Millbrook Country Club v S.F.M Investments Limited HC Auckland CIV-2009-404-2850

[2011] NZHC 995

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-2850

BETWEEN  MILLBROOK COUNTRY CLUB Plaintiff

ANDS.F.M. INVESTMENTS LIMITED First Defendant

ANDGARRY ALBERT MUIR Second Defendant

Hearing:         15 August 2011

Counsel:         N A Farrands for Plaintiff

G A Muir for Defendants

Judgment:      19 August 2011

RESERVED JUDGMENT OF ELLIS J

This judgment was delivered by me on 19 August 2011 at 3.30 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:     Morrison Kent, PO Box 10035, Wellington 6143

Muir Law, PO Box 37508, Auckland

MILLBROOK COUNTRY CLUB V S.F.M. INVESTMENTS LIMITED HC AK CIV-2009-404-2850 19 August

2011

[1]      This judgment concerns an application for review by the defendants of timetabling orders made by Associate Judge Faire on 8 July 2011.   Central to those orders was the direction that the application by Millbrook Country Club (Millbrook) for summary judgment against the two defendants be heard on 25 September 2011. The other directions were merely facilitative of that.  For reasons that I will set out later, the defendants essentially say that these directions or orders were made without jurisdiction.

[2]      The history of the substantive proceedings and the procedural backdrop to the summary judgment application are of some importance.  For that reason, I set them out in some detail below.

[3]      Proceedings between the parties commenced in May 2009 when Millbrook filed a statement of claim and an application for summary judgment against the two defendants in relation to the first defendant‟s failure to settle the sale and purchase of a property known as Lot 305.   The second defendant‟s liability was said to arise under a guarantee.

[4]      The relevant orders sought in this first summary judgment application were framed in the following way:

(a)       An order that the first respondent specifically perform its obligation under an agreement for sale and purchase of property; and

(b)       An order that the second respondent specifically perform, or procure the specific performance of, the first respondent‟s obligations under the sale and purchase agreement;

(c)      In the alternative, if for any reason specific performance of the agreement cannot be granted, an inquiry into damages; ...

[5]      That application was heard by Associate Judge Robinson.   At [8] of his judgment   dated   10   December   2009,   the   learned  Associate   Judge   recorded Millbrook‟s position in terms similar to those contained in the application.  He said:

[8]     Millbrook now brings these proceedings for orders requiring the first and second defendants to specifically perform their obligations under the agreement or in the alternative if for any reason specific performance cannot be granted an inquiry into damages together with interest and costs. As

Millbrook believes the defendants have no defence Millbrook seeks relief by way of summary judgment.

[6]      The possible defences to Millbrook‟s claims raised by the defendants were rejected by Associate Judge Robinson who granted summary judgment against the first  defendant  and  ordered  it  specifically  to  perform  the  contract.   As  regards Dr Muir‟s position he said:

[62]   In the circumstances I conclude that Dr Muir has no defence to the plaintiff‟s claim. However, the plaintiff‟s claim against Dr Muir must be on the basis of Dr Muir‟s guarantee of the liabilities and obligations of S F M Investments Ltd.  At this stage Millbrook cannot obtain an order for specific performance against Dr Muir as Dr Muir is not the purchaser. Consequently, I conclude that Millbrook may be entitled to summary judgment against Dr Muir on the basis of liability but defer entering such judgment pending the outcome of the order I am making for specific performance.

[7]      These findings were reflected in the formal orders made in the following paragraph which were as follows:

(a)       An order that S F M Investments Ltd do specifically perform its obligations under the agreement for sale and purchase bearing date on or about 14 December 2006 between S F M Investments Ltd as purchaser and Millbrook Country Club Ltd as vendor and shall pay to Millbrook Country Club Ltd the balance required to purchase lot

305 in terms of that agreement. On payment of that sum Millbrook

Country Club Ltd shall transfer to S F M Holdings Ltd the property known as lot 305 and more particularly described in that agreement.

(b)       The application for summary judgment against the second defendant will be adjourned pending the outcome of the order for specific performance made in terms of paragraph “a” hereof.

[8]      An  appeal  was  filed  by  the  defendants  but  no  stay  of Associate  Judge Robinson‟s judgment was sought.   Mr Muir said (from the bar) that no stay was considered to be required because:

(a)       there  were  defects  in   the  sealed  judgment  which   rendered   it unenforceable;[1] and

(b)      no steps were taken by Millbrook to enforce it in any event.

[1] Millbrook did in fact later apply to correct the date on the sealed judgment, and an order was made in that respect by Associate Judge Faire under r 11.10 of the High Court Rules, on 20 July 2011.

[9]      By  August  2010,  Millbrook  had  found  another  buyer  for  the  property. Millbrook then made a further application to the Court seeking:

(a)       that the order for specific performance be dissolved; (b)           cancelling the contract with the first defendant;

(c)      granting leave to Millbrook to seek entry of judgment against the defendants in due course for damages in relation to losses arising from the cancelled contract.

[10]     The  dissolution  of  the  order  for  specific  performance  was  granted  by Associate Judge Faire on 13 August 2010 but he did not make the other two orders sought.  In his minute he recorded:

Mr Gedye for both defendants neither consents nor opposes the making of any order dissolving the order for specific performance.  I am satisfied that an order should be made.  If the plaintiff elects to cancel the agreement as a result and resell they are matters for it to determine.  What it decides may well have an impact on any subsequent pleading and claim in this case. Counsel advise that there is an appeal from the judgment of Associate Judge Robinson due to be heard on 10 May 2011.   The Registrar shall notify counsel of an appropriate chambers list mention for this application in late June  or  early  July  2011.    I  reserve  leave  to  the  plaintiff  to  have  the application listed at an earlier time if the plaintiff considers that it is still appropriate to proceed with the orders sought in paragraphs 1(b) and (c) before the disposal of the appeal.

[11]     It should also be noted that in his memorandum to the Court, Mr Gedye had also said:

As concerns cancellation of the contract, the defendants‟ position is that the contract was cancelled by the first defendant on 24 December 2008 and that they therefore cannot have any objection to the Court (or the plaintiff) terminating the contract now.

As  concerns  any further  orders  or  directions,  I submit  that  the  court  is functus officio in relation to all matters presently before the Court of Appeal, including liability.  Therefore, it would be inappropriate for the plaintiff to file an application for entry of judgment for damages.  Stay of execution is not relevant as it relates to execution of a money judgment, or some other actionable order of the Court.

I note that the plaintiff does not seek any order or direction in relation to judgment for damages at this stage but it would be appropriate for the Court now to direct that any further steps should await the outcome of the appeal and to adjourn the proceeding until a date in July 2011 to allow for judgment in the appeal (fixture 10 May 2011) to be delivered.

[12]     Notice of cancellation was immediately given by Millbrook to the defendants and the agreement for the sale of the property to a third party became unconditional on 17 August 2010.  As foreshadowed by Mr Gedye, no further steps were taken by Millbrook to pursue its damages at that stage because of the pending appeal.

[13]     Ultimately  the  defendants‟  appeal  against  Associate  Judge  Robinson‟s judgment was abandoned, part heard, on 10 May 2011.  Mr Muir says (by way of a memorandum of counsel, rather than by affidavit) that the decision to abandon was made  in  reliance  on  the  fact  that  the  order  for  specific  performance  had  been dissolved and that the contract had been cancelled.

[14]     In June 2011 Millbrook filed an amended statement of claim (ASOC) in which its claim for damages (based on the losses suffered as a result of the sale) was set out and quantified.  A further application for summary judgment was also made on the same basis.

[15]     On 1 July 2011, the defendants filed a notice of opposition to the claim for summary judgment in which the grounds of opposition advanced were that:

(a)      it is an abuse of process to seek damages because the right to damages had been waived prior to the granting of an order for specific performance;

(b)leave was required to file the ASOC because the (original) claim had already been set down and, indeed determined;

(c)      the defendants would be prejudiced by the grant of leave now because they abandoned their appeal on the strength of their understanding that the plaintiff had waived its right to damages;

(d)it is not possible to apply twice for summary judgment in the same proceedings;

(e)       an  Associate   Judge   has   no   jurisdiction   to   determine   whether jurisdiction exists to grant or withhold summary judgment.

[16]     On 8 July, Associate Judge  Faire made the timetable orders that are the subject of the present application.  It is not clear to me whether Mr Muir‟s counsel signalled to the Associate Judge that he wished the “jurisdictional” matters raised by his notice of opposition to be determined prior to that hearing.

[17]     On 15 July, the defendants filed an application for a review of Associate Judge Faire‟s 8 July “decision”.  The basis for the review was essentially that the matter should not have been permitted to proceed without first hearing and determining the jurisdictional objections.

[18]     On 22 July, the defendants filed a further, consequential, application that the orders made by Associate Judge Faire be vacated on the grounds that he had acted outside jurisdiction.

[19]     On 3 August, Associate Judge Faire granted leave to the defendants to file a counterclaim for money had and received and a counterclaim was duly filed on 10

August.

[20]     Millbrook‟s initial  position  on  the  application  for  review  was  that  such jurisdictional issues should simply be advanced as part and parcel of the defendants‟ opposition to the application for summary judgment.  However, prior to the call of the matter in the Duty Judge list on Monday this week, a joint memorandum was filed seeking that a hearing and determination of those issues take place before the hearing of the summary judgment application on 25 September.  It was on that basis that I heard argument on the application at the end of the list on that day.

Discussion

[21]     The  defendants  accepted  that  there  is  no  need  to  consider  the  second application if the application for review does not succeed.  It is accordingly to the issues raised by that review application that I first turn.

[22]     The central issue raised by Mr Muir derives from the terms of the summary judgment sought by Millbrook and granted by Associate Judge Robinson.   More particularly, he relies on the fact that (an inquiry into) damages in the alternative was stated only to be sought “if for any reason specific performance of the agreement cannot be granted”.

[23]     Mr  Muir  says  that  the  framing  of  the  relief  in  this  way  constitutes  an “election” on the part of the plaintiff.   And in light of the fact that specific performance was in fact granted by the learned Associate Judge, he says that the plaintiff has, by this election, waived any future right to claim damages.   He also says that s 16A of the Judicature Act 1908[2]  cannot avail the plaintiff because the Court no longer has jurisdiction to entertain an application for specific performance, because the property has now been sold.

[2] Section 16A provides:

Where the Court has jurisdiction to entertain an application for an injunction or specific performance, it may award damages in addition to, or in substitution for, an injunction or specific performance.

[24]     Mr Muir seeks to bolster that contention by saying that by dint of the appeal and because no leave was reserved to reopen the question of damages by the learned Associate Judge, this Court is now functus officio as regards the proceedings.  He says that the only course open to it (faced with the present application for damages) would be to recall Associate Judge Robinson‟s judgment.  But that this cannot now occur (he says) because it has been perfected (albeit imperfectly, according to Mr

Muir).  I mention that Associate Judge Robinson has also now retired.

[25]     In my view, however, Lord Wilberforce‟s magisterial judgment in Johnson v Agnew[3] makes clear why none of these arguments can succeed.  That case (like the present) concerned a plaintiff who wished to cancel a contract and obtain damages following the discharge of an order for specific performance.

[3] Johnson v Agnew[1980] AC 367 (HL).

[26]     In terms of election and waiver, Lord Wilberforce made it clear that the relevant right of “election” in cases such as the one before him does not involve some irrevocable choice made by a plaintiff at trial between the remedies of specific performance and damages.[4]     Rather, the relevant election relates to the issue of enforcement and arises at a subsequent point, after specific performance has been ordered.  In that respect Lord Wilberforce endorsed the judgment of Greene MR in Austins of East Ham Ltd v Macey[5] in which he said:[6]

The real position, in my judgment, is that, so far from proceeding to the enforcement of an order for specific performance, the vendor, in such circumstances is choosing a remedy which is alternative to the remedy of proceeding under the order for specific performance.  He could attempt to enforce  that  order  and  could  levy  an  execution  which  might  prove completely fruitless.  Instead of doing that, he elects to ask the court to put an end to the contract, and that is an alternative to an order for enforcing specific performance.

[4] Which is not to say that there is not also a right of election in this respect.

[5] Austins of East Ham Ltd v Macey [1941] Ch 338 (CA).

[6] At 341.

[27]     Like Greene MR, Lord Wilberforce roundly rejected the argument that a vendor‟s “election” to seek specific performance rather than damages in the first instance is somehow irrevocable and precludes him from making this later election. Lord Wilberforce said:[7]

[7] At 398.

In my opinion, the argument based on irrevocable election, strongly pressed by  the  appellant‟s  counsel  in  the  present  appeal,  is  unsound.    Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity.    … A vendor who seeks (and gets) specific performance is merely electing for a course which may or may not lead to implementation of the contract - what he elects for is not eternal and unconditional affirmation, but a continuance of the contract under the control of the court which control involves the power, in certain events, to terminate it.  If he makes an election at all, he does so when he decides not to proceed under the order for specific performance, but to ask the court to terminate the contract. … The fact is that the election argument proves too much.  If it were correct it would deny the vendor not

just the right to damages, but the right to „rescind‟ the contract, but there is no doubt that this right exists: what is in question is only the right on

„rescission‟, to claim damages.

[28]     Lord Wilberforce also made it clear why a rescission of a contract following the dissolution of the order that that contract be specifically performed does not relieve the purchaser of an obligation to pay damages.  In that respect he said:[8]

[8] At 392-393.

At this point it is important to dissipate a fertile source of confusion and to make clear that although the vendor is sometimes referred to in the above situation as 'rescinding' the contract, this so-called 'rescission' is quite different from rescission ab initio, such as may arise for example in cases of mistake, fraud or lack of consent. In those cases, the  contract  is  treated  in  law  as  never  having  come  into  existence.  (Cases  of  a contractual right to rescind may fall under this principle but are not relevant to the present discussion.) In the case of an accepted repudiatory breach the contract has come into existence but has been put an end to or discharged. Whatever contrary indications may be disinterred from old authorities, it is now quite clear, under the general law of contract, that acceptance of a repudiatory breach does not bring about 'rescission ab initio'.   I need only quote one passage to establish these propositions. In Heyman v Darwins Ltd Lord Porter said:

“To say that the contract is rescinded or has come to an end or has ceased to exist may in individual cases convey the truth with sufficient accuracy, but the fuller expression that the injured party is thereby absolved from future performance of his obligations under the contract is a more exact description of the position. Strictly speaking, to say that, upon acceptance of the renunciation of a contract, the contract is rescinded is incorrect. In such a case the injured party may accept the renunciation as a breach going to the root of the whole of the consideration. By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded.”

(citations omitted)

[29]     In my view, neither of the points made by Lord Wilberforce can be dependent on whether or not the Court that ordered specific performance reserved leave or on points of pleading.   Post judgment events may or may not be predictable.   But it seems to me that a vendor who obtains a court order for specific performance is entitled to assume that it will be complied with.  In the event that that expectation is not fulfilled, his right to elect what enforcement steps he will take cannot be constrained by meretricious points of pleading or acute procedural arguments.

[30]     Although Mr Muir effectively sought to argue that the Court of Appeal‟s

decision in Neylon v Dickens[9] meant that Johnston v Agnew did not apply, it seems to

me that that decision involved circumstances quite different to the present.  In that case the purchasers of a property obtained an order for specific performance against the vendor.  That order was complied with and the property was transferred.  Later, the purchasers made an entirely new claim for loss of profits which they said arose due to the delay in their ability to sell the property, a fact caused by the litigation (the property was eventually sold by them, but only for a price they said was less than they would have obtained had it been sold earlier).  The Court held (unsurprisingly) that they could not recover twice.

[9] Neylon v Dickens [1987] 1 NZLR 402 (CA).

[31]     The Court drew an express distinction between the facts of the case before (where the plaintiff sought a further remedy notwithstanding that they had received the benefit of the first remedy) and cases such as the present where a change of circumstances warrant the seeking of different (alternative) relief.   The Court also noted the jurisdiction conferred by (what is now) r 16.2 of the High Court Rules to order an account or inquiry after the making of a decree for specific performance. Plainly, the Court of Appeal had no concerns about the Court being functus officio in that respect.

[32]     In the present case, there is no question of the plaintiff reaping the cumulative benefit of two different remedies.  Rather, it has sought a remedy in substitution for that ordered by the learned Associate Judge because circumstances had changed. Not only had it become apparent that the defendants had no intention of specifically performing the contract pending the resolution of the appeal(s) (and notwithstanding the absence of any application for a stay), the plaintiff now had an alternative buyer interested in the property.   In my view, there is nothing in Neylon v Dickens that suggests that the plaintiff is not entitled to do what it has done.

[33]     Even  if  I am  wrong  in  relation  to  the  election/waiver  point,  I note  that Associate Judge Robinson did explicitly adjourn the issue of remedies in relation to his finding that Mr Muir was also personally liable.  At the very least, therefore, the plaintiff‟s ability to recover from Mr Muir remains at large on that basis (and on the basis that cancellation of the contract did not render it void ab initio).

[34]     In my view, the other jurisdictional matters raised by Mr Muir as a bar to the summary judgment application proceeding are equally without merit.

[35]     More particularly, I consider that for the reasons given above, the plaintiff is entitled to pursue its claim for damages and (accordingly) if necessary or helpful to amend its pleadings.  In that respect, I record my view that, in any event, leave was not required to file the amended statement of claim because:

(a)      there has been no relevant “setting down” under the rules because an interlocutory   application   (whether   for   summary   judgment   or otherwise)  cannot  be  “set  down”  and  cannot  therefore  activate r 7.18(2); and

(b)even if I am wrong in that, I accept Mr Farrands‟ submission that the ASOC is merely of an updating nature and thus would be permitted by r 7.18(3).

[36]     For those reasons, there is no need to consider the question of whether leave should be granted.   For completeness, I record my view that Mr Muir‟s argument about prejudice arising from his abandoning of the appeal does not impress.  At the time the appeal was abandoned, Mr Muir knew perfectly well that the plaintiff intended to pursue the defendants for damages arising from the cancellation of the contract.  While I accept that he may have disputed the legal merits of the plaintiff‟s position, there was always a prospect that the Court would not agree with him about that.  There is no meaningful prejudice; Mr Muir simply chose to gamble, and (in my opinion) lost.

[37]     Similarly, I consider that any argument that it is not possible to apply twice for summary judgment in the same proceedings is not correct, at least in the present context.  While it may be (and in this respect I express no opinion) that it would not be possible to apply twice in relation to exactly the same issue (and I note that

Venning J has so held in Braid Motors Ltd v Scott[10]) that is not what has occurred

here.  Associate Judge Robinson has already determined liability; that is not being (and cannot be) revisited.   Rather, there is an entirely new application (albeit one which arises in the same proceedings) that relates to the recovery of damages that are payable in the face of subsequent events; namely the cancellation of the contract in the face of the defendants‟ non-compliance with the Court‟s earlier order.   The plaintiff  is  plainly  entitled  to  pursue  that  matter  expeditiously  and  by  way  of summary judgment.

[10] Braid Motors Ltd v Scott (2001) 15 PRNZ 508 (High Court).

[38]     Lastly, and although it was not argued by Millbrook, I would add that there must be some question about whether orders of the sort made by Associate Judge Faire are reviewable at all.   By analogy with the case law in relation to rights of appeal under s 66 of the Judicature Act 1908[11] it seems to me doubtful that timetable directions can properly be said to constitute an “order or decision” in terms of s 26P of that Act.   However in light of my conclusions in relation to the other matters above, it is unnecessary for me finally to determine that point.  The application for review is dismissed for all the reasons I have given.  There is no need to determine

the second application and it, too, is dismissed.

[11] Association of Dispensing Opticians of New Zealand Inc v The Opticians Board [2000] 1 NZLR 158 (CA).

[39]     At the hearing before me Mr Muir very responsibly signalled the likelihood of an application for leave to appeal and for a stay in the event that his application for review was unsuccessful.  In light of the timetable that remains in play and the imminent hearing date of 25 September, I direct that any such application(s) are to be made  within  5  working  days  of  the  date  of  this  judgment  and  any  notice  of opposition is to be filed within 2 working days of that date.  Any such application is to be referred to me and (subject to any objection from counsel) I will deal with it on

the papers.

Rebecca Ellis J