Smith v Moana

[2013] NZHC 2754

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2012-419-1589 [2013] NZHC 2754

BETWEEN  SHANE MICHAEL SMITH and LEANNE MARGARET SMITH Plaintiffs

ANDTOMMY KURU MOANA and JOHN MALCOLM RUKA as trustees of the Te Rau Aroha Manu Whenua Trust Defendants

Hearing:                   17 October 2013

Counsel:

Appearances:

JK Gilby-Todd for plaintiffs

MD Talbot given leave to withdraw

TK Moana and JM Ruka, defendants in person

Judgment:                22 October 2013

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application to set aside summary judgment]

This judgment was delivered by me on 22 October 2013 at 3pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Harkness Henry, Hamilton

Talbot Law, Hamilton

And To:             TK Moana and JM Ruka, Hamilton

SMITH v MOANA [2013] NZHC 2754 [22 October 2013]

The application

[1]      The defendants apply to set aside a summary judgment obtained against them on 18 February 2013.

The grounds advanced in support

[2]      The application is made in reliance on r 12.14 of the High Court Rules.  Rule

12.14 provides:

12.14   Setting aside judgment

A judgment given against a party who does not appear at the hearing of an application for judgment under rule 12.2 or 12.3 may be set aside or varied by the court on any terms it thinks just if it appears to the court that there has been or may have been a miscarriage of justice.

[3]      The defendants say that they have affirmative defences to the claim that was filed against them and which in summary are as follows:

(a)       There was an oral variation of the agreement which was the basis for the summary judgment application;

(b)The date for the settlement in the agreement had been waived by the plaintiffs;

(c)      They had part-performed the oral variation; and

(d)The  plaintiffs  are  estopped  from  denying  the  existence  of  the variation.

[4]      A further matter is raised, namely that the agreement which is the subject of the summary judgment application contained a provision that limited the defendants’ liability to the assets of the Te Rau Aroha Mano Whenua Trust.

Representation of the defendants

[5]      Mr MD Talbot was instructed on the defendants’ behalf and duly prepared the

application to set aside the judgment, together with two affidavits in support and the

two affidavits in reply.   He advised that his instructions had been withdrawn and accordingly appeared and sought leave to withdraw, which was duly granted.

Submissions

[6]      When a fixture was made for this application, directions were made for the filing and service of submissions in support and in opposition.  No doubt because of the withdrawal of Mr Talbot’s instructions, the defendants did not comply.   The plaintiffs’ counsel was forced to file submissions without the benefit of submissions in support of the application on the defendants’ side.  That had a practical difficulty in that precise submissions in response to the defendants’ case were not prepared. When  I read  the submissions  I was  not  satisfied  that  there had  been  a  careful consideration of the specific matters raised in the defendants’ application and it was for that reason that a minute was issued in the following form:

[1]      I am scheduled to hear the defendants’ application to set aside a

summary judgment I entered against the defendants on 18 February

2013 tomorrow, 17 October 2013.

[2]       When this fixture was allocated, I gave directions for the filing and service of submissions in support and in opposition.  The defendants did  not  comply  with  those  directions  and  have  only  belatedly, namely 15 October 2013, filed submissions on their own behalf.

[3]       I note in the application itself that the grounds sought to be relied upon the defendants raise, in essence, affirmative defences to the original summary judgment application which can be briefly summarised as:

a)        There was an oral variation to the written contract;

b)There  was  part  performance  of  the  oral  variation  to  the written contract;

c)The plaintiffs are estopped from relying on the written terms of the agreement for sale and purchase by virtue of the oral variation.

[4]       The grounds advanced as affirmative defences to the claim, which was the subject of the summary judgment were no doubt framed by counsel who assisted the defendants in the preparation of their application as a response to the requirements of s 24 of the Property Law Act 2007.  Subsection 1 of s 24 provides:

24        Contracts  for  disposition  of  land  not  enforceable unless in writing

(1)        A contract for the disposition of land is not enforceable by action unless—

(a)       the contract is in writing or its terms are recorded in writing; and

(b)       the contract or written record is signed by the party against whom the contract is sought to be enforced.

[5]       I apprehend that the defendants are now acting in person. Their brief submission does  not address the legal  foundation for the factual assertions that they are making.  As I have already recorded I have drawn the legal consequences from the application which was originally filed and, obviously, was prepared with the assistance of counsel.

[6]       Despite the lack of assistance from the defendants’ submissions, the plaintiffs’ counsel must be in a position to address the three affirmative defences because they are raised by the application itself.

[7]       I am raising this matter for the benefit of counsel for the plaintiffs because I appreciate that counsel for the plaintiffs has not had the benefit of a submission from the defendants which addresses the legal issues that are raised by the application.   Counsel for the plaintiffs should therefore be in a position to address the court on those three affirmative defences to the original summary judgment application, which I apprehend is what the defendants rely upon.

[8]       The papers also disclose that there may well have been a failure in the judgment itself to recognise the impact of clause 16 of the sale and purchase contract.   In short, should any judgment have been limited to the assets of the Te Rau Aroha Mano Whenua Trust?

Background

[7]      The plaintiffs placed their property at 165 Osborne Road, Horsham Downs, Waikato on the market for sale in or about April 2010.  They withdrew it from the listing agent in May 2011.  They kept it on Trade Me until approximately September or  October  2011.     In  November  2011,  Mr Moana  approached  Mr Smith  at Mr Smith’s  home  and  asked  if  the  plaintiffs  were  still  interested  in  selling  the property.  Mr Smith advised that the property was still on the market for sale and that the selling price was $1,100,000.   The parties negotiated a price and apparently agreed on a figure of $1,050,000.  Mr Moana told Mr Smith that the purchase was to be on behalf of a Maori trust.

[8]      There is a dispute as to whether the plaintiffs were advised at that time that there were, in fact, three trustees of the Maori trust.

[9]      Solicitors were involved with both the plaintiffs and the defendants before the contract was signed.  The plaintiffs’ solicitor drew the contract.  It was not sent to the defendants’ solicitor for execution, however.   Some of the steps that were taken leading up to the execution of the actual contract can be verified in part from the documents produced.

[10]     Mr BS Palliser, solicitor of Christchurch has sworn an affidavit in which he confirms that he first met the defendant, Mr Ruka, in early 2010.  That related to a water project which Mr Ruka was developing.  Mr Palliser says that he introduced Mr Ruka  to  a  prominent  Chinese  businessman  and  friend  and  client  of  his, Dr Kiawan Jan.  He says that this person was, and remains, interested in establishing strong Maori/Chinese cultural relationships and also in investments in New Zealand. He says that in the course of the introduction, Mr Ruka raised the proposal regarding a manuka honey project with a view to a base being established at the property which is the subject of this proceeding at 164 Osborne Road, Hamilton.   He confirmed that the vehicle for this was to be a trust.  He says that in October 2011 he travelled to Hamilton with Dr Jan and met both defendants and had a private formal meeting with the Maori King at the Novotel Tainui Hotel.  At the conclusion of the meeting he said he and the two defendants and Dr Jan visited the proposed site. They  continued  their  discussions  with  the  object  of  seeking  venture  capital investment from China.  There was a further visit in October 2012 where again there were discussions.  Of some importance is the fact that Mr Palliser said he made it clear to the defendants that any venture funding for the requirements of the manuka honey project would be subject to various fundamental conditions being met, which included a sound business financial plan being provided.

[11]     I have referred to Mr Moana’s approach to Mr Smith in November 2011, which seems to be the trigger for negotiations for the subject contract.   That was followed by the first-named plaintiff sending an email to his solicitor to draw a sale and purchase contract on 22 November 2011.   The email refers to the sale of the property at 165 Osborne Road, Hamilton and then continues:

Sold at an agreed Price of $1,000,050 One Million and fifty thousand dollars exactly to:

Te Rau Aroha Mano Whenua Trust

Trusties [sic]

Tommy Kuri Moana

John Malcolm Ruka

The trust does not currently have a physical address but all correspondence to C/O Tommy Moana PO Box 182 Ngaruawahia

I am currently waiting on a code of compliance to be issued by Waikato district Council for Effluent field that was installed and that should be done in the next day or so.

Do you need titles etc of the property etc? Security is held by the ANZ Bank

Let me know what else you require.

We would like an early settlement if possible so I want to settle this side of

Christmas if at all possible.

[12]     A draft was returned by the lawyer to the plaintiffs on 23 November 2011. The draft and an accompanying email from the lawyer, which summarised a number of the terms, and added the following:

I spoke with Tommy yesterday and he advises that neither he nor John are beneficiaries of the Te Rau Aroha Mano Whenua Trust.  This means that if the Trust does not perform its obligations under the agreement [i.e. pay the deposit, settle on the settlement date] then neither Tommy nor John will be personally liable for the Trust’s defaults.  Any recourse that you will have will be against the Trust assets only.  From my brief searches of LINZ and the Companies Office register it appears the Trust doesn’t own any land or shares, and I have no way of actually verifying whether the Trust actually exists.  One option is for you to instruct me to include a clause which makes Tommy and John personally liable for the obligations of the Trust purchaser under the agreement.  Please let me know if you would like me to do this.

[13]     On  24 November  2011  an  email  course  of  correspondence  took  place between the plaintiffs’ solicitor, Mr Harrison, and the lawyer acting for the defendants, Mr Hanlon.  Its content is significant having regard to the positions taken by the parties.   The plaintiffs’ lawyer’s email of 24 November 2011 refers to his discussion with the defendants’ lawyer concerning the preparation of an agreement for sale and purchase and then provided:

Please advise whether the compulsory zero rating rules will apply.   Our clients are GST registered.

Can you please also confirm that the trust exists and confirm the names of its trustees.

[14]     That received a reply on 25 November 2011 from the defendants’ solicitor:

I am instructed that the Trust is registered for GST.

I am advised that a copy of the Trust Deed is being sent to me by my client’s accountant.

On 28 November 2011,  the plaintiffs’ solicitor emailed the defendants’ solicitor

again with these questions:

Do the trustees intend to use the property for making taxable supplies?

Do the trustees intend to use the property as a principal place of residence by any person associated with the trust under s 2A(1)(c) of the GST Act 1985?

A further email was sent by the plaintiffs’ solicitor to the defendants’ solicitor on

29 November 2011 as follows:

I understand from my client that Tommy Moana may have responded to your email to him with my below questions.  Correct?

That  received  a  reply  from  the  defendants’ solicitor  on  29 November  2011  as follows:

No.  I’ve not had a reply.

[15]     On 6 December 2011, the plaintiffs’ lawyer emailed to the first plaintiff an amended agreement for sale and purchase.   The amendment dealt with the GST position.   That was necessary because the plaintiffs had not received a definitive answer from the defendants in relation to GST.

[16]     The agreement was further amended on 13 December 2011 to remove the ten per cent deposit.   It also changed the settlement date to 29 February 2012.   The reasons  for  these  amendments  are  contained  in  the  first  plaintiff’s  email  to  his solicitor of 13 December 2011 which provides:

I was correct in saying they would like to drop off the Deposit for now.

They are happy to sign a new agreement as soon as you can draw that up.

They would just like to include that settlement would be the 29th Feb at the latest but would like it noted that they could pay sooner if possible.  They have said that they have a separate pool of funds which they have accessible with a Bank that will be available early January and may draw that down ASAP so they want that option for two weeks notice of us to vacate the premises if that happens.

I thought that this may be too much to hand write as it would look unprofessional on my part.

If you can do a revised version for me they will sign documents tomorrow afternoon (Wednesday) with no deposit.

I am not too worried about the settlement date so long as we have the agreement in place.  John Ruka seemed confident that he would access funds earlier but wanted to leave the options open just in case.

[17]     It is perhaps significant that this email refers to Mr Ruka’s ability to access funds  as  opposed  to  having  approval  to  uplift  funds.    Certainly,  the  plaintiffs’ position all the way through is that the contracts were never conditional on finance.

[18]     The next step came with Mr Moana signing the latest form of contract.

[19]     It  was  common  ground  that  the  plaintiffs  and  the  defendants  met  on

19 December 2011.  It is accepted that the agreement, which was the subject of the summary judgment application, was then signed by Mr Ruka.  There is a dispute as to precisely what was said before the contract was signed.  Mr Ruka says that:

I said to Shane Smith there is no way anything is going to happen without the Chinese investor committing funds.

I said the Chinese investor cannot commit until he is ready to invest and he is not ready yet.   Shane Smith replied straight away that he would not be holding us to any obligations.  I asked why he would do that.  He said that he had an opportunity to move his business to Tokoroa and expand.  He said the expansion is to do with quarrying a type of rock that could only be sourced in a particular area.

Mr Ruka says that later Mr Smith said:

If there are any delays in our funding, no problems, he would keep extending out the settlement date.

Mr Ruka then says:

I made it clear funding could be months or even years away or may never eventuate.  He said that was fine.  He in fact said he was willing to offer us to move in and pay when the funds arrived.

[20]     Mr Ruka also said that he raised the question of a third trustee having to sign. He says that Mr Smith said that that could wait.  Mr Smith denies that there was any reference to a third trustee.   Statements about extending the settlement and third trustee  are  denied  by  Mr Smith.    They  are  the  foundation  for  the  defendants’ proposition that there was an oral variation of a written sale and purchase contract and that possibly there had been a waiver in relation to the requirements to settle and pay interest for late settlement.

[21]     The contract that was signed by the parties bears the date 21 December 2011 but the parties agree it was finally signed on 19 December 2011.  The agreement is on the standard Real Estate Institute Auckland District Law Society Eighth Edition Form.   It describes the plaintiffs as the vendor and the purchaser as Tommy Kuru Moana and John Malcolm Ruka as trustees to the Te Rau Aroha Mano Whenua Trust.   The agreement identifies the property as 165 Osborne Road, Hamilton.   It records the purchase price as $1,000,050.  It records that there is no deposit payable. It records the requirement to pay the purchase price in cleared funds on 29 February

2012.

[22]     Thereafter the general printed terms of the standard form, without alteration, are contained.   Of some importance to the defendants’ liability is clause 16 which provides as follows:

16.0     Limitation of Liability

16.1If any person enters into this agreement as trustee of a trust, then:

(1)      That person warrants that:

(a)      that person has power to enter into this agreement under the terms of the trust;

(b)      that  person  has  properly  signed  this agreement in accordance with the terms of the trust;

(c)       that person has the right to be indemnified from the assets of the trust and that right has

not been lost or impaired by any action of that person including entry into this agreement; and

(d)       all of the persons who are trustees of the trust  have  approved  entry  into  this agreement.

(2)      If that person has no right to or interest in any assets of the trust except in that person’s capacity as a trustee of the trust, that person’s liability under this agreement will not be personal and unlimited but will  be  limited  to  the  actual  amount  recoverable from the assets of the trust from time to time (“the limited amount”).  If the right of that person to be indemnified from the trust assets has been lost, that person’s liability will become personal but limited to  the  extent  of  that  part  of  the  limited  amount which cannot be recovered from any other person.

[23]     There  are  further  terms  that  are  not  significant  for  the  purposes  of  this judgment.   It records Mr Harrison as the vendors’ lawyer and Mr Hanlon as the purchasers’ lawyer.

[24]     The plaintiffs say they moved out of the property on 26 February 2012 in the expectation  that  they  would  be  handing  over  possession  on  29 February  2012. Mr Smith says he had discussions with Mr Ruka regarding the handing over of keys and other matters.   He was then told by Mr Ruka that settlement was going to be delayed due to the issues with Crafar Farms deal.  The parties remained in contact, but the contract did not settle.

[25]     The Te Rau Aroha Mano Whenua Trust Deed was produced to the court.  It bears the date 3 June 2012.  The settlers are described as Mr Moana and Mr Ruka. The trustees are Mr Moana and Mr Ruka and a company, International and Domestic Property  Trustees   Ltd.     Mr Moana  and  Mr Ruka  are  described  as   primary beneficiaries in the trust deed.

[26]     Mr Smith  was  concerned  at  the  delays.    He  produced  a  series  of  text messages sent between himself and Mr Ruka between 6 July 2012 and 25 July 2012. Amongst the matters referred to in those texts was the possibility that the defendants take a lease pending settlement of the purchase.

[27]     The  series  of  texts  start  with  Mr Smith  asking  Mr Ruka  “Are  you  still wanting to purchase our property?”   That received a reply from Mr Ruka that he apologised for the delay.  He said that he was organising an alternative funder and that he was about two weeks from securing the finance for the property.  He thought that they would settle within 30 days.   He suggested that the plaintiffs consider a resale of the property. That received a response from Mr Smith as follows:

Thankyou john

Good to know where you at. Appreciate the reply.

You currently have a contract on the property so long as i know that you are still requiring the property then i will wait.  You hadnt replied to my email regarding the interest that has been accruing so just need to to be mindful of that.

You must have had a hell of a time with your crafar farms deal.  I have been listening daily for your court decision. All the best with that.

[28]     Further  texts  were  exchanged  which  concluded  with  Mr Smith’s  text  of

25 July 2012 as follows:

Good evening john.  How are you getting on with your finance?  Are you ready for settlement by the end of the week?

[29]     Nothing happened.  The settlement notice was issued.  It was not complied with.  A new sale and purchase agreement with a third party was entered into on

28 September  2012.    Proceedings  were  then  issued  against  the  defendants  on

12 November 2012 and served on the defendants on 19 and 20 November 2012.

[30]     The proceedings included an application for summary judgment which was called before me on 18 February 2013.  The defendants did not appear.  Judgment was entered against the defendants for $303,121.72 which was the shortfall between the resale and the original contract, plus costs.   An application to set aside that judgment was filed on 16 July 2013.  The defendants faced problems because of a conflict of interest and had to find new solicitors, which explains a small section of the delay.

The  Court’s  approach  to  an  application  to  set  aside  a  default  summary judgment

[31] The application is made in reliance on r 12.14, which I have referred to in [2].

[32]     The court may set aside or vary the judgment if it appears to the court that there has been a miscarriage of justice.  Although the discretion is unfettered, the Court of Appeal has confirmed that three factors are generally to be regarded as relevant to the inquiry, namely that:

(a)      The defendant has a substantial ground of defence; and

(b)      The delay is reasonably explained; and

(c)       The plaintiff will not suffer irreparable injury if the judgment is set aside.1

[33]     In Equiticorp Finance Group Ltd v Cheah the Court of Appeal said:2

In the case of a summary judgment regularly obtained it will normally be necessary for the defendant seeking to set aside judgment to adduce material which leads the Court to the conclusion that the plaintiff has not satisfied the Court that there is a defence to the claim.

That judgment was confirmed by the Privy Council.3

[34]     In  the  summary  judgment  context,  judgment  will  be  entered  against  a defendant where the court is satisfied that the defendant has no defence to a cause of action.4     The approach which the court adopts was summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd where the court said:5

The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have

1      Russell v Cox [1983] NZLR 654 (CA) at 659

2      Equiticorp Finance Group Ltd v Cheah [1989] 3 NZLR 1 (CA) at 8.

3 [1989] 3 NZLR 15 (PC).

4      HCR 12.2.

5      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]

to respond if the application is to be defeated: MacLean v Stewart (1997)

11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence  or  assess  the  credibility  of  deponents.  But  it  need  not  accept

uncritically evidence that is inherently lacking in credibility, as for example

where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

The potential defences analysed

[35]     The plaintiffs’ claim is based on an alleged breach by the defendants of a sale and purchase contract in respect of the sale of land.  Such contracts are governed by the provisions of s 24 of the Property Law Act 2007. Section 24 provides:

24       Contracts  for  disposition  of  land  not  enforceable  unless  in writing

(1)      A contract for the disposition of land is not enforceable by action unless—

(a)      the contract is in writing or its terms are recorded in writing;

and

(b)      the contract or written record is signed by the party against whom the contract is sought to be enforced.

The oral variation

[36]     This  case  involves  a  contract  which  is  clearly  governed  by  s 24  of  the Property Law Act 2007. Any variation to the contract’s terms must also comply with s 24 of the Property Law Act 2007 to be enforceable.6    A variation that does not comply will be disregarded and the contract in its original form will be enforced.7

[37]     The result is that even if the defendants’ claims in relation to finance, the additional trustee, the extension of time for settlement and the deletion of the interest provisions were proven, they would not be enforceable and would not provide a

defence to the plaintiffs’ claim based on the written contract.

6      Morris v Bacon & Co [1918] AC 1 (HL); Home Buyers Ltd v Mu (2006) 7 NZCPR 822.

7      Vezey v Rashleigh [1904] 1 Ch 634; Morris v Bacon & Co, above n 6; Tennyson Motor Inn (2003) Ltd v Wallace HC Napier CIV-2007-441-739, 19 November 2007 at [26] per Associate Judge DI Gendall.

Part performance

[38]     The doctrine of part performance as a means of circumventing s 24 of the Property Law Act 2007 is preserved by s 26 of the Property Law Act 2007, which provides:

26        Doctrine of part performance not affected

Sections 24 and 25 do not affect the operation of the law relating to part performance.

[39]     It is therefore necessary to consider whether the doctrine applies to the facts of this case.

[40]     Ms Gilby-Todd  referred  to  the  analysis  of  the  doctrine  undertaken  by

Tipping J in TA Dellaca Ltd v PDL Industries Ltd where he said:8

…in a part performance case the Court must consider three points which I

would frame as follows:

1.Was there a sufficient oral agreement such as would have been enforceable but for the Act?

2.Has there been part performance of that oral agreement by the doing of something which:

(a)       clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and

(b)       when viewed independently of the oral contract was, on the probabilities, done on the footing that a contract relating to the land and such as that alleged was in existence.

3.Do the circumstances in which that part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the Act?

[41]     Ms Gilby-Todd submitted that the defendants have provided no evidence to show that they took some step in reliance on the alleged oral conditions.  So far as the defendants’ attempts to obtain finance is concerned, the evidence suggests that the defendants were proceeding with this irrespective of whether it was required for

this contract or for other potential contracts that they were considering.  There is no

8      TA Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 (HC) at 109.

evidence to suggest that what they were doing was part performance of the alleged oral term of the contract.

[42]     There is nothing to suggest that anything was done concerning the addition of the additional trustee to the contract.   Reference is made, in the papers, to the requirement that the deposit had been dispensed with.  That has no relevance to this analysis because that had already been removed from the written contract when the contract was signed on 19 December 2011.

[43]     The next question that requires comment is the extension of the settlement date.  Once again, there is nothing that fits within the definition of part performance as analysed by Tipping J which permits that doctrine to apply either to the settlement date or to the imposition of penalty interest in this case.9

[44]     I conclude therefore that the doctrine of part performance cannot be applied to incorporate variations of the type alleged by the defendants in this case.

Estoppel defence

[45]     In analysing a possible estoppel defence in this case, I take particular account of the helpful guidance given by the Court of Appeal:10

[213]  In a contractual setting, a promissory estoppel argument more commonly arises post-contract when one party promises the other that an existing contractual provision will not be enforced. It is well established   that   a   pre-existing   contractual   relationship   is   not necessary before promissory estoppel may operate.   But it is less common and more difficult to establish promissory estoppel on the basis of a pre-contractual promise or representation. This is because the party seeking to establish the representation faces obvious evidential difficulties in proving a promise not to enforce a contractual provision when that party subsequently signs a contract in which he or she agrees to perform the relevant obligation notwithstanding the claimed promise that he or she would not have to do so. In such circumstances, statements made in pre-contractual

negotiations  may  be  overtaken  and  contradicted  by  the  written contract.

[citations omitted]

9      Ibid.

10     Hickman v Turn & Wave, [2011] NZCA 100, [2011] 3 NZLR 318 (CA) at [213].

[46]     The obvious difficulty arises in this case.  What the defendants are saying is, in essence, that there was no contract at all.  It was simply an indication that if they were able to obtain finance they would purchase the property on terms at some undefined future time.  But, they then went on and signed a contract which spelled out clear obligations that they are required to meet.   The defendants’ actions throughout display their desire to attempt to perform the contract.  Nothing which they have said amounts to the entry into a conditional contract.  At best it seems to be asserted that the contract would, in effect, be held in escrow but with no definite time  by  which  it  would  take  effect.    The  defendants’ position  contradicts  the document they signed.   I am satisfied that the current circumstances would not provide a foundation for an estoppel defence to the plaintiffs’ claim.

The Trust issue

[47]     I have already referred to the fact that the Trust Deed has now been produced. I have noted that the defendants are beneficiaries of that Trust.

[48]     Ms Gilby-Todd submitted that there were three possible interpretations as follows:

(a)       The plaintiffs entered into a contract which was enforceable against the two named defendants;

(b)Alternatively, the contract was enforceable against the defendants as trustees of an existing trust;

(c)       The contract was enforceable against the individuals in relation to a trust to be formed.

[49]     Ms Gilby-Todd noted that the second alternative could not apply as there was no  trust  in  existence  at  the time the  contract  was  signed.   Accordingly,  it  was necessary to consider either the first or third alternatives.

[50]     If one adopted the interpretation most favourable to the defendants, namely the third alternative, their liability still arises because, as beneficiaries of the Trust,

they are not entitled to the limitation of liability which is provided in clause 16.  The result, then, is that this question provides no ground for the defendants resisting the plaintiffs’ claim.

[51]     It goes without saying that if the first alternative is correct the defendants are liable.

Result

[52]     The above analysis leads me to the position that there is no proper foundation for a defence to the plaintiffs’ claim and therefore no justification for setting aside the judgment that was entered against the defendants.

[53]     Accordingly, I dismiss the defendants’ application to set aside judgment.

Costs

[54]     At the conclusion of the hearing I discussed the possibilities that could arise in relation to costs with counsel and with the defendants.  Each accepted that this is a Category 2 case and that Band B is appropriate for the steps that have been taken. The plaintiffs have been successful.   Accordingly, I order that the defendants pay costs based on Category 2 Band B for this application, together with disbursements

as fixed by the Registrar.

JA Faire

Associate Judge