Robertson v Agri Trustee Company Limited
[2013] NZHC 3479
•19 December 2013
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
CIV 2013-476-000295 [2013] NZHC 3479
BETWEEN ROBERT HAY ROBERTSON and
JENNIFER ROBERTSON Plaintiffs
AND
AGRI TRUSTEE COMPANY LIMITED First Defendant
ROBERT JAMES BOOTH Second Defendant
Hearing: 16 December 2013 Counsel:
D M Lester and D M Jackson for Plaintiffs
No appearance for DefendantsJudgment:
19 December 2013
JUDGMENT OF WHATA J
[1] The plaintiffs sold a large property to Agri Trustee Company Limited. The second defendant, Robert James Booth, provided a personal guarantee as to the performance of the first defendant’s obligations under the agreement. The agreement was due to settle on 21 June 2013, and the plaintiffs issued two settlement statements requiring the first defendant to pay $450,000 for the business and $13,650,000 for the land. A settlement notice was then issued. The settlement notice expired. The plaintiffs now seek damages for the failure to settle, having recently elected to cancel the agreement.
[2] No statement of defence has been filed and this is a judgment as to formal proof.
ROBERT and ROBERTSON v AGRI TRUSTEE COMPANY LIMITED [2014] NZHC 3479 [19 December
2013]
Background
[3] The background is essayed in the affidavit of Robert Hay Robertson dated
28 November 2013. Mr Robertson is one of the plaintiffs in the proceeding along with his wife, Jennifer Robertson. He describes land subject to this proceeding, being that land subject to Certificates of Title to 858 McHenrys Road, Hakataramea Valley, being 2652.3985 hectares of land. The land comprises two farms, “Foveran Station” and “the Brothers” and a smaller section of land comprising a hunting lodge situated at Kurow.
[4] Attached to his affidavit is an Agreement for Sale and Purchase signed by the defendants and dated 6 June 2013. Under that agreement the first defendant unconditionally purchased Foveran and the business of New Zealand Trophy Hunting Limited.
[5] The sale price was $14,100,000 (with a $1 deposit paid on execution). As set out by Mr Robertson the agreement also records that:
35.The Purchaser agrees to make an additional payment to the Vendor in addition to the Purchase Price of $200,000. This payment will be mutually agreed as to how it is derived but will be paid to the Vendor within 6 months from the date of this agreement.
[6] Mr Robertson then says that the total amount due under the agreement was therefore $14,300,000 and that the purchase price was to be paid as follows:
$12,100,000 on settlement, $200,000 by 6 December 2013 and $2,000,000 by way of vendor finance to be repaid in full on 14 December 2013.
[7] Reference is also made to the personal guarantee as to performance of all the first defendant’s obligations at cl 30.1 of the agreement. Mr Robertson then says that settlement was scheduled to occur on 21 June 2013. Settlement statements were issued on 20 June 2013 requiring the defendant to pay $450,000 for the business and
$11,650,000 for land, plant and equipment on the settlement date. Rates and outgoings were also apportioned.
[8] Mr Robertson confirms that as at 21 June 2013 they were ready in all respects to settle. However, settlement did not occur on the 21st or subsequently, and on the
28th a settlement notice pursuant to cl 10 of the agreement was issued. It is said that the settlement notice expired on 7 July 2013.
[9] At 16 December 2013 penalty interest on $12,100,000 at 15% per annum from 22 June 2013 (177 days) will be $880,150.68. It is noted that the current overdraft facility is 12.45%. Legal fees are also tallied at $15,856.20 in relation to the transaction and $11,028.25 in relation to attendances on the proceedings.
Procedure
[10] Affidavits of service confirm that the first defendant was served with the proceedings on 21 August 2013, and that the second defendant was served on
14 September 2013. The last date for filing expired on 18 October 2013.
Pleadings
[11] The statement of claim initially pleaded two causes of action, the first for specific performance, and the second seeking damages, interest and costs on the basis that:
As a result of the defendant’s failure to settle the plaintiffs have suffered loss by virtue of settlement compensable (amongst other things) by way of interest for late settlement of 15% per annum.
Submissions
[12] Mr Lester for the plaintiffs states that the plaintiffs do not now seek specific performance but seek damages in the form of interest on the purchase price from the date of settlement, 21 June 2013, to the date of cancellation, 13 December 2013. Damages are sought at the contractual rate for late settlement of 15% together with what counsel says are wasted legal costs in respect of the contract.
[13] Mr Lester also helpfully refers to an observation in McMorland Sale of Land that a contractual rate for late settlement is not recoverable where the contract is cancelled.
[14] The following passage is cited:1
Following cancellation, the vendor is able to claim damages which can be assessed by reference to a reasonable rate of interest but that rate of interest is not governed by the interest rate for late settlement and may well be lower.
[15] It is also accepted that the payment on the $12.1 million was due on 21 June
2013, $200,000 due on 6 December 2013 and the remaining $2 million to have been paid by 14 December 2013. As the defendant had until 13 December 2013 to pay the
$2 million, it is accepted that interest cannot run on that sum.
[16] It is further submitted that if the Court does not consider a penalty rate of
15% is appropriate to calculate damages, then the evidence is that the cost of funds for the plaintiffs is 12.45% (namely its current overdraft rate).
Assessment
[17] I am satisfied that the agreement dated 6 June 2013 records the following:
(a) The first defendant was to purchase 858 McHenrys Road, Hakataramea Valley for a purchase price of $14,100,000;
(b) A deposit of $1 was to be paid;
(c) The balance of the purchase price was to be paid on a settlement date of 21 June 2013;
(d) The interest rate for late settlement was 15%;
(e) Special conditions included cl 31.1:
Payment of purchase price is agreed to be made as follows:
(a) payment on settlement and possession $12,100,000 (plus
GST, if any), less deposit (if paid)
(b) balance purchase price of $2,000,000.00 shall be paid on
14 December 2013.
1 McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [11.19(c)].
(f) The purchaser agreed at cl 35 to make an additional payment to the vendor, in addition to the purchase price, of $200,000. The payment was to be made within six months of the date of the agreement, namely by 6 December 2013.
(g) Clause 30.1 also provides:
In consideration of the Vendors agreeing to sell the property to the company at the request of the directors and shareholders of the Purchaser, Robert James Booth as director of the Purchaser company guarantees to the Vendors the performance of all the Purchaser’s obligations under this agreement and the securities to be given by the Vendors for purchase financing the Vendors have agreed to provide to the Purchaser and has separately executed the Memorandum of contract attached to this agreement in that capacity in acceptance of this obligation.
[18] I am also satisfied that the first defendant failed to settle when required to do so. This provided a proper basis for cancellation and to seek damages from both the first defendant and the second defendants as guarantor.
[19] As to damages, the normal measure of damages is to place the contracting party in the position they would have been in had the contract been performed.2 In some circumstances, damages may be awarded to enable the plaintiff to have the contract performed as fully as was reasonable and possible. Tipping J in Marlborough District Council v Altimarloch summarised the position in this way:3
In the first kind of case, where the subject-matter is readily substitutable, the damages are truly compensatory, that is, they compensate for the difference between the value of the defective subject-matter (which is either actually or notionally sold) and the value or cost of goods or other subject-matter answering to the contractual requirements. In the second kind of case, where the subject-matter is not readily substitutable, the damages are designed to require the defendant to pay the plaintiff enough money to enable the plaintiff to have the contract performed as fully as is reasonable and possible. Damages in this second kind of case can therefore usefully be called performance damages, as opposed to damages which compensate for loss of value.
[20] As the passage cited from McMorland Sale of Land illustrates, a special approach has been taken to interest claims dealing with sales and purchases of land.
2 See Stirling v Poulgrain [1980] 2 NZLR 402 (SC & CA) at 422.
3 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] 2 NZLR 726 at [158].
In short, it has been authoritatively held,4 and it appears it has been the position in New Zealand for some time that a penalty interest rate is an inappropriate measure of damages where a sale and purchase agreement for land has been cancelled. I do not propose to test this longstanding dicta and in this regard the plaintiffs are prepared to seek judgment on a lesser basis.
[21] During the course of the hearing, it then became clear that the plaintiffs had two distinct options, namely:
(a) Claim a reasonable interest rate on the unpaid settlement sums; and/or
(b)Seek compensation for additional interest cost incurred as a consequence of settlement not having been undertaken.
[22] I therefore invited the plaintiffs to provide a memorandum setting out the respective quantums with supporting affidavit evidence. I also invited the plaintiffs to elect the measures by which they would prefer to have the matter resolved. The plaintiffs, however, submitted that in relation to the first head, namely interest on the contract sum payable, should be fixed at the Judicature Act 1908 rate of 5%.
[23] It transpires that the plaintiffs have elected to seek relief on the basis of actual holding costs and interest forgone. The amount claimable under this head was helpfully detailed in a table which I reproduce here:
FOVERAN INTEREST EXPENSE 21 June 2013 until 13 Dec 2013
Loan Amount Interest
Rate
Days Amount SBS 5,650,000 7.15% 175 193,687 Stockco 2,300,000 15.0% 175 165,411 ASB 166,000 5.75% 175 4,576 PGG
Wrightson
150,000 12.45% 175 8,954 Residual
Value
3,834,000 5.00% 175 91,911 TOTAL 12.1M $464,539
4 Nicholls v Forrest HC Auckland A1305/85, 12 June 1986 at 17-18.
[24] The interest rates and the amount paid on the loans to SBS, Stockco, ASB and PGG Wrightson are confirmed in the affidavit of Paul Stuart Croft, being the Chief Financial Officer of the Infinity Group of companies and responsible for preparing the accounts for the Bob and Jen Robertson Family Trust. He also confirms that during the last six months Foveran itself produced no net income. In the table above, the residual value represents interest after the discharge of debts on the equity value of the property of $3,834,000 at 5%.
[25] Interest is also sought on the $200,000 due on 6 December 2013 at 5% for seven days from 6 December to 13 December 2013 calculated at $191.78. In total the amount claimed, based on interest actually paid and interest forgone is
$464,730.78.
[26] Given that I am satisfied that the sale and purchase agreement was breached and cancellation was justified, and further given that I consider that the plaintiffs should be put in the position they would have been in had the contract been performed, the sum sought is appropriate in the circumstances.
[27] There shall be judgment accordingly against both defendants for the sum of
$464,730.78. Indemnity costs were sought. The basis for this was not specified. I
prefer to approach costs on an orthodox basis. Costs therefore shall be awarded on a
2B basis together with disbursements as fixed by the Registrar.
Solicitors:
Berry & Co, Oamaru
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