Madhava Corporation Limited v Austin
[2024] NZHC 2152
•2 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-002184
[2024] NZHC 2152
BETWEEN MADHAVA CORPORATION LIMITED
Applicant
AND
BENJAMIN MICHAEL AUSTIN and LYNN JOYCE FERNANDES
Respondents
Hearing: On the papers Counsel:
M G Keall for Applicant
A T Grant for Respondents
Judgment:
2 August 2024
JUDGMENT OF ANDREW J
[Leave to appeal]
This judgment was delivered by Justice Andrew on 2 August 2024 at 3.00 pm
pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar
Date …………………………
MADHAVA CORPORATION LTD v AUSTIN [2024] NZHC 2152 [2 August 2024]
Introduction
[1] This is an application for leave to appeal my judgment of 29 April 2024 to the Court of Appeal.1 This would be a second appeal, the original proceedings having commenced in the District Court.
[2] The substantive proceedings involve a defendant’s summary judgment application – a contract dispute relating to an agreement for the sale and purchase of land (“the Agreement”). At issue is the right of the respondent purchasers to cancel the Agreement on the basis of a building report that was not satisfactory.
[3] In my judgment of 29 April 2024, I upheld the decision of the District Court granting the respondents’ summary judgment application. I held that the District Court Judge was correct to conclude that the respondents had established that the applicant’s contract claim was incapable of success. I found that it was fair and reasonable for the respondents to rely on the building report to cancel the Agreement.
Factual background
[4] The full factual background is set out at [3]–[16] of my judgment of 29 April 2024. I summarise below the key facts.
[5] The agreement for sale and purchase was a standard-form ADLS sale and purchase agreement. Clause 9.4 provided for a building report condition and cl 9.10 set out the operation of the conditions (including the building report condition).
[6] The executive summary of the building report obtained by the respondent purchasers read:
The exterior cladding consists of a combination of concrete blocks and timber weatherboards, which presents in an average condition. The exterior weatherboard cladding is original and is requiring some general maintenance and repairs to be carried out. We noted there were several cracks in weatherboards which will need to be filled followed by a fresh coat of paint to protect the internal timbers from water ingress. We also noted the window outside bedroom one has insufficient fall on the windowsill, which is needed to protect the internal frames from water ingress. There are gaps under the
1 Madhava Corp Ltd v Austin [2024] NZHC 975.
windowsill that need to be filled also to protect the internal frames from water ingress. We also noted stepped cracking under the same window. We recommend further investigation of the cracking by a qualified engineer to see if the structural integrity has been affected. We also recommend engaging a qualified builder to re-install the windowsill with sufficient fall. The ground level around the front is very close to weatherboards, the recommended height to the underside of weatherboards is 100 mm to prevent water ingress and wood decay. Overall the exterior cladding presents in moderate condition and requires some maintenance and repairs to bring the exterior to above-average standard.
[7] Following an exchange of correspondence between the parties, the respondents cancelled the Agreement. They advised that the building report condition was not satisfied.
[8] Subsequent to the cancellation of the Agreement the property was sold by the applicant company to its director, Mr Karmarkar for $700,000.
[9] In the statement of claim the applicant seeks the sum of $115,000 (the difference between the two selling prices) and interest. The sole cause of action is breach of contract.
Relevant legal principles
[10] Section 60 of the Senior Courts Act 2016 governs appeals against decisions of this Court (“on appeal from the District Court”).
[11] The Court of Appeal in Butch Pet Foods Ltd v Mac Motors Ltd,2 addressed the test for leave to bring a second appeal as follows:3
The test for leave to bring a second appeal to this Court is well established. The proposed appeal must raise some question of law or fact capable of bona fide and serious argument, in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal. On a second appeal this Court is not engaged in the general correction of error. Its primary function is to clarify the law and to determine whether it has been properly construed and applied by the Court below. It is not every alleged error of law that is of such importance, either generally or to the parties, as to justify further pursuit of litigation which has already been twice considered and ruled upon by a court.
2 Butch Pet Foods Ltd v Mac Motors Ltd [2018] NZCA 276 (footnotes omitted); see also Young v Ross [2023] NZCA 411 at [4].
3 Butch Pet Foods Ltd v Mac Motors Ltd, above n 2, at [4].
Analysis and decision
[12] The application for leave identifies five alleged errors in my judgment which it says justified leave.
[13]The two key issues I must address are as follows:
(a)Whether the proposed appeal raises some question of law or fact capable of bona fide and serious argument; and
(b)Whether the case is of such interest or importance so as to outweigh the cost and delay of a further appeal of a question that has already been twice considered and ruled upon.
[14]I address each of the grounds of appeal in turn.
No objectively reasonable basis to avoid the contract
[15] The applicant contends that the respondents bore the evidential burden of proving that cl 9.4.1 (building report condition) was not satisfied but the report arguably disclosed nothing of concern to a reasonable and fair-minded purchaser.
[16] Both my judgment and the judgment of the District Court below thoroughly considered the building report at issue. I held that the applicant had tended to downplay the concerns raised in that report. In my findings, I expressly referred to the executive summary set out above. I also noted that the report and any concerns to the purchaser are to be assessed objectively. In doing so, I referred to the leading authorities Learner v Schiehallion Nominees Ltd4 and Strack v Grey.5
[17] In my view, the alleged “error” here is no more than an attempt to have a third court re-litigate the seriousness of the defects which the applicant claims are minor. Contrary to that position, two courts have now agreed that the defects identified could be of concern to a reasonable purchaser.
4 Lerner v Schiehallion Nominees Ltd [2003] NZLR 671 (HC).
5 Strack v Grey [2018] NZHC 1254, 19 NZCPR 687 at [109].
[18]I find that this alleged error is not capable of bona fide and serious argument.
“Implied terms” in the Agreement
[19] The applicant claims that both the District Court judgment and my judgment failed to account for “implied terms” in the Agreement, which required the respondents to act reasonably as part of negotiations. It also says that I failed to find it arguable that the respondents had breached those implied terms.
[20] As noted above, the Agreement at issue was a standard-form ADLS sale and purchase agreement. The applicant points to no support for its position. The scope of the respondents’ obligations in respect of the clause at issue has previously been considered on multiple occasions by this Court and the Court of Appeal.
[21] The case law in this area is well settled. The applicant now attempts, for the first time, to raise an issue of good faith obligation and accuses the respondents being “…arguably capricious” in their dealings. There is no evidential basis for that contention. I find that this matter is not capable of bona fide, serious argument.
[22] I am further of the view that the “implied terms” argument is an attempt to re- litigate the “bargaining” issue raised during the hearing before me. In my view, this argument is without merit.
Effect of 4 February 2022 email
[23] In my judgment at [33] I rejected the applicant’s contention that the 4 February 2022 email comprised a definitive list of the respondents’ concerns and that the respondents could not reasonably refuse a counter-proposal that addressed the substance of that “singular concern”.
[24] In my view, this point is not capable of bona fide and serious argument. The applicant’s submission misses the point; the applicant vendor’s proposed solution meant that the respondent purchasers, rather than the vendor, would carry the risk. That was contrary to the respondent purchasers’ proposal.
Evidential issues
[25] The applicant contends that certain aspects of the evidential record that form the basis for my judgment (and that of the District Court) were “uncritically accepted” and should properly have gone to trial. This, it says, justifies a further appeal of the granting of summary judgment.
[26] All the matters that the applicant claims were “uncritically accepted” relate to the correspondence between the parties after the building report was received. The applicant’s argument is essentially that both courts were bound to examine subjective elements of these exchanges, such as the genuineness of the respondents’ “concerns” and “knowledge” and the methodology for the $7,000 estimate generated by a builder the respondents engaged.
[27] This argument again ignores the objective nature of the inquiry under the building report condition. The subjective concerns and knowledge of the purchasers have consistently been held not to be relevant.6
[28] I also agree with the submission of Mr Grant that the applicant’s contention misunderstands the law on summary judgment. A court faced with a fact that is uncontroverted by the opposing party’s evidence is not bound to subject that uncontroverted fact to “discovery and cross-examination” merely on the basis of counsel’s submission that it be so.7
Alternative grounds
[29] Despite not having raised this issue before either myself or the District Court, the applicant now claims the respondents did not satisfy the burden on them to provide a report by a suitably qualified building inspector.
[30] That contention is plainly wrong. The report by IHNZ was attached to the affidavit of the respondent, Mr Austin. It set out the qualifications of the relevant inspector. The methodology was clearly stated for the conclusions that were reached.
6 See, for example, Lerner v Schiehallion Nominees Ltd, above n 4.
7 See Westpac Banking Corp v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
[31]Again, this point is not capable of bona fide and serious argument.
[32] I now turn to address the second issue of whether the proposed appeal involves an interest of sufficient importance to outweigh the cost and delay of the further appeal.
Interest of sufficient importance
[33] As the Court of Appeal held in Butch Pet Foods Ltd,8 a second appeal should not be granted in the interests of the Court of Appeal engaging in “error correction”. Leave should not be granted to an applicant who merely seeks to re-litigate issues upon which two courts have previously made contrary rulings.9 Instead, “something more” is required, such as a “clarification of the law” where it is uncertain, or the fact that the matter is of interest to the public at large.10
[34] I find that there is no interest, either public or private, of sufficient importance that would justify a second appeal in this case. As noted, the clause the applicant seeks to re-litigate is a standard-form clause in an agreement that has been considered and decided by many cases. The facts of this case were capable of being, and were, decided on the strength of existing and consistent authority.
[35] I also note and record the concerns of the respondents as to the implications of further cost and delay. I record the submission of the respondents that prior to this proceeding, a “Madhava entity” has commenced proceedings in a district court or senior court at least 15 separate times since 2010. Some 33 judgments have been issued by senior or district courts since that time in which a Madhava entity has been the plaintiff. No Madhava entity has ever been ultimately successful in any of the proceedings.11
8 Butch Pet Foods Ltd v Mac Motors Ltd, above n 2, at [4].
9 Mailley v Shaw [2020] NZHC 583 at [7].
10 Mailley v Shaw, above n 9, at [7]; YMCA North Inc v Auckland Council [2023] NZHC 3697 at [24].
11 Most of the proceedings the respondents refer to have been brought in the name of Mr Karmarkar, the director of the applicant company.
[36] I also record the significant difficulties the respondents have had in recovering some of the legal costs incurred to date that they should have been entitled to as the successful party. The overall conduct of the applicant provides further support for my decision to decline to grant leave. It reinforces my view that the proposed appeal lacks merit.
[37] For all these reasons, I conclude that the application for leave to appeal should be dismissed.
Result
[38]The application for leave to appeal to the Court of Appeal is dismissed.
[39] I order that the applicant is to pay costs to the respondents on a 2B basis plus disbursements.
Andrew J
0
6
0