O'Connor v Hoyle HC Hamilton CIV-2010-419-1129

[2011] NZHC 419

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2010-419-1129

IN THE MATTER OF     an appeal pursuant to the District Courts

Act 1947, s 72.

BETWEEN  PATRICK O'CONNOR Appellant

ANDLAWRENCE ARTHUR HOYLE First Respondent

ANDDONNA KAYE HOYLE Second Respondent

Hearing:         11 April 2011

Appearances: D Hayes for the Appellant

M Talbot for the Respondent

Judgment:      11 April 2011

ORAL JUDGMENT OF PRIESTLEY J

Counsel/Solicitors:

D Hayes, P O Box 9323, Waikato Mail Centre, Hamilton 3240. Fax: [phone]
Email: [email protected]

Brook Law, P O Box 9600, Waikato Mail Centre, Hamilton 3240. Fax: [phone].

Email: [email protected]

M Talbot, P O Box 24232, Hamilton 3253. Fax: [phone]. Email: [email protected]

O'CONNOR V HOYLE HC HAM CIV-2010-419-1129 11 April 2011

The appeal

[1]      In October 2009 the appellant sued the respondents in the Hamilton District

Court for $50,000, plus interest, and costs.

[2]      The plaintiff’s cause of action was simple.  He claimed he was entitled to the

$50,000 as a result of a short agreement between him and the respondents, signed on

24 September 2008.  That agreement entitled him to a $50,000 fee as a result of his “negotiating skills”.   In addition the fee was payable because the appellant had reduced considerably the purchase price of an easement which the respondents needed.

[3]      In the District Court the respondents claimed that they were entitled to a set off to the extent of $22,500.

[4]      The hearing was before Judge Maze in July last year.  Her Honour effectively found in favour of the respondents.   The result of her judgment was that the respondents were obliged to pay to the appellant $27,500, plus interest and costs effectively on a pro rata basis.[1]     The appellant challenges that judgment by this appeal.

Background

[1] Patrick O’Connor v Laurence Arthur Hoyle And Anor DC HAM CIV-2009-001630, 9 August 2010.

[5]      If ever there was a cautionary tale as to why lay people should not enter into relatively complicated transactions without the benefit of legal advice, this is it.

[6]      The  respondents  own  land  which  adjoined  the  property owned  by Catra Properties (“Catra”).  Although at the relevant time the respondents were under the impression that the appellant had an interest in Catra, that was not the case.  Rather one of Catra’s directors was the appellant’s son.   In any event, because of an impending subdivision, the respondents were anxious to obtain a legal easement

whereby they could benefit from reticulated electricity and water supplies running

into Catra’s property.  It was for this purpose that the appellant became something of

a go-between.

[7]      Although the first agreement between the parties was undated, it seems to be common ground that it was concluded in May 2008.   The subject matter of the agreement was the easement to which I have referred.   The relevant terms of this agreement for the purposes of this appeal (and indeed at the District Court hearing), were:

(a)       That the respondent, Mr Hoyle, would pay to Catra $200,000 plus

GST for the easement.

(b)Mr Hoyle was to pay “a deposit of $20,000 plus GST (being a part of the  transfer  price)  on  the  agreement’s  execution”.     An  agreed alteration to the typed clause was the deposit would be “non- refundable”.

[8]      The agreement was duly executed and the $20,000 was paid.  Significantly, given the applicable GST rate at the time, this deposit totalled $22,500.

[9]      For  various  reasons,  which  it  is  not  necessary  to  detail,  the  May  2008 agreement was re-negotiated.  There seemed to have been three agreements which replaced it.   Those agreements are all dated 24 Spetember 2008.   One of these agreements, between Catra and both respondents, provides as follows:

1.In May 2008 the Hoyles agreed to pay a sum of money to Catra Properties Limited on the understanding Catra Properties Limited would Register an easement over the titles that Catra owned and which allowed access to the Hoyles subdivision.

2.The  parties  have  entered  a  replacement  agreement  and  agree  to destroy any copies of     the May 2008 agreement.   After the transaction has been completed.

3.The parties now agree the May 2008 agreement is at an end and now Catra Properties Limited, Pat O’Connor hereby indemnify Laurence Arthur Hoyle and Donna Kaye Hoyle against any costs or losses they may suffer should the May 2008 agreement be enforced except

if the Hoyle’s copy of the agreement is used in any enforcement

action by the Hoyles or their solicitors.[2]

[2] Italics represent handwritten portions.

[10]     Clause 3 of this agreement has central significance because it was the route

whereby the Judge allowed the respondents’s set off.

[11]     One of the documents signed on 24 September constituted the agreement between the parties setting out the $50,000 fee to which I have already referred (supra [2]).  Another document in the set was an agreement for the transfer of an easement by Catra to the respondents. The “transfer price” was $20,000 plus GST.

[12]     Unfortunately it seems that the $22,500 paid promptly by the respondents on

9 July 2008 did not find its way to the coffers of Catra but instead went to another company.

[13]     The subdivision was of course proceeding during this timeframe.  However, for reasons not apparent, Catra experienced financial difficulties and was placed into receivership on 16 February 2009.   Shortly thereafter Catra’s receivers demanded payment of $22,500 for the easement pursuant to the September 2008 agreement.

[14]     The respondents have no alternative, so the Judge found, but to pay that figure.  The respondents’ easement was registered in May 2010.  The proceeding by the appellant, for his fee, followed.

[15]     I  record  here  the  obvious  fact  that  the  $22,500  figure  stipulated  in  the September agreement for the easement was identical to the “non-refundable” deposit paid in May 2008.  So the central dynamic of this dispute is whether the respondents had already paid for their easement under the May agreement, or whether the September renegotiated arrangements imposed on them an obligation to pay the same sum again.

[16]     This dynamic clearly weighed with the Judge.  That said, it is noteworthy that the September 2008 documents are totally silent as to how the paid May deposit was

to  be  treated.    It  is  also  noteworthy  that  in  the  wake  of  the  September  2008

agreements, no demand for payment was made by Catra, up to the point of it being placed into receivership.

District Court judgment

[17]     There is no real dispute by Mr Hayes about Judge Maze’s findings of fact.  A significant number of facts (recorded in [6] of her judgment) were not in any event disputed.

[18]     Other findings of importance, however, are these:

(a)      At [8] the Judge accepted that at all times the respondents dealt with the appellant  as  agent  for Catra.    He was,  so  she found,  holding himself out as the company’s authorised agent.

(b)      The Judge decided a conflict of evidence in favour of the respondents.

The appellant’s evidence was that the parties had actually discussed at the time of the September documentation the fact that the non- refundable May deposit  was  not  to  be taken  into  account  for the purpose of the new agreement.  Mr Hoyle, when giving evidence, said there had been no such discussion.  The Judge preferred the evidence of Mr Hoyle in that regard and accepted as a fact that the respondents had only paid a second time because they had no option.

(c)      When turning to the various poorly drafted agreements to which I have referred the Judge considered that “an informed observer objectively viewing the situation” would be satisfied that the total purchase  price  for the  easement  had  descended  from  $200,000  to

$20,000 “plus GST”, and that there was no dispute over the lesser

figure.  I agree.

(d)The Judge correctly identified as an issue whether the payment made in July 2008 of the $22,500 payable under the May agreement was a cost or loss incurred by the respondents which was caught by the

appellant’s indemnity.   The Judge at [18] held it was “abundantly clear” the respondent had “indeed lost $22,500 as a result of being held to their obligations under the first agreement, because the liquidators for [Catra] demanded a second payment ...”

(e)      The Judge further held it was clear the parties intended, when signing the September documents, that the respondents would not be out of pocket as a result of the change.  Indeed that was, she found, what had induced them to sign the documents.

(f)      The  use  of  the  terminology  “non-refundable”  in  the  May  2008 agreement should be construed to regard the $22,500 figure as a deposit which would not be refundable if the purchasers breached the agreement. That was not the case here.

(g)      Para [20] of the Judge’s judgment:

[20]      It is an unnatural interpretation to say only agreement three is being enforced.   Plainly Catra Properties has insisted on performance of both agreements one and two, without regard to the fact that agreement two completely replaced agreement one.

Discussion

[19]     Mr Hayes’ submission was simple and direct.  The May 2008 agreement had come to an end.   The parties had agreed that the agreement was at an end.   The September agreement was expressed to be a replacement.  On that basis, it was an error to find that the appellant had indemnified the respondents because such indemnity only covered losses or costs which flowed from the May 2008 agreement being enforced.

[20]     Furthermore there was absolutely nothing in writing to suggest that the non- refundable $20,000 plus GST deposit would be applied against the lower purchase price of the easement to which the parties agreed in September.  Thus, as a matter of interpretation, the indemnity given by the appellant did not assist the respondents in the factual circumstances which they faced.

[21]     Mr Hayes repeated also, as a subsidiary argument, the submission he made in the District Court that the $22,500 was non-refundable in any event.

[22]     Mr Talbot’s submissions were to the contrary.  I initially had some difficulty in seeing how it could be that the $22,500 paid subsequently by the respondents to Catra’s receiver would in any way be caught by the terms of the indemnity as a cost or loss flowing from the enforcement of the May 2008 agreement.   Mr Talbot’s submission,  however,  was  that  at  the  point  the  receivers  made  demand  for  the

$22,500 (on the respondents’ analysis), the second time, it became very clear the

May 2008 agreement was being construed in such a way as to make the earlier

$22,500 payment non-refundable, or certainly not available as a credit to the reduced consideration negotiated in September 2008.

[23]     In that regard, the Judge’s findings of fact assume critical importance (supra

[18](b)).    She  rejected  the  appellant’s  evidence  that  the  July  2008  payment  of

$22,500 would never be refundable.  She accepted the evidence of the respondent, Mr Hoyle.  She noted further that right up to the end of May 2009 Mr Hoyle acted in such a way as if he had already paid in full the purchase price of the easement.

[24]     Of  course,  the  subjective  beliefs  of  the  parties  to  a  contract  are  not conclusive. The traditional approach is to look at the words of the contract when one is interpreting them, particularly when there is no ambiguity.

[25]     I am totally satisfied that, in the context of the negotiating history to which I have been  referred,  the  indemnity from  the appellant  was  of importance to  the respondents.  The Judge found, and I consider rightly so, that the indemnity in large measure induced the respondents to negotiate the easement price.  Obviously, on one level the respondents’ main exposure would have been to the original purchase price for the easement which was 10 times the sum of the final price.  Any contract party in this situation would need reassurance that the $200,000 obligation was forever at an end.

[26]     Returning to the context, the Judge’s additional but closely related finding

(supra [23]) that the respondents believed they had paid the purchase price is equally

important.     Is  there  anything  in  the  somewhat  muddled  and  crudely  drawn documents which would justify a Court coming to a contrary view?

[27]     Ideally the specific $22,500 paid in July 2008 should have been referred to. It  was  not.    However,  I note that  the  document  which  contains  the  appellant’s entitlement to his fee (supra [9]) is prefaced by the clause that:

In May 2008 the Hoyles agreed to pay a sum of money to [Catra] on the understanding [Catra] would Register an easement over the titles that [Catra] owned and which allowed access to the Hoyles’ subdivision.

[28]     This makes it very clear, that closely related to the appellant’s entitlement to his fee, was the understanding the monies paid under the May 2008 agreement were uniquely related to Catra providing the easement.  Thus, I do not regard the omission of specific reference to the $22,500 paid in July as being fatal to the interpretation Mr Talbot is advancing.  Rather I consider the documents, when looked at together and read as a set, justify the conclusion that the full but reduced purchase price for the easement had already been paid.

[29]     How does this relate to the appellant’s indemnity?  In my judgment the extra payment which the respondents had to make in May 2009 were brought about by the “enforcement” of the May 2008 agreement.   That money had been paid to Catra under the May agreement and retained.   Contrary to the respondents’ legitimate expectation, and the identical $22,500 figure in both agreements, the expected credit was  not  made.    Catra  took  the  stance  that  the  July  2008  payment  was  non- refundable.  It also asserted that the $22,500 was not the agreed figure (already paid) for the transfer of the easement.  It was thus, erroneously, enforcing the May 2008 agreement, thus triggering the appellant’s indemnity obligation.  I therefore conclude that the indemnity (supra [9]) attaching to the appellant was available to the respondents as a set off.

[30]     It thus follows that I consider Judge Maze was correct in her findings and the conclusion she reached.  The appeal will thus have to be dismissed.

[31]     There were also appeals attaching to the Judge’s subsequent decision relating

to costs.  Counsel are agreed, in the circumstances, that were I to dismiss this appeal

there will be no challenge to the appellant’s entitlement to costs, disbursements, and interest in the District Court as ordered by Judge Maze in respect of the appellant’s partial success of obtaining judgment for $27,500.

Result

[32]     The appeal is dismissed.

Costs

[33]     Counsel agree that, the appellant having lost, the respondents are entitled to costs on the agreed 2B scale.

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Priestley J