New York Grill Limited v Harding
[2024] NZHC 3615
•3 December 2024
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-163
[2024] NZHC 3615
BETWEEN NEW YORK GRILL LIMITED
Plaintiff
AND
DAVID ALEXANDER HARDING
Defendant
Hearing: On the papers Appearances:
AC Foley for the Plaintiff
No appearance for the Defendant
Judgment:
3 December 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 3 December 2024 at 11am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Halliwells, Auckland
NEW YORK GRILL LTD v HARDING [2024] NZHC 3615 [3 December 2024]
Introduction
[1] The plaintiff, New York Grill Ltd (NYG), applies for summary judgment against the defendant, David Harding, to recover a deposit of $286,000 plus interest that NYG alleges is owing pursuant to an agreement for sale and purchase of a restaurant business that did not proceed.
[2] No notice of opposition has been filed by Mr Harding although several memoranda were filed on his behalf seeking adjournments when the matter was first called as he was initially incarcerated and required further time to instruct lawyers. Following his release, Mr Harding did not appear at a rescheduled call or file any notice of opposition. I therefore issued a minute confirming that I would consider the summary judgment application on the papers.
[3] After consideration of the application and affidavit filed in support, I sought further submissions and evidence from NYG as it appeared that an email sent by Mr Harding purporting to cancel the agreement had been sent after NYG had failed within the time given in the agreement to obtain the landlord’s consent to assign the lease.1 In those circumstances, it was arguable the deposit would be refundable with no right for either party to claim damages from the other. Summary judgment for the amount of the deposit would not then be available.
[4] A further memorandum and evidence were filed on behalf of NYG. In the further affidavit filed, NYG’s director, Adrian Loy, deposed that at all material times it was verbally discussed and agreed between the parties that NYG would not seek consent from its landlord until the agreement was unconditional in all other respects and the deposit paid. The issue is whether the evidence is sufficiently consistent with this for NYG to have established that Mr Harding has no reasonably arguable defence.
[5] I set out the background and the legal principles applying to summary judgment below before considering the issue above.
1 New York Grill Ltd v Harding HC Tauranga CIV-2022-470-163, 19 July 2024.
Background
[6] NYG operates a restaurant at Westfield Mall, Newmarket, Auckland, under the name New York Grill.
[7] On 27 July 2021, NYG and Mr Harding entered into a sale and purchase agreement in respect of the restaurant business (Agreement).
[8] The Agreement is on the ADLS/REINZ standard form Agreement for Sale and Purchase of a Business, 4th edition 2008(6), and records that the total purchase price was $2,860,000 with a 10 per cent deposit payable “on this agreement becoming unconditional”. The “Further Terms of Sale” included a term relating to payment of the purchase price as follows:
21.0 Purchase price
21.0 The parties have agreed that the purchase price will be paid by the purchaser to the vendor by $2.55 million in cash on settlement day and $250,000.00 by 5 equal monthly instalments, due on the last business day of each of each calendar month with the first payment being due on 30 September 2021.
[9] There is an issue in relation to the purchase price as Mr Loy’s evidence for NYG is that:
c.The purchase price was to be paid as follows:
i.$2,550,000.00 on settlement date
ii.5 monthly payments of $250,000.00, payable on the last business day of the month with the first payment to be made 30th of September 2021
d.A deposit of 10% was payable upon the agreement becoming unconditional
[10] This suggests each of the five monthly payments was to be $250,000 but that would result in a total purchase price of $3,800,000, not $2,860,000 as recorded in the Agreement. This is also before accounting for the 10 per cent deposit. As the purchase did not proceed, the terms agreed for payment of the purchase price do not need to be determined but I note the discrepancy in terms of the evidence.
[11] The Agreement was subject to a due diligence condition as set out in cl 8.2, to be satisfied within 10 working days of the Agreement.
[12] In addition, NYG was to obtain the landlord’s written consent to the assignment of the lease by 27 August 2021 (with Mr Harding to provide all reasonable assistance).
[13] The parties continued to correspond about the payment of the deposit, the landlord’s consent to the assignment of the lease, and alteration of the settlement date. However, on 29 November 2021, Mr Harding sent an email to NYG’s lawyer, Aaron Foley, saying:
I am going to pass on the New York bar and grill. As New Zealand has traveled [sic] over the past 6 months and the next 6 months coming
It makes the purchase not viable [sic]
[14] Mr Foley responded for NYG, recording that Mr Harding had confirmed the Agreement was unconditional on 20 August 2021, and that there had been variations to the settlement date and numerous requests for the deposit. Mr Foley said that Mr Harding could not now unilaterally purport to cancel the Agreement without consequence and NYG’s preference was to complete the sale. He said that if Mr Harding refused to complete the sale then discussions would be needed as to compensation pursuant to the Agreement.
[15] Mr Harding responded saying he was happy to wait, apparently by reference to Auckland’s COVID-19 alert levels, saying “lets look at it in two weeks once open and people feel better with the economy”. Mr Foley responded saying that NYG was not prepared to adopt a “wait and see approach” confirming that NYG preferred to complete the sale. He invited a proposal from Mr Harding as to how the matter could be resolved stating “Certainly our client is entitled to compensation in the amount of the deposit that is overdue for payment”.
[16] No further correspondence is in evidence. No settlement notice therefore appears to have been issued.
[17] Proceedings were filed on 21 December 2022. The application for summary judgment seeks payment of the deposit of $286,000 plus interest at the late settlement interest rate of 14 per cent.
Summary judgment principles
[18] Under r 12.2(1) of the High Court Rules 2016, the court may give summary judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim.
[19] The principles applying to a plaintiff’s application for summary judgment were set out by the Court of Appeal in Krukziener v Hanover Finance Ltd and are well established:2
(a)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.3
(b)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.4
(c)The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. However, 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.5
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] to [27].
3 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
4 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
5 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
(d)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.6
Has NYG established that Mr Harding has no reasonably arguable defence?
[20] NYG is seeking payment of the deposit which it says is owing under the Agreement plus default interest.
[21] The first page of the Agreement provides that the 10 per cent deposit was payable when the Agreement became unconditional.
[22] NYG proceeds on the basis that when the due diligence condition was satisfied the Agreement became unconditional. However, the requirement for the vendor to obtain the landlord’s consent in writing to assignment of the lease is one of the conditions provided for in cl 8 of the Agreement. Clause 8 is headed “Conditions and terms of security” and includes under the subheading “particular conditions” the finance, due diligence and lease conditions including that the vendor obtain the landlord’s consent to assignment of the lease. 7
[23] It is clearly arguable, therefore, that the requirement for NYG to obtain the landlord’s consent in writing was a condition of the Agreement.
[24]Clause 8.5, under the subheading “Operation of conditions” then records:
8.5If the agreement is expressed to be subject either to the above or to any other condition(s), then in relation to each such condition, the following shall apply unless otherwise expressly provided:
…
(5) If the condition is not fulfilled by the date for fulfilment, either party may, at any time before the condition is fulfilled or waived, cancel this agreement by giving notice to the other. Upon cancellation of this agreement, the purchaser shall be entitled to the immediate return of the deposit and any other moneys paid by the purchaser to the vendor, and neither party shall have any right or claim against the other arising from this agreement or its cancellation.
6 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
7 Clauses 8.1–8.4 of the Agreement.
[25] Considering cl 8.5 in terms of the facts in this case, it is arguable that Mr Harding’s email on 29 November 2021 saying he no longer wished to proceed was effective notice of cancellation as the written terms of the Agreement required the landlord’s consent to have been obtained by 27 August 2021. Clause 1.3 of the Agreement records that all notices must be served in writing on the party or the party’s lawyer and permits such notice to be served via email so Mr Harding’s email on 29 November 2021 is arguably effective notice.
[26] At the time of Mr Harding’s 29 November email, NYG accepts that it had not obtained the consent of the landlord to the assignment of the lease. As mentioned in the introduction, however, Mr Loy’s evidence for NYG is that at all material times it was verbally discussed and agreed between the parties that NYG would not seek approval from Westfield, the landlord, until the Agreement was unconditional in all other respects and the deposit paid.
[27] The email correspondence annexed to Mr Loy’s original affidavit begins with the lawyer for NYG contacting the lawyer for Mr Harding on 5 August 2021 about the Agreement and then a reply on 9 August 2021 from Mr Harding’s lawyer requesting several documents, including the lease of the premises. Copies of the two relevant leases were provided on the same day.
[28] It appears that the date by which the due diligence condition was required to be satisfied was extended as it was not until 20 August 2021 that Mr Harding emailed his lawyer saying “please do declare that the diligence is satisfied”. His lawyer replied “As discussed, I will wait for us to be in a position to pay the deposit before I confirm satisfaction of the due diligence condition”. Mr Harding, however, forwarded a copy of this email chain to NYG’s director on the same day. Mr Foley then asked Mr Harding’s lawyer to confirm that he was awaiting transfer of the deposit funds. Mr Harding’s lawyer confirmed on 23 August 2021 that he would advise when the deposit funds were received and asked for a copy of the plans for the outdoor seating area.
[29]Mr Foley replied on 23 August 2021 saying:
We are conscious that settlement day is just a week away. I am instructed to contact Westfield as to the assignment of lease as soon as we have cleared deposit funds in our trust account.
[30] There is then email correspondence directly between NYG’s solicitors and Mr Harding recording the solicitor’s understanding that Mr Harding was no longer instructing his lawyers. In an email on 27 August 2021, Mr Foley attached a notice seeking payment of the deposit and asked Mr Harding to confirm that he was still intending to complete the purchase and pay the funds.
[31]Mr Foley’s email continued:
The notice was sent on Wednesday. If no deposit is received by the end of Monday, 30 August 2021, non-payment will be a repudiation of the agreement and our client will be entitled to cancel the agreement and seek damages from you. Obviously the preference is to complete the sale, please let us know your position.
[32] Mr Harding replied saying that he would “only settle 5 days once we are in level 2” and saying he was not interested otherwise. He did not mention payment of the deposit.
[33] Mr Foley, replied saying the settlement date variation proposal was agreed and that “The agreement remains on-foot and there has merely been a variation to the settlement date”. Mr Foley continued “On that basis please confirm payment of settlement funds”. Mr Foley then, however, proposed a variation to the method of payment of the settlement funds as follows:
On a separate note, given the later settlement date, my client proposes that the full settlement amount should be settled on that date without
$250,000 being left outstanding for payment by equal monthly instalments after settlement. Please let me have your position on this.
[34]Mr Harding replied:
Reply, yes that is true Thank you
I know that Adrian needs to sell and this will work out the best for the both of us
[35] Emails followed regarding the deposit and how it would be paid. Mr Foley then emailed Mr Harding on 28 September 2021 saying:
Hi David
I cannot find the email I sent a few days ago. However, the gist of it was that we were thanking you for confirming the variation of the agreement to settle 5 days after we move to Level 2. We then wondered, without prejudice to that agreement, if you wanted to move settlement to the first day of Level 2 so that you are taking over from the first opportunity? Please let us know either way?
Can you also advise when and how you will be making payment of the deposit. When we have funds we will be able to advance the lease matters with the landlord.
[36] The following exchanges occurred that same day. First, Mr Harding replied “Yes 100% that is my understanding” to which Mr Foley responded “Sorry, I’m not sure I understand. Do you want to take over 5 days after Level 2 or on the first day of Level 2?” Mr Harding replied “Yes i would like to”. Mr Foley then confirmed “Thanks David. Settlement is confirmed for your takeover the first day of Level 2 in Auckland. Are you able to let us have the deposit?”
[37] Mr Harding agreed to provide the deposit and asked for the appropriate account number. Mr Foley provided the account number but NYG’s evidence is that no deposit was paid. The next communication annexed to the affidavits is Mr Harding’s 29 November email saying he was going to “pass on the purchase of the restaurant”.
[38] I do not consider it is clear from the above communications that Mr Harding agreed that the landlord’s consent did not need to be obtained until after payment of the deposit thereby waiving his rights under cl 8.5. NYG’s lawyer advised that it was his instructions not to obtain the consent until after payment but Mr Harding never clearly agreed to this.
[39] The written terms of the Agreement were that the landlord’s consent was to be obtained by 27 August 2021. By not obtaining consent by that date, it is arguable that Mr Harding was entitled to cancel the Agreement under cl 8.5(5) with the immediate return of the deposit (if it had been paid) and with neither party retaining any right or claim against the other under the Agreement or its cancellation.
[40]Even if the deposit had been paid, cl 2.4 of the Agreement provides:
Where this agreement is entered into subject to any condition(s), the person to whom the deposit is paid shall hold it as a stakeholder until the agreement becomes unconditional or is cancelled for non-fulfilment of any condition(s) in accordance with subclause 8.5.
[41] Additionally, the Agreement provided that the deposit was only payable once the Agreement became “unconditional”. As the Agreement was subject to the landlord’s consent condition, the deposit may not have been payable yet in any event.
[42] The Agreement does provide for forfeiture of the deposit but only where a settlement notice has been issued and not complied with — which did not happen in this case. And nor could NYG have issued a settlement notice without first obtaining the landlord’s consent.
[43] For all these reasons I consider that it is arguable that Mr Harding had a right to cancel the Agreement under cl 8.5(5) and in that case would have been entitled to return of the deposit if it had been paid with NYG no longer having any rights or claims under the Agreement or in respect of its cancellation.
[44] In NYG’s further submissions NYG submits that cl 3.3 of the Agreement required Mr Harding to prepare at his cost a deed of assignment of the lease within a reasonable time prior to settlement, that Mr Harding never did this and that this was a condition precedent to the matters in cls 8.4 and 8.5(5).
[45] I do not accept that the requirement for the purchaser to prepare a deed of assignment is a condition precedent to cls 8.4 or 8.5(5). Clause 3.3 begins:
The purchaser shall at its cost prepare a deed of assignment of the lease (if one is required to assign the lease) within a reasonable time prior to the settlement date.
[46] The timing requirement in cl 3.3 is therefore “within a reasonable time prior to the settlement date” whereas cl 8.4 requires the vendor to seek the landlord’s consent “as soon as it is reasonable”. From a practical perspective, obtaining the landlord’s consent must come before preparation of the deed of assignment as there would be no point in preparing a deed of assignment if the landlord did not consent.
[47] Furthermore, cl 8.4 is expressed in the Agreement as a condition, and is in addition to the condition in cl 8.3(1)(b) that the purchaser approve the lease. Clause
3.3 is not expressed as a condition in the Agreement and is simply an obligation on the purchaser to organise the deed of assignment prior to settlement. I do not accept that any failure to draft a deed of assignment in some way removes the obligation on the vendor to obtain the consent of the landlord to assignment of the lease.
[48] Counsel for NYG also refers to two decisions in their memorandum of 27 September 2024, Northwest Developments v Li,8 and Windsor v Sloane.9
[49] Northwest Developments v Li involved an application for summary judgment as to liability arising out of the failure by a defendant to complete an agreement for sale and purchase of a property. NYG appears to rely on this case to submit that a plaintiff is entitled to proceed with its application for summary judgment even where the defendant takes no steps to defend the proceeding. There is no question that the plaintiff may proceed in the absence of opposition but the plaintiff must still satisfy the Court that the defendant has no defence.
[50] Windsor v Sloane involved a summary judgment application relating to an unconditional sale and purchase agreement in respect of a property. The defendant in that case opposed summary judgment on the basis of a misrepresentation inducing entry into the agreement.10
[51] Counsel for NYG points to the Judge’s reference in Windsor v Sloane to the settled principles in Krukziener v Hanover Finance, which I set out above. In particular, counsel noted that that the Court must be left without any real doubt or uncertainty and that 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.
[52] Neither of these cases progress matters for NYG as they do not discuss the application of cl 8.5(5) which is in issue in this case.
8 Northwest Developments Ltd v Li [2019] NZHC 473.
9 Windsor v Sloane [2016] NZHC 3197.
10 At [7].
[53] For the reasons set out above, I consider it arguable that even if the deposit had been paid, NYG would have been required to return to Mr Harding pursuant to cl 8.5(5). In those circumstances, neither party has any right or claim against the other arising from the Agreement or its cancellation. As a result, NYG has not established that Mr Harding has no reasonably arguable defence. Summary judgment must therefore be declined.
Result
[54]NYG’s application for summary judgment is declined.
[55] As Mr Harding was self-represented at the commencement of these proceedings and has taken no formal steps, there is no order for costs.
Directions
[56] Mr Harding did not file any formal documents in opposition to the summary judgment application but initially took steps in opposition and indicated difficulty obtaining legal representation. It is appropriate for him to be given an opportunity to file a defence if NYG wishes to pursue its substantive claim.
[57] I make directions below for NYG to confirm to the Court by memorandum whether it wishes to proceed with the substantive proceedings and then for Mr Harding to file any statement of defence within a further ten working days.
[58]I direct:
(a)NYG is to confirm by memorandum whether it wishes to proceed with its substantive claim by 20 December 2024;
(b)If NYG so confirms, Mr Harding is to file any statement of defence by 31 January 2024; and
(c)The parties are then to file memoranda in accordance with r 7.3 of the High Court Rules 2016 in the usual way.
Associate Judge Sussock
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