Smith v Beaven - [2022] NZHC 2162

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-212

[2022] NZHC 2162

BETWEEN
MAUREEN DOROTHY SMITH

Plaintiff/First Counterclaim Defendant

AND

ANDREW JOHN BEAVEN, KAY

ELIZABETH BEAVEN and JAMES
CHRISTOPHER DAVIES, as trustees of the MAJESTIC TRUST
Defendants/Counterclaim Plaintiffs

GRENADIERS REAL ESTATE LIMITED
Second Counterclaim Defendant

ALISON MOANA AITKEN

Third Counterclaim Defendant

Hearing: 17 August 2022

Appearances:

T J Twomey for Plaintiff T C Daley for Defendants

Judgment:

29 August 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

SMITH v BEAVEN [2022] NZHC 2162 [29 August 2022]

[1] The plaintiff was the successful party in a determination (the Determination) undertaken pursuant to a dispute resolution clause in a contract between the parties. Pending the Determination, a sum was paid (the interim amount) to a stakeholder. The plaintiff as the successful party seeks orders that, in substance require the stakeholder to release the interim amount to her. The defendant as the unsuccessful party in the Determination, resist release of the interim amount.

Background

[2] The plaintiff was the vendor of a property in Christchurch sold by auction pursuant to an ADLS REINZ Fifth Edition Auction Form dated 2020 (the Auction Terms).

[3] The defendants were nominated to complete the purchase. The first-named defendant was the original contracting party. Neither party takes issue at this time with the defendants being “nominees” rather than the original contracting parties.

[4] Shortly before settlement, the defendants raised a claim to compensation based on an asserted pre-contractual misrepresentation in relation to the repair of earthquake damage to the property. The information booklet for the property stated that “All repairs completed except for tiles & driveway – the cash settlement for these items will be transferred to new owners upon settlement”. The vendor disputed liability. The parties invoked the process set out in cl 11 of the Auction Terms. In the case of a pre-contractual misrepresentation, the purchaser may claim a right to compensation as an alternative to cancelling the agreement.

[5]Clause 11.1 of the Auction Terms provides:

If the purchaser has not purported to cancel this agreement, the breach by the vendor of any term of this agreement does not defer the purchaser’s obligation to settle, but that obligation is subject to the provisions of this cl 11.0.

[6] While cl 11.1 of the Auction Terms refers to breach “of any term of this agreement”, cl 11.2(1) lists a range of claims for which compensation may be sought, including a claim for misrepresentation.

[7] Clause 11 of the Auction Terms sets out a process by which a purchaser gives formal notice of a claim which, in most cases, has to be given on or before the last working day prior to settlement. The notice must give particulars of the alleged breach and state a genuine pre-estimate of the loss claimed to have been suffered.

[8]The following parts of cl 11 are relevant:

11.6 If the purchaser makes a claim for compensation under subclause 11.2(1)…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZHC 2162
Decision Date: 29 August 2022

CaseChat Overview and Summary

Smith v Beaven [2022] NZHC 2162 involved a dispute over the release of an interim amount held by a stakeholder, following a determination process set out in a contract between the parties. The plaintiff, Maureen Dorothy Smith, sought an order for the release of the interim amount held by a stakeholder pending the outcome of a dispute resolution process. The defendants, Andrew John Beaven, Kay Elizabeth Beaven, and James Christopher Davies as trustees of the Majestic Trust, opposed the plaintiff's claim. The legal issues before the court included whether the determination process was binding on the parties, whether the defendants could rely on equitable set-off, and whether the plaintiff had come to equity with clean hands.

The court found that the dispute resolution process was intended to permit the parties to achieve settlement and that the parties had agreed to participate in the determination process with the intention of completing it. The court held that there was no contractual basis for saying the parties agreed to a right of appeal and that the determination process was not intended to be an academic exercise. The court further found that the defendants' reliance on equitable set-off was misplaced as the plaintiff was seeking her money, not a recovery of money from the defendants. The court also rejected the defendants' assertion that the plaintiff had not come to equity with clean hands, finding that the defendants' complaint about the plaintiff's involvement in the determination process could not survive the findings of the Determiner.

The court concluded that the plaintiff was entitled to the funds held by the stakeholder as the dispute resolution process had been completed, and the defendants were required to complete the balance of their settlement obligations within two working days after the release of the determination. The court held that the defendants' counterclaims were an entirely new process and that they could not maintain the benefit of the stakeholder process while denying the burden of the determination. The court further held that the plaintiff was entitled to judgment for the costs fixed by the Determiner and awarded interest on the amounts due from the defendants.

In summary, the court found in favour of the plaintiff and ordered the stakeholder to release the interim amount to her. The defendants were also ordered to pay interest and costs to the plaintiff. The court's decision upheld the binding nature of the determination process and rejected the defendants' arguments based on equitable set-off and clean hands.

Orders