.
[58] Mr Tingey raised as a further distinguishing feature in that the letter of 20
October made clear that Denarau Investments did not intend to perform, whereas in
Starlight Enterprises there was a clear intention to continue performance.
[59] As discussed, the thrust of the 20 October letter was that Stage 2 would only proceed if Mr Ludlow and Ms Braithwaite agreed to offer the variation and Denarau Investments choose to accept it. At the meeting that followed, Mr Ludlow and Ms Braithwaite attempted to obtain further information from Mr Mahon. Mr Mahon denies stating that Denarau Investments would not perform its obligations unless they signed the addendum. However, there is not the slightest hint in his evidence
that he advised that Denarau Investments would meet its contractual obligation to build their villas at the contracted prices, or that it would cancel Stage 2 and return the deposits. What he did do was send the 1 November letter, which did not qualify or change the position Denarau Investments set out in the 20 October letter.
[60] A reasonable person would conclude, in these circumstances, that Denarau Investments did not intend to perform the contract in a manner substantially consistent with its obligations. Further, Mr Ludlow’s letter of cancellation did not come without some warning, unlike the buyer’s cancellation in Starlight Enterprises.
[61] The present case is clearly not on all fours with Starlight Enterprises.
Proof of Repudiation/Attendant Circumstances
[62] I come next to Denarau Investments’ contention that proof of intention requires consideration of the wider factual context and that it will be necessary to consider the attendant circumstances, the motives that prompted its October letter and the relevant factual matrix. Mr Skelton relied on Burrows Finn & Todd’s Law of Contract in New Zealand (3rd ed, 2007) at 18.2.1(a). The relevant extract reads:
Whether a breach of contract amounts to repudiation is “a serious matter not to be lightly found or inferred”. What has to be established is that the defaulting party has made clear beyond reasonable doubt the intention no longer to perform his or her side of the bargain. Proof of such an intention requires an investigation inter alia of the nature of the conduct, the attendant circumstances and the motives which prompted the conduct.
[63] Mr Tingey submitted that the extract from Burrows Finn & Todd cannot be taken as a statement of general principle and that the cases that Mr Skelton cited and which are discussed by the learned authors at 18.2.1(a) do not appear to go as far as the passage would suggest. Repudiation is certainly “a serious matter not to be lightly found or inferred” as Lord Wright said in Ross Smyth & Co Ltd v Bailey, Son
& Co [1940] 3 All ER 60, 71 and it must be proved to the requisite standard in civil cases. “Beyond reasonable doubt” appears to be a rendition of the need to show an “unequivocal” intention not to perform – it does not indicate a departure from the normal onus of proof placed on the plaintiff in civil cases. Further, both Mersey Steel & Iron Co v Naylor Benzon & Co (1884) App Cas 434, 439 and Starlight
Enterprises, which Mr Skelton cited, point to the necessity of looking at the “actual circumstances”, but it must be remembered that the test is an objective one and it does not mean that the character of the conduct complained of cannot be assessed in the context of a summary judgment application in appropriate cases.
[64] The factors Mr Skelton relied on do not raise any serious question about the adequacy of the plaintiffs’ proof as to intention. The fact that Denarau Investments wrote similar letters to all purchasers of villas in Stage 2 does nothing to indicate that the letters were or were not repudiatory in any event. The 20 October letter itself makes clear that Denarau Investments was seeking a successful conversion of all existing Stage 2 sales to the revised prices, so that a decision could be made on its single proposal for completion.
[65] The letter also puts paid to the argument in so far as it is based on the other factors Denarau Investments has raised. The increase in the cost of construction in Fiji was referred to in the letter and its significance, as far as intention to perform is concerned, was clearly spelled out in the letter. The reality is the increase in cost was a business risk the developer took and the letter clearly shows the developer realised that reality. The letter indicated that if it was to complete stage 2, it required a successful conversion of all stage 2 sales to the revised prices. The investment Denerau Investments made in stage 1 and stage 2 obviously would have been a significant factor in deciding on its choices, but as the letter makes clear, it had considered all of its choices, concluded that building at the contract prices was not feasible, and decided that it had no alternative but to adopt its chosen course. The contention that Denarau Investments took care in ensuring that the parties remained bound by the agreement is based on its decision not to exercise its right to cancel. The letter makes clear however that it was not retaining, as an option, performing at the contract prices. Rather that it was simply pushing out its right to cancel while it explored the feasibility of its single option for completing Stage 2. That option was not consistent with an intention to perform its obligations under the agreements.
[66] There is nothing therefore in the factors that Denerau Investments raised, that indicates the necessity to examine the wider factual context at trial.
Disputed Evidence
[67] Mr Skelton pointed to three pieces of disputed evidence which he says make summary judgment inappropriate.
[68] First, there is the dispute as to whether Mr Mahon made a statement at 30
October meeting that Denarau Investments would not perform its obligations if Mr Ludlow and Ms Braithwaite did not agree to make the proposed offer. I accept Mr Tingey’s submission that the dispute is of no importance because even if Mr Mahon is right and he did not make the statement, the letter of 20 October is to that effect. Furthermore, Mr Mahon makes no suggestion that he indicated that the letter did not represent Denarau Investments’ position and he does not suggest that he altered that position at the meeting in any way.
[69] Secondly, there is a dispute as to whether around 7 November there was an oral agreement that the agreements were cancelled and that the deposits would be returned. This dispute is also of no importance as Mr Ludlow and Ms Braithwaite do not rely on an oral agreement to cancel. Their argument is that there was in any event repudiation and cancellation based on the repudiation. I accept Mr Tingey’s submission that even if Mr Mahon’s version of events is correct, the result remains that the cancellation had already taken place as Mr Ludlow and Ms Braithwaite cancelled by way of the letter of 7 November. They cancelled pursuant to their rights under the Contractual Remedies Act. Neither Denarau Investments’ nor Strategic’s consents were required.
[70] The same applies to the disputed evidence that subsequently Mr Mahon told Mr Ludlow and Ms Braithwaite several times that he could not cancel the agreement without Strategic’s express approval. The evidence is of no consequence and does not help Denarau Investments to show it has an arguable defence.
[71] The result is that the points on which Mr Mahon and Mr Ludlow disagree are not material facts that affect the end result.
Result
[72] For the above reasons, I am satisfied that Mr Ludlow and Ms Braithwaite have demonstrated that Denarau Investments repudiated the agreements and that they cancelled the agreements as they were entitled to do. Conversely, I am satisfied that Denarau Investments has not raised an arguable defence.
[73] That brings me to the question of the relief that should be granted. Section 9 of the Act sets out the Court’s powers. The relevant part of s 9 provides:
9 Power of Court to grant relief
…
(2) An order under this section may—
(a) Vest in any party to the proceedings, or direct any such party to transfer or assign to any other such party or to deliver to him the possession of, the whole or any part of any real or personal property that was the subject of the contract or was the whole or part of the consideration for it:
(b) Subject to section 6 of this Act, direct any party to the proceedings to pay to any other such party such sum as the Court thinks just:
(c) Direct any party to the proceedings to do or refrain from doing in relation to any other party any act or thing as the Court thinks just.
…
[74] The section enables the Court to ensure, in the orders it makes, that the parties can be disentangled effectively from their obligations, and adjustments can be made for shifts in property and benefits as a result of the contract.
[75] The only preconditions for the grant of relief under s 9 are that the contract must have been validly cancelled in terms of ss 7 and 8 and that it is just and practicable to grant relief. Relief is not limited to the cancelling parties and the interests of both parties must be considered, although where a contract is cancelled due to a default by one party that will be a relevant consideration in the grant of relief.
[76] Although Denarau Investments disputes valid cancellation, the parties concur as to the relief that should follow an affirmative finding on liability. They agree there should be an order under s 9(2)(a) of the Act that Minter Ellison pay to Mr Ludlow and Ms Braithwaite the deposits. They also agree that if for some
unforeseen reason Minter Ellison no longer holds deposit monies, then leave should be given to seek a further order that the Denarau Investments pay the equivalent sum.
[77] There is no dispute that the plaintiffs are entitled to interest on any judgment sum. The interest will either be:
a) The interest earned on the deposits and accruing in the Minter Ellison account, or
b)In the event that the deposits have not been held in an interest bearing account, interest on the sum of $242,500.00 at the rate of 7.5% per annum from 7 November 2006, being the date of cancellation of the agreements, to the date of judgment, under s 87 of the Judicature Act
1908.
Orders
[78] There will be orders for summary judgment as follows:
a) An order pursuant to s 9(2)(a) of the Contractual Remedies Act 1979 that Minter Ellison pay to Mr Ludlow and Ms Braithwaite, within twenty-one days, the deposit monies of $242,500.00 it holds as stakeholder for Mr Ludlow and Ms Braithwaite and Denarau Investments, together with the net interest earned on the deposits in trust.
b)An order reserving leave to Mr Ludlow and Ms Braithwaite to seek further orders if there is any dispute as to the interest to be paid or if a further order is required pursuant to s 9(2)(b) that Denarau Investments pay damages to Mr Ludlow and Ms Braithwaite in the sum of $242,500.00 with appropriate interest.
[79] There will also be an order for costs against Denarau Investments in favour of Mr Ludlow and Ms Braithwaite on 2B basis together with disbursements to be fixed by the Registrar.
[80] There is no order for costs against Minter Ellison. Quite properly, the plaintiffs do not pursue an order for costs against the firm.
Dated at Auckland on at am/pm.
Associate Judge Sargisson
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