Sheat v Boulton

[2012] NZHC 1755

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-002435 [2012] NZHC 1755

BETWEEN  WARREN THOMAS SHEAT AND LYNLEY MAY SHEAT

Plaintiffs

ANDJOHN ROBERT BOULTON Defendant

Hearing:         3 May 2012

(Heard at Christchurch)

Appearances: G M Brodie for Plaintiffs

J R Boulton (Defendant) in Person

Judgment:      18 July 2012

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

[upon plaintiffs’ summary judgment application]

[1]      The Sheats are farmers.  Mr Boulton is an importer of agricultural equipment. In February 2011 Mr Boulton agreed to sell to the Sheats a baling machine which he was to import from the United States. The total price, including freight and GST was to be $161,844.15.  (All figures in this judgment are in New Zealand dollars unless otherwise  indicated).    The  Sheats  in  February  2011  paid  Mr  Boulton  half  the purchase price ($80,922.07).  Mr Boulton did not complete his intended purchase of the baler, did not import the baler, and it was never delivered to the Sheats.   The Sheats say that they were entitled to and did cancel the contract.  Mr Boulton says that he was unable to complete the purchase of the baler because the Sheats failed to perform their obligations under the contract.

[2]      In this proceeding the Sheats apply for summary judgment for $80,922.07 and interest.

SHEAT V BOULTON HC CHCH CIV-2011-409-002435 [18 July 2012]

The pleadings

The Sheats' statement of claim

[3]      The Sheats’ statement of claim is concise. They plead:

(a)      The plaintiffs are farmers and  agricultural  contractors  carrying on business at Dunsandel near Christchurch.

(b)In  February  2011  the  plaintiffs  entered  into  a  contract  with  the defendant for the supply of a New Holland BB9060 Medium Square Baler 2009, Serial Number 244708031, with a Rotor Cutter, Tandem Axle and Auto-steer at and for a total price of $NZ161,944.15.

(c)       On 17 February 2011 the plaintiffs paid to the defendant the sum of

$80,922.07 on account of the purchase price.  It was agreed between the plaintiffs and the defendants that the balance of the purchase price would be paid upon delivery of the baler to New Zealand.

(d)The defendant stated that the baler would be landed in New Zealand and available to the plaintiffs by 8 March 2011.

(e)      The defendant has subsequently failed or refused to supply the baler purchased by the plaintiffs.

(f)      The plaintiffs have now learnt that the defendant does not own the baler.  It was intended by him to be purchased from Ceresville New Holland Inc.  However, the defendant did not secure the supply of the baler from that company and it has now been sold by that company to another purchaser.

(g)The defendant is therefore unable to supply the baler contracted for and is thereby in breach of the contract.

(h)The plaintiffs have accordingly cancelled the contract and hereby seek recovery of the money paid on account of the purchase price.

Mr Boulton’s opposition

[4]      Mr Boulton (then represented by a solicitor) filed a notice of opposition in which he stated as grounds:

(a)       The defendant has a defence to the plaintiffs’ claim.

(b)The  money  paid  by  the  plaintiffs  to  the  defendant  was  a  non refundable deposit pursuant to the terms of the contract (as varied by agreement)  between  the  parties  for  the  importation  and  sale  of  a baling machine.

(c)       The defendant is entitled to keep the money.

(d)The  defendant  has  set-offs/counterclaims  against  the  plaintiffs  in respect of:

(i)Losses yet to be quantified resulting from the defendant being unable to purchase the baling machine in the United States; and

(ii)Losses incurred (and yet to be incurred) by the defendant in transporting items to New Zealand that were to be transported in the same container as the baling machine; and

(iii)Losses incurred on a separate contract between the parties for the importation and purchase of various items; and

(iv)     Losses incurred on the defendant’s contract with the plaintiffs

to   provide   his   agricultural   contracting   services   for   the

2011/2012 harvest season; and

(v)      Losses incurred by the plaintiffs’ failure to return various items

loaned to them by the defendant.

(e)      These   set   offs/counterclaims   will   extinguish   any   liability   the defendant may have towards the plaintiffs (if any).

[5]      In his notice of opposition Mr Boulton relied on the Contractual Remedies

Act 1979 and his own affidavit.

Plaintiff’s summary judgment application – the principles

[6]      The starting point for a plaintiff’s summary judgment application is r 12.2(1) High  Court  Rules,  which  requires  that  the  plaintiff  satisfy  the  Court  that  the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.

[7]      I  summarise  the  general  principles  which  I  adopt  in  relation  to  this application:

a)        Commonsense, flexibility and a sense of justice are required Haines v

Carter.1

b)The onus is on the plaintiff seeking summary judgment to show that 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.

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

1      Haines v Carter [2001] 2 NZLR 167 at 187.

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)       In weighing these matters, 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 that 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.

The history of the transaction

[8]      A number of aspects of the transaction are not in dispute.   A summary of those will give a general picture of events before I return to the matters in issue in the litigation.

[9]      Mr  Boulton  imports  agricultural  equipment  for  waiting  buyers  in  New

Zealand.

[10]     He had in 2006 imported a baler for the Sheats.  They paid him the purchase price ($99,265.43) in September 2006 and the  baler arrived in New Zealand in November 2006.

[11]     Mr Boulton says (uncontradicted) that the 2006 importation was atypical in that he was passing on the baler at cost to the Sheats who were his friends.   The indirect  benefit  to  Mr  Boulton  was  that  he  could  put  other  items  in  the  same imported container, avoiding separate transportation costs on those items.  Because the  2006  contract  was  not  for  profit,  he  imported  the  baler  personally  and  not through his company Dag Ag Limited.

[12]     In 2011 the Sheats decided to buy a new baler.  They discussed their needs with Mr Boulton.   He indicated that he had identified a suitable baler which was ready for import.  I will refer to it simply as “the baler”.

[13]     Once again, Mr Boulton did not propose to make a profit on the importation. He indicated that delivery would take 4-6 weeks subject to transportation and that the baler would arrive in a container.   In February Mr Boulton sent the Sheats his personal invoice for the baler.  The invoiced price (including GST and freight) was

$161,844.15.

[14]     Mrs Sheat deposes that she was not able to arrange funding for that sum without having the baler as security and advised Mr Boulton that she could pay one half of the invoice immediately.  Mr Boulton agreed to that.  There is a dispute as to when the balance was to be paid, which I will return to (below [46]).

[15]     The Sheats paid Mr Boulton $80,922.07 on 17 February 2011.

[16]     Around the same time as the parties negotiated the contract for the baler, Mr Boulton agreed to import for the Sheats some additional items of equipment.  The price of those items was $3,302.57 which Mr Boulton also invoiced in February

2011.  When he initially gave evidence in this proceeding he indicated that the sum due under the invoice was still outstanding.  It transpired that it was not.  The Sheats paid that sum to Mr Boulton on 25 March 2011.  Mr Boulton did not subsequently deliver the parts to the Sheats.   He indicated in his submissions in Court that he accepts that that sum must be repaid to the Sheats.

[17]     Months then passed by.  There is a dispute as to what occurred in that period, to which I will return.

[18]     Mr Boulton has produced his KiwiBank current account bank statements for

the period 17 February 2011 to 16 April 2011.  They show the receipt of the Sheats’

$80,922.07 on 17 February 2011, increasing his account balance  to $84,052.78. Thereafter, through many transactions which appear to be almost invariably of a personal nature, the account is depleted.  By 16 April 2011 it stood at $19,025.28. Mr Boulton does not suggest that any of the payments made from the account was in relation to the Sheats’ intended purchase.   During the period covered by the statements,  $80,927.07  was  the  only large  payment  received  into  Mr  Boulton’s account.  (He received some remuneration for contract work done for the Sheats but that was of around $4,000 only).

[19]     Since this litigation commenced, Mrs Sheat has been able to identify and make contact with the American vendor of the baler, one Robert Dinsmore.   Mrs Sheat has obtained from Mr Dinsmore a series of emails which passed between Mr Dinsmore and Mr Boulton which are in evidence.  Mr Boulton does not challenge their authenticity.

[20]     The available emails show –

23 February 2011 – Mr Boulton emails Mr Dinsmore to advise that he cannot process any payments “due to the current problems” (being a reference to the Christchurch February 2011 earthquake) – “will be in touch later”.

11 May 2011 – Mr Boulton apologises to Mr Dinsmore for having just found some of Mr Dinsmore’s emails in his spam mail.   He apologises for not replying.

10 June 2011 – Mr Boulton advises Mr Dinsmore that he is waiting for money to be released – he says that he was invested in one of the companies which had its building wrecked in one of the earthquakes, and this has caused the delay.

11 June 2011 – Mr Dinsmore advises Mr Boulton that he still has the baler.

11 June 2011 – Mr Boulton replies to Mr Dinsmore – “will have some money to you next week”.

12 August 2011 – Mr Boulton asks Mr Dinsmore - “have those funds I sent through shown up as I haven’t heard from you”?

13 August 2011 – Mr Dinsmore emails Mr Boulton to state that he never received the funds and that both the balers he had have been sold.  He asks Mr Boulton if he would like him to price new balers.

13 August 2011 – Mr Boulton replies that he still needs a baler (of the same kind) and will check on Monday to see where the payment he sent had gone – he had had no time to follow it up due to his mother being very ill.

[21]     Accordingly, Mr Boulton knew by 13 August 2011 at the latest that the baler he was to deliver to the Sheats had already been sold to someone else.

[22]     Discussions between the Sheats and Mr Boulton came to something of a head in September.  The Sheats had been wanting to put the baler into the Ellesmere Show but  there  was  no  sign  of  it.    Mrs  Sheat  says  that  they  had  a  discussion  with Mr Boulton in late September when Mr Boulton said that he did not know where the baler was and that a company called Mainfreight Ltd was carting it.  Mrs Sheat says that on contacting Mr Boulton a few weeks later Mr Boulton said that the baler had gone on a car carrier in order to save freight.  Still later he said that the baler had been offloaded in Japan and was sitting in Japan and he was uncertain when it would be brought to New Zealand.

[23]     While there is dispute between the Sheats and Mr Boulton as to what was discussed in earlier months, Mr Boulton in his evidence did not challenge several of the specific conversations described by Mrs Sheat as having occurred from September.   He says that through this period he was awaiting payment from the

Sheats (a proposition to which I will return).   In relation to the discussions which

Mrs Sheat details, Mr Boulton says:

...I had not put the baler onto a ship.  I didn’t mean for the plaintiffs to think that the baler was actually already on a ship, because it was not.

[24]     Mr Boulton did not specifically deny the conversations which Mrs Sheat detailed. The very specific discussions concerning the baler being offloaded in Japan and sitting in Japan are not referred to by Mr Boulton at all.

[25]     As against that, the Sheats also adduced evidence from one Lindsay Parnham who knows both the Sheats and Mr Boulton.  Mr Parnham deposes that he distinctly remembers  a  conversation  with  Mr  Boulton  in  about  September  2011  when Mr Boulton told him that the Sheats’ baler had already been shipped and that there could be a delay because the baler could be discharged in Japan and might arrive in New Zealand on another boat.  This was given by Mr Boulton as the reason for the delay in bringing the baler into New Zealand.

[26]     Mr Boulton did not respond by affidavit to Mr Parnham’s evidence at all. (Mr Boulton in his submissions at the hearing began to comment to me that there were things which he could tell me about Mr Parnham but I indicated to him that my consideration of the factual information was confined to the affidavit evidence).

[27]     Soon afterwards, there was a discussion between Mr Boulton and the Sheats as to the possibility of a replacement baler.   The way in which that conversation came about is again the subject of a dispute, to which I will return.   Mr Boulton offered the Sheats a replacement baler.  It was agreed that Mr Boulton would send an invoice for a replacement baler on 24 or 25 October 2011.  Mrs Sheat, on 24 October

2011, emailed to Mr Boulton eight points of information which the Sheats required.

[28]     Mr Boulton replied to Mrs Sheat’s email on 31 October 2011 by attaching an invoice for a used (2010) New Holland baler.  The invoice was for $161,985.40 and gave credit for “$80,992.70” being “deposit”.  Mr Boulton’s email did not respond to any of the specific points in Mrs Sheat’s email other than the provision of an invoice. Mr Boulton’s invoice went on to state:

This baler will be shipped once full payment has been received as this baler was sold to you on a non-commission deal, if you wish for me to continue funding this baler commission will be charged at 20% of which is still a discounted rate.

[29]     The invoice is issued in the name of “J R Boulton DAG AG Ltd”.  This was different from the invoice for the original baler which Mr Boulton had issued in his personal name because he presented the original baler as a personal deal with no mark-up.

[30]     There  is  a  dispute  as  to  whether  the  parties  reached  agreement  on  a replacement baler, to which I will return.

[31]     Mr Boulton has produced a photocopy of a document which he says is the purchase agreement for the replacement baler.  At the time he swore his affidavit on

16 January 2012 he stated that his records were in the United States so that this was the only copy which he had available.  He has not since 16 January 2012 produced either the original or a better copy.   The (poor quality) copy he produced is reproduced  as  Schedule  A  to  this  judgment.     Mr  Boulton  deposes  that  the replacement baler was bought from a dealership called Minnesota Ag Group in the United States.  The document he produced purports to show a cash price of $106,900 (US currency). The document is dated 24 August 2011.

[32]     In  the  space  of  the  purchaser’s  signature,  there  appears  Mr  Boulton’s signature with the words “Dag Ag Ltd New Zealand” below.

[33]     The  Sheats  and  their  legal  advisers  researched  information  as  to  the replacement  baler.    Mrs  Sheat  has  produced  a  copy  of  the  advertisement  of Minnesota Ag Group in relation to the replacement baler which indicates that the asking price was $76,900 (US currency).

[34]     Mrs Sheat subsequently provided information concerning the replacement baler to the Court by an affidavit dated 1 February 2012.  She noted that the figures “10” appear to have been written over “7” to change an amount of “$76,900” to “$106,900”.  Mr Boulton did not between 1 February 2012 and the hearing file any reply evidence to explain the apparent overwriting.

[35]     In November 2011 the Sheats instructed their solicitors, Russell, Moon & Fail, to write a letter demanding the return of the funds they had paid to Mr Boulton. This included both the $80,922.07 paid on account of the baler and the $3,302.57 paid for additional items.  Russell, Moon & Fail sent a letter on 9 November 2011 to Mr Boulton referring to the background and demanding repayment.

[36]     Mr Boulton responded on 10 November 2011.  The email is headed “without prejudice”.  However it contains no proposals in settlement and it is not privileged. The email reads:

As stated I am out of the country at the moment and are not due back until December your client is well aware of this.   Just to point out a fact the money paid was accepted as a Deposit for the mentioned baler and no more. The price quoted was a indent price with full payment before shipping.  With no margin in this for me as it was to help out friends.   Normally I would have a margin of 20-30 percent.  As you have now cancelled this order there deposit is non-refundable as I have had a lot of expense to get this far and are along way out of pocket in this matter.  No further correspondence will be entered into until I return.

[37]     Appropriately, Mr Boulton had treated the Russell, Moon & Fail letter as a letter of cancellation.   His response was in effect notice that the deposit had been forfeited.  (No reference was made to the $3,302.57).

[38]     Given Mr Boulton’s response, the Sheats issued this proceeding.

[39]     By her affidavit filed in support of the interlocutory application Mrs Sheat stated that:

In the circumstances, we hereby cancel our contract with Mr Boulton ...

[40]     The fact is that Mr Boulton had regarded the Russell, Moon & Fail letter as a cancellation.   If that were not enough, Mrs Sheat’s cancellation through the documents  by  which  she  initiated  this  proceeding  is  a  sufficient  cancellation:

Chatfield v Jones.2

2      Chatfield v Jones [1990] 3 NZLR 285.

Mr Boulton’s credibility generally

[41]     I have referred to the document produced by Mr Boulton as a photocopy of the  purchase  agreement  for  the  replacement  baler  (Schedule A).    Mr Boulton’s evidence contained no suggestion or admission that the contract document had been altered from what had been initially written.   But the research undertaken by the Sheats and the document produced by Mrs Sheat in her additional evidence unequivocally established that the American vendor had been charging $76,900 for the (replacement) baler.  This is to be contrasted with the “$106,900” on the copy produced by Mr Boulton.

[42]     At  the  hearing,  in  making  submissions  on  his  own  behalf,  Mr  Boulton conceded that the document had already been altered to read “$106,900” instead of

$76,900.   He began to give what was evidence as to the reason for changing the document.  I explained to him that he could not give evidence in the course of his submissions.   He then asked the Court to accept that a purchaser such as himself might well have asked the American vendor to change a figure originally recorded to be US currency to the New Zealand currency equivalent.  I reject the invitation to embark on such an inherently improbable line of speculation.  It is for the defendant in a summary judgment application to provide a proper evidential basis for a positive allegation.  There is no basis in this case to reach any conclusions, whether arguable or firm, in favour of Mr Boulton as to either someone else altering the document or as to an innocent explanation on Mr Boulton’s part.  The explanation advanced for the first time at trial gave the distinct impression that it was an explanation manufactured by Mr Boulton at some point after the Sheats established by their own efforts the true price of the replacement baler.

[43]     Mr  Boulton’s  evidence  on  this  important  point  was  so  lacking  and  his submitted explanation so contrived and implausible that the Court is entitled to reject it  even  in  a  summary  judgment  context,  as  it  does  not  contain  an  arguable proposition.

[44]     I am coming to a discussion of disputed areas of fact.   There is, running through the evidence, a high degree of consistency and plausibility, supported by

detail, in the evidence of Mr and Mrs Sheat.  Contrasted with that, and in keeping with the last minute attempt to explain away the alteration of the $76,900 on the contract document, there is in Mr Boulton’s evidence a lack of plausibility and a lack of support when the detail is examined.

[45]     I now turn to areas of dispute in the evidence.

When were the Sheats to pay the purchase price of the baler?

[46]     The Sheats allege that on 17 February 2011 they agreed with Mr Boulton that the balance ($80,922.02) of the purchase price would be paid on delivery of the baler.   Mrs Sheat deposes that this discussion occurred when Mr Boulton had presented the invoice and she explained to him that the Sheats could immediately pay only half the invoiced sum.  Mr Boulton does not give any evidence in direct response to the Sheats’ evidence as to this discussion.  He says, without reference to a particular discussion, that the Sheats agreed to full payment in advance.

[47]     It will often be the case in relation to a factual conflict of this nature that the Court cannot resolve the conflict.   In other words, the defendant’s evidence may provide an arguable foundation for his proposition.  I am satisfied that that is not so in this case for four reasons.

[48]     First, the fact that the Sheats paid half the purchase price promptly after the discussion  and  negotiation  of  the  purchase  price  points  strongly  towards  an agreement that half only would be paid in advance.   If the agreement was for the whole of the price to be paid there would have been no point in the Sheats paying only half.

[49]     Secondly, Mrs Sheat’s explanation for not being able to pay in advance in full

– because the Sheats needed to use the baler as security – makes sense.

[50]     Thirdly, there is the substantial contrast in explanations given by Mrs Sheat and Mr Boulton respectively as to what happened between February and September

2011.

[51]      Mrs  Sheat  deposes  that  after  she  paid  Mr  Boulton  the  $80,922.07  on

17 February 2011 (and she was expecting delivery of the baler in March):

10.... I did not hear from him in the immediate future. The baler did not arrive  by  8  March.    Over  the  next  several  months  I and/or  my husband contacted him on numerous occasions asking for a report on the delivery of our baler.   By September of 2011 we gained the impression that he was beginning to avoid us.  We had wanted to put the new baler into the Ellesmere Show but were not able to get a sensible response from him.

[52]     Mr  Boulton’s  version  of  events  from  February  to  September  2011  is

significantly different.  He deposes:

16....  I did  discuss  the  agreement  with  the  plaintiffs in  the  months subsequent to February 2011.  This was especially the case during the period February to May 2011 when I was often working with the plaintiffs.  In my view things were at an impasse because I hadn’t received  the  remainder  of  the  payment.    However,  I  found  the subject matter difficult to discuss with the plaintiffs as I didn’t want to push the issue too far and possibly jeopardise my other business arrangements with them.  At this time, I also noted that the plaintiffs were seemingly spending large amounts of money on equipment and building works, so I was also a little confused about why they hadn’t paid me.  In summary, while we did discuss various possibilities, I was still awaiting the remainder of the payment and for that reason, I had not put the baler onto a ship.  I didn’t mean for the plaintiffs to think that the baler, was actually already on a ship, because it was not.

[53]     It is clear on Mr Boulton’s evidence, exactly as Mrs Sheat had deposed, that Mr Boulton through the period after February 2011 was deliberately avoiding discussion as to the progress of the importation with the plaintiffs and was fudging his explanations.  Mr Boulton’s sole explanation for that avoidance and fudging was that he did not wish to “possibly jeopardise my other business arrangements with them”.  At no point does he explain what those other business arrangements were or their value.   At no point does he explain why, if there was some genuine misunderstanding over the terms of payment, the Sheats with whom he had had a very good relationship would not have dealt with and resolved any misunderstanding in a sensible way.  Mr Boulton’s explanation for his avoidance of the Sheats and his fudging of explanations is entirely implausible.   That conduct, combined with the evidence that Mr Boulton was through this period using the Sheats’ money on his personal expenses, points overwhelmingly to the fact that Mr Boulton had in some

way got himself into difficulties – possibly both financial and logistical – in completing the transaction and was not able to face up to the Sheats to frankly explain the situation.

[54]     Fourthly, in his communications with his United States vendor, Mr Boulton never once referred to a failure by his New Zealand purchasers to honour their contract with him.   If the problem lay with others, namely the Sheats, then it is incomprehensible that Mr Boulton would explain his delay other than by honestly blaming it on those who were responsible for it.  Instead, when he did explain his delay in payment to his United States vendor, it was repeatedly by reference to his own money and investments being held up through the consequence of the earthquakes.  This is entirely consistent with the conclusion I have come to in this regard  for  the  earlier  stated  reasons,  namely  that  the  evidence  indicates  that Mr Boulton was prevaricating because of financial or logistical difficulties he had got himself into.

[55]     I accordingly find that the Sheats have established, beyond argument, that they had a contract which required them to pay only half the purchase price of the baler in advance.

What happened between February and September 2011?

[56]     It is significant that Mr Boulton does not deny that the Sheats repeatedly requested reports on the delivery of the baler.  Mr Boulton suggests that he fudged his answers because he found it difficult to raise the issue of non-payment with the Sheats.  I have found that there is no credible evidence to support the contention that the Sheats were in breach of an obligation to pay the full price in advance.  There is equally no credibility in Mr Boulton’s excuses for his delays.  Whatever those actual reasons – whether because Mr Boulton had been spending the Sheats’ payment on personal expenses or because he genuinely could not liquidate other assets to pay the balance – those reasons  for Mr Boulton’s  failure to complete his United States purchase are not attributable to the Sheats.

How did the concept of a replacement baler arise?

[57]     Mrs Sheat deposes that after Mr Boulton’s September revelation that the baler was sitting in Japan, Mr Boulton told the Sheats he would arrange for a replacement baler.  Mr Boulton does not deny that he gave an explanation as to the baler going to Japan and then being offloaded.  He merely states – cryptically – that:

... I didn’t mean for the plaintiffs to think the baler was actually already on a ship, because it was not.

[58]     Given the importance to Mr Boulton in this case of the explanations he was offering along the way, I have to regard his failure to deny the “Japan” explanation as deliberate.  I am satisfied that was, beyond argument, the explanation he gave to the Sheats.

[59]     By August Mr Boulton knew that the (original) baler had been sold.  His final email exchange with Mr Dinsmore of 13 August 2011 indicates he was already on the search for a replacement baler.

[60]     The concept of a replacement baler for the Sheats therefore made absolute sense – the Sheats had a contract for a baler, had paid half the price, and knew Mr Boulton was experienced in the importation of balers.   There was no commercial reason for them to depart from existing base terms (other than to agree any necessary adjustment to price to reflect the cost to Mr Boulton of the replacement baler).

[61]     Mrs Sheat deposes that the Sheats asked for one changed term – namely that Mr Boulton use the Sheats’ preferred shipping company (Transport Logistics Limited).    She  says  Mr  Boulton  agreed  to  that.    Mrs  Sheat’s  email  sent  to Mr Boulton on 24 October 2011 expressly refers to the fact that “Transport Logistics Ltd is transporting it.”   Mr Boulton did not take issue with the discussion on the transportion term.

[62]     Mrs Sheat recorded the October discussion as a whole in the 24 October 2011 email.  She says that it was in response to this email (without any record of a change of terms to require full advance payment) that Mr Boulton on 31 October 2011

emailed (from Idaho) the invoice for the replacement baler. The invoice contains the notation requiring full payment set out at [28] above. Mr Boulton’s covering email does not suggest that such a term had been discussed for the replacement baler.

[63]     By 31 October 2011 –

(a)       The Sheats had met their contractual obligations under the contract for the original baler.

(b)They had been without the use of the baler from March to October, while Mr Boulton had had the half-payment for slightly longer.

(c)       Mr  Boulton  had  avoided  them,  prevaricated  and  given  fudged explanations for delay.

(d)Mr Boulton had eventually explained that the (original) baler was sitting in Japan.

[64]     As Mrs Sheat explains in her evidence –

15.I  was  very  concerned  about  paying  over  this  additional  money without security.

[65]     Mr Boulton’s evidence is to the effect that the Sheats nonetheless agreed to pay over in advance the balance of the purchase price for a baler that was yet to be shipped from the United States.

[66]     Mr Boulton’s evidence on this, as on other matters, entirely lacks credibility. For the Sheats to have agreed to a further advance payment would make no commercial  sense.    It  is  not  credible  that  the  Sheats  would  have  accepted  the

31 October demand for full payment when Mr Boulton had failed to respond to all but one of the Sheats’ 24 October demands and queries.  If Mr Boulton’s version of discussions relating to the replacement baler were correct, it is unthinkable that he would  not  have  required  written  confirmation  that  the  Sheats  agreed  to  his

31 October 2011 stipulation of full payment in advance.

[67]     It is clear from the evidence that Mr Boulton’s last email of 31 October was the final straw for the Sheats.  It is clear that at that point they had lost all confidence and trust in him.

[68]     Mr Boulton’s evidence is to the effect that a (replacement) contract for the replacement baler came into existence.  To do so, that must have been at some point after Mr Boulton sent his email and invoice, with its stated terms, on 31 October. But there is no suggestion in Mr Boulton’s evidence of a conversation of acceptance by the Sheats.  To the contrary, the Sheats had Russell, Moon & Fail write to Mr Boulton a little more than a week later, demanding full repayment of the sums paid for the baler ($80,922.07) and for the parts ($3,302.57).

The concept of a non-refundable deposit

[69]     Notwithstanding the Sheats’ rights of cancellation, it is necessary to deal with one of Mr Boulton’s grounds of opposition3 in which he asserts that the $80,922.07 paid by the Sheats was a non-refundable deposit.

[70]     Even assuming the $80,922.07 was a non-refundable deposit which had been expressly or impliedly agreed (which I do not find), this cannot assist Mr Boulton. The Sheats had met their obligation by paying the $80,922.07.  Mr Boulton was the party in default of his obligation.  When Mr Boulton failed to purchase the baler and to  deliver  it  on  to  the  Sheats,  it  was  inevitable  that  the  $80,922.07  would  be repayable by him to the Sheats.  This would arise either through operation of law – that the payment was truly refundable – or by way of relief for the innocent party under the Contractual Remedies Act 1979.

Conclusion on the evidence

[71]     All the material allegations in the Sheats’ statement of claim4 are established in this summary judgment context.  The Sheats have established that Mr Boulton has no arguable defence to those allegations.

[72]     In summary, I find:

(a)       the Sheats and Mr Boulton entered into sale and purchase contract in

February 2011 for a baler;

(b)      the Sheats paid half the sale price;

(c)       the Sheats were to pay the balance of the purchase price on delivery of the baler;

(d)Mr Boulton did not achieve the purchase, let alone the importation, of the baler;

(e)       the Sheats also paid an agreed $3,302.57 for parts; (f) Mr Boulton did not supply the parts; and

(g)      the Sheats cancelled the contracts due to non-delivery.

Mr Boulton’s cross-claim

[73]     In his notice of opposition,5  Mr Boulton seeks to assert rights of set-off and counterclaim.

[74]     A cross-claim can arise in this case only if the Sheats’ purported cancellation of the baler contract was found to be invalid or the Sheats had earlier failed to meet a contractual obligation to pay the full price of the baler in advance.   I have found against those underlying contentions of Mr Boulton.   He has no right to damages either by way of set-off or counterclaim.

Costs

[75]     Costs must follow the event.

[76]     The plaintiffs have from commencement sought indemnity costs.  Mr Brodie confirmed at the hearing that such costs are sought pursuant to r 14.6(4) High Court Rules.

[77]     The relevant provisions of r 14.6(4) allow the Court to order indemnity costs if:

[(a) – sub-rule of 14.6(4); and

...

(f) – sub-rule – some other reason exists]

[78]     The  particular  matters  which  strongly  count  against  Mr  Boulton  in  the exercise of the discretion as to costs are:

(a)     Mr  Boulton  took  the  Sheats’  money  and  used  it  for  personal

expenditure.

(b)He failed to take any timely steps to ensure the baler was purchased and delivered.

(c)     He gave false explanations to the key people involved, namely his US

vendor and the Sheats, concerning progress.

(d)     Through his prevarication he extended the period in which he had the

use of the Sheats’ money.

(e)    While he accepted that the Sheats had cancelled the baler contract, he purported to rely on a replacement contract in order to assert a cross claim for damages when it is clear that no replacement contract ever came into existence.

(f)     His conduct forced the Sheats to issue this proceeding which they did, having first warned Mr Boulton that indemnity costs would be sought.

(g)For  the  purpose  of  this  proceeding  and  through  affidavit  evidence, Mr Boulton produced an altered contract document which caused the Sheats to incur further time and cost in investigating its authenticity.

[79]     On any view of the matter, this was an unnecessary defence of the Sheats’

proceeding. Aspects of the defence were improper.

[80]    In these circumstances reference to authority is hardly required but the observations of the Court of Appeal in Bradbury v Westpac Banking Corporation6 are on point.  Baragwanath J, delivering the judgment of the Court, summarised the approaches taken in relation to the various categories of costs.  His Honour said of indemnity costs that they may be ordered where the party involved has behaved either badly or very unreasonably.7    His Honour emphasised that indemnity costs, given that they depart from the predictability of the Rules Committee’s regime, are exceptional and require exceptionally bad behaviour.  Thus, misconduct is generally required to have been “flagrant” to use the expression adopted by the Supreme Court in Prebble v Awatere Huata (No 2).8   Baragwanath J referred with approval to a list of circumstances in which indemnity costs are appropriately ordered, including the category of cases described by French J (now Chief Justice of Australia) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2),9  in which his Honour observed that it was sufficient to enliven the discretion to award indemnity costs that, for whatever reason, a party had persisted in what should on proper consideration have been seen as a hopeless case.

[81]     All those epithets – flagrant, exceptionally bad, hopeless – can be ascribed to

Mr Boulton’s case and to his conduct of this case.

[82]     This is an exceptional but very clear case for the imposition of indemnity costs.

[83]     The plaintiffs ought not to have been put to the expense of a proceeding to recover the payments they had made to Mr Boulton.  Their claim was direct and to the point.   It was appropriately filed as a summary judgment application and was able to be dealt with in that way, thanks in part to additional investigation carried out

by the Sheats when Mr Boulton gave his response to the claim.  Nothing the Sheats

6      Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400.

7 At [27].

8      Prebble v Awatere Huata (No 2) [2005] 2 NZLR 467 at [6].

9      J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) (1993) 46 IR 301 at 303.

have done in relation to this claim has unnecessarily added to the time or expense of the proceeding. The expense of the proceeding is entirely caused by Mr Boulton.

Freezing order

[84]     This Court on 15 February 2012 in this proceeding made a freezing order in relation to assets of Mr Boulton.  The freezing order was granted upon the basis that the Sheats had a good arguable case on their cause of action for recovery of the purchase price.   I am now entering judgment for the Sheats.  The extent to which Mr Boulton’s  assets  need  to  continue  to  be  available  under  the  freezing  order pending satisfaction of the judgment is readily quantifiable.   This judgment will therefore contain directions in relation to the freezing order.

Orders

[85]     I order:

(a)    There is judgment for the plaintiffs against the defendant in the total sum of $84,224.64 (comprising $80,922.07 in relation to the baler contract and $3,302.57 in relation to the parts contract).

(b)The  defendant  is  to  pay  interest  (calculated  on  $80,922.07  at  8.4 percent per annum from 17 February 2011 to today’s date – being 517 days) in the sum of $9,628.17.

(c)     The defendant is to pay indemnity costs together with disbursements.

Such indemnity costs are to be the reasonable solicitor/client cost of this litigation from 9 November 2011 to date.  Counsel for the plaintiffs is to file and serve within 10 working days an affidavit exhibiting the plaintiffs’ relevant fee notes and deposing to (if it is not evident on the face of the fee notes) the time expended on attendances and the rates time-recorded against the work of the lawyers involved. The Court will then fix the quantum of costs and disbursements on the papers.

(d)Counsel for the plaintiffs is to confer immediately with Mr Boulton as to arrangements for satisfaction of the judgment and consequential discharge of the freezing order, with leave to either party to apply on 48 hours’ notice if there is disagreement.

Solicitors:

Russell Moon & Fail (P Bradford), PO Box 22, Ashburton. Counsel – G M Brodie.

Email: [email protected]

Mr J R Boulton, 701 Robinsons Road, RD 8, Christchurch. Email:  [email protected]

SCHEDULE A