McGettigan v Addams Trust Company Limited
[2017] NZHC 1168
•31 May 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-000375 [2017] NZHC 1168
UNDER the High Court Rules and the Property law
Act 2007
IN THE MATTER
of possession of the property at 1243A Hibiscus Coast Highway, Waiwera
BETWEEN
JOHN VINCENT MCGETTIGAN Plaintiff
AND
ADDAMS TRUST COMPANY LIMITED AS TRUSTEE FOR THE WAITAKERE FOOTHILLS TRUST
Defendant
Hearing: 25 May 2017 Appearances:
R S Reed for Plaintiff
A A H Low and T M Kelly for DefendantJudgment:
31 May 2017
JUDGMENT OF GILBERT J
This judgment is delivered by me on 31 May 2017 at 11 am pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Solicitors/Counsel:
Powle & Hodson, Auckland
Alexandra Low & Associates, Auckland
R S Reed, Barrister, Auckland
MCGETTIGAN v ADDAMS TRUST COMPANY LIMITED [2017] NZHC 1168 [31 May 2017]
Introduction
[1] This is an application pursuant to r 12.14 of the High Court Rules to set aside a summary judgment obtained by default. The proceedings, including the application for summary judgment, were served at the registered office of the defendant company. However, the defendant had moved from this address without updating the Companies Office records. As a result, the defendant’s director was unaware of the proceedings and this is why it did not take any steps to defend them. The Court may set aside the judgment if it appears that there has been a miscarriage of justice. Although not the only consideration, the answer will largely depend on
whether the defendant can show that it has an arguable defence to the claim.1
Background
[2] From 2009 to 2015, the plaintiff built a substantial concrete and copper house on his six-hectare property at Waiwera. Towards the end of the building process, Mr McGettigan separated from his wife. He doubled the mortgage in order to partially settle his wife’s claim to relationship property but he needs to sell the property to complete the division.
[3] Council carried out a final inspection on 4 November 2015. The only outstanding requirement identified was for all documents required by the conditions of the consent to be delivered to Council. However, the code compliance certificate has still not been obtained.
[4] On 5 November 2015, the plaintiff entered into an agreement to sell the property to the defendant for $2.5 million with settlement to occur on 8 December
2016. The agreement was in the standard form approved by the Real Estate Institute and the Auckland District Law Society (ninth edition 2012 (2)) and contained the
following standard warranties:
1 Russell v Cox [1983] NZLR 654 (CA); Cheah v Equiticorp Finance Group Ltd [1989] 3 NZLR 1 (PC).
6.0 Vendor’s warranties and undertakings
…
6.2 The vendor warrants and undertakes that at settlement:
…
(5) Where the vendor has done or caused or permitted to be done on the property any works:
(a) any permit, resource consent or building consent required by law was obtained; and
(b) to the vendor’s knowledge, the works were completed in compliance with those permits; or consents; and
(c) where appropriate, a code compliance certificate was issued for those works.
[5] Where there is a breach of warranty that is sufficiently serious to justify cancellation of the agreement, the purchaser is put to an election. The purchaser may cancel the agreement and pursue a claim for damages for loss of bargain. Alternatively, if the purchaser wishes to proceed notwithstanding the breach, its obligation to settle is not deferred but is subject to its rights at law or in equity, including any right of equitable set-off. This is provided for in cl 6.5 of the agreement which reads:
6.0 Vendor’s warranties and undertakings
…
6.5If the purchaser has not validly cancelled this agreement, the breach of any warranty or undertaking contained in this agreement does not defer the obligation to settle but that obligation shall be subject to the rights of the purchaser at law or in equity, including any rights under subclause 5.4 and any right of equitable set-off.
[6] The agreement was conditional on the defendant arranging finance for the purchase within 10 working days of the date of the agreement. The deposit of
$125,000 was to be paid upon satisfaction of this condition. However, it was not paid until 21 June 2016, seven months late.
[7] In terms of the agreement, the defendant or its nominee was given the right to occupy the property and use the plaintiff ’s chattels and possessions from
8 November 2015 until settlement in return for payment of rental at the rate of
$1,000 per week. The defendant’s sole director and shareholder, Addam Buttling, and his partner, Phoebe Clegg, lived in the property in terms of this agreement. Twelve months’ rent was paid in one lump sum on 7 December 2015. The agreement provides that the handing over of keys was not to constitute the giving of legal possession, nor was it to constitute the creation of any form of periodic tenancy. The tenancy was to be a fixed tenancy with the term expiring on the earlier of the cancellation of the agreement or settlement. Upon expiry of the right to occupy for any reason other than settlement, the defendant promised to vacate the property and return all keys immediately.
[8] Although the defendant has not settled the purchase, Mr Buttling continues to live at the property and has not paid anything for this since 7 December 2016. This has caused considerable financial hardship to Mr McGettigan. He had to borrow additional money to service the mortgage on the property and the additional outgoings left him unable to continue paying rent on the apartment where he was living. As a result, he now lives in his office. He is very concerned that the bank will force a mortgagee sale of the property if he cannot continue to service his loans. Mr McGettigan says that his health has suffered as a result of the stress he has been placed under.
[9] In August 2016, Mr McGettigan asked Mr Buttling by text message whether he was on track for settlement in December:
“How’s your projects? Are you on track for settlement? Can I make plans assuming settlement December?”
[10] Mr Buttling responded by proposing a trade on another property but this did not interest Mr McGettigan:
“Sorry mate only interested in the east coast, Places like Waiwera I will make no other plans in case I get it back by default. Don’t want to add to your stress but its finally all over one way or the other on 8th December”.
[11] Mr Buttling replied on 15 August 2016:
We will see about that
[12] Mr McGettigan says that Mr Buttling telephoned him soon after this and asked if they could agree to a price adjustment. Mr McGettigan says that Mr Buttling told him that he could not borrow sufficient money to complete the purchase because of new lending rules. To overcome this problem, Mr Buttling suggested that they agree to an increased sale price of $3 million with the increase offset by an acknowledgement that Mr McGettigan owed Mr Buttling $500,000 for site works. Mr McGettigan declined this proposal. Mr McGettigan says that Mr Buttling was angry at this response.
[13] In late September 2016, Mr McGettigan assembled the documentation required for the code compliance certificate and went to Council’s offices. When he got there, he was surprised to learn that Council had been back to the property and carried out a further detailed inspection on 16 September 2016. This inspection had been arranged by Mr Buttling without Mr McGettigan’s authority and without any prior consultation or notice to him.
[14] As a result of this inspection, the matter was referred to Council’s durability team. On 28 October 2016, Mr McGettigan attended the property with the Council inspector. When they arrived, they found that the gate was chained even though Mr Buttling was at the property and knew that they were coming. They had to climb over the gate to gain access. Following this inspection, Council issued a notice under s 95A of the Building Act 2004 setting out their reasons for not issuing a code compliance certificate.
[15] Mr McGettigan made a number of attempts to access the property with his building consultant to address the matters identified by Council. However, Mr Buttling frustrated these attempts by repeatedly denying access to the property. Mr McGettigan had to engage his solicitors to secure access but this was not achieved until late November 2016. Some of the works were carried out and a proposal, prepared with the assistance of Mr McGettigan’s building surveyor, was submitted to Council for the remaining works.
[16] On 7 December 2016, the day before settlement, the defendant’s solicitors wrote to the plaintiff’s solicitors giving notice pursuant to cl 7.1 of the agreement
claiming an equitable set-off of $1.344 million. The notice listed 14 items, many of which do not appear to correlate to the s 95A notice issued by Council. The defendant also lodged a caveat against the title to the property.
[17] Clause 7 of the agreement addresses the situation where a purchaser claims a right to equitable compensation. This clause relevantly provides:
7.0 Claims for compensation
7.1 If the purchaser claims a right to compensation … for an equitable
set-off:
(1) The purchaser must serve notice of the claim on the vendor before settlement; and
(2) The notice must:
…
(b) in the case of a claim to an equitable set-off, state the particular matters in respect of which compensation is claimed;
(c) comprise a genuine pre-estimate of the loss suffered by the purchaser; and
(d) be particularised and quantified to the extent reasonably possible as at the date of the notice.
…
7.4 If the amount of compensation is disputed:
(1) An interim amount shall be deducted on settlement and paid by the purchaser to a stakeholder until the amount of the compensation is determined.
(2) The interim amount must be a reasonable sum having regard to all of the circumstances.
(3) If the parties cannot agree on the interim amount, the interim amount shall be determined by an experienced property lawyer appointed by the parties. … If the parties cannot agree on the appointee, the appointment shall be made on the application of either party by the president for the time being of the New Zealand Law Society.
[18] On 8 December 2016, the plaintiff proposed that an interim amount of
$100,000 be held by a stakeholder pending resolution of the defendant’s claim to equitable set-off. The plaintiff’s solicitors confirmed that they were in a position to complete settlement, subject to the withdrawal of the defendant’s caveat.
[19] The defendant did not respond to the plaintiff’s proposal, nor did it tender settlement in any sum. Accordingly, the plaintiff requested the president of the New Zealand Law Society to appoint an experienced property lawyer to determine the interim amount to be deducted on settlement and paid to a stakeholder pending resolution of the claim. The president of the New Zealand Law Society nominated Ian Haynes, a very experienced and highly respected property lawyer.
[20] The parties made submissions and provided documentary evidence to Mr Haynes to support their respective contentions. On 25 January 2017, Mr Haynes determined that the sum of $120,000 should be deducted on settlement and paid to a stakeholder.
[21] That same day, the plaintiff’s solicitors sent the defendant’s solicitors an amended settlement statement taking into account the interim amount to be paid to the stakeholder. The solicitors proposed that settlement take place on 31 January
2017.
[22] On 31 January 2017, the plaintiff’s solicitors confirmed that the plaintiff was
ready, willing and able to settle. The defendant did not tender settlement.
[23] On 2 February 2017, the plaintiff’s solicitors served a settlement notice requiring settlement within 12 working days. They also gave notice under s 28 of the Property Law Act 2007. Such notice is required where a vendor wishes to cancel an agreement with a purchaser in possession.
[24] The defendant did not settle in response to these notices and accordingly, on
24 February 2017, the plaintiff gave notice cancelling the agreement.
[25] Mr Buttling prevented Mr McGettigan from re-entering the property peaceably and he therefore commenced this proceeding seeking an order for possession by way of summary judgment and consequential orders. Lang J was satisfied that the defendant had no arguable defence to the claim and accordingly granted summary judgment on 2 May 2017.
[26] The plaintiff does not resist the defendant’s application to set aside three ancillary orders included in the judgment, being compensation for conversion of Mr McGettigan’s chattels and unpaid occupancy costs. The contest is restricted to the orders requiring the defendant to yield vacant possession.
Does the defendant have an arguable defence?
[27] The defendant claims that it has an arguable defence to the claim for possession, contending that the agreement has not been validly cancelled. This is based on the following propositions which are set out in its notice of application to set aside the judgment:
(a) Mr McGettigan gave a warranty knowing it to be false;
(b)Mr McGettigan refused to take steps to “remedy the warranty”, thereby causing the defendant’s inability to settle; and
(c) at the time of the purported cancellation on 24 February 2017, the defendant was:
(i) taking steps to ensure settlement could occur;
(ii) seeking information on the cost to remedy the warranty; and
(iii)trying to agree a reasonable retention sum so that settlement could occur.
[28] The defendant also contends that the Tenancy Tribunal has exclusive jurisdiction to determine whether Mr McGettigan is entitled to exclusive possession of the property. This is said to be because Mr Buttling occupies the property under a residential tenancy agreement under the Residential Tenancies Act 1986. Mr Buttling contends that Mr McGettigan should have applied for an order for possession in that jurisdiction. Mr Buttling has now initiated proceedings in the Tenancy Tribunal seeking a refund of rent on the basis that the house is defective and does not have a code compliance certificate.
[29] The defendant’s claim that Mr McGettigan gave a knowingly false warranty should not have been made. This serious allegation is without foundation and is also misconceived. Mr Buttling knew that the code compliance certificate had not been issued at the time the agreement was signed. The relevant warranties concerned the position “at settlement”, not when the agreement was signed. The warranty was that, at settlement, all works undertaken on the property by Mr McGettigan had been completed in accordance with the permits or building consents (to the best of his knowledge) and that a code compliance certificate had been issued.
[30] The defendant’s next contention, that Mr McGettigan “refused to take steps to remedy the warranty”, is also unsupported by the evidence. On the contrary, it appears that Mr Buttling actively frustrated Mr McGettigan’s efforts to obtain a code compliance certificate. This may be relevant to whether the defendant is disqualified from relying on the breach of warranty because this would be to allow it to take advantage of its own wrongdoing. For present purposes, I will assume in favour of the defendant that it is not disabled from relying on the warranty.
[31] Leaving this issue to one side, Mr McGettigan was in breach of the warranty at settlement. If the breach was as serious as the defendant contends, it was put to an election. It could cancel the agreement or elect to perform it. It chose the latter course with full knowledge of the breach and affirmed the agreement. It was therefore obliged to perform its obligations under it. The defendant claimed compensation by way of equitable set-off, as it was entitled to do. However, because there was a bona fide dispute as to the amount of compensation to be deducted on settlement, the mandatory process under cl 7.4 applied. This process was duly followed and both parties became bound by Mr Haynes’ determination for the purposes of settlement.
[32] The defendant did not tender settlement as it was obliged to do. Mr McGettigan was ready, willing and able to settle in accordance with Mr Haynes’ determination. It follows that Mr McGettigan was entitled to issue a settlement notice when the defendant failed to settle on the settlement date. When the defendant did not comply with this settlement notice, Mr McGettigan was entitled to give notice cancelling the agreement. This he did.
[33] For these reasons, the defendant has not shown that it has an arguable case that the agreement was not validly cancelled. When Mr McGettigan cancelled the agreement on 24 February 2017, the defendant’s right to occupy the property ceased and it was required to vacate the property and return the keys immediately in terms of the agreement.
[34] Ms Low suggests that the defendant could seek relief against cancellation of the agreement under s 33 of the Property Law Act 2007. No such application has been made even though cancellation occurred on 24 February 2017. Moreover, there is no evidence that the defendant has the means to perform its obligations under the agreement.
[35] Ms Low submits that Mr McGettigan ought to have joined Mr Buttling and Ms Clegg as defendants to the proceedings because they are unlawful occupiers. She relies on r 13.3 of the High Court Rules which requires a plaintiff claiming the recovery of land that is solely occupied by one or more unlawful occupiers to name as a defendant each unlawful occupier known to the plaintiff. An unlawful occupier is a person who occupies or continues to occupy land of the plaintiff without the licence or consent of the plaintiff or the plaintiff’s predecessor in title and is not a
tenant or subtenant holding over after termination of a tenancy or subtenancy.2
Ms Low argues that the summary judgment was irregularly obtained because
Mr Buttling and Ms Clegg were not joined as defendants and were not served.
[36] This raises the question as to who was occupying the property at the time the proceedings were served. The parties agreed that the defendant company would have the right to occupy. They obviously envisaged that the company would exercise this right through its sole director and shareholder, Mr Buttling and that he would live there. This is what happened. On that basis, the company became the unlawful occupier when it failed to vacate the property on cancellation of the agreement. It was named as the defendant and it was validly served.
[37] If, contrary to this analysis, Mr Buttling is to be regarded as the occupier, not his company, then he faces the difficulty that he contends that he is a tenant. If he is
2 High Court Rules, r 13.1.
right about that, he is not an unlawful occupier and did not need to be served. However, I am satisfied that Mr Buttling is not a tenant. The parties agreed that a fixed tenancy was created which was to expire on cancellation of the agreement or settlement. That tenancy was between Mr McGettigan and the defendant company. While the special conditions refer to the vendor allowing “the purchaser (or its nominee)” to occupy, this reflects that the purchaser is the defendant or its nominee. There is no evidence that the defendant nominated Mr Buttling or anyone else to take title under the agreement.
[38] Mr Buttling’s claim that the Tenancy Tribunal has exclusive jurisdiction to determine occupation rights is misconceived. For the reasons given, Mr Buttling is not a tenant. Further, the tenancy established under the agreement for sale and purchase falls outside the scope of the Residential Tenancies Act 1986. Section 5(o) provides that the Act does not apply where the tenant is the purchaser under an agreement for sale and purchase with the landlord as vendor.
[39] Ms Low attempted to meet this problem by noting that the agreement for sale and purchase provided that the parties were to enter into a standard form residential tenancy agreement. However, this does not assist the defendant for two reasons. First, no such agreement was signed. Second, the defendant would not have been entitled to insist on a tenancy agreement that would be covered by the jurisdiction of the Tenancy Tribunal. It is plain that the parties did not intend this.
[40] For these reasons, I conclude that Mr McGettigan was not required to name Mr Buttling or Ms Clegg as defendants. The judgment was not irregularly obtained. I note that Ms Clegg has vacated the property so an order for possession is not required in her case.
[41] I accept that the defendant has given a reasonable explanation for not taking any steps to contest the claim. However, the judgment was regularly obtained, there is no arguable defence to the claim and there is no basis to set the judgment aside. In short, there has been no miscarriage of justice.
[42] Mr Buttling’s ongoing occupation of the property is unlawful. He has paid no rent since 7 December 2016 and this is clearly causing considerable hardship and distress to Mr McGettigan. The defendant must now vacate the property. This is to be done no later than 5.00 pm on 1 June 2017 and otherwise in accordance with the judgment of Lang J dated 2 May 2017.
Result
[43] By consent, the application to set aside the summary judgment is allowed in respect of the chattels and payment for occupancy (1d, e and f of the sealed judgment).
[44] The application to set aside the judgment is otherwise dismissed.
[45] The defendant is ordered to vacate the plaintiff’s property no later than
5.00 pm on 1 June 2017.
[46] The plaintiff is entitled to costs on the application calculated on a category 2, band B basis.
M A Gilbert J
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