Paul v Jade Residential Limited

[2019] NZHC 304

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2018-441-29

[2019] NZHC 304

BETWEEN

MURRAY PAUL AND MARIE PAUL

Appellants

AND

JADE RESIDENTIAL LIMITED

Respondent

Hearing:	13 August 2018
Appearances:	K A Lomas for Appellants M B Lawson for Respondent
Judgment:	1 March 2019

JUDGMENT OF GRICE J

(Appeal from District Court)

Contents

Para No

Background  [1]

The decision  [5]

Grounds of appeal  [10]
Scope of appeal  [12]

Questions on appeal  [15]

Substantive findings  [17]

Were the milestone payments due and payable?  [17]

“Closed-in” milestone  [17]
“Lined” milestone  [25]

What was the effect of the dispute resolution clause on the cancellation

of the contract by the Pauls?  [40]

Was the contract otherwise validly cancelled?  [58]
Were the Paul’s in breach of cl 14 of the contract?  [69]
Was the Judge entitled to allow further evidence to be adduced on
quantum?  [73]
Conclusion  [86]
Good faith  [89]
Costs  [91]

PAUL v JADE RESIDENTIAL LIMITED [2018] NZHC 304 [1 March 2019]

Background

[1]        In the District Court, Jade Residential Limited (the original plaintiff and the respondent here) obtained judgment against Mr and Mrs Paul (the original defendants and the appellants in this court) for a sum to be fixed at a subsequent hearing.1

[2]        The judgment concerned work Jade had done in the construction of the Pauls’ house in Havelock North. The house was finally completed after the Pauls purported to cancel the construction contract with Jade. The cancellation was precipitated by Jade ceasing to work on the job before the house was completed. Jade did so because the Pauls had not paid two milestone payments which Jade said were due.

[3]        Jade made a claim for payment of the two milestone payments. The Pauls lodged a counterclaim for damages for the cost they had incurred to complete the house.

[4]Both parties now appeal against the District Court decision.

The decision

[5]The District Court Judge found that:

(a)The Pauls could not lawfully cancel the contract because they had refused to go to dispute resolution and the contract contained a clause requiring the parties to go to mediation in the event of a dispute.2

(b)Jade had not completed the contractual milestones. These were called the “closed-in” milestone and “lined” milestone. The milestones required completion before specified payments were due for each milestone.3

1      Jade Residential Limited v Paul [2018] NZDC 5673.

2 At [56].

3      At [27], [38] and [57].

(c)Failure to complete the milestones meant that there was no obligation on the Pauls to meet any progress payment at the time the accounts were rendered by align="left">(d)The Judge found that while the Pauls unlawfully cancelled the contract,

Jade was not “without fault”.5

[6]Jade could not rely on the contractual milestone payments of $134,513 and

$57,576—the amounts contained in the statement of claim—as the milestones had not been completed.6 The Judge concluded the most appropriate outcome would be for the Pauls to pay Jade for the actual work done, rather than the milestones. The Judge was of the view that Jade had not established exactly how much was owing to it for the work done.7 However, no evidence was before the Court that allowed calculation of cost of the actual work done.

[7]        The Judge gave leave to Jade to offer further evidence as to actual costs of construction pursuant to s 98 of the Evidence Act 2006. He rejected the argument that this was allowing Jade to run their case again.

[8]The Judge then concluded:

[70]      There is judgment for the Plaintiff against both Defendants jointly and severally. The amount of the judgment will await agreement or further hearing. All questions of costs and disbursements are reserved until all issues have been finally determined.

[71]      On the Defendants’ counter-claim there will be judgment for the Plaintiff against the Defendants jointly and severally. All issues of costs and disbursements on the counter-claim are also reserved.

[9]        The matter did not progress to a further hearing on the issue of damages due to the filing of the appeals.

4      At [27] and [38].

5 At [57].

6 At [63].

7 At [60].

Grounds of appeal

[10]The Pauls appeal on the following grounds:

(a)The Judge erred when he found the dispute resolution clause in the contract estopped the Pauls from cancelling the contract until after mediation.

(b)The Judge erred in determining the quantum was to be established through reference to the value of the work done by Jade until it left the site.

(c)The Judge erred in granting Jade leave to adduce further evidence because the case had been closed, and there was enough evidence before the Court for it to determine quantum.

[11]Jade cross appeals on the following grounds:

(a)The Judge erred when he found there was no agreement nor variation of the “closed-in” milestone in the contract.

(b)The Judge erred when he found that the “lined” milestone had not been completed in accordance with the contract;

(c)The Judge failed to consider cl 14 of the contract, and the effect of the Pauls entering into possession of the property.

Scope of appeal

[12]      The appeal was brought under s 124 of the District Court Act 2016 which confers a general right of appeal.

[13]      While the Court is entitled to form its own assessment on the matters in issue afresh the appellant has the onus of satisfying the Court that it should differ from the

decision below.8 No deference is required beyond the customary caution appropriate when the Tribunal hearing the matter has had a particular advantage such as technical expertise or the opportunity to assess the credibility of witnesses.9 Elias CJ summarised the position of the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar as follows:10

[16] Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ.29 In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.

[14]      In this case the Judge had the benefit of seeing and hearing from the witnesses and made credibility findings some of which are essential to the judgment. The Court made findings of fact which I accept. I am of the view that nothing raised as to the way which the factual findings were arrived at give rise to an appearance of a miscarriage of justice.11

Questions on appeal

[15]A number of questions arise from the grounds of appeal and cross appeal.

[16]      First, I propose dealing with the questions arising in light of the Judge’s substantive findings. Secondly, I will deal with the approach to damages and whether or not the Judge was entitled to allow Jade to seek a further hearing to provide evidence on the quantum of damages that should be awarded following the Judge’s findings on liability.

8      Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103; [2008] 2 NZLR 141 (SC).

9      At [5] and [16].

10 At [16].

11     Junior Farms Limited v Hampton Securities Ltd (in liq) [2006] NZSC 60 at [5]; Richina Pacific Limited v Samson Corporation [2018] NZSC 72 at [14].

Substantive findings

Were the milestone payments due and payable?

“Closed-in” milestone

[17]      Pursuant to the contract between the parties, a progress payment of $158,334 was to be paid to Jade when the “closed-in” milestone was completed.

[18]      The contract describes the “closed-in” milestone date as “the date the house is able to be locked and external cladding has been completed”. It is common ground the external cladding had not been completed when Jade issued the invoice for the “closed-in” progress payment.

[19]      A dispute arose between Jade and the Pauls as to who would pay for the increased cost of exterior plastering after the contractor who had agreed to do the work became sick and was unable to undertake job. The cost of that quote from the original contractor was incorporated in the “closed-in” progress payment. The subsequent quote from a new contractor was twice the price. Progress on the exterior plastering stalled.

[20]      Jade said that the Pauls had agreed that Jade would render an invoice for the “closed-in”  milestone  despite  the  milestone  not  having  been  completed.   On   12 February 2016 Jade rendered that invoice for $158,334 due on 19 February 2016. Mr Walls the representative of Jade said that the Pauls then sought an extension of time until 26 February 2016. Following the rendering of the invoice, the Pauls spoke to their bank and emailed Mr Walls on 2 March 2016 saying that they were in a position to pay “the residual amount of the progress claim” but that they would not pay for the uncompleted exterior plastering due to their banks intervention.

[21]      There were then further discussions. Jade said that it understood that it was to render an amended invoice. It did so for $134,513. Mr Walls said that was by agreement between the parties. He said that he gave the amended invoice to the Pauls and their accountant at a meeting on 15 March 2016. The Pauls and their accountant

deny this. They say they were not provided with that invoice and that there was no agreement that they would pay any reduced amount.

[22]      The Judge found that he was not satisfied that Mr Walls had presented an amended invoice at the meeting on 15 March 2016 or that the Pauls had accepted and agreed to pay it. The Judge noted, pursuant to the decision in Beneficial Finance Ltd v Brown, that the burden lay on the party alleging the variation to prove the variation on the balance of probabilities.12 Therefore, the Judge found for the Pauls and rejected the evidence of Mr Walls.

[23]It was open to the Judge to do so.

[24]      The Judge made no error concluding the milestone had not been completed in accordance with the original contract. There was conflicting evidence on this point. It was entirely appropriate for the Judge to assess whether Jade had discharged its burden. He found the house was not “closed-in”, there was no variation of contract and no obligation on the Pauls to meet the progress payment. I agree with the Judge. He was not in error in finding there had been no variation.

“Lined” milestone

[25]      The contract provided that Jade would be paid a progress payment of $57,576 when the “lined” milestone was met. The building work was inspected on 7 March 2016 by a regulatory building inspector from the Hastings District Council. He passed the building for its post lining inspection.

[26]      The Pauls received an invoice issued by Jade for $57,576 being the progress payment for completion of the “lined” milestone, but at that stage the showers had not been completed to the required specifications. The Pauls told Jade this. Jade undertook some relining work to remedy the defect with the showers. The Pauls still refused to pay.

12     Beneficial Finance Limited v Brown [2017] NZHC 964 at [22].

[27]      The “lined” milestone is defined as “the date when the linings have been completed”. Clause 5 of the contract defines the building works as “The construction of the house described in the Plans and Specifications but excluding Client Work and other items which the parties have agreed are not the responsibility of the builder.” The Pauls argue that this clause defines completion with reference to the Plans and Specifications which indicate what must be finished by the builders on the house.

[28]      The Plans and Specifications set out what work is required in terms of the Elephant Plasterboard Linings. The contract provides for work to line the walls as follows:

Walls

Allow to line all walls in all rooms including the Stairwell (except Bathroom, Ensuite and Laundry) with 10mm Elephant board sheets horizontally fixed and stopped to Level 5 finish and painted. Where walls to rooms are to be wallpapered allow to stop walls to a Level 4 finish. Allow to line all walls in Bathroom, Ensuite and Laundry with 10mm Elephant Aquaboard sheet, fixed and stopped to a Level 5 finish and left ready for painting. Where walls are to be tiled a Level 4 finish shall be acceptable.

Shower cubicles are to be lined with 9mm Villaboard sheet stopped and waterproofed by the Tiler.”

[29]      The Judge found, and it was common ground, that the linings were fixed, but had not been stopped.

[30]      In the District Court, Jade called Mr Nicholls. He gave evidence, as an experienced builder and building inspector in Hawkes Bay, that, in his opinion, the linings were “complete” when the building was lined on the inside, the ceilings were in place and the bracing inspection had been passed by the Council. This had been achieved in the Pauls’ home.

[31]      The Pauls called Mr Green, a chartered arbitrator, adjudicator and mediator with over 40 years’ experience in the construction industry. He was of the view that the contract required lining which included stopping. Therefore, the failure to stop meant that the linings were not completed in terms of the “lined” milestone.

[32]      The Judge noted that Tipping J in Vector Gas Limited v Bay of Plenty Energy Limited said:13

[19] The ultimate objective in a contract interpretation dispute is  to  establish the meaning the parties intended their words to bear. In order to be admissible, extrinsic evidence must be relevant to that question. 15 The language used by the parties, appropriately interpreted, is the only source of their intended meaning. As a matter of policy, our law has always required interpretation issues to be addressed on an objective basis. The necessary inquiry therefore concerns what a reasonable and properly informed third party would consider the parties intended the words of their contract to mean. The court embodies that person. To be properly informed the court must be aware of the commercial or other context in which the contract was made and of all the facts and circumstances known to and likely to be operating on the parties’ minds. Evidence is not relevant if it does no more than tend to prove what individual parties subjectively intended or understood their words to mean, or what their negotiating stance was at any particular time.

[33]      The Judge found that the fixing of the internal linings and the signing off of those linings by the local authority did not mean that the requirements of the contract had been met. He held “stopping” was not simply a decorative aspect unrelated to the milestone, but rather a specific requirement to be done before the milestone had been completed. Therefore, the “lined” milestone was not met and the progress payment was not due.

[34]      On appeal, Jade disputes the Judge’s interpretation of the contract and what “linings” included in that context. Jades submission is that the milestone did not require “stopping”. It argues the Plans and Specifications the Judge relied upon in finding that “stopping” was required, also referred to other work that was required before the house was completed, like painting and cleaning. It argued that those items of work included “stopping”. Jade says the expert opinion of Mr Nichols’ should have been preferred.

[35]      I do not consider the Judge was in error in finding the “lined” milestone had not been achieved, and I agree with his conclusions.

13     Vector Gas Limited v Bay of Plenty Energy Limited [2010] NZSC 5 at [19].

[36]      In interpreting a contract, a court must establish what “a reasonable and properly informed third party” would consider the relevant words meant.14 This is an objective test informed by the language of the parties.

[37]      In the contract, the “lined” milestone is defined as “the date when the linings have been completed”. The Plans and Specifications for completion of the lining for “Walls”, includes the lining and stopping of the walls. The Judge was correct to rely on the interpretation of the contract pursuant to the usual principles.

[38]      The fact that the local authority might have had a different view of when it could sign off the lining of a building does not override the specific provisions of the contract.

[39]      Therefore, I do not consider the Judge was in error in finding that the lining milestone had not been achieved. The progress payment for that milestone was not due.

What was the effect of the dispute resolution clause on the cancellation of the contract by the Pauls?

[40]      On 8 April 2016 Jade suspended work because it had not been paid on the invoices for the two progress payments. The Pauls then gave Jade notice that it was in breach of contract as it had no proper basis for suspending work and it was failing to maintain a continuous work programme as required under the contract. The Pauls required Jade to return to the site by 12 April 2016 and recommence work. It therefore made time of the essence.

[41]      Jade failed to return to the site on 12 April 2016. It argued it was entitled to suspend work. On 13 April 2016 the Pauls’ solicitors told Jade’s solicitors that the Pauls were cancelling the contract due to Jade’s failure to maintain a continuous work programme. On 14 April 2016 the solicitors for Jade wrote back advising that they did not accept the purported cancellation and asserted that a dispute existed. They invoked the dispute resolution process contained in cl 27 of the contract. They noted

14 At [19].

there had been an initial unsuccessful meeting and asked for suggestions for a mediator.

[42]      On 15 April 2016 the Pauls’ solicitors responded that they refused to comply with the dispute resolution clause as there was no dispute in existence. On 18 April 2016 the Pauls took possession of the site.

[43]      The Judge found there was a clear dispute between the parties in that there was disagreement about both the “closed-in” and “lined” milestones. He said an impasse had been reached. A dispute notice was given by Jade on 14 April 2016 in terms of cl 27 and therefore mediation had to occur as soon as reasonably practicable after the notice.

[44]Clause 27 of the contract provides as follows:

27.      Dispute Resolution

(a)Good faith meeting: If any dispute arises between the parties, the parties agree to meet promptly in good faith and use their best endeavours to resolve such dispute as soon as possible.

(b)Dispute notice: If any dispute arises between the parties and such dispute has not been resolved in accordance with clause 27(a), then any party may give notice of the dispute to the other party (referred to as the Dispute Notice). The Dispute Notice must briefly describe the dispute and state that it is given under this clause.

(c)Mediation: As soon as reasonably practicable after the Dispute Notice has been given, the parties shall refer the dispute to mediation as follows:

(i)The mediator must be agreed between the parties. If the parties cannot agree on a mediator within 5 Working Days of the date the Dispute Notice is given, a mediator must be appointed by the President of the Arbitrators and Mediators Institute of New Zealand.

(ii)Each party must pay its own costs associated with the mediation.

(d)No proceedings: Neither party may require any arbitration, or issue any legal proceedings (other than for urgent interlocutory relief), in respect of any such dispute, unless that party has first taken all reasonable steps to comply with clause 27.

[45]      The Judge also noted that Mr Paul said that the reasons were not based on the delays and the failure to comply with the continuous work programme. The Judge concluded that the Pauls were actually concerned about the financial viability of Jade and concerned about the company collapsing without completing the construction.

[46]      The Judge held that the cancellation was ineffective as the parties were required to go to dispute resolution before it could be valid. The Judge relied on the decision of Waihopai Valley Vineyard Limited v Savvy Vineyards 3550 Limited (Waihopai).15 He said:16

[54]      A valuable analysis of the law in this area is contained in the judgment of Brewer J in Waihopai Valley Vineyard Limited v Savvy Vineyards 3550 Limited & Ors. At para [195] the learned Judge said as follows:

“[195]     The commercial purpose of the notice provisions in the GSA is to ensure that the contract remains on foot. It requires the parties to discuss breaches of the contract with a view to reaching agreement as to how to rectify such matters, rather than allowing the parties to terminate the agreement immediately. The focus is on maintaining the relationship between the parties.”

[55]      In my view the same considerations apply here. The parties are not excluded from common law or statutory rights dealing with cancellation but they may not be exercised until after the dispute resolution process laid out in the contract has been followed and completed. Also see in that regard Tool Team Limited v Tool Team 2010 Limited.

[56]      By refusing to comply with the Dispute Notice which was validly served on them the Defendants were in breach of the contract and therefore their purported cancellation of the contract on 13 April 2016 was unlawful and of no force and effect.

[47]      On appeal, Mr Lomas, for the Pauls, says that while cl 27 acts as a barrier to the parties issuing proceedings or going to arbitration in respect of a dispute, it does not otherwise suspend the parties’ rights under the contract. In particular, it does not prevent the Pauls from cancelling the contract due to breach by       The Pauls point out that the wording of the contract is quite specific. It does not extend the dispute resolution “bar” beyond legal or arbitral proceedings. On that

15     Waihopai Valley Vineyard Limited v Savvy Vineyards 3550 Limited [2015] NZHC 2089 at [179]– [197].

16     Jade Residential Limited v Paul, above n 1 (foonotes omitted).

note the Judge in Waihopai Valley Vineyard Limited v Savvy Vineyards 3550 Limited

said:17

[189] … The Courts are slow to conclude that the parties intended to give  up their common law rights unless there is evidence that such was the intention of the parties.

[190] The New Zealand Courts take a similar approach to  contracts governed by the CRA¹⁸ when determining whether the parties intended for the remedies clause of a contract to preclude the parties from relying on the remedies contained in the CRA.

[49]      The Pauls also cited the Supreme Court decision of Property Ventures Investments Limited v Regalwood Holdings Limited.19 In that decision, the Court said:20

Express words or a very clear implication are needed to remove a remedy for breach of contract arising by operation of law.

[50]      The Judge noted that the effect of cl 27 is not to exclude the remedies for breach or repudiation but rather delay effecting any remedy until after the dispute resolution requirements have been fulfilled.

[51]      I am of the view this situation is very different to that considered in Waihopai. In Waihopai the contractual arrangement between the parties governed a long-term relationship. The contracts involved were a grape supply agreement and vineyard management agreement. These were intended to regulate the relationship between the parties for many years. The dispute resolution clause was a complex and far reaching.

[52]      The Waihopai dispute resolution clause specifically prohibited the termination of the contract before the mediation procedure had been followed. In Waihopai, the Judge carefully considered the context of the relationship, the length over which the contracts were intended to remain in existence and the specific wording of the contracts. He concluded that the dispute resolution process should be followed before Waihopai could terminate the GSC. The Judge said:

17     Waihopai Valley Vineyard Limited v Savvy Vineyards 3550 Limited, above n 15.

18     Contractual Remedies Act 1979.

19     Property Ventures Investments Limited v Regalwood Holdings Limited [2017] NZSC 47.

20 At [71].

[194]     The GSA is a long-term agreement. It can be renewed for up to 50 years. It would be a drastic step to terminate the GSA summarily on the basis of an essential breach relating to a single harvest.

[195]     The commercial purpose of the notice provisions in the GSA is to ensure that the contract remains on foot. It requires the parties to discuss breaches of the contract with a view to reaching agreement as to how to rectify such matters, rather than allowing the parties to terminate the agreement immediately. The focus is on maintaining the relationship between the parties.

[196]     Waihopai's cancellation of the contract is not consistent with this underlying commercial purpose. Waihopai did not make any serious attempt to pursue the dispute settlement procedure set out in cl 24.2(a). I am satisfied on the evidence that Waihopai came to know that the 2014 harvest would be a bumper harvest and, because it was distrustful of Savvy’s intentions towards the harvest, it decided that it would cancel the contract after the harvest if the surplus were realised. It deliberately did not raise the matter until after the harvest. In cross-examination, Mr Botting acknowledged that this was because Waihopai did not want Savvy to cut back the grapes to be within the cl 12.1 target levels. This is also made clear in an email of Mr Botting dated 16 January 2014.

[197]     The steps that Waihopai took were not consistent with the commercial purpose of the notice and dispute resolution clauses. The purported termination is invalid at common law.

[53]      Therefore, in Waihopai the act complained of that triggered the cancellation was specifically governed by the dispute resolution clause.

[54]      In this case the contract was not governing a long-term relationship between the parties. It was a contract for a one-off building. In addition, the dispute resolution clause is clear and does not purport to bar anything other than the issue of court or arbitral proceedings.21

[55]      There is nothing in this contract to suggest that the dispute resolution clause would have the effect of barring or delaying the other rights of the parties under the contract. If a party wished to cancel the contract they could do so.

[56]      In my view, the dispute resolution clause in this case does not prevent nor did it prevent the Pauls from validly cancelling the contract.

21     Waihopai Valley Vineyard Limited v Savvy Vineyards 3550 Limited & Ors, above n 15, [194]– [197].

[57]      Accordingly, I find the Judge was in error when he held that the dispute resolution clause acted to render the Pauls cancellation of the contract “unlawful and of no force and effect”.22

Was the contract otherwise validly cancelled?

[58]      The Judge focussed on the cancellation being invalid due to the failure to follow the process established in the dispute resolution clause. While he did not examine the other aspects relating to cancellation with the same detail, he did find that Jade had suspended work on 8 April 2016 and the Pauls required a return to work by 12 April 2016. When that did not happen, the contract was cancelled.

[59]      In its submissions Jade expanded its arguments on appeal to challenge the Judge’s finding on cancelling the contract. Jade argued that the breach was not an essential term and, in any event, Jade had not repudiated the contract as it had a valid argument in that it considered the matter should go to dispute resolution as there were valid disputes about the payment of the plasterer’s account.

[60]      Jade had ceased work and had been given notice by the Pauls making time of the essence. Jade responded that it did not intend to resume work unless it was paid. That response was sufficient to establish that cancellation had occurred because of repudiation by Jade. Jade had refused to return to work unless it was paid the milestone payments. I agree with the Judge that they were not due.

[61]      A contractual repudiation is defined s 36(1) of the Contract and Commercial Law Act 2017 as a party clearly communicating it does not intended to perform or complete its obligations under the contract. A repudiation of the contract gives rise to the right of cancellation.

[62]      Repudiation is not a conclusion adopted lightly and the “evidence must show an unequivocal intention not to perform the contract”.23 This is an objective test and

22     Jade Residential Limited v Paul, above n 1, at [56].

23     Kumar v Station Properties Ltd [2015] NZSC 34 at [58].

it does not matter if the party can meet their obligations as long as a reasonable party in the shoes of the innocent party would find it clear that the party will not perform.24

[63]In Betham v Margetts Fisher J said that: 25

The question is whether in all the circumstances the communication should be regarded as an irrevocable indication that the party concerned would take no further steps to perform his or her obligations under the contract or alternatively that he or she would perform it only in a manner substantially inconsistent with the obligations which the contract imposed. If that were the objectively determined meaning of the communication, it matters not what the party make it intended or wanted. It would be different if there were a mere misinterpretation or legal error with opportunity for correction before due date for performance.

[64]      The Supreme Court considered the situation where parties have opposing views under a contract and whether it amounted to a repudiation in Kumar v Station Properties:26

… This fact-based assessment must be made against the background that the threshold is a high one and that disputes about the meaning of contracts or the nature of the obligations they impose are commonplace. The mere fact that a party vigorously espouses a view of a contract's meaning that is ultimately shown or accepted to have been wrong does not mean that the party is thereby manifesting an intention not to perform its obligations under the contract. If it is clear that the party accepts that it is bound by the contract, whatever meaning it is ultimately determined to have, the party should not be held to have repudiated the contract….

[65]The Supreme Court in Kumar further said:27

… By contrast, if a party persistently refuses to perform unless the other party accepts additional onerous terms inconsistent with the contract or on the mistaken view that there was never an enforceable contract, the party may well be found to have repudiated the contract. In such circumstances, the stance adopted amounts to a refusal to accept any obligation to complete the contract in accordance with its terms.

[66]      In this case, Jade’s responses demonstrated it did not intend to complete the Contract except on terms which were substantially different to those imposed by the Contract. A right of cancellation arose when Jade communicated its position to the

24     Betham v Margetts [1996] 2 NZLR 708 (HC) at 711; Denarau Investments Ltd v Ludlow [2008] NZCA 158, (2008) 9 NZCPR 252.

25     Betham v Margetts, above n 24, at 711.

26     Kumar v Station Properties, above n 23, at [63].

27     At [63] (footnotes omitted).

Pauls, and Jade did not recommence work. It is insufficient for Jade to now argue that, following Kumar, it honestly believed money was owed.

[67]      I make this finding in light of Jade’s refusal to return to the site to perform the contract. Jade insisted it would “…perform it only in a manner substantially inconsistent with the obligations which the contract imposed….”28 The question therefore becomes whether this was a legal error that could be corrected before the date of performance. Mr Lomas points to Kumar in support of his argument noting that the Court said “…if a party persistently refuses to perform unless the other party accepts additional onerous terms inconsistent with the contract…the party may well be found to have repudiated the contract…”.29 That must be the case here.

[68]In light of this repudiation, the contract was validly cancelled on 13 April 2016.

Were the Paul’s in breach of cl 14 of the contract?

[69]      Jade’s final ground for appeal was a failure of the Judge to consider cl 14 of the contract. This clause provides:

14.      Default

…

(b)Breach by Client: if the Client takes possession of the Section or the Work in breach of clause 13, then (without prejudice to any other remedies available to the Builder):

(i)In addition to any other amounts payable by the Client pursuant to the terms of this Contract, the Client shall pay the Builder liquidated damages for such breach at the rate of

$150.00 per day for each day which the Client remains in possession in breach of clause 13;

(ii)Any unpaid part of the Contract Price (and all other amounts payable by the Client pursuant to this Contract) shall become immediately due and payable by the Client.

[70]      Clause 14 does not apply when the contract has already been cancelled. The provisions concerning possession under cl 14 are no longer effective.

28     Betham v Margetts, above n 24, at 711.

29     Kumar v Station Properties, above n 23, at [63].

[71]Therefore, I find this ground of appeal is not made out.

[72]      I now turn to the issues raised concerning damages and the Judge’s proposal that further evidence be called.

Was the Judge entitled to allow further evidence to be adduced on quantum?

[73]      The Judge left open the issue of quantum. He had found that Jade had succeeded on its claim in liability but sought further evidence before making a determination of quantum. He indicated that he proposed dealing with quantum by reference to the value of the work done by Jade until it left the site.

[74]      He gave leave for further evidence to be called pursuant to s 98 of the Evidence Act.

[75]      As I have found that the Pauls’ notice of cancellation was effective. Therefore, the liability judgment should have been in favour of the Pauls. Nevertheless, as the cancellation was effective, the issue remains of what should be granted as relief.

[76]      The Judge had proceeded on the basis that he was entitled to grant relief following calculation under s 43 of the Contract and Commercial Law Act 2017. This provides:

43       Power of court to grant relief

(1)        When a contract is cancelled by any party, the court may, if it is just and practicable to do so, make an order or orders granting relief under this section.

(2)The relief may be granted in the course of any proceeding or on application made for the purpose.

(3)An order under this section may—

(a)direct a party to pay to any other party the sum that the court thinks just (subject to section 35):

(b)direct a party to do or refrain from doing, in relation to any other party, any act or thing that the court thinks just:

(c)vest the whole or any part of any relevant property in a party:

(d)direct a party to transfer or assign the whole or any part of any relevant property to any other party:

(e)direct a party to deliver the whole or any part of the possession of any relevant property to any other party.

(4)In subsection (3),—

party means a party to the proceeding

relevant property means real or personal property that was the subject of the contract or was the whole or part of the consideration for the contract.

[77]      The Judge wanted Jade to call further evidence covering the work it had done and the value of it or cost to it of the work. The exact approach he intended to take to determine quantum is no longer relevant in view of my findings on liability.

[78]      The Judge specifically noted that any unfairness to the Pauls because of further evidence could be dealt with by way of costs. The Judge said:30

[66]      … If the Plaintiff wishes to take advantage of the opportunity to call additional evidence that must be addressed exclusively to the value of work done up until the time it left the site. The evidence must be presented in advance by affidavit annexing all relevant exhibits. Obviously, if needed, the Defendants will have the right to challenge either the amount claimed in total or any constituent part of the total.

[67]      In the event that the Plaintiff does not wish to call further evidence then there will be judgment for the Plaintiff on the claim but no amount of damages will be awarded.

[68]      The Plaintiff will have 14 days from the delivery of this judgment to notify the Court and the Defendants whether it wishes to call further evidence. In the event that the Plaintiff does wish to call further evidence then an issue of costs will arise in accordance with s 98 of the Evidence Act 2006. I am quite satisfied that an appropriate award of costs to the Defendants will deal with any potential unfairness to them.

[79]      The Judge considered that he could allow Jade to call evidence under s 98 of the Evidence Act 2006. This provides:

98       Further evidence after closure of case

(1)In any proceeding, a party may not offer further evidence after closing that party’s case, except with the permission of the Judge.

30     Jade Residential Limited v Paul, above n 1, at [63].

(2)In a civil proceeding, the Judge may not grant permission under subsection (1) if any unfairness caused to any other party by the granting of permission cannot be remedied by an adjournment or an award of costs, or both.

(3)In a criminal proceeding, the Judge may grant permission to the prosecution under subsection (1) if—

(a)the further evidence relates to a purely formal matter; or

(b)the further evidence relates to a matter arising out of the conduct of the defence, the relevance of which could not reasonably have been foreseen; or

(c)the further evidence was not available or admissible before the prosecution’s case was closed; or

(d)for any other reason the interests of justice require the further evidence to be admitted.

(4)In a criminal proceeding, the Judge may grant permission to a defendant under subsection (1) if the interests of justice require the further evidence to be admitted.

(5)The Judge may grant permission under subsection (1),—

(a)if there is a jury, at any time until the jury retires to consider its verdict:

(b)in any other proceeding, at any time until judgment is delivered.

[80]      There was no issue of natural justice arising as the Judge had in mind that both parties would participate in the further hearing. The main objection by the Pauls related to the fact that Jade had the opportunity to adduce the evidence, during the hearing and should not be given another chance to cover the point.

[81]      However, the Judge found, in the particular circumstances of the case, that it was appropriate to allow the further evidence to be called and that any unfairness could be cured by costs. That was a decision open to him in the circumstances. He had seen and heard the evidence and clearly formed the view that it was an appropriate case to grant leave to adduce further evidence on quantum.

[82]In any event, that did not occur.

[83]      Therefore, as the evidence the Judge needed to consider quantum is not before the Court and I have found that there was a valid cancellation of the contract by the Pauls I am faced with the same difficulty the Judge had in determining appropriate relief under s 43 of the Contract and Commercial Law Act 2017.

[84]      It appears that Jade has not been paid for the work it has done (whether by way of value of work or actual cost of work) and the Pauls have had to pay extra to complete the construction which cost them more than had Jade completed the contract.

[85]      Jade has also raised the issue of whether the cost to complete could have been less, so suggesting arguments based on mitigation.

Conclusion

[86]      I have found that the Judge erred in relation to liability in one respect. That related to the effect of the dispute resolution clause on cancellation of the contract by the Pauls. Therefore, the appeal is allowed on that ground.

[87]      In the circumstances I consider the most appropriate manner of dealing with this appeal is to:

(a)Make a declaration that the contract was validly cancelled by the defendants.

(b)Remit the matter to the District Court for a hearing on relief to be granted pursuant to s 43 of the Contract Law Reform Act 2017.

[88]Those orders are made accordingly.

Good faith

[89]      The parties filed submissions concerning good faith as that issue had arisen during the oral submissions. The appellant and respondent both filed helpful submissions. However, the appellant objected to a number of matters raised in Jade’s further submissions. The Pauls said that the matters raised were outside the scope of the leave granted. That appears to be the case. The submissions complained about

covered matters which had been the subject of oral submission, but not earlier written submissions. They related to the making of time of the essence and repudiation which I have dealt with above.

[90]      In any event, as will be obvious, the issue of good faith is not referred to in my decision. It was not the subject of a ground of appeal, nor was it argued in detail before the Judge. I am of the view that it has limited relevance to the matters under appeal.

Costs

[91]      The usual situation is that costs are awarded in favour of the successful party on appeal. If the parties are unable to agree on costs they are to file submissions as follows:

(a)The appellant to file submissions on or before seven days from the date of the delivery of this decision.

(b)The respondents to file submissions in response on or before a further seven days from the date of this decision.

(c)The appellant may file any reply (limited to the matters raised) within a further three days.

Grice J

Solicitors:

Braun Bond & Lomas Ltd, Hamilton Lawson Robinson, Napier