Molloy v Clarke HC Auckland CIV-2010-404-8568

[2011] NZHC 846

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-8568

BETWEEN  GEORGE IAN VICTOR MOLLOY Plaintiff

ANDHAMISH JAMES CLARKE Defendant

Hearing:         2 August 2011

Counsel:         D G Collecutt for Plaintiff

A Paterson for Defendant

Judgment:      3 August 2011 at 4:00 PM

RESERVED JUDGMENT OF ASSOCIATE JUDGE FAIRE

This judgment was delivered by me on 3 August 2011 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:      Ewart & Ewart, PO Box 26190, Auckland

Rennie Cox, PO Box 6647, Auckland 1141

MOLLOY V CLARKE HC AK CIV-2010-404-8568 3 August 2011

[1]      The plaintiff seeks summary judgment against the defendant in terms of the

prayer for relief contained in the plaintiff’s statement of claim.

[2]      There are two causes of action pleaded in the statement of claim.

[3]      In the first cause of action the plaintiff seeks judgment for $276,152.64 which is said to be repayment of advances made together with interest.

[4]      In the second cause of action the plaintiff pleads breach of a settlement agreement with the defendant and seeks an order appointing an accountant to carry out the accounting to be undertaken as required by the settlement agreement.

[5]      A half-day  fixture  was  allocated  for  this  application  by Associate  Judge Doogue.  In the minute issued by his Honour on 31 March 2011, he ordered that the plaintiff had 14 days to file any affidavit in reply and that the plaintiff was to comply with the provisions of r 7.39 as to synopsis, chronology and bundle, 10 working days prior to the fixture and that the defendant was to comply five working days prior to the fixture.

[6]      On  27  May  2011  the  High  Court  notified  counsel  of  a  fixture  for  this proceeding for 10 am on 2 August 2011.

[7]      The plaintiff did not file his affidavit in reply by 14 April as ordered.  In fact, the reply affidavit was not filed until 27 May 2011.

[8]      The plaintiff did not file his synopsis, chronology and bundle of documents by 19 July as ordered.

[9]      The file was assigned to myself for hearing.   I issued a minute on 27 July

2011.  I recorded the following:

1.I am scheduled to hear an opposed summary judgment application in relation to this matter at 10am on 2 August 2011.

2.I  note  that  the  plaintiff  is  in  breach  of  the  obligations  to  file submissions,  chronology  and  the  bundle  prescribed  by  r  7.39  ten

working  days  prior  to  the  fixture  as  ordered  by Associate  Judge

Doogue on 31 March 2011.

3.This defect must be cured immediately.  The plaintiff is put on notice that its default may lead to orders being made pursuant to r 7.48 of the High Court Rules.

[10]     The plaintiff remained in default.  As at close of business on Friday 29 July no synopsis had been filed.   Ms Paterson  remained at her chambers on Friday evening in anticipation that something might be received so that she could work on her submissions over the weekend.  No synopsis was received by her.  At sometime on the weekend a synopsis was faxed to Ms Paterson’s office.  However, she did not in fact receive the draft until 9 am on Monday 1 August.  The signed copy of the submission was received by her at 11.30 on Monday 1 August.

[11]     Ms Paterson complained that there was simply insufficient time to prepare submissions  in  answer  and  to  do  justice  to  the  defendant’s  opposition  to  the plaintiff’s application for summary judgment.  Accordingly, she sought orders in the alternative that either:

(a)       I dismiss the application for summary judgment; or

(b)      Adjourn it for a later fixture date.

[12]     In determining Ms Paterson’s application for one or other of the orders I

allowed counsel to address briefly on the merits.

[13]     This proceeding arises out of arrangements entered into by the plaintiff and the defendant to develop residential type properties.   The plaintiff’s role was principally to provide substantial funding.  He is a real estate agent and had hoped to be involved in the sale of the properties. The defendant’s task was principally to find the proposed properties which were suitable for development and to actually arrange the development.

[14]     The plaintiff advanced a total of $353,000.   Properties at Birkdale Road, Waverley Avenue and Manutara Avenue were located and purchased.  The Birkdale property was eventually sold as two properties in November 2009 and in April 2010.

The Waverley Avenue property was sold as two properties, in one case in August

2010 and the other July 2010. The Waverley properties were acquired in the name of

Mr Clark’s company, Benetti Holmes Ltd.

[15]     The Manutara Avenue property has been sold, although precise details are not contained in the papers before me.  I was simply told of this position from the bar.

[16]     The parties fell out.   Of the $353,000 which the plaintiff advanced, he has received payments of $106,228.24 leaving a capital balance outstanding in respect of the advances of $246,771.76. That position is agreed in the papers.

[17]     The plaintiff seeks interest and costs as well.   There is a dispute as to the contractual basis for that part of the claim.

[18]     The parties have been engaged in prior proceedings.   Those proceedings arose as  a result of the plaintiff placing caveats on a number of the properties concerned  and  also  on  an  additional  property  which  appears  not  to  have  been covered initially by the original arrangements which the parties entered into.

[19]     The   caveat   proceedings   came   before   Associate   Judge   Doogue   on

3 September 2010.  His Honour’s minute is particularly important, having regard to the issues that now arise between the parties and accordingly I set it out in full:

[1]       This caveat needs to be dealt with promptly.  Mr Smyth has said that in the very constricted time available to him not all the evidence has been filed that should be filed for the respondent.  I therefore direct that the respondent is to file and serve any further affidavits in this proceeding by 9 September 2010.

[2]        The  applicant  is  to  have  until  16  September  2010  to  file  any affidavits in reply.

[3]        The  applicants  are  to  file  and  serve  the  bundle  of  relevant documents (filed both for the applicant and respondent) to be filed and served by 5pm 17 September 2010.  Because of the timeline, it will not be possible to include any affidavits in reply on the main bundle and they can be included in a supplementary bundle.   The pagination of the supplementary bundle should continue on from the last document in the main bundle.

[4]       The synopsis for the applicants is to be filed and served by 5 pm 16

September 2010 and the synopsis of the respondent by 5 p.m. 20

September 2010.    The synopsis on each side is not to exceed 15 pages.

[5]       The proceeding is allocated a fixture commencing at 10 a.m on 21

September 2010 (one half-day).

[6]        The parties are agreed that an order can be made by consent that Caveat Number 8566659.1 be removed pursuant to s 143 of Land Transfer Act 1952.   It is a condition of that order that the surplus funds remaining after sale are to be held in the trust account of Rennie Cox solicitors on interest bearing terms pending further order of the Court.   The surplus funds will be those that are left after payment of:

a)The amount of money required to discharge any mortgage registered before the respondent lodged his caveat;

b)      Real estate agent commission;

c)Reasonable  legal  fees  incurred  in  connection  with  the settlement of the sale.

[7]       I will hear counsel further should they wish to make submissions on the detail of the form of these orders.

[8]        The application for removal of caveats 8566285.1 and 8572359.1 will be dealt with at the hearing on 21 September 2010.   Costs of today’s hearing are reserved to be dealt with following the decision on 21 September 2010.

[20]     In [6] of his Honour’s minute there is recorded that it was a condition of the order made that surplus funds remaining after sale are to be held in the trust account of Rennie Cox, solicitors, on interest bearing terms pending further order of the Court. The order then stipulates what is meant by surplus funds.

[21]     The papers before me disclose that emails passed between lawyers in which solicitors acting for the defendant, Rennie Cox, confirmed, as at 22 September 2010, that they held a net figure of $83,831.12.  Counsel clarified for me from the Bar that those proceeds related to the sale of the Waverley Avenue property.

[22]     The  Waverley Avenue  properties  were  sold  for  $408,000  and  $382,500 respectively. A real question, therefore, arises as to whether the sum which is held in the trust account of Rennie Cox, solicitors, represents a full compliance with the order made by Associate Judge Doogue.   No evidence was provided to me of the existence of any mortgage registered against those titles. Accordingly, I am left with

a very real concern as to whether the defendant complied with the order of Associate Judge Doogue.  I can only express it as a concern because there simply is insufficient material before me to make any final determination on the matter.

[23]     The caveat proceedings came before Lang J in accordance with Associate Judge Doogue’s minute on 21 September.   Again, because it is important in the consideration of the issues which arise on this pleaded summary judgment application, I set out his Honour’s minute:

[1]       This morning I was due to hear an application by the applicants for an order removing two caveats that the respondent has lodged against certificates of title to properties that the applicants own.

[2]       During  the  course  of  the  hearing  counsel  were  able  to  reach agreement regarding the terms on which the caveats could be removed.  The agreement also provides a pathway for resolution of all matters currently in dispute.  I commend counsel and the parties for their sense in reaching this agreement.

[3]       I  make  orders  by  consent  removing  the  caveats  8566285.1  and

8572359.1.  I do so on the basis of the agreement that counsel have reached and documented this morning.

[4]       The  issue  of  costs  in  relation  to  this  proceeding  remains  to  be resolved.   Mr Power has helpfully provided me with a synopsis of his submissions in relation to costs.  Mr Smyth is to file a brief memorandum in response by 12 noon on Friday 24 September 2010.  Any memorandum by the applicants in response is to be filed and served no later than 5 pm on 24

September 2010.  When filing a memoranda counsel should ask the Registry to ensure that the documents are placed on my desk on Friday afternoon so

that I can draft my decision over the weekend.

[24]     The agreement recorded in his Honour’s minute has been produced.  Again I

set out the full text of the settlement agreement:

1.The parties agree to the caveat in this proceeding being removed on the basis set out at paragraph 6 of the Minute of Associate Judge Doogue of 3rd September 2010, and that the proceeds of the sale may also be dealt with by consent of the parties in writing.

2.The applicant (Clarke) agrees to prepare an accounting for all development   costs   for   the   properties   at   256   Birkdale   Road,

2 Waverley Avenue and 1 Manutara Avenue, which will be supported by invoices, settlement statements or such other proof of payment for the purpose of determining the share of profit payable to Clarke

and the respondent (Molloy).   The accounting will be provided to

Molloy by the 5th of October 2010.

3.Clarke and Molloy agree that the proceeds of sale after development costs is to be shared equally.

4.Molloy will prepare a schedule of the amounts advanced by him, together with interest, less any repayments made by Clarke and will provide that to Clarke by 24th September 2010.

5.The parties agree to use their best endeavours to agree upon the actual costs of development, and the amount payable to each party. For the avoidance of doubt, the parties agree that the costs of development include:

(a)      Any monies advanced by either party for the purchase of the property, or to undertake development of the property;

(b)      Any interest payable on such advances; (c) Real estate commission; and

(d)      Reasonable legal fees upon and in connection with the sale.

6.In the event that the parties are unable to agree upon the amounts payable to each other in terms of the accounting to be undertaken as set out in paragraph 2 above, Molloy agrees to issue proceedings seeking an accounting and any other relief by the 14th  of October

2011.

[25]     There was no material before me indicating what had happened with the proceeds of sale of the Manutara Avenue property.  Ms Paterson advised me that her firm did not act.  She was unaware of any funds being held in a trust account which, of course, is a requirement of the settlement agreement when it is read in conjunction with Associate Judge Doogue’s minute.

[26]     My preliminary view is that the settlement agreement is arguably an accord and satisfaction which discharges previous agreements or arrangements between the parties.   I say deliberately “arguable”.   In my view, final determination of that question is a matter for trial and not a matter to be resolved on a summary judgment application.  I reach that view because paragraph 5 suggests that the amount payable to each party follows the sale of the subject properties.  I repeat, however, that this is a preliminary view and is made on the basis that its final determination is a matter for trial.

[27]     Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that a defendant has no defence to a cause of action in the statement of claim or to a

particular part of any such cause of action.  The obligations imposed by the rule have been examined by a number of authorities.

[28]     The correct approach to an application for summary judgment by a plaintiff was recently summarised in Krukzeiner v Hanover Finance Ltd1  where the court said:

The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11

PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[29]     Accordingly, my view is that summary judgment is not appropriate.   That simply reinforces my view that the application should be dismissed on the two grounds, namely;

(a)      For non-compliance of the Court’s directions; and

(b)Because the matter, as pleaded, is not suitable for determination by way of summary judgment.

[30]     Normally, where a party is in default, the party would be expected to pay costs which are occasioned by the default.   I am not satisfied, in this case, that is appropriate.   The defendant’s position, I find, is also unsatisfactory.   As I have mentioned, I was told that there were no funds held in respect of the sale of the Manutara Avenue property.  That suggests, prima facie, that there is a breach of the settlement agreement.  I have already referred to the fact that I have concerns that the order of Associate Judge Doogue, relating to the Waverley Avenue property, may

also not have been strictly complied with by the defendant.  It is not possible on the papers before me to express any final view on these two matters.  That leads me to the position that until the issues are properly ventilated at trial, it would not be appropriate to make any order for costs.  It is for that reason that I have reached the view  that  costs  in  relation  to  the  application  for  summary judgment  should  be reserved.  They are reserved for another reason and that is the reason often referred

to by reference to the Court of Appeal decision in NZI v Philpott.2

[31]     The papers and the discussion that I have had counsel have drawn attention, with greater precision, to the real area of inquiry that must be made in this case.  The precise benefits of that, of course, will not be known until the matter is finally determined at trial.

[32]     My comments in the preceding paragraph are, however, the reasons why I now make a number of orders in relation to this proceeding.  They have been made after discussing what is appropriate in terms of time with counsel.  Accordingly, I order:

(a)       The plaintiff’s application for summary judgment is dismissed and

costs in relation to that application are reserved.

(b)      The plaintiff shall file and serve any amended statement of claim by

12 August 2011.

(c)      The defendant  shall  file  and  serve  a statement  of defence to  any amended statement of claim by 26 August 2011.

(d)The defendant shall produce for inspection by plaintiff’s counsel the defendant’s solicitor’s reporting statement to Mr Clarke and to his companies in respect of the sale of the five properties concerned, namely at Birkdale Road (two) Waverley Avenue (two) and Manutara Avenue by 12 August 2011.

(e)      Each party shall file and serve affidavits of documents which comply with the High Court Rules by 9 September.

(f)      Any party seeking an interlocutory order or direction (probably an application for taking of accounts pursuant to part 16) shall file and serve the appropriate application by 23 September.

(g)The application shall have as its date of hearing a case management conference at 9.30 am on 4 October 2011.  Notice of opposition and affidavits in opposition shall be filed and served by 23 September

2011.  In all other respects r 7.19 and the following rules contained in

Part 7 of the High Court Rules shall apply.

[33]     A telephone  case  management  conference  with  counsel  shall  be  held  at

9.30 am on 4 October. The following matters will be discussed:

(a)      Disposal   of,   or   allocation   of,   a   fixture   for   any   outstanding interlocutory application;

(b)Settlement and whether a mediation or Judicial settlement conference should be ordered;  and

(c)      Trial duration – the fixing of a trial date and the making of any special trial directions that are required.

[34]     In respect of these matters, counsel should have available the number of witnesses to be called and the general scope of the evidence to be covered by them so that an accurate assessment can be made of trial duration.  In addition, counsel should be in a position to indicate if any order should be made in relation to experts pursuant to r 9.44.  Because the issues requiring resolution at trial will be considered at the conference, memoranda should be filed on a sequential basis so that the defendant has the opportunity of commenting upon the plaintiff’s summary of trial issues.  To achieve this, the plaintiff’s memorandum dealing with the above matters shall be filed and served by 26 September and the defendant’s memorandum dealing

with the above matters, and in particular commenting upon conceding or adding to

the list of issues, shall be filed and served by 29 September.

JA Faire

Associate Judge