Robins v Cartwright
[2022] NZHC 868
•29 April 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-748
[2022] NZHC 868
BETWEEN GARETH JOHN ROBINS
Plaintiff
AND
BENJAMIN EDWARD CARTWRIGHT
Defendant
Hearing: 27 April 2022 (VMR) Appearances:
A Onley for Plaintiff
C Matsis for Defendant
Judgment:
29 April 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
ROBINS v CARTWRIGHT [2022] NZHC 868 [29 April 2022]
[1] The plaintiff applies for summary judgment for the balance of the purchase price he claims is owed by the defendant in respect of the sale of a real estate business.
[2] The plaintiff, by a written agreement undated but made in April 2016 (the Agreement), sold to the defendant a real estate business for $750,000 plus GST. The purchase price was payable in monthly instalments. Initially, the instalments were calculated with reference to a formula in the Agreement. In May or June 2018, the Agreement was varied to make the payments a set $11,000 plus GST per month.
[3] The defendant paid the instalments until December 2019, albeit intermittently from 18 June 2018, and has since made no further payments. At the time of the last payment the defendant had paid $226,447.22 towards the purchase price, leaving a balance of $523,552.78 plus GST payable under the instalment arrangement. When the plaintiff chased up payment in the New Year of 2020, the defendant did not offer any explanation as to why he had stopped making payments.
[4] As at 17 November 2021, that is, shortly before the statement of claim was issued on 24 November 2021, there were unpaid instalments of $430,650.00 including GST. Interest in respect of those unpaid instalments and in respect of earlier short paid instalments (some payments being made without the GST component), is claimed in the sum of $87,531.58. The defendant did not take issue with the plaintiff’s calculation of the amounts outstanding.
[5] The balance of the purchase price is pursued by the plaintiff as damages. I deal with the damages claim separately as, in my view, that claim is not suitable for summary judgment.
[6] Under the Agreement, from 1 April 2016, the parties were to operate the business jointly, with the plaintiff’s involvement decreasing over what was called the ‘Development Period’. That Development Period was initially for a year with the defendant having the option of extending the Development Period by up to a further year, along with a further six months’ extension (which is not relevant here). Payment of the purchase price was to commence upon the defendant repaying a $20,000 loan
provided for in the Agreement. That loan was paid in June 2016 and is not in issue. The Agreement then provided:
13.Upon payment in full of the Loan, Ben [the defendant] will pay the Purchase Price as follows:
a.Until the expiry of the Development Period and/or the Extension Period, by any amount of Ben’s income exceeding
$15,000 plus GST gross in any month, on the date on which Ben receives that income; and
b.After the expiry of the Development Period and/or the Extension Period, by any amount of Ben’s income exceeding
$21,000 plus GST gross in any month, on the date on which Ben receives that income.
14.During the Development Period and/or Extension Period, Gareth [the plaintiff] and Ben agree they will share Gareth’s Leaders income and Ben’s Leaders income (Ben’s Commissions) using the following formula:
Ben’s 2015-16 gross commissions divided by (Gareth’s 2015-16 gross commissions + Ben’s 2015-16 gross commissions) x 100 = Ben’s share
Gareth’s 2015-16 gross commissions divided by (Gareth’s 2015-16 gross commissions + Ben’s 2015-16 gross commissions) x 100 = Gareth’s share
Where:
Ben’s 2015-16 gross commissions = $318,740 Gareth’s 2015-16 gross commissions = $956,209
15.In the event that Ben fails to earn more than $10,000 plus GST gross per month from the Business (excluding Ben’s Commissions) (the Target Income), Gareth will pay to Ben a retainer (the Retainer) to bring Ben’s earnings up to the Target Income, for a period of no longer than 6 months from the Commencement Date (the Retainer Period).
[7] Given the defences raised by the defendant, cls 14 and 15 of the Agreement are important. Clause 15 contemplates the event that the defendant may not generate the income the business had produced in the past and therefore a Retainer would be paid by the plaintiff. There is no evidence the defendant had to call on payment of the Retainer provided for in cl 15. It is not claimed by the defendant that the figure given for the plaintiff’s gross commissions in cl 14 was inaccurate.
[8]The defendant made the following payments pursuant to the formula:
Date
Amount paid
18 July 2017
$11,521.98
16 August 2017
$5,320.12
18 September 2017
$6,894.27
19 October 2017
$18,149.80
17 November 2017
$16,109.19
14 December 2017
$21,322.86
21 February 2018
$19,035.00
17 April 2018
$22,094.00
15 May 2018
$18,000.00
[9] I was not told why the first payment was not made until 18 July 2017 when it should have been made in June 2016, the date the loan referred to in cl 13 of the Agreement was repaid. That said, there is no evidence of any complaint about when the payments commenced. In any event, the defendant had possession of the business from 1 April 2016 for well over a year before commencing payments.
Summary judgment principles
[10] The summary judgment principles are well settled and not in dispute. They are:
(a)Commonsense, flexibility and a sense of justice are required.1
(b)The onus is on the plaintiff seeking summary judgment to show there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.
(c)The Court will not hesitate to decide questions of law where appropriate.
1 Haines v Carter [2001] 2 NZLR 167 (CA).
(d)The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements and affidavits.
(e)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however, equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
(f)In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation.
(g)The Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.
(h)Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required for the protection of the integrity of the summary judgment process.
(i)Once the Court is satisfied there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.
[11] In particular, the plaintiff relies on the obligations on a defendant to set out a proper evidential foundation for the claimed defences which are said to justify the refusal of summary judgment.2
2 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392.
[12] Counsel for the plaintiff also notes that where a defendant raises a claim belatedly, and for the first time only in response to a foreshadowed claim, the Court is entitled to be sceptical of such defence.3
[13] The plaintiff says this is a straightforward case of monthly instalments due under an agreement for sale and purchase of a business not being paid. There is no dispute as to the contractual terms, no dispute that the payments have not been made, and accordingly the plaintiff says he is entitled to judgment.
The essence of the defence
[14] The notice of opposition claims that the defendant was induced to enter into the Agreement by misrepresentations made by the plaintiff giving rise to a claim for damages. It is also claimed the plaintiff breached the Agreement, giving rise to a claim for damages. It is said: “[t]he damages claims exceed the amount of the plaintiff’s claim”.
[15] The defendant raises a number of alleged breaches of the Agreement but I only deal with those where some attempt to place a value on the cross-claim is made.
[16] The defendant attaches to his affidavit in opposition to the application, a draft statement of defence and counterclaim. The first counterclaim asserts that because of pre-contractual misrepresentations made by the plaintiff about the real estate business, including as to the value of the business systems, the business was only worth “in the vicinity of $30,000”. On that basis, the defendant says he has overpaid for the business by nearly $200,000.
[17]In the defendant’s affidavit, Mr Cartwright says:
The only actual value in the business was the database, which ended up being predominantly filled with low value cold call prospects worth no more than
$30,000. I believe that I have already well overpaid with the $226,442 that I have paid already.
3 Haines v Carter above n 1.
This is the full extent of the defendant’s evidence in respect of the value of his claim relating to pre-contractual issues. I raised this with Mr Matsis, counsel for the defendant, who responded that when the above paragraph was read in the context of the full affidavit, the balance of the affidavit provided evidence that the other aspects of the business were of no value.
[18] In respect of the counterclaim alleging breach of contract, the draft counterclaim seeks an order that:
… the plaintiff pay the defendant damages for the contractual breaches, the amounts of which are to be quantified at trial.
[19] There is no attempt by Mr Cartwright in his affidavit to explain the losses arising from the breach of the Agreement, save for an allegation that the plaintiff insisted that he remained directly involved with certain developers during his period of assistance after settlement of the sale of the business. It is claimed that, while the plaintiff insisted on remaining involved, through his lack of follow through and communication with the client, the business lost eight listings, representing approximately $100,000 in commissions. Mr Cartwright does not name the developer concerned, nor the development where the sales were lost, nor the timing of the lost sales. Just why Mr Robins would put in jeopardy his share of $100,000 in commissions is not explained.
The need to quantify cross-claims
[20] I put to one side at the moment the fact a counterclaim does not provide a defence to a summary judgment (though a set-off does).4 I expect counsel recognised that if the defendant’s cross-claim arising from the alleged pre-contractual misrepresentations was reasonably arguable, given the plaintiff was suing for the balance of the purchase price owed as a result of the alleged misrepresentations, the defendant’s cross-claim was arguably a set-off.
4 Andrew Beck and others McGechan on Procedure: High Court Rules 2016 (online ed, Brookers) at [HR12.9.09 and HR12.9.10]
[21] As noted by Associate Judge Osborne in Freshmax NZ Ltd v Oak Glen Orchards Ltd:5
Arguable breach (supported by evidence) is insufficient unless accompanied by arguable damage or loss (supported by evidence).
[22] I again leave to one side the question of whether there is evidence of arguable breach as I am satisfied that what is lacking here is evidence of arguable damage or loss in relation to the claim to pre-contractual misrepresentation.
[23] The defendant needed to provide an evidential basis for his calculation of the quantum of his cross-claim. As Associate Judge Johnston said in Herbert v USAR Napier Ltd:6
… a defendant relying on a cross-claim to avoid summary judgment will need to point to an evidential foundation upon which it can argue that it suffered compensatable loss. I do not say that the defendant needs to be able to identify the precise loss, but the Court needs to be satisfied that there is evidence to support this aspect of the claim. Grey v Stevenson, Freshmax and Pacific Basin v Education all contain searching analyses of whether there is evidence of loss.7
[24] Putting the absence of evidence in context is that the plaintiff first followed up non-payment of the monthly instalments in the New Year of 2020. As noted, the defendant did not then advance any of the matters now relied on but what is clear is the defendant has had more than ample time to obtain accounting or valuation evidence to support his assertion that the business was only worth $30,000. There is in fact only the bare assertion the business was worth $30,000. The defendant’s failure to obtain such evidence when there was ample opportunity to do so, his failure to respond to the follow-ups regarding non-payment and his failure to produce any financial information for the business or provide any personal explanation as to how loss was calculated, means I am satisfied that there is not an evidential foundation in respect of quantum for the cross-claim based on pre-contractual misrepresentation.
5 Freshmax NZ Ltd v Oak Glen Orchards Ltd [2012] NZHC 1560 at [23].
6 Herbert v USAR Napier Ltd [2022] NZHC 655 at [23].
7 Gray v Stevenson (unreported), HC Wellington CIV-2008-485-1935), 15 October 2008; Freshmax NZ Ltd v Oak Glen Orchards Ltd, above n 5; Pacific Basin Education Foundation v Richina Ltd [2016] NZHC 2193 (Pacific Basin was not followed by the Court of Appeal in MGH Trah Ltd v Fox Mortimer Trustee Co Ltd [2021] NZCA 59, (2021) 22 NZCPR 102, but on a different point – there being no criticism of the need for loss to be established by evidence).
[25] I do not accept the submission noted at [17] above that the balance of the defendant’s affidavit is evidence demonstrating the business other than the database was valueless. The defendant’s evidence explains why, in his view, the representations he says were made to him by the plaintiff about various aspects of the business were incorrect. But such evidence goes to liability and does not of itself support the assertion that the business was essentially valueless when acquired. It does not follow from a finding of a pre-contractual misrepresentation that its effect was to negate all value in relation to the subject matter of the misrepresentation.
[26] The defendant says the change from the monthly payments being calculated by a formula to a set amount was because it was apparent by then that the level of income generated by the business was for less than what the plaintiff had promised. However, no evidence of actual turnover achieved or any financial information is provided by the defendant. In any event, the payment history based on the formula set out at [6] above, shows that in lean months the monthly payment fell as low as $5,320 and in good months was well over $20,000.
[27] As monthly instalments were linked to turnover, the defendant’s reasons for the change in payment terms does not make sense. In months when the turnover was down, the formula reduced the monthly payment so, if turnover was down as claimed by the defendant, it would make more sense to retain a formula that gave him the benefit of turnover fluctuations rather than a fixed amount.
[28] A central plank in the submissions of Mr Onley, counsel for the plaintiff, was it was not credible the defendant would have had the concerns he now claims, including believing that the business was only worth $30,000, not having previously raised any of those issues with the plaintiff.
[29] On the defendant’s case, he learnt virtually from 1 April 2016 of some of the matters he now relies on. The plaintiff was to provide a period of assistance for up to one year, but the defendant alleges the plaintiff essentially abandoned him and the business within months of purchase of the business.
[30] Mr Matsis sought to answer this point by submitting the defendant being, in effect, stuck with the business and dependent on the plaintiff for assistance, was not in a position to confront the plaintiff with his concerns. I do not accept this submission. Mr Matsis had submitted with the plaintiff having accepted a management role with Leaders Real Estate, rather than honouring his commitment to assist the defendant, the plaintiff had “cut and run” to focus on the management role. So, well within one year of acquisition, the defendant says the plaintiff’s ongoing assistance ceased in breach of the Agreement.8
[31] On the defendant’s case, he was sold a lemon with the business only being worth $30,000 yet notwithstanding having operated the business from 1 April 2016, the plaintiff having abandoned the business, and with full knowledge of the breaches of contract now alleged, the defendant commenced payments in July 2017, pursuant to the formula. In short, the defendant, on his own case, could not have had any expectation of further assistance from the plaintiff well before the payments commenced in July 2017, let alone from when the instalment arrangement changed.
[32]The defendant says in his affidavit:
… I did not feel confident or comfortable raising all the issues and concerns at the time. The reality is that I was dependent on Gareth for help and support. I was worried he would provide even less help and support if I complained.
[33] However, on the defendant’s case, the plaintiff’s “help and support” ceased from around July 2016 when the plaintiff is alleged to have started working fulltime in his management role with Leaders Real Estate. The defendant also complains in his affidavit that the plaintiff moved out of the business premises soon after the Agreement was signed.
[34] Mr Matsis sought to turn the issue of delay on its head, saying that, while the plaintiff sent chase-up emails when the instalments stopped in January, February and March 2020, he then did nothing until instructing counsel to send a letter of demand in June 2021. The defendant in his affidavit, does not deal with the timing of his response, or rather, lack of response, to the demands. It is unreal to suggest that the
8 The plaintiff says the defendant did not extend the one year period of assistance but that dispute cannot be resolved in this context.
defendant believed that a debt of over $500,000 was not going to be pursued (to be fair, the defendant does not make such a claim in his evidence).
[35] There was no incentive on the plaintiff to issue proceedings immediately as he can only seek judgment in debt for instalments that are overdue. In any event, the plaintiff is protected by interest. I do not consider any delay by the plaintiff to be relevant.
[36] Mr Matsis raised the delay point partly in response to my noting the absence of any expert evidence or independent evidence as to value. In effect, the submission was that the plaintiff’s inaction had lulled the defendant into a false sense of security. Again, there is no evidence as to how the defendant treated delay by the plaintiff. Mr Matsis noted the summary judgment proceedings were issued at the end of November 2021, meaning the defendant was in the unenviable position of attempting to find an expert prepared to give evidence over the Christmas/New Year period.
[37] I do not accept the timing of the proceeding as explaining why no explanation of loss was provided. The Court would have been sympathetic to an application for an extension of time to file expert evidence due to the Christmas/New Year period. But such is not an answer to the defendant not providing any financial information in relation to the business whatsoever. His failure to produce, even in summary or redacted form, the accounts for his business is, in this context telling when his primary complaint is that the business has not produced the turnover expected. Given the time frames for filing papers in opposition, expert evidence of quantum may not be available but the defendant has to set out the evidentiary basis supporting the claimed loss – simply asserting the business was effectively of no value was not sufficient.
[38] Mr Onley’s submission as to the significance of the defendant not having previously raised the issues now relied on, was primarily to support his submission that the defendant had not produced evidence to support breach. However, the same point holds true in respect of the defendant not producing any material in relation to the quantum of damages to support his claims at any time nor even an explanation as to how the business he agreed was worth $750,000 was in fact only worth $30,000.
[39] For all of these reasons, I am satisfied there is no reasonably arguable evidence of loss in this case and that the plaintiff is entitled to summary judgment in relation to the instalments that were unpaid as at the commencement of this proceeding.
Breach of contract
[40]This is the claim of a loss of commission referred to at [19] above.
[41] The plaintiff says he has no knowledge of the claim that he failed to follow through with a client resulting in the loss of eight listings worth approximately
$100,000 in commission. The complete absence of detail in relation to the lost commission claim meant the plaintiff had nothing to reply to. The details of this claim must be known to the defendant but he has not provided an adequate evidential foundation for breach or for the quantum of this claim.
[42] Prior to the issue of this proceeding, in a response to a letter demanding payment of arrears, defendant’s counsel listed as an alleged breach of contract the following:
2. Insisting that he remain directly involved with certain developers and demanding payment from Mr Cartwright for his involvement in those proposed developments, contrary to clause 21 and the Agreement as a whole.
[43] The plaintiff, in his affidavit in support of his application, dealt with this and other issues raised in the letter. It was only in the defendant’s affidavit that the loss of listings and commission was raised. I note no attempt to quantify damage in respect of any claim was made in counsel’s letter provided before the issue of these proceedings.
[44] Accordingly, I do not accept the submissions of Mr Matsis that the plaintiff had in his reply affidavit gone silent on this issue when he claimed he did not know what sales had been lost. The plaintiff, in his affidavit in support, dealt with the allegation set out above. Mr Matsis submitted more detail from the defendant was not necessary as the fact the plaintiff responded to the above issue showed that both parties knew what was being referred to in the above passage and therefore any lack of detail should not be held against the defendant.
[45] I do not accept that submission. The plaintiff properly dealt with the issues raised in the letter but is not required to anticipate defences of which he has no notice.9 I accept Mr Onley’s submission that there is no realistic evidential foundation for this cross-claim in respect of both breach and quantum.
Damages for balance of purchase price
[46] The statement of claim did not seek judgment for such further monthly instalments as had fallen due between the filing of the claim and the date of hearing. The quantum of the claim in debt is fixed as at the date of the statement of claim. The claim then seeks damages for a sum representing all future monthly instalments from the date of the claim.
[47] Neither the plaintiff nor defendant has purported to cancel the Agreement. The Agreement therefore continues to provide that the defendant is only liable to pay instalments month by month. Unless and until an instalment falls due, the defendant is not in breach of the Agreement and so no issue of damages arises. Once an instalment falls due it becomes a debt and is sued for as such – not in damages.
[48] Cancellation requires notice.10 While it might be said the defendant’s position indicates he has no intention of paying the future instalments, the plaintiff does not have to cancel for such anticipatory breach – he can hold the defendant to the contract.11 While cancellation can be made clear through conduct,12 the circumstances here do not make it clear that cancellation has occurred.
[49] It follows the plaintiff’s claim for damages is not suitable for summary judgment as it is at least arguable the Agreement remains on foot. This aspect of the plaintiff’s application for summary judgment is dismissed.
9 Greenback NZ Ltd v Haas [2000] 3 NZLR 341 (CA).
10 Contract and Commercial Law Act 2017, s 41.
11 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexix, Wellington, 2018) at [18.3].
12 Contract and Commercial Law Act, s 41(2).
[50] However, as I have already said, the plaintiff is entitled to judgment for the arrears as pleaded.
[51]Accordingly, summary judgment is entered against the defendant in the sum of
$430,650.00, together with interest payable under the Agreement of $87,531.58. I again note, no issue was taken with the plaintiff’s calculation of these amounts. The plaintiff is also entitled to costs on a 2B basis plus disbursements as fixed by the Registrar.
[52] As to the balance of the plaintiff’s claim, he will need to consider amending the claim to reflect further instalments that have fallen due since the issue of this proceeding, whether cancellation of the Agreement is available and, if so, whether he should take that step.
[53] The Registrar is to allocate a telephone conference in approximately six weeks’ time for directions to be made in respect of the balance of this proceeding.
Associate Judge Lester
Solicitors:
Morrison Mallett, Wellington (for Plaintiff) Gault Mitchell Law, Wellington
Copy to counsel:
A Olney, Barrister, Wellington (for Plaintiff)
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