Perry v O'Neills Building Removals Limited
[2017] NZHC 2060
•30 August 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-000856 [2017] NZHC 2060
BETWEEN BRENDA MARGARET PERRY
Plaintiff
AND
OʼNEILLS BUILDING REMOVALS
LIMITED
First DefendantJEREMY OʼNEILL
Second DefendantAUBURN DEVELOPMENT LIMITED Third Defendant
Hearing: 17 August 2017 Counsel:
GR Grant for Plaintiff
RO Parmenter for First and Second Defendants
No appearance for Third DefendantJudgment:
30 August 2017
JUDGMENT OF DOWNS J
This judgment was delivered by me on Wednesday, 30 August 2017 at 11.45 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel: Rainey Law, Auckland.
Daniel Overton & Goulding, Auckland. RO Parmenter, Auckland.
PERRY v OʼNEILLS BUILDING REMOVALS LTD [2017] NZHC 2060 [30 August 2017]
The application
[1] This is a pre-trial application for relief under s 9 of the Contractual Remedies Act 1979. Trial is not until 28 May 2018. Ms Perry seeks an order for repayment of a deposit and other monies spent in reliance on a contract with O’Neills Buildings Removals Limited, more easily O’Neills. Ms Perry has cancelled the contract. She says validity of cancellation is beyond dispute and it is just and practicable for the Court to make the order now. O’Neill’s contests jurisdiction for pre-trial relief under the Act. O’Neill’s also contends pre-trial relief is premature as validity of cancellation is contested and an issue that should await trial.
[2] Ms Perry seeks other ancillary orders. O’Neills contests these too.
The parties
[3] Ms Perry owns a piece of land on Waiheke Island. She wanted to relocate a house there and contracted with O’Neills to do so. Its principal business is house relocation. O’Neills is run by Mr and Mrs O’Neill. Mr O’Neill has been joined as a party (as a director of O’Neills) for the purpose of enforcing a particular order.
[4] Auburn Development Limited, or Auburn, is a property developer. Auburn owns land in Takapuna, upon which it proposes to build a large apartment complex. Auburn has not filed a statement of defence nor taken any part in the case thus far. Ms Perry does not seek relief against Auburn at this stage.
A précis of the key facts
[5] On 16 July 2016 Ms Perry entered a contract with O’Neills to relocate a house to Waiheke Island. The house was on Auburn’s Takapuna site. Ms Perry paid O’Neills $89,000, half of the total cost. Under the contract, the balance was payable in two further instalments. The contract did not provide for—and nor did the parties expressly agree on—a removal date. However, circumstance arguably implied a degree of urgency as the Takapuna site was due to be developed into an apartment complex. Ms Perry says she was told development might begin on 1 August 2016.
[6] August came. And went. Ms Perry was told there was no longer urgency. The parties continued to correspond through September in relation to a removal date. O’Neills did not provide one.
[7] On 10 October 2016 Ms Perry drove past the Takapuna site and discovered the bricks of the house had been removed. O’Neills accepts it began removing bricks and cladding in mid-October in preparation for the move. From then, the house began to suffer damage. For example, the water mains leaked causing water damage, the carport was demolished, and a vanity unit was smashed. Also of concern to Ms Perry, Auburn commenced earthworks on the site.
[8] Ms Perry says O’Neills prevaricated for months, while the condition of the house continued to deteriorate. And despite her efforts to fix a removal date, O’Neills did not provide one. Ms Perry’s frustration continued into 2017. Frustrated by delay and concerned about damage, Ms Perry issued proceedings on 21 April
2017. Her statement of claim alleges various breaches of contract and misleading or deceptive conduct under s 9 of the Fair Trading Act.
[9] On 29 April 2017 O’Neills loaded the house onto a trailer. And on 10 May, relocated it to a storage yard in Ranui. Since then, the house has allegedly suffered further extensive damage, in part from not being weathertight. The extent of the damage is amply demonstrated by photographs Ms Perry has provided to the Court. Her case appears to be strong.
Relief under s 9 of the Act for wasted costs
[10] The first issue is whether the Court has jurisdiction to make an order for final relief before trial. The starting point is the statute. Section 9(1) of the Contractual Remedies Act provides:
9 Power of court to grant relief
(1) When a contract is cancelled by any party, the court, in any proceedings or on application made for the purpose, may from time to time if it is just and practicable to do so, make an order or orders granting relief under this section.
[11] Ms Grant submits the effect of the provision is clear: as soon as a contract is cancelled the Court may grant relief as “just and practicable”. In Ms Grant’s submission, the section plainly contemplates the availability of relief, final or otherwise, at an interlocutory stage. She derives support for this proposition from Law of Contract in New Zealand in which the learned authors observe:1
It is apparent that the Contracts and Commercial Law Reform Committee in proposing the draft s 9 did not intend it to be a substitute for the right to recover damages. Rather, the Committee saw its purpose as being to enable the court to make an immediate order directing payment of money as between the parties, notwithstanding that a claim for damages might be in contemplation or pending.
[12] Ms Grant contends a number of cases provide support for this view.2
[13] Mr Parmenter submits s 9 cannot be deployed at an interim stage to effect final relief. He contends the proper procedural pathway for relief in advance of trial is confined to summary judgment.3 At the hearing, Mr Parmenter drew a distinction between interim injunctions and monetary awards. He submits the cases cited by Ms Grant in which interim relief was granted under s 9 involved injunctive relief only designed to preserve the plaintiff’s position before trial.
[14] I consider s 9 affords jurisdiction for final relief in advance of trial. The broad language of the provision supports this conclusion. So too purpose, as articulated by the Contracts and Commercial Law Reform Committee. Moreover, s 9 is independent of the summary judgment procedure. However, the Act is also clear s 9 relief is confined to the situation in which the contract has been validly cancelled. It follows if validity of cancellation is in issue, relief must await
determination of that issue, that is, at trial. Some elaboration is required.
1 John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (5th ed, LexisNexis, Wellington, 2016) at [21.3.1].
2 Newmans Tours Limited v Ranier Investments Ltd [1992] 2 NZLR 68 (HC); Thomas v Rankin [1993] 1 NZLR 408 (CA); Gallagher v Young [1981] 1 NZLR 734 (HC); Oldhams Cullens & Co v Burbery Finance Ltd HC Christchurch A368/83, 4 October 1985; Safety Step (New Zealand) Ltd v Safety Step Auckland Ltd HC Auckland CP466/01, 19 December 2001; Marnell Corrao
Associates Inc v Sensation Yachts Ltd (2000) 15 PRNZ 608; Hungry Horse Restaurants (1986)
Ltd v Jesson HC Auckland CP299/88, 16 March 1988; Wairau Natural Stone (East Coast) Ltd v Hales HC Napier CP109/86, 16 February 1987.
3 I note there are cases which have doubted whether the jurisdiction to order relief under s 9 should be exercised in the context of an application for summary judgment. See for example Webster v Ren [2017] NZHC 479 at [5] and M v B HC Auckland CP572/96, 8 August 1997 at 25.
[15] Cancellation of a contract is governed by s 7 of the Act. There are, broadly, three situations in which a contracting party has a right to cancel the contract. The first is where the other party repudiates the contract. The second is where the cancelling party has been induced to enter the contract by a misrepresentation of the other party. And the third is where the other party breaches—or will breach—a term of the contract. In the last two situations, the breach or misrepresentation must have a substantial effect on the contract before a right of cancellation arises. The relevant provisions of s 7 read:
(2) Subject to this Act, a party to a contract may cancel it if, by words or conduct, another party repudiates the contract by making it clear that he does not intend to perform his obligations under it or, as the case may be, to complete such performance.
(3) Subject to this Act, but without prejudice to subsection (2), a party to a contract may cancel it if—
(a) he has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made by or on behalf of another party to that contract; or
(b) a term in the contract is broken by another party to that contract; or
(c) it is clear that a term in the contract will be broken by another party to that contract.
(4) Where subsection (3)(a) or subsection (3)(b) or subsection (3)(c)
applies, a party may exercise the right to cancel if, and only if,—
(a) the parties have expressly or impliedly agreed that the truth of the representation or, as the case may require, the performance of the term is essential to him; or
(b) the effect of the misrepresentation or breach is, or, in the case of an anticipated breach, will be,—
(i) substantially to reduce the benefit of the contract to the cancelling party; or
(ii) substantially to increase the burden of the cancelling party under the contract; or
(iii) in relation to the cancelling party, to make the benefit or burden of the contract substantially different from that represented or contracted for.
[16] In Wairau Natural Stone (East Coast) Ltd v Hales Eichelbaum J held a contract must be validly cancelled pursuant to these provisions before s 9 can be
invoked.4 There, the defendants opposed an application for relief under s 9 but did not file evidence. On the material before him, Eichelbaum J considered the plaintiffs had made out a persuasive factual case. But His Honour was not prepared to grant relief because both parties did not accept there had been a valid cancellation.
[17] As His Honour observed, jurisdiction under s 9 is governed by its opening words: “When a contract is cancelled by any party”. These words must be read against s 2 of the Act which defines “cancel” to mean “cancel in accordance with section 7”. Thus, until compliance with s 7 is proved or accepted, relief under s 9 is not available. In the words of Eichelbaum J, s 9 does not “entitle the Court to make an interim order where there [is] merely a prima facie case of cancellation or a serious question to be tried”. The Court has “jurisdiction to make such an order
where the parties both [accept] there [has] been a valid cancellation”.5 I respectfully
agree. Pre-trial relief under s 9 following the cancellation of contract would not be “just and practicable” if validity of cancellation—the very basis for relief—is in issue.
[18] The cases helpfully cited by Ms Grant, Newmans Tours Ltd v Ranier Investments Ltd, Thomas v Rankin, and Gallagher v Young, do not undermine this conclusion. These cases discuss the breadth of discretion once jurisdiction is established.6 They do not, however, establish the availability of final relief in advance of trial when cancellation is in issue. And the remaining cases— which do deal with interim relief under s 9—do not hold pre-trial relief extends to the repayment of monies, such as a deposit. In Safety Step (New Zealand) Ltd v Safety Step Auckland Ltd, Randerson J made interim orders of an injunctive nature to preserve the plaintiff’s position before trial.7 Similarly, in Marnell Corrao Associates Inc v Sensation Yachts Ltd injunctive relief was ordered on an interim
basis pending arbitration.8
4 Wairau Natural Stone (East Coast) Ltd v Hales, above n 2.
5 At 3-4.
6 Newmans Tours Ltd v Ranier Investments Ltd, above n 2; Thomas v Rankin, above n 2;
Gallagher v Young, above n 2.
7 Safety Step (New Zealand) Ltd v Safety Step Auckland Ltd, above n 2.
8 Marnell Corrao Associates Inc v Sensation Yachts Ltd, above n 2.
[19] The case of Oldham Cullens & Co v Burbery Finance Ltd does not assist either.9 While that decision is entitled “Interim Judgment of Heron J”, the heading is not apt: the decision followed a three day hearing in which the issue of cancellation was tried. The judgment is described as “interim” only because the Judge reserved leave to either party to apply for further orders.
[20] In Hungry Horse Restaurants (1986) Ltd v Jesson Barker J declined to make an interim injunction restraining the defendants from trade.10 The balance of convenience favoured the defendants as damages were held to be an adequate remedy. Notably, Barker J adopted the reasoning of Eichelbaum J in Wairau in declining to order relief under s 9.
[21] Ms Grant submitted there could be no real dispute as to the validity of Ms Perry’s cancellation. Her principal argument concerned the failure of O’Neills to file any evidence in response to Ms Perry’s extensive and detailed affidavit. She submitted O’Neills had been given ample opportunity to challenge cancellation and had failed to take any steps towards doing so. Ms Grant further submitted the statement of defence filed by O’Neills does not contain any challenge as to the validity of cancellation.
[22] Mr Parmenter submitted cancellation would be in issue at trial. He noted the requirements for cancellation when a party failed to perform the contract within the time period expected by the other.
[23] In reply, Ms Grant submitted there were a number of grounds upon which Ms Perry cancelled the contract, only some of which could be validly disputed at trial. Ms Grant referred to a letter sent to O’Neills on 20 June 2017 in which Ms Perry “elect[ed] to exercise her right to cancel for all or any of the following reasons”:
1. O’Neills and Jeremy O’Neill induced Ms Perry to enter into the contract in the first place by the misrepresentations summarised in the amended statement of claim. Sections 7(3)(a) and 7(4) of the Contractual Remedies Act 1979 (“the Act”) apply; and/or
9 Oldhams Cullens & Co v Burbery Finance Ltd, above n 2.
10 Hungry Horse Restaurants (1986) Ltd v Jesson, above n 2.
2. O’Neills and Jeremy O’Neill have to date committed numerous breaches of the contract as specified in the amended statement of claim served today. Sections 7(3)(b) and 7(4) of the Act apply; and/or
3. O’Neills and Jeremy O’Neill have repudiated the contract by making it clear by their persistent failure and/or refusal to perform their obligations to date that they do not intend to perform their obligations under the contract or complete such performance. Section 7(2) of the Act applies.
[24] The first ground relied on—misrepresentation—alleges O’Neills falsely represented to Ms Perry it had full and unfettered authority to sell her the house and contract with her to relocate it from the site.11 This allegation is denied in the statement of defence, as is every allegation relating to misleading or deceptive conduct. More significantly, the statement of defence alleges Ms Perry was advised orally before entering the contract that “removal of the House was subject to the
direction of Auburn”. Plainly, the issue is disputed.
[25] The second ground relied on for cancellation—breach of contract—requires analysis under s 7 of the Act. As observed, the fact a party is in breach of its contractual obligations (denied in this case) does not give the other party an automatic right of cancellation under s 7 of the Act. Rather, the parties must have expressly or impliedly agreed performance of the breached term was essential to the
cancelling party,12 or the breach must have substantially reduced the benefit of the
contract to the cancelling party.13 Again, these are matters for trial.
[26] Ms Grant relied on admissions in the statement of defence which, she submitted, put the validity of cancellation beyond argument. Ms Grant referred to paragraphs in the statement of defence in which O’Neills accepted it had “an obligation to keep the house watertight once it has started work” and an admission it
“commenced the removal process” in mid-October.14 However, elsewhere in its
11 Neither the statement of claim nor amended statement of claim refers to “misrepresentations” on the part of the defendants. However, they allege misleading and deceptive conduct under the Fair Trading Act 1986. I have assumed these allegations replicate those relied on for cancellation under s 7(3)(a) of the Contractual Remedies Act 1979.
12 Contractual Remedies Act, s 7(4)(a).
13 Or substantially increase the burden of the contract to the cancelling party; or make the benefit or burden of the contract substantially different from that represented or contracted for: Contractual Remedies Act, s 7(4)(b).
14 Paragraphs 13(m) and 16(c).
statement of defence O’Neills says it “met its obligations under the Contract”.15 If that is correct, no right to cancellation arises—nor jurisdiction to award relief under s 9.
[27] The third ground relied on—repudiation—is also disputed. O’Neills’ statement of defence records it “effected the removal at the first reasonable opportunity to do so”.16 It says it had no right to move the house until Auburn gave it permission to do so, and says it continued to negotiate with Ms Perry as to whether she wanted to proceed with the contract once the house was moved to Ranui. These pleadings are inconsistent with Ms Perry’s allegation O’Neills repudiated the
contract. Again, these are matters for trial. Relief now would be premature.
[28] All of this said, my sympathy rests with Ms Perry. On the material before me, she appears to have a strong case.
An order requiring proceeds of sale to go to Ms Perry
[29] Ms Perry seeks an order permitting the sale of the house with any and all proceeds to be paid to her. The concern is O’Neills’ solvency. Ms Grant submits O’Neills should not be unjustly enriched by retaining the proceeds of any sale of the house. For these reasons, she submits it is both just and practicable for the Court to make the order sought under s 9.
[30] Ms Perry, however, confronts the same jurisdictional difficulty precluding the return of her deposit and compensation for other wasted costs. The proposed order is sought under s 9 of the Act which, as discussed, only arises when cancellation is not in dispute. For the reasons expressed above, I decline to order the relief sought.
“Unless” orders under r 7.45
[31] Ms Perry seeks an order under r 7.45 of the High Court Rules 2016 requiring all three defendants to file and serve within seven days a completed sworn affidavit
of documents and provide copies of discoverable documents. Ms Perry asks for
15 Paragraph 55.
16 Paragraph 24(c).
non-compliance to result in each defendant being debarred from defending the proceeding.
[32] Mr Parmenter sought to resist an order of this nature with reference to a Minute of Kós J issued in Murphy v Amtech Construction Ltd.17 There, Kós J was confronted with an invitation, by way of a memorandum, to make an order requiring the filing of a properly particularised statement of claim with failure to comply resulting in the claim being struck out. Kós J described the invitation as a “procedural curiosity” and declined to accede to it. In the absence of an
interlocutory application compliant with the High Court Rules, his Honour declined “to proceed informally on a mere memorandum”. Mr Parmenter submits the “unless” order sought by Ms Perry in the present case should be met with a similar response.
[33] Ms Perry’s interlocutory application, filed on 21 June 2017, did not refer to the “unless orders” now sought. No doubt, that is because at the time the application was filed the defendants were not in breach of their timetable obligations. Those obligations appear in a Minute of Associate Judge Doogue dated 12 July 2017 in which His Honour directed the defendants to file verified affidavits of documents along with copies of all discoverable documents by 2 August 2017.
[34] The first time the “unless orders” were mentioned were in Ms Grant’s written submissions filed on 14 August 2017. In those submissions, Ms Grant sought to modify a number of the orders sought under the original application, including by adding the “unless orders” now sought.
[35] I consider the present situation to be materially different from the one facing Kós J. The parties have had an opportunity to be heard (even if Auburn has not availed itself of that opportunity) and the defendants were given notice of the orders in advance of the hearing by way of memorandum. Moreover, the “unless orders”
now sought relate to breaches of timetabling orders made on 12 July 2017. There is
17 Murphy v Amtech Construction Ltd HC Christchurch CIV-2014-441-7, 29 August 2014 (Minute
(No 3) of Kós J).
little prejudice to the defendants in proceeding to make these orders in the absence of a formal application.
[36] In those circumstances, I propose to exercise my discretion under r 1.9 of the High Court Rules to amend Ms Perry’s interlocutory application so that it includes the “unless orders” as sought in Ms Grant’s written submissions filed on 14 August
2017. Given the parties had notice of the orders sought in advance of the hearing, had an opportunity to make submissions on them, and because the orders sought are a response to timetable breaches on the part of the defendants, I do not consider any party will be unduly prejudiced by the absence of a formal application.
[37] All defendants are in breach of their timetable obligations. Auburn has not even filed a statement of defence. The orders sought are reasonable. I will allow, however, 14 days for compliance.
[38] Accordingly, I make the following order:
(a) Within 14 days of this judgment’s delivery, the three defendants are to file and serve a sworn affidavit of documents and provide copies of discoverable documents to Ms Perry.
(b)Non-compliance by a defendant will result in that defendant being debarred from defending the proceeding.
Costs
[39] Ms Perry seeks costs. I do not consider it appropriate to make a costs order now. Costs are reserved.
An early trial?
[40] As observed at the outset, trial is not until late May 2018. That delay strikes me as undesirable. I invite the Registry to identify an earlier fixture if possible. Five days is unlikely to be required—three should suffice.
……………………………..
Downs J
2