Paragon Commercial Limited v McGuire
[2024] NZHC 3830
•16 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-419-189
[2024] NZHC 3830
BETWEEN PARAGON COMMERCIAL LIMITED
Plaintiff
AND
STEPHEN ROBERT MITCHELL MCGUIRE
Defendant
Hearing: 25 November 2024 Appearances:
DM O’Neill for the Plaintiff
SRM McGuire, Defendant in Person
Judgment:
16 December 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 16 December 2024 at 11 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Ellice Tanner Hart, Cambridge
PARAGON COMMERCIAL LTD v MCGUIRE [2024] NZHC 3830 [16 December 2024]
Introduction
[1] The plaintiff, Paragon Commercial Ltd (PCL) seeks summary judgment of its claim for breach of contract following the failure by the defendant, Stephen McGuire, to settle the purchase of a property in Hannon Road, Hautapu. PCL has since re-sold the property but sues Mr McGuire for losses arising from the failure to settle the original agreement as follows:
(a)loss on purchase price on resale: $220,000;
(b)default interest: $151,178.58;
(c)real estate agents’ commission on resale: $48,000;
(d)real estate agents’ advertising on resale: $4,835; and
(e)legal fees on resale and default: $2,848.50.
[2] I extended the time by which Mr McGuire was to file any notice of opposition and affidavit in support but no documents were filed in accordance with those directions.
[3] Mr McGuire attended the hearing on 25 November 2024, prior to which he had filed a one page “statement” recording that he had not been able to engage a lawyer to assist with the notice of opposition and that he had offered a settlement to PCL of
$50,000 in an effort to stop them “throwing good money after bad”. Mr McGuire says that he is not in a financial position to borrow further money and that no one has suffered bigger losses from the failure of this project than he has. Mr McGuire alleges the real estate agent involved in the sale misrepresented the Property but ends his statement by saying that he just wants people to stop spending money on this and that he has nothing left to offer except for the $50,000 offered by way of settlement. He says his only other option is to go bankrupt when PCL will not receive anything.
[4]PCL confirmed that it wished to proceed despite Mr McGuire’s stated position.
[5] When asked at the hearing, Mr McGuire was not prepared to indicate when he would be in a position to file a notice of opposition. As a result, there was no option but for the application to proceed on the basis that it was unopposed.
[6] Prior to the hearing I had considered the documents filed and was satisfied that PCL had established that Mr McGuire had no arguable defence. I therefore made orders granting summary judgment for liability but reserving the position on quantum to allow the interest sought to be confirmed. I issue this judgment to set out my reasons for granting summary judgment on liability and to determine quantum.
Background
[7] On or about 8 July 2021, PCL entered into an agreement for the sale and purchase of property at Hannon Road, Hautapu, (Property), as vendor, with Mr McGuire, as purchaser (Agreement).
[8] The Property comprised two lots in an industrial subdivision that PCL was completing, being lots 2 and 3, Deposited Plan 496258 and record of title 729964 South Auckland Registry.
[9]The Agreement included the following terms:
(a)a purchase price of $2,400,000 plus GST (if any);
(b)the deposit was 10 per cent of the purchase price;
(c)payment of the deposit was subject to due diligence (cl 20);
(d)settlement was to occur ten working days after the vendor notified the purchaser that search copies of the new records of title for the Property were available (cl 22); and
(e)the interest rate for late settlement was 12 per cent per annum.
[10] On 18 October 2021, Mr McGuire’s solicitor advised that the due diligence condition had been satisfied and, subject to PCL’s agreement to vary the terms of the
deposit amount and payment, the Agreement would be unconditional. The deposit variation proposed included a reduction in the deposit from 10 per cent to 7.5 per cent, with five per cent to be paid immediately and 2.5 per cent in December 2021.
[11] PCL agreed to the deposit variation and so Mr McGuire paid $120,000.00 directly to the real estate agent and the remaining $60,000.00 to PCL's solicitor's trust account on 24 December 2021.
[12] On 21 June 2022, the Agreement was further varied, when Mr McGuire agreed that he would contribute $55,138.00 (plus GST) towards the cost of supply and installation of stormwater disposal infrastructure required by the Waipa District Council on the Property, with payment to be made as set out in the agreement including requiring supply by PCL of a valid GST invoice.
[13] On 30 August 2023, PCL’s lawyer supplied Mr McGuire’s lawyer with copies of the new titles. Pursuant to cl 22 of the Agreement this meant that settlement was due 10 working days later, being 13 September 2023.
[14] On 31 August 2023, Mr McGuire’s lawyer replied, requesting that settlement be deferred to 2 October 2023. PCL responded advising that no extension to the settlement date was agreed to.
[15] On 11 September 2023, Mr McGuire’s lawyer advised PCL that settlement was unlikely to occur on settlement date, but that Mr McGuire intended to complete settlement as soon as possible.
[16] On the settlement date, 13 September 2023, Mr McGuire’s lawyer advised that Mr McGuire was unable to complete settlement. As a result, PCL’s lawyer served a settlement notice at 5.33 pm on the same day. The notice confirmed that PCL was ready, willing and able to settle and that settlement was required to be completed (including the payment of interest and costs for default) within 12 working days, that is by 29 September 2023 at 4.30 pm, time being of the essence. The settlement statement recorded that $2,275,541.17 was required to complete settlement.
[17]Mr McGuire’s solicitor acknowledged receipt of the settlement notice at
5.52 pm on 13 September 2023.
[18] Mr McGuire did not complete settlement by 29 September 2023 so on 2 October 2023, PCL cancelled the Agreement pursuant to cl 11.4(1).
[19] By this time, the subdivision was complete and new titles had been issued for the Property. The subdivision resulted in the address of the Property changing from Hannon Road to Parakiwai Road, Cambridge. The folio descriptions, however, remain the same, being lots 2 and 3 on Deposited Plan 585506 and records of title 1104188 and 1104189 of the South Auckland Registry.
[20] Following the cancellation, PCL engaged a real estate agent to market and attempt to resell the Property.
[21] The real estate agency undertook a tender campaign which attracted three offers, being $970,000 and $700,000 for each of the individual lots comprising the Property, and $1,800,000 for the whole Property. The tender offers were rejected in December 2023.
[22] In early 2024, the real estate agency attempted an auction campaign. While the Property passed-in at auction, PCL received a post‑auction offer of $2,000,000. Considering the low offers previously received, Mr Beckett’s evidence for PCL is that PCL considered that this was the best price that could be achieved.
[23] On 26 January 2024, PCL therefore entered into an agreement for the resale of the Property to the third party for $2,000,000 plus GST, if any (Resale Agreement).
[24] On 20 February 2024, $50,000 was paid by way of deposit on the resale and on 3 April 2024, the resale was settled.
[25] On 4 April 2024, PCL instructed its solicitor to send Mr McGuire’s lawyer a letter of demand for PCL’s losses, calculated at that date as being $490,177.09. This is greater than the amount PCL now claims as it included a loss of $62,500.00 relating to vendor finance that PCL no longer seeks.
[26] Mr McGuire failed to pay the demand and so PCL filed proceedings including for summary judgment.
Summary judgment principles
[27] 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.
[28] 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:1
(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.2
(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.3
(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.4
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] to [27].
2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
3 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
4 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.5
Remedies available against the defendants
[29] The Agreement is on the ADLS/REINZ (Tenth Edition 2019(2)) standard form. Clause 11.4(1) of that Agreement provides that where the purchaser does not comply with a settlement notice, the vendor may either sue for specific performance or:
(b)cancel this agreement by notice and pursue either or both of the following remedies, namely:
(i)forfeit and retain for the vendor’s own benefit the deposit paid by the purchaser, but not exceeding in all 10% of the purchase price; and/or
(ii)sue the purchaser for damages.
[30]PCL has cancelled the Agreement and is pursuing both of the above remedies.
[31] Clause 11.4(3) makes specific provision where a resale is contracted within one year from the date by which the purchaser should have settled in compliance with the settlement notice.
[32] Here, the settlement notice required compliance by 29 September 2023 and the date the Resale Agreement was entered into was 22 December 2023, so the resale was clearly within one year and cl 11.4(3) applies.
[33] Clause 11.4(3) provides that the damages claimable by the vendor under cl 11.4(1)(b)(ii) (as set out above) include all damages at common law or in equity and include (but are not limited to):6
(a)interest on the unpaid portion of the purchase price at the interest rate for late settlement from the settlement date to the settlement of such resale;7 and
5 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
6 Original Agreement, cl 11.4(3).
7 Clause 11.4(3)(a).
(b)all costs and expenses reasonably incurred in any resale or attempted resale;8 and
(c)all outgoings (other than interest) on or maintenance expenses in respect of the property from the settlement date to the settlement of such resale.9
[34] In addition to the difference in the purchase price, PCL is seeking the damages set out above at (a) and (b). I discuss each of these categories below.
Difference in the purchase price
[35] PCL is claiming $220,000 as the loss on resale or difference in the purchase price.
[36] PCL was not under a duty to obtain the best price, it was only under the ordinary common law duty to mitigate its loss. This requires that PCL takes such steps to obtain a proper price as are reasonable in the circumstances, including those in which PCL is placed as a result of Mr McGuire’s default.10
[37] I am satisfied that PCL took reasonable steps to obtain a proper price in reselling the property and so the difference in price is appropriately claimed.
[38] The purchase price in the original agreement was $2,400,000 with a deposit paid of $180,000 (in tranches of $120,000 plus $60,000). The purchase price in the resale was $2,000,000. Taking the deposit paid by Mr McGuire into account, the difference is $220,000 as claimed ($2,400,000-$180,000 - $2,000,000 = $220,000).
8 Clause 11.4(3)(b).
9 Clause 11.4(3)(c).
10 Donald McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at 565.
Interest on the unpaid portion of the purchase price at the interest rate for late settlement from the settlement date to the settlement of such resale
[39] In paragraph 19(b) of its statement of claim, PCL seeks “default interest on the settlement amount from settlement date until resale settlement”. This is quantified by PCL as being $151,178.58.
[40] PCL has calculated the interest on the basis of the amount owing under the settlement statement of $2,275,541.17. This amount includes the stormwater variation of $55,138 and the purchaser’s pro-rata share of the rates owing.
[41] However, cl 11.4(3)(a) only allows the vendor to claim interest at the default rate on the “unpaid portion of the purchase price” rather than the whole of the amount owing in the settlement statement. I do not consider that in the summary judgment context, the stormwater contribution and the purchaser’s share of the rates owing ought to be included in the sum on which default interest is calculated. The default interest awarded has, therefore, been recalculated on the basis of the unpaid portion of the purchase price.
[42] The receipt of the deposit reduces the unpaid portion of the purchase price so the interest calculation needs to be done in two stages, first for the period prior to receipt of the deposit for the resale and then for the period following receipt.
[43] Prior to receipt of the deposit on 20 February 2024, the unpaid portion of the purchase price was $2,200,000. Default interest on $2,200,000 from the settlement date of 13 September 2023 to 20 February 2024 is $115,726.03.11
[44] Following receipt of the deposit of $50,000 under the resale agreement, the unpaid portion reduces to $2,150,000 ($2,200,000 less the deposit of $50,000). PCL claims default interest on $2,150,000 from 20 February 2024 until the settlement occurred on 3 April 2024. The default interest for this period is $30,394.52.12
[45]Together the default interest awarded comes to $146,120.55.
11 $2,200,000 x 12% x 160/365.
12 $2,150,000 x 12% x 43/365.
[46] PCL has not sought interest on the difference in the purchase price following settlement of the resale until payment and so no interest is awarded for that period.
[47] I record that s 23 of the Interest on Money Claims Act 2016 (IOMCA) extends the application of a default interest provision to the period both before and after judgment unless the contract expressly provides otherwise. However, to rely on the IOMCA, a plaintiff must first comply with s 25 of the IOMCA by pleading the section under which the interest is sought and, as far as possible, the period for which interest is sought.
[48] As set out above, in this case PCL simply claims at paragraph 19(b) of its statement of claim, “default interest on the settlement amount from settlement date until resale settlement”, without reference to the IOMCA.
[49] There is the power under s 25(4) for amendments to be made to a pleading but the threshold for doing so requires overcoming what have been referred to as the three formidable hurdles in Elders Pastoral Ltd v Marr.13
[50] I do not consider it would be appropriate to allow such an amendment in this case given the pleading did not indicate that default interest would be sought for the period following settlement of the resale. Furthermore, from a practical perspective given the statement filed by Mr McGuire, as discussed in the introduction, allowing such an amendment may not make a difference to the amount recovered.
Costs and expenses reasonably incurred on a resale or attempted resale (cl 11.4(3)(b))
PCL claims the following costs and expenses:
(a)real estate commission of $48,000.00;
(b)real estate advertising $4,835.00;
13 Elders Pastoral Ltd v Marr (1987) 1 NZPC 91, (1987) 2 PRNZ 383 at 385 as discussed in Chen v Huang
[2024] NZCA 38 at [242]–[245].
(c)legal fees on sale $1,985.50; and
(d)legal fees on sale default $863.00.
[52] Copies of the invoices for these costs are annexed to Mr Beckett’s affidavit for PCL except in respect of the real estate advertising. However these costs and expenses relate to the original sale rather than the resale. Clause 11.4(3)(b) refers to costs and expenses on the resale or attempted resale rather than the original sale. This is because cl 11.4(3) relates to losses claimed on an expectation, rather than reliance, basis.
[53] The real estate commission on the resale is likely to be less than the original commission given the reduced sale price. The other amounts may be similar but there is not sufficient evidence of the advertising costs in any event. In the circumstances I consider it is appropriate to allow the plaintiff to file a further affidavit setting out the costs and expenses on the resale. I therefore adjourn the application in that respect for the filing and service of a further affidavit attaching the relevant invoices. Further orders will then be made in respect of the costs and expenses on the resale.
Costs
[54] At the hearing on 25 November 2024, I ordered costs and disbursements on a 2B basis as sought by PCL amounting to $10,994.00 in costs, plus disbursements of
$2,712.50. The disbursements awarded however include GST when I presume PCL is registered for GST. To prevent double recovery, I therefore adjust the award of disbursements made to remove GST from the disbursements claimed, resulting in an award for disbursements of $2,358.70. If PCL is not registered for GST, then a memorandum may be filed confirming that position and the disbursements can be fixed by the Registrar at $2,712.50.
Result
[55] PCL’s application for summary judgment was granted as to liability on 25 November 2024 with Mr McGuire now ordered to pay the following amounts by way of quantum:
(a)loss on purchase price on resale of $220,000; and
(b)default interest of $146,120.55.
[56] PCL’s application for costs and expenses is adjourned for a further affidavit to be filed setting out the costs and expenses on resale and attaching the relevant invoices by 19 December 2024 (with leave to apply for an extension if necessary).
[57] Costs are to be paid on a 2B basis in the amount of $10,994 plus the GST exclusive amount for disbursements of $2,358.70 (unless a memorandum is filed confirming PCL is not registered for GST when the disbursements amount will be fixed by the Registrar at $2,712.50).
Associate Judge Sussock
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