Smith v Noble Investments Limited
[2017] NZHC 2885
•23 November 2017
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2014-409-000549 [2017] NZHC 2885
BETWEEN GREGORY ROBERT SMITH AND
COLIN PETER STOKES Plaintiffs and First Counterclaim Defendants
AND
NOBLE INVESTMENTS LIMITED
First Defendant and Counterclaim PlaintiffAPPLEFIELDS LIMITED
Second Defendant and Counterclaim
PlaintiffJUSTIN WILLIAM PRAIN Third Defendant
CARDNO (NZ) LIMITED Fourth Defendant
GOLD BAND FINANCE LIMITED Fifth Defendant
DELTA UTILITY SERVICES LIMITED Sixth Defendant
SHAYNE PHILPOTT, NEW ZEALAND TRUSTEE SERVICES LIMITED, FAY EUNICE RICHARDSON AND BURNSIDE TRUSTEES LIMITED Second Counterclaim Defendants
STUART ELLESMERE LINDSAY AND JULIE IVONNE LINDSAY
Third Counterclaim Defendants
Hearing: 7 and 8 November 2017 Appearances:
Plaintiffs and First Counterclaim Defendants, in person
P McMenamin for First Defendant, Second Defendant andCounterclaim Plaintiff
SMITH & STOKES v NOBLE INVESTMENTS LTD [2017] NZHC 2885 [23 November 2017]
No appearance by or on behalf of Third Defendant
No appearance by or on behalf of Fourth Defendant
C Vinnell and T Grimwood for Fifth Defendant
D Sim and S Wells for Sixth Defendant
Shayne Philpott in person
Other Second Counterclaim Defendants not represented
Stuart Lindsay in person, Julie Lindsay not representedJudgment:
23 November 2017
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
Table of Contents
Introduction [1]
The principles to be applied on an application to strike out [10]
The principles to be applied on an application by a defendant for
summary judgment [14]
Applications by Shayne Philpott and Stuart Lindsay to strike out the counterclaims by NIL and Applefields [17]
Discussion [43]
Applications by Gold Band Finance Limited
The ninth cause of action - strike out [54] The ninth cause of action - summary judgment [74] The tenth cause of action – strike out [75] The tenth cause of action – summary judgment [82]
Applications by Delta Utility Services Limited
The seventh cause of action – summary judgment [91] The seventh cause of action – strike out [106] The eighth cause of action – summary judgment and strike out [107] The ninth cause of action – summary judgment and strike out [108]
Outcome [111]
Costs [112]
Introduction
[1] There are six interlocutory applications before the Court:
(a) By the first-named second counterclaim defendant, Shayne Philpott (Mr Philpott) for an order striking out the counterclaim against him brought by the first and second defendants as counterclaim plaintiffs, Noble Investments Limited (NIL) and Applefields Limited (AFL).
(b)By the first-named third counterclaim defendant, Stuart Lindsay (Mr Lindsay) for an order striking out the counterclaim against them by the first defendant and second defendants as counterclaim plaintiffs, NIL and AFL.
(c) By the fifth defendant Gold Band Finance Limited (GBF) for an order striking out the ninth and tenth causes of action in this proceeding.
(d)By GBF for summary judgment to be entered on the ninth and tenth causes of action, in the alternative to (c).
(e) By Delta Utility Services Limited (Delta) for summary judgment on the seventh, eighth and ninth causes of action.
(f) By Delta for an order striking out the seventh, eighth and ninth causes of action, in the alternative to (e).
[2] All applications are opposed.
[3] A number of interlocutory applications have already been determined on proceedings which arise out of an intended subdivision of land in Yaldhurst, Christchurch by NIL. The first was brought by Mr Philpott. He had purchased proposed Lot 9 on the subdivision from the developer, NIL, and lodged two caveats to protect various interests he claimed to have. He applied for orders that his caveats not lapse. In June 2012 the Court directed that these caveats not lapse, save only that
an order was made directing that one caveat should lapse so far as it affected Lot 11.1
On appeal the orders that the caveats not lapse were confirmed but the condition in relation to Lot 11 was quashed.2
[4] In April 2014 the Court issued a further judgment in relation to a caveat lodged by Mr and Mrs Lindsay. The Court directed that the caveat should not lapse until further order of the Court.3 Subsequently the Court issued a supplementary
judgment in relation to the ambit of the earlier order.4
[5] On 30 September 2015 the Court issued a judgment on an application by GBF for an order that a caveat lodged by Mr Smith and Mr Stokes should lapse, this time to enable registration of a transfer pursuant to a power of sale exercised by GBF.5 The Court made orders that the caveats be removed from the register so far as they affected certain titles.
[6] The mortgagee sale did not immediately ensue. In July 2016 the Court issued a judgment on an application by Mr Stokes and Mr Smith, the present plaintiffs, for a stay of enforcement of the orders made in the previous judgment until an appeal they had lodged with the Court of Appeal had been heard and finally determined.6
[7] The Court declined the application for a stay. The appeal to the Court of
Appeal lapsed. The mortgagee sale proceeded, and the subdivision land was sold.
[8] The Philpott parties, Mr and Mrs Lindsay, GBF and Delta were not parties to the present case until this year. GBF and Delta are now defendants to claims brought by Mr Smith and Mr Stokes, as fifth and sixth defendants respectively. Mr Philpott and the remaining second counterclaim defendants, as well as Mr and Mrs Lindsay, are defendants to a counterclaim brought against them and against Mr Smith and Mr Stokes by NIL and AFL. It is these claims and counterclaims which are the
subject of the applications presently before the Court.
1 Philpott v Noble Investments Ltd [2012] NZHC 1431 at [1] – [30].
2 Philpott v Noble Investments Ltd [2015] NZCA 342.
3 Lindsay v Noble Investments Ltd [2014] NZHC 799.
4 Lindsay v Noble Investments Ltd (No 2) [2014] NZHC 2127.
5 Gold Band Finance Ltd v Philpott [2015] NZHC 2383, (2015) 16 NZCPR 749.
6 Gold Band Finance Ltd v Philpott [2016] NZHC 1674.
[9] All these judgments contain references to the facts of the long and complex saga of the subdivision. In this judgment I refer to the facts to the extent necessary to decide the applications before the Court, as it is unnecessary to relate past events beyond that.
The principles to be applied on an application to strike out
[10] The legal principles to be applied when considering an application to strike out all or part of a proceeding are well settled and are not in dispute in this case. Rule 15.1 of the High Court Rules provides that the Court may strike out all or part of a pleading if it does not disclose a reasonably arguable cause of action or defence, as the case may be, or it is frivolous or vexatious or otherwise an abuse of the process of the Court.
[11] The principles to be applied on an application under this rule are these:7
(a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.
(b) The cause of action or defence must be clearly untenable.
(c) The jurisdiction is to be exercised sparingly and only in clear cases.
This reflects the Court’s reluctance to terminate a claim or defence
short of trial.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(e) The Court should be particularly slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.
[12] In Couch v Attorney-General, Elias CJ and Anderson J observed “it is inappropriate to strike out a claim summarily unless the Court can be certain that it
7 Attorney-General v Prince [1998] 1 NZLR 262 (CA); Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.
cannot succeed”.8 They said that particular care is required in areas where the law is confused or developing.
[13] Where a defect in a pleading can be cured by amendment, and the respondent to an application to strike out is prepared to make an amendment, the correct course for the Court to follow is to permit an opportunity to amend rather than strike out the pleading.9
The principles to be applied on an application by a defendant for summary judgment.
[14] Summary judgment may be entered for a defendant under r 12.2 of the High Court Rules if it satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed. As with an application for summary judgment by a plaintiff, the onus of establishing its position lies at all times on the applicant, and an applicant will not succeed in obtaining summary judgment if there are material disputes on material factual issues which cannot be resolved on evidence given by way of affidavit.
[15] An application for summary judgment by a defendant is similar to an application to strike out, in that the defendant has to show that the plaintiff cannot succeed. Here, though, it is possible to obtain judgment on the basis of material other than that contained in the pleadings. Summary judgment will not be entered where it is possible for a claim to be amended so as to remedy an identified defect. It will also be refused unless the defendant has a clear answer to the claim which
cannot be contradicted.10 Where a claim is untenable as a matter of law it will
generally be appropriate to strike it out, rather than to enter summary judgment.11
[16] Summary judgment will only be entered for a defendant if that defendant has established that none of the causes of action against it can succeed. Unlike an application for summary judgment by a plaintiff, judgment for a defendant will not
be entered in relation to part only of a claim.
8 Couch v Attorney-General, above n 7, at [33].
9 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC).
10 Westpac Banking Corp v MM Kembla NZ Ltd [2001] 2 NZLR 298 (CA).
11 Bernard v Space 2000 Ltd [2001] 15 PRNZ 338 (CA).
Applications by Shayne Philpott and Stuart Lindsay to strike out the counterclaims by NIL and Applefields
[17] These applications will be considered together, even though argued separately by Mr Philpott and Mr Lindsay, because the defence to the applications was presented on a basis which is applicable to both.
[18] The application by Mr Philpott was brought in his capacity as a trustee, a position which he holds jointly with the second-named second counterclaim defendant, New Zealand Trustee Services Limited. It is accepted that the outcome of the application necessarily binds both Mr Philpott and the trustee company. In this judgment I will refer to them as the Philpott trustees, and to the Philpott Trust. The other second counterclaim defendants, Ms Richardson and Burnside Trustees Limited, are trustees of a different trust which is the co-owner with the Philpott trustees of the property described in this litigation as lot 9, which needs no better description at this point. Ms Richardson and Burnside Trustees Limited are not parties to the present application to strike out.
[19] The application by Mr Lindsay is brought only in his name. However, he is a joint tenant with his wife, Julie Lindsay, of the properties over which they registered the caveats which are the basis of the claims now brought against them. Accordingly it is accepted that Mrs Lindsay is also bound by the outcome of Mr Lindsay’s application.
[20] In essence the counterclaim brought by NIL and AFL against the Philpott Trust is based on an alleged breach of their contract for sale and purchase of the land in question by refusing to execute a release of their caveats when requested to do so. It will be recalled that in the judgment issued on 28 June 2012 in relation to these caveats, orders were made that they not lapse on certain terms, and that in essence
these orders were upheld, though varied, by the Court of Appeal.12
[21] Although in the counterclaim orders are sought directing withdrawal of the caveats, the caveats are no longer registered as a consequence of the subsequent
mortgagee sale. The remaining remedy sought is damages said to have been
12 Philpott v Noble Investments Ltd, above n 1, summary at [1] – [30].
incurred as a result of these alleged breaches of contract. The damages claimed are not quantified, but the basis upon which they are evidently to be assessed is expressed in expansive terms. Generally, it is said that the subdivision development “has been subject to repeated delays and ultimately has been brought to a standstill”. So far as the claim against the Philpott Trust is concerned it is said that its actions have resulted in considerable extra costs in proceedings under the Resource Management Act 1991 and other legal proceedings, and:
vastly increased interest costs, currently estimated at approximately
$10,000,000, and lost sales, have put the entire project in jeopardy and may in due course have the effect of depriving [the counterclaim plaintiffs] of the entire benefit of their efforts and investment in creating the development.
[22] It is said in the pleading that total losses would be in the order of
$50,000,000.
[23] The same is said of the actions of the Lindsays. Questions in relation to the adequacy and appropriateness of these pleadings, which are directed also to NIL and AFL, are not presently before the Court, but if the present applications to strike out are unsuccessful these issues will come into focus. Suffice it to say in the present context that the intending developers, NIL and AFL, appear to lay the entire blame for the failure of their subdivision venture at the feet of Mr Smith, Mr Stokes, Mr and Mrs Lindsay and the Philpott Trust as purchasers of land within the intended subdivision who lodged caveats to protect their contractual rights. As noted, in the case of the Lindsay and Philpott caveats the Court has already found that the caveats should be sustained, by application of the legal principles applying to the question of whether caveats should remain on titles pending final resolution of claimed rights.
[24] Each of the contracts by which Mr and Mrs Lindsay and the Philpott Trust purchased from NIL, at a comparatively early stage of the intended subdivision, contained terms relating to further subdivision at a later date, and the obtaining of a “further consent”. The term “further consent”, is defined in each contract:
“Further Consent” means the full and final resource consent to the Further Subdivision by the Relevant Authority, including written consent and approvals from parties other than the Purchaser and the Relevant Authority necessary to give effect to the Further Subdivision, and the disposal of any objection or appeal after the expiry of any objection or appeal period.
[25] The term “Further Subdivision” is also defined, and the further subdivision is the subject of clause 21 in each contract. An obligation is placed on NIL to pursue applications for further subdivision, and obligations are placed on the purchasers by the same clause. Of present relevance is clause 21.5 which is in each contract in the following terms:
21.5 If the Vendor obtains the Further Consent, the Purchaser agrees:
21.5.1 to execute and deliver any plans and documents, including transfers of title, releases of covenants and surrenders of easements, and to do all things which may be reasonably required by the Vendor for the purposes of the Further Consent; and
21.5.2 to execute and deliver all documents required to grant, create or receive whatever easements, covenants, restrictions, or other encumbrances, rights or obligations that may be imposed by the Relevant Authority or that may reasonably be required by the Vendor in order to effect the Further Subdivision and to provide for access and services to the lots within the Further Subdivision, and to enable the Vendor to register all such documents against the relevant certificates of title; and
21.5.3 to obtain consent from the Purchaser’s mortgagee for the
above purposes.
[26] The essence of the claims brought by NIL and AFL against Mr and Mrs Lindsay and the Philpott Trust is that, contrary to this clause, they did not release their caveats when required to do so, it being their case that the “Further Consent” had been obtained, and thus the obligation to release had been triggered.
[27] Notwithstanding this contention against each of these parties, the details of the alleged further consent are not pleaded. Indeed there are no pleadings giving any indication of how the obligations in clause 21.5 are said to have been activated. It was not until Mr McMenamin, counsel for NIL and AFL, served his written submissions that he disclosed his clients’ case on this point, putting it in these terms:
“Further Consent” is defined as “the full and final resource consent to the
Further Subdivision … necessary to give effect to the Further Subdivision
…”. It would appear then, that the consent which was granted on 25 May
2009 was that which was required for the “Further Subdivision” and that it
is, therefore, the “Further Consent” referred to in the contract which theapplicants contend has not been obtained.
[28] Whilst it appears that way to Mr McMenamin, and he confirmed that this would be specifically pleaded as the consent triggering the obligations in clause 21.5 if the claim remains after the present applications, it certainly does not appear that way either to Mr and Mrs Lindsay or the Philpott Trust. Their position is that a further consent as defined has not ever been obtained, and that the consent relied on by NIL and AFL as long ago as 2009 did not deal with sufficient elements of the subdivision that it could be described as “the full and final resource consent to the further subdivision …”.
[29] The argument presented by Mr Philpott made a number of points. First, clause 23.1 of his contract obliged NIL, as part of the process of pursuing its further consent and undertaking the further subdivision, to apply on behalf of the purchaser and other purchasers for the vesting and dedication of an access lot, including a road- widening area, to the relevant local authority. No such application was ever made.
[30] Secondly, Mr Philpott says that the key to the vesting of the access lot referred to was the provision by NIL of a storm water solution for the further subdivision of all its land. Over time it became abundantly clear that NIL was refusing to provide for storm water generated on the access lot for the subdivision to be disposed of over its own land, and thereby to give effect to the further subdivision envisaged by the contract.
[31] The third point made by Mr Philpott was that the consent relied on (as it now transpires) by NIL as the required full and final resource consent has been varied multiple times since it was granted. Initially it did not make provision for the part of this subdivision which applied to the Philpott’s land. There have been numerous revisions and amendments and Mr Philpott says that no full and final consent has yet been granted because present storm water plans under the initial consent provided for drainage of storm water for some of the land in a westerly direction to other land which is one metre higher, a prospect which according to NIL’s own subdivision designer (Cardno, the fourth defendant) was simply not possible.
[32] Fourthly, Mr Philpott says, correctly, that the definition of the further consent which NIL was required to obtain included obtaining written consent and approvals
from parties other than the Philpott Trust (and other purchasers) and the relevant authority which were necessary to give effect to the further subdivision. Mr Philpott said that at the time the request was made by NIL for release of the Trust’s caveat, NIL’s resource consent contemplated use of land which NIL did not own for the creation of storm water basins, and the passage of storm water pipes or swales across other land. All of this land was owned by other parties whose consent had never been granted. Further, the resource consent required NIL to construct slip lanes at the intersection of its central spine road with Yaldhurst Road, but part of the required slip road would cross a lot which is owned by parties who have bought the land from NIL. Their consent has not been obtained either.
[33] Consequently Mr Philpott says that NIL did not have at any relevant time all written consents and approvals from parties, as required by the contract. Therefore it was not entitled to require a release of the caveats under clause 21.5.
[34] Mr Philpott also says that the release of his Trust’s caveats was not reasonably required, this being a pre-requisite to an obligation to give a release, by clause 21.5.1. He says that NIL did not at any time identify a legitimate reason for requesting release, so it can only, in reality, have been about funding issues. He points out, however, that the request must be reasonably required “for the purposes of the further consent” which does not include the raising of finance. Mr Philpott also says that the Court of Appeal determined in its judgment that NIL could not reasonably require that the caveats be lifted if they were protecting easements to which the caveators were contractually entitled, namely the provision of an assured route for storm water.
[35] Sixthly, Mr Philpott says that the request for release of the easements could not logically have been made under clause 21.5.2, as a request under that sub-clause can only require a release which “may reasonably be required by the vendor in order to effect the further subdivision”. He says that NIL has not given any reason why this was reasonably required, pointing out that this must be a reason that relates to use of the land or development of the subdivision but not, he says, the raising of money. In any event, even if NIL were entitled to have the caveats lifted in order to enable funds to be raised to carry out the subdivision, contrary to his primary
argument, no loss was caused because NIL entered a scheme with GBF and Delta (which is discussed in detail later in this judgment) by which $16,100,000 was raised with the caveats in place. There was also scope for further funds to be raised over other land not the subject of the caveats.
[36] Mr Lindsay also argues that the pre-requisite to requiring a surrender of a caveat was also the obtaining of a further consent which has never been achieved, that any request had to demonstrate that the release of the caveat was reasonably required, and that in any event it was reasonable for him to continue to protect his interests, which did not either prevent the obtaining of the defined further consent or undertaking the defined further subdivision.
[37] Mr Lindsay’s submissions largely mirrored those delivered by Mr Philpott, in content. He also notes that a number of storm water catchment plans have been drawn up by Cardno but none have ever been demonstrated to be practicable and the council has confirmed that they may not be possible solutions to storm water disposal requirements.
[38] Mr Lindsay goes on to argue that it is not and never has been shown why it was reasonable for him to be required to remove his caveat, and it remains unclear as to how the existence of the caveat has caused any of the losses that NIL claims in the statement of claim. He points out that in the judgment of the Court of Appeal, the
Court said:13
[54] Finally, Noble says that cl 21.5 is an insurmountable obstacle in the way of the appellants’ claim to a caveatable interest in connection with either caveat. This is because maintaining the caveat is in breach of cl 21.5, and because Noble is entitled to call upon the appellants to release both any caveat and any easement.
[55] The critical words in cl 21.5 for these purposes are “may be reasonably required”. Requiring the appellants to surrender easements to which they are contractually entitled to (sic) is not a reasonable requirement, at least not at this point in time when it is possible that the caveators’ legitimate interest will be prejudiced by removal.
13 Philpott v Noble Investments Ltd, above n 2.
[39] Thus it is argued that it is simply not shown that release of the caveat could ever properly be demanded under the contract and therefore that the claim cannot succeed.
[40] Mr Lindsay points to a number of other reasons why in his opinion the subdivision failed but I need not refer further to those in this judgment.
[41] Mr McMenamin acknowledges that the pleading should refer specifically to the consent which NIL and AFL rely on as the further consent in terms of the definition of that phrase, which activates the obligations in clause 21.5. He says, however, that this is an omission which can be cured by amendment, and that the application to strike out stems from a misunderstanding of the nature of the strike out process.
[42] He argues that the question of whether the consent of May 2009 was the further consent as defined in the contract is a matter of fact which must be the subject of evidence at trial, that it is also a matter of fact whether releases of the caveats were reasonably required in order to effect the further subdivision. He says the decisions upholding the caveats in earlier proceedings do not amount to a determination of the actual rights and obligations of the parties under the contract, rather they merely establish the position to the extent of deciding that there is an arguable case that the caveats should remain. He notes that the Court of Appeal itself said “these caveats are upheld on the basis that it is reasonably arguable that the appellants have a caveatable interest. Whether the appellants are ultimately able
to establish a caveatable interest remains at issue”.14
Discussion
[43] Earlier in this judgment I have recorded that for a claim to be struck out the Court must be satisfied that it cannot succeed. As well, pleaded facts whether admitted or not are, for this purpose, assumed to be true.15 The Court must determine, therefore, whether the points made by Mr Philpott and Mr Lindsay are
such that NIL and AFL should not be permitted to take their claim through to trial.
14 At [69].
15 At [11].
[44] There is real force in the issues that they have raised. First, their obligations under clause 21.5 did not arise until a consent had been received that met the definition of “further consent”, which means the full and final resource consent to the further subdivision, and approvals from parties necessary to give effect to the further subdivision had to have been obtained. There are two evidentiary factors in this which favour the applicants. First, there are relevant parties who have not given their written consent and approvals necessary to give effect to the further subdivision of the land. Secondly, giving the words “the full and final resource consent” their ordinary meaning it is strongly arguable that a consent granted in 2009 which has been varied numerous times and still does not provide for essential features of the subdivision, including drainage, is not a full and final resource consent. Consenting a subdivision under the Resource Management Act can be a sequential process of obtaining consents to various stages and commonly involves amendment as practical realities in effecting the consent as granted dictate that amendment is necessary.
[45] But these are evidentiary issues. Mr McMenamin argues that at trial evidence would be given that the meaning of this term in the contract is not the last consent ever required, or for that matter the compendium of consents arrived at during the evolution of the subdivision process, but rather the initial comprehensive consent obtained in May 2009 which, he says, was agreed by the parties to trigger the developer’s right to have purchasers of allotments respond in accordance with clause 21.5. He noted that in the judgment of the Court in June 2012 the Judge specifically referred to NIL having “progressed the further subdivision”. The Judge specifically recorded that “[t]he subdivision application (contemplated by FT15) was
approved by the Christchurch City Council about 25 May 2009”.16 The reference to
FT15 is Further Term number 15 in the Philpott contract which refers to “a Further Subdivision” and placed a burden on NIL to undertake certain work if a further subdivision were approved. The phrase “Further Subdivision” is the same phrase as in clause 21.5 and is defined in the special conditions of sale at clause 16, as referred to earlier.
[46] Mr McMenamin says that the correct interpretation of the phrase “full and final” is that the consent granted is, as he put it, complete within itself. He says that
16 Philpott v Noble Investments Ltd, above n 1, at [21].
it has never been in doubt, until now, that the May 2009 consent is the full and final consent contemplated by the contract, as is evidenced by the references in the judgment just quoted.
[47] It is clear, on the evidence presently before the Court, that the claims by NIL and AFL face very real evidentiary hurdles. These have been identified clearly by Mr Philpott and Mr Lindsay. That evidence, though, is neither comprehensive nor tested at trial. I reiterate, this is an application to strike out, and though the factual issues raised by Mr Philpott and Mr Lindsay strongly suggest that in the end the counterclaims against them will not succeed, it cannot be said that assuming, as the Court must, that the pleaded facts are true, the claim is clearly untenable. That is all the Court may decide on these applications.
[48] It is apposite, however, to make further observations. The statement of claim is woefully short of complying with the requirements of good pleading, and the High Court Rules. First, as Mr McMenamin enunciates it, the claim is based on breach of clause 21.5 of the contract each applicant entered. There are a number of elements to clause 21.5. The first significant defect in the pleading is the complete absence of any particulars about “the full and final resource consent” which NIL and Applefields allege was obtained. This detail only emerged in submissions. It is proper that NIL and AFL should be tied to this by their pleading, so that the defendants to this counterclaim know that this is the point they need to meet.
[49] Secondly, the contractual obligations on the applicants do not arise until written consents and approvals have been given by parties other than the purchaser and the local authority. The pleading needs to state that it is NIL and AFL’s position that these consents were obtained and then to give particulars of them, namely who they were required from, who they were given by and when. There is no mention of this information in the pleading.
[50] Thirdly, the pleading does not state how the continuing registration of the counterclaim defendants’ caveats caused all or any part of the losses which NIL and AFL maintain they have incurred. Given that the evidence shows that they managed to achieve significant funding with the caveats in place, had not (at the time they lost
title to the subdivision) produced a solution to significant drainage issues nor obtained final resource consents in respect of them, and had not obtained written consents which they required for proposed storm water drainage (evidently uphill) there are self-evidently significant causation issues which NIL and AFL will need to overcome in order to succeed. They must plead exactly how it is said that the continuing registration of caveat documents on the title had direct causative effect of the losses which are referred to in general terms in the pleading. It is well short of sufficient to say “in direct consequence of these actions the development has been subject to repeated delays and ultimately has been brought to a standstill”.
[51] Similarly it is not pleaded how the continuing presence of the caveats “vastly increased interest costs, currently estimated at approximately ten million dollars ($10,000,000), and lost sales,” let alone how this has “put the entire project in jeopardy” and how it will “have the effect of depriving the first and second defendants of the entire benefit of their efforts in investment in creating the development”. These are emotive generalisations. Finally, given that a mortgagee sale has now taken place, it is presumably alleged (by deduction from the present pleadings) that losses have now been incurred “in the order of $50,000,000”. Little more needs to be said about that claim. Its inadequacy speaks for itself.
[52] These are not points which direct a positive outcome on this application to strike out, because the pleading can be amended. They are issues which will inevitably result in the claim being stayed if not replaced by a pleading which, at the least, complies with the requirements of adequate pleading on the fundamental issues I have referred to.
[53] There is a self-evident irony in a claim being brought by developers against purchasers blaming them for the failure of a subdivision, when throughout the years that have elapsed since they bought land within the subdivision they have been actively engaged in standing by their contractual rights to ultimately receive the land which they agreed to buy. The reason that Mr Smith and Mr Stokes brought this proceeding in the first place was to enforce their contractual rights as purchasers. They and the present applicants lodged caveats to protect against the prospect that they might lose those rights. In the end they lost them because NIL and AFL were
unable to prevent a mortgagee sale by a creditor. It remains to be seen, at trial, whether the mortgagee sale which deprived NIL and AFL of their subdivision was caused by caveats being registered on a small number of the titles to the property.
Applications by Gold Band Finance Limited
The ninth cause of action - strike out
[54] In the ninth cause of action Mr Smith and Mr Stokes cite three agreements in relation to the first mortgage GBF had over land owned by NIL. These agreements have been discussed in earlier judgments. It is apposite to repeat passages from one of those judgments where these agreements are described:17
[42] Gold Band had a registered security with priority over the interest caveated by Philpott. The value of the security may be sufficient to protect Gold Band’s exposure.
[43] Delta provides utility services and did so in relation to Noble’s subdivision from, at the latest, 2009. On 20 November 2009, Delta and Noble entered into a loan contract including Noble’s agreement to grant a first mortgage security over Noble’s Lot 14. Gold Band had agreed to Delta’s mortgage having first priority capped at an amount of $5 million. Philpott was approached to withdraw the Philpott caveats or to provide consent to allow registration of the Delta mortgage as a first mortgage, but refused to do either.
[44] Gold Band, Delta and Noble entered into a Security Sharing Deed on
14 April 2010. The parties recorded that, since Philpott had refused to withdraw the caveat to allow the registration of the Delta mortgage as a first
mortgage, Gold Band had agreed to hold its mortgage over Lot 14 as trustee
for Delta, Gold Band thereby subordinating its priority in favour of Delta.
[45] Noble and Delta subsequently entered into a second loan agreement in respect of further work completed by Delta. Delta was again unable to register a mortgage having priority over the Gold Band mortgage because Philpott refused to withdraw its/their caveats so far as they affected Lots 18 and 19. Gold Band, Delta and Noble then (on 21 December 2011) entered into a second Security Sharing Deed giving Delta first priority to $8.6 million on the new mortgage and increasing its priority under the first mortgage to $5.5 million.
[46] On 20 August 2013, Noble and Delta entered into a further (collateral)
mortgage agreement over the remaining lots (other than Lots 14, 18 and 19).
[47] On 22 August 2013, Gold Band and Delta entered into a deed of partial assignment of debt and security sharing with Avanti Finance Ltd (Avanti). By that deed, Gold Band sold 37.5 per cent of its Philpott loan to Avanti and
17 Gold Band Finance Ltd v Philpott, above n 6.
30 per cent to Delta. Gold Band Also agreed to hold part of its mortgage security on trust for Delta and Avanti in those proportions.
[48] As a consequence of the various dealings between Gold Band, Noble, Delta and Avanti, the legal position is:
(a) Gold Band is the first mortgagee (both legal and beneficial of
Lots 11-13 and 15-17); and
(b) Gold Band holds its first mortgage in Lots 14, 18 and 19 in trust for Delta; and
(c) Gold Band’s interests include those of Avanti.
[55] In the ninth cause of action Mr Smith and Mr Stokes plead in relation to this:
129Pursuant to s 84 of the Property Law Act 2007 the interests of a mortgage must assign all rights, powers and remedies.
130In breach of s 84 of the Property Law Act 2007 the Partial Assignment of Debt and Security Sharing Deed purported to share Gold Band’s first mortgage between three parties.
[56] Based on these pleadings Mr Smith and Mr Stokes seek a declaration that the security sharing agreements and partial assignment described above are illegal contracts. They also seek damages.
[57] On the latter point Mr Smith and Mr Stokes say that they were interested, possibly with a group of other investors, in redeeming GBF’s mortgage and having it transferred to them. When they approached GBF they were initially told that this may be possible and that a redemption figure would be in the order of $5,900,000. GBF later informed them that the sum to redeem the mortgage would be
$16,393,741. It seems that the former figure referred to GBF’s debt but the latter figure included the debts of Delta and Avanti. At the former figure they were interested in proceeding, but not at the latter: had they been able to redeem the mortgage for $5,900,000 or thereabouts it would have been a profitable venture for them, as a rate of interest which they regarded as favourable was to be paid under the mortgage, and the secured land was probably worth, in their view, in the order of
$20,000,000. Presumably, though it is not pleaded, their claim for damages is based on some form of assessment derived from these views. It hinges, however, on GBF being obliged to transfer the mortgage to Mr Smith and Mr Stokes (or presumably at their direction) for the amount owing to GBF only.
[58] In the context of an application to strike out the Court must accept that pleadings of fact are capable of proof and are correct. Paragraph 129 of the fourth amended statement of claim, pleads a proposition of law, and it is incorrect. Section
84 Property Law Act provides:
84 Assignment of mortgage
(1) The interest of a mortgagee under a mortgage over property may be assigned by an instrument that –
(a) is endorsed on, or attached to, the mortgage instrument, or the existence of which is recorded on or with the mortgage instrument; and
(b) is executed by the mortgagee in the same manner as a deed is required to be executed; and
(c) states that the mortgagee assigns to the assignee all the amounts and all the benefits of any other obligations secured by the mortgage, and all rights, powers, and remedies of the mortgagee under the mortgage, and the whole of the mortgagee’s interest in the mortgaged property, or words to that effect.
(2) The interest of a mortgagee under a mortgage over land under the Land Transfer Act 1952 may also be assigned by a transfer instrument that is registered under that Act.
(3) An instrument that is duly executed under subsection (1) or registered under subsection (2) operates as if it were a deed and transfers to the assignee –
(a) the debt; and
(b) the benefits of any other obligations secured by the mortgage; and
(c) the interest of the mortgagee in the mortgaged property; and
(d) all rights, powers, and remedies of the mortgagee under the mortgage.
[59] This section provides for the way that the interest of a mortgagee under a mortgage may be assigned. Thus it applies, for example, where a mortgagee sells a mortgage to another lender, or a mortgage is to be transferred to another party pursuant to a will. That is not what occurred by the agreements which Mr Smith and Mr Stokes called into question, and evidently regard as fraudulent. It must be remembered, but perhaps is overlooked by Mr Smith and Mr Stokes, that a
mortgage is a security, not a debt. It is a charge, not the money secured by it.18
18 See the definition of “mortgage” in s 4 Property Law Act 2007, and G W Hinde and others
Principles of Real Property Law (2nd ed, LexisNexis, Wellington, 2014) at 14.003.
[60] By the deed dated 14 April 2010 GBF declares that it holds the rights under its first mortgage and all monies it recovers on trust for itself and Delta. This arrangement continued by the deed of 21 December 2011 with Delta accorded a priority over GBF to a limit of $5,500,000. By the document executed in August
2013 GBF assigned part of its debt to a third party financier, Avanti Finance Limited. All these agreements related to the debts secured by GBF’s mortgage. The mortgage itself was not at any point assigned by GBF to Delta or Avanti.
[61] In the GBF mortgage, the monies secured are defined:
(a) In this mortgage, “the secured monies” means:
(i) All monies which are now or at any time in the future owing by the party giving this mortgage or an accommodated person to the mortgagee.
[62] An “accommodated person” means any person:
(i) with whom the mortgagee contracts or makes any arrangement; or
(ii) to whom the mortgagee provides any financial services or facility for the accommodation of the party giving this mortgage
[63] “For the accommodation of the party giving this mortgage” means “for the accommodation of, at the request of, at the direction of or on account of the party giving this mortgage”.
[64] The party which gave the mortgage is NIL. NIL is a party to all three of the deeds I have described. Delta and Avanti contracted or made an arrangement with NIL for the accommodation of NIL. It follows that Delta and Avanti are accommodated persons. From this it follows that the monies secured under the mortgage include all monies owed to Delta and Avanti, as well as GBF, pursuant to the deeds.
[65] None of the documents had the effect of assigning the interest of GBF as mortgagee under its mortgage. Rather, GBF retained its interest as mortgagee but as a result of the documents agreed to hold part of its security on trust for others. It was entitled to do this under the express terms of its mortgage.
[66] As Mr Vinnell submits,19 even if the documents did constitute an assignment of the mortgage itself, s 84 only prescribes a way in which the interest of a mortgagee may be assigned. Whilst Mr Smith and Mr Stokes say that s 84 relates to the assignment of an entire interest of a mortgagee, it is clear that part of the interest of a mortgagee may also be assigned. In Law of Mortgages of Land in New Zealand the learned author observed:20
Apart from s 79(5) of the Property Law Act 1952, it is possible for the debt and the land to be assigned or conveyed separately in whole or in part.
[67] Further, whilst part of a debt could not be assigned by virtue of s 130(1) of the Property Law Act 1952 (though it could be in equity) this was altered by s 50 of the Property Law Act 2007, and from 1 January 2008 part of a thing in action may be assigned whether by a legal or an equitable assignment.
[68] The proposition in paragraph 129 of the fourth amended statement of claim is correct, as a matter of law, to the extent that it correctly records the position in relation to s 84 of the Property Law Act 2007, but the pleading in paragraph 130 is wrong as a matter of law because the documents referred to do not breach s 84 of the Property Law Act for the reasons given.
[69] Although this is sufficient to determine this application, I refer to a further issue raised by Mr Stokes. While presenting his case, Mr Stokes referred to the decision in Instant Funding Ltd v Greenwich Property Holdings Ltd.21 The principle applied in that case was argued before Associate Judge Osborne both on the application by GBF to remove caveats registered by Mr Philpott and Mr Lindsay and on the subsequent application for a stay of that judgment.22 In the former judgment
his Honour said:
19 As did Mr Sim for Delta.
20 P T Young Law of Mortgages of Land in New Zealand (Butterworths, Wellington, 1995) at
[16.7].
Note that s 79(5) of the Property Law Act 1952 was the predecessor of s 84 of the Property Law
Act 2007.
21 Instant Funding Ltd v Greenwich Property Holdings Ltd HC Auckland CIV 2007-404-006806,
20 December 2007.
22 Gold Band Finance Ltd v Philpott, above n 6 and Gold Band Finance Ltd v Philpott, above n 7, respectively.
[75] Neither the circumstances relating to Gold Band’s security sharing arrangement with Delta nor Gold Band’s present intention to enforce its security by a mortgagee sale involve, even arguably, unconscionable conduct by Gold Band. Gold Band made a commercial decision to share its security with Delta. Now, in the absence of repayment by Noble, Gold Band seeks to realise that security through an ordinary sale process. The arguable inference of unconscionable motivation in the selection of one buyer and the rejection of another Instant Funding is not available in this case.
[70] In the latter case his Honour referred to further conclusions in the former case, which had led to this finding.
[71] I have considered the argument presented by Mr Stokes on the present application, and the judgment in Instant Funding, as well as the conclusions reached by the learned Judge in the two cases just referred to. I agree with the learned Judge’s conclusions. In Instant Funding the owner of a property granted a mortgage over it, and then agreed to sell it with a long-term settlement date. The buyer placed a caveat on the title. The owner went into receivership. The mortgagee conducted a mortgagee sale. The mortgagee sought an order removing the caveat from the title. The Court found that it was arguable that the receiver and the mortgagee came to an agreement to avoid the contractual obligation the receiver had to sell to the buyer, by the mortgagee undertaking a mortgagee sale. The Court found that the mortgagee had acted with the receivers of the owner to defeat the purchaser’s interest in the property and in that way had arguably committed a fraud under the Land Transfer Act, applying the principle in Waimiha Sawmilling Co Ltd (In Liq) v Waione Timber
Company Ltd,23 and later cases. Neither the receiver of the owner, nor the
mortgagee, had explained why a mortgagee sale had taken place when the lender could have been paid out in full by a prospective purchaser. This enabled the Court to conclude that, arguably, the agreement between the receiver and the mortgagee had been made in order to avoid the sale to the buyer.
[72] In the present case, on a somewhat similar sequence of events, a mortgagee has conducted a mortgagee sale after the Court declined to stay a buyer’s caveat, with the result that buyers have lost their contractual rights. It is not the sequence of events, however, that dictates that the principle recognised in Instant Funding should be applied in the present case. The missing element here is the arguable element of
collusion between the owner and the mortgagee, in Instant Funding, to achieve a mortgagee sale when the mortgagee could have been repaid without agreeing to proceed to a mortgagee sale at the behest of the receivers of the owner. There is no equivalent element of unconscionable conduct, because for the reasons set out in this judgment the arrangements made between NIL, GBF, Delta and Avanti were lawful commercial transactions taken in the ordinary course of business to secure funding to enable the subdivision to proceed towards completion (in the best interests, in any event, of all the purchasers) and then to enforce the first mortgage security on default by the land owner, NIL. The principle in Instant Funding is not applicable; there has not been fraud under the Land Transfer Act 1952.
[73] It follows that the ninth cause of action cannot succeed against GBF, and must be struck out accordingly.
The ninth cause of action – summary judgment
[74] Given the decision in relation to the application by GBF to strike out the ninth cause of action it is not necessary to consider its alternative application for summary judgment. For completeness, however, I record that had it been necessary to do so the Court would have entered summary judgment for GBF for the same reasons. The application is dismissed.
The tenth cause of action – strike out
[75] In the tenth cause of action Mr Smith and Mr Stokes cite, first, the documents by which GBF advised them initially that an indicative figure for the purchase of its mortgage would be $5,900,000, and later, that the mortgage could only be redeemed for $16,393,741.24 They cite two written requests they made to redeem the mortgage pursuant to s 102 of the Property Law Act for the “principle amounts actually loaned and secured by the mortgage and the legal amount you contend is owed.” They then plead:
139In breach of s 102 of the Property Law Act 2007 Gold Band has refused to allow its mortgage to be redeemed without the plaintiffs also purchasing Delta’s mortgage.
140 The plaintiffs have suffered a loss as a result of Gold Band’s refusal to
allow its mortgage to be redeemed.
[76] They seek declarations that they were entitled to redeem Gold Band’s mortgage and that they were not required to purchase Delta’s mortgage as part of that redemption. They also seek damages.
[77] This cause of action, like the ninth cause of action, is founded on Mr Smith and Mr Stokes’ view that the financial arrangements made by GBF and Delta, as well as Avanti, are unlawful. Although not spelled out in so many words in this cause of action, it has at its heart their view that GBF’s mortgage secured, and lawfully could only secure, debt owed by NIL to GBF and no other party.
[78] For reasons already set out in this judgment,25 that is not correct. The steps taken by GBF, Delta and Avanti, in conjunction with NIL to share the first mortgage security were lawful. That is also the conclusion reached by this Court in its judgment dated 30 September 2015.26
[79] When this is realised, the tenth cause of action falls away. Certainly, Mr Smith and Mr Stokes were entitled to redeem the mortgaged property under ss 102 and 103 of the Property Law Act 2007, but only on “payment to the mortgagee of all amounts that would have been payable if the discharge of the mortgage had been sought under sections 97 – 101 …”.27 Mr Smith and Mr Stokes come into the category of persons entitled to redeem the mortgage. In Coltart v Lepionka the Court of Appeal considered the meaning of the phrase “or any other person entitled to redeem” as those words appear in s 97 of the Property Law Act, which appear also in s 102.28 In that case the Court of Appeal said that Mr Coltart, who had an option to purchase part of the property secured by way of mortgage, was a person entitled to redeem the mortgaged property. On the same principle, Mr
Smith and Mr Stokes were entitled to request a transfer of the mortgage under s 102.
25 [59] – [67].
26 Gold Band Finance Ltd v Philpott, above n 6, at [71], [73], [74] and [75].
27 Section 103(a) Property Law Act 2007.
28 Coltart v Lepionka & Company Investments Ltd [2016] NZCA 102, [2016] 3 NZLR 36 at [39] –
[52].
[80] Where they falter in their argument is in their view that GBF was entitled only to require payment of its own advances, and not payment of all sums owing under the mortgage pursuant to the security sharing arrangements which I have outlined. It is clear on the evidence that GBF gave Mr Smith and Mr Stokes ample opportunity to redeem at a figure which represented the entire debt secured by its mortgage and indeed offered to consider an offer at a lower sum, but no such offer was made. It is clear that the tenth cause of action cannot succeed as pleaded because an opportunity to redeem the mortgage was given but not taken.
[81] If Mr Smith and Mr Stokes were able to prove each of the propositions as pleaded in the tenth cause of action they could succeed in their claim. The reason they cannot succeed is based on a factual issue. Accordingly it is not appropriate that the application to strike out succeed, and accordingly it is dismissed.
The tenth cause of action – summary judgment
[82] As noted in relation to the application to strike out the tenth cause of action the fundamental premise of Mr Smith and Mr Stokes’ claim is that they were entitled to have the mortgage transferred to them for a redemption figure which reflected debt owing only to GBF and not additional debt owing to Delta. That point has been decided against them. The premise they derive from that position is that GBF refused to allow its mortgage to be redeemed, in breach of s 102.
[83] The evidence shows, incontrovertibly, that is not correct, once it is realised that the amount for redemption of the mortgage is the entire debt owing under it, and not just a portion of that debt which was owed to GBF.
[84] On 15 July 2016 Anthony Harper, solicitors for GBF, wrote to Duncan Cotterill, solicitors for Mr Smith and Mr Stokes, advising “the redemption figure as at today is $16,448,660.04”. The solicitors went on to advise that edealing had been set up and prevalidated. They noted that Duncan Cotterill had not certified and signed the edealing on behalf of their clients as transferees of the mortgage. They went on to advise however that they were ready, able and willing to settle and invited a telephone call when Mr Smith and Mr Stokes were ready to attend for settlement.
[85] Anthony Harper also acknowledged that settlement would be without prejudice to Mr Smith and Mr Stokes’ ability to contest the redemption figure after settlement.
[86] The previous day the solicitors had written to Mr Smith and Mr Stokes direct. They referred to their notice under s 102, pointing out that to be entitled to a transfer of the mortgage Mr Smith and Mr Stokes must pay the amount secured by it, a figure which had been given to them subject only to final adjustment for daily interest and costs. They said that GBF would be prepared to accept payment of the transfer price without prejudice to their ability to challenge the validity of that figure after settlement, and they said that GBF would treat the notice under s 102 as abandoned if settlement did not occur by 5.00 pm on 15 July. They went on to say that if Mr Smith and Mr Stokes considered that the debt secured by the mortgage was lower than the figure provided, then they should have their solicitor tender what they believed to be the correct figure before the deadline in the manner already set out for settlement. They recorded that GBF did not consider that it was obliged to accept a lower tender but may elect to do so. They reiterated that GBF was not waiving the requirement to tender.
[87] These communications were part of an exchange of emails at that time in which Mr Smith and Mr Stokes recorded their objection to GBF’s position, as I have said. However, they did not at any point tender either the sum required by GBF or any lesser sum.
[88] By reference to the tenth cause of action,29 the allegation in paragraph 139 is correct, but the cause of action cannot succeed because, for the reasons given, GBF was entitled to refuse to allow its mortgage to be redeemed without Mr Smith and Mr Stokes also repaying debt owing to Delta which was secured by that mortgage.
[89] It follows that the tenth cause of action cannot succeed on the undisputed facts before the Court in relation to the amount Mr Smith and Mr Stokes needed to
tender in order to redeem the mortgage, which was not tendered. Nor, for
29 Above at [76].
completeness, was any lesser sum proffered for GBF’s consideration. The notice
under s 102 lapsed.
[90] On the tenth cause of action I enter summary judgment for GBF.
Applications by Delta Utility Services Limited
The seventh cause of action - summary judgment
[91] The relevant pleadings in the seventh cause of action are these:
Seventh cause of action – deceit – Sixth Defendant (Delta)
109 The Plaintiffs repeat paragraphs 1 – 57 and say:
110 The Plaintiffs consented to a mortgage over Lot 14 on proviso that the mortgage security would include their interests.
111 Delta used the Plaintiffs’ consent to register a mortgage but then did
not provide for their interests.
112 Delta’s works made the implementation and effecting of Lot 9’s part of the Further Subdivision including its roading impossible and materially:
112.1 Did not make provision for stormwater drainage for Lot 9; and
112.2 Did not make provision for stormwater drainage to enable the legal roading and services to and for Lot 9’s subdivision.
113 Delta continued to represent to the Plaintiffs that the physical works could allow for Lot 9’s further subdivision.
114 The Plaintiffs have suffered loss as a result of Delta’s deceit including:
114.1 Refraining from taking any steps to enforce the ASAP and
Further Agreement until after 22 October 2013.
[92] In Amaltal Corp Ltd v Maruha Corp the Court of Appeal confirmed the elements of this tort. It involves a false representation as to a past or existing fact made by a defendant who knew it to be untrue or had no belief in its truth or who was reckless as to its truth.30 It requires proof of an intention that the claimant should have acted on the representation, and action by the claimant in reliance on the
representation. The first difficulty Mr Smith and Mr Stokes face is that there is no
30 Amaltal Corp Ltd v Maruha Corp [2007] 1 NZLR 608 (CA) at [46] and [55]. Note deceit was not in issue in the appeal to the Supreme Court against this judgment, [2007] 3 NZLR 192.
pleading of any representation by Delta as to a past or existing fact, nor that anything Delta may have said was untrue. If this cause of action were to remain it would be necessary for the pleading to be amended to show with precision how it is said each of the elements of this tort exists. As best one can infer the position from the present gaps in the pleading, it is perhaps being said by Mr Smith and Mr Stokes that they consented to the registration of a mortgage to Delta on the basis of some kind of statement of intent by Delta to act in a certain way. Even if that is the case, that is not a representation as to a past or existing fact, it would be a representation that Delta would, in the future, act in a certain way. That would not establish the principal element of the tort, unless the representation was such that it was a statement as to the existence of an intention. That possibility could not be ruled out, if the facts supported it, but for reasons I now turn to, the assertions made by Mr Smith and Mr Stokes are contrary to clear and express contemporaneous documents.
[93] In evidence Mr Stokes says:
The allegations in clause 110 of the Fourth Amended Statement of Claim are not proved by the evidence. At the time and date of the plaintiff signing the caveators’ consent for Delta’s mortgage it was made clear the requirements upon which the caveators were giving their consent. Delta acknowledged this as they made it clear they were not happy with the conditions and expectations. Whether however Delta wanted to use the plaintiffs’ dated consent was up to Delta; they could take it or leave it but knew the plaintiffs’ conditions at the time it was dated. Delta also knew their construction and actions thereafter in conjunction with their SSJV partners was contrary to what was assured by Delta and their SSJV partners that any caveators’ consent to a Delta mortgage would benefit the plaintiffs in relation to their roading and subdivisions protected by their caveats.
In bad faith and in deceit, both in terms of the second mortgage Delta chose to register in reliance on the plaintiffs’ caveators’ consent and in relation to Delta’s confidential 67.5% subsequent ownership and 100% control of the first mortgage, Delta constructed the physical works and led the plaintiffs to believe their provisions were included in those works when Delta knew that it wasn’t and that it in fact made the plaintiffs’ roading and subdivisions impossible.
[94] This evidence was in response to the affidavit of Mr G G Dixon, the chief financial officer of Delta. He produced correspondence at the time the caveators, Mr Smith and Mr Stokes, were being asked to consent to registration of Delta’s mortgage. At the time Delta was represented by GCA Legal. NIL was represented
by Cavell Leitch, solicitors. At 5.19 pm on 22 December 2009 Mr Smillie of GCA Legal wrote to Ms Wood of Cavell Leitch by email, stating:
Victoria
Delta is not prepared to agree to the condition requiring it to become liable with Noble to the caveators.
We would ask that you and your client revert to the caveators as soon as possible and again ask them to withdraw their caveat to allow registration on the basis that (as we understand it) having Delta carry out the works will result in Noble being able to provide the required roading and services.
Our client is very annoyed that this issue has arisen now given that previous indications seemed to be that a withdrawal of caveat would be provided.
[95] The following day at 1.54 pm Mr Stokes wrote to Victoria Wood and discussed the request that they consent to a mortgage in favour of Delta being registered. He concluded his email thus:
Notwithstanding the above, so as to enable the roading and services to continue with respect to Delta’s growing lack of confidence with your client, we will consent to the mortgage being taken and will not require Delta to jointly take liability for NIL’s obligations to Lot 9 for which we will pursue directly with your client.
[96] And further:
We are currently putting signatures to the mortgage consent document previously received and expect to have that ready at 3.30pm.
[97] Thus, Delta expressed in writing its unwillingness to agree to a condition on the giving of consent to registration of its mortgage requiring that it become liable to Mr Smith and Mr Stokes for NIL’s contractual responsibilities to them, and Mr Stokes expressly stated that consent would be given without this occurring.
[98] The written consent was duly given. Ms Wood wrote to Mr Smillie of GCA Legal at 3.48 pm on 23 December:
Caveator consent now attached. The reference to Mtg 8325807 is to the dealing as prepared by Saunders & Co. Please let us know once certified so that we can register.
[99] At 4.11 pm Mr Smillie replied to Ms Wood:
Delta’s mortgage has been registered and I am attaching a copy of the title.
[100] The consent itself is dated 22 December 2009. By the consent the caveators, who include Mr Smith and Mr Stokes, give their consent to registration of the Delta mortgage. The document appears to be signed by Mr Smith and Mr Stokes and neither suggests that he did not do so.
[101] The consent is dated 22 December, the day before Mr Stokes wrote his email indicating that he and Mr Smith would consent to the mortgage being taken. Mr Stokes refers to this in his affidavit in opposition to this application. He says:
The allegations in clause 110 of the Fourth Amended Statement of Claim are not disproved by the evidence. At the time and date of the plaintiffs signing their caveators’ consent for Delta’s mortgage, it was made clear the requirements upon which the caveators were giving their consent. Delta acknowledged this as they made it clear they were not happy with the conditions and expectations. Whether however Delta wanted to use the plaintiffs’ stated consent was up to Delta. They could take it or leave it but knew the plaintiffs’ conditions at the time it was dated.
[102] That evidence lacks credibility. The contemporaneous documents show that as at 22 December Mr Smith and Mr Stokes were still holding out for Delta becoming jointly liable, in some way, with NIL for the latter’s obligations to them, if they were to consent to registration of Delta’s mortgage. That is the date the consent was signed. To that extent, Mr Stokes’ evidence in this paragraph can be taken at face value. However, it misses the point: Mr Stokes and Mr Smith altered their position, and then handed over the consent dated 22 December on 23 December
without any condition attached to it.31 Where evidence is given by affidavit, it is not,
as a general rule, appropriate to make findings of credibility. However, the Court is in a position to find that the consent was given without conditions, notwithstanding the assertions of Mr Smith, because those assertions conflict with a
contemporaneous document which he signed and which made his position at the
31 Although the consent document is dated 22 December, Mr Stokes’ email advising unconditional consent to the mortgage is dated 23 December. It is clear that the document was actually signed on 23 December because in the email of that date Mr Stokes says: “We are currently putting signatures to the mortgage consent document previously received and expect to have that ready at 3.30pm. Shayne will be in town at that time and can drop it off if you please?” The reference to Shayne is to Mr Philpott, who was also a caveator under the caveat in question.
time unequivocally clear. As Greig J said in Attorney-General v Rakiura Holdings
Ltd:32
In a matter such as this it would not be normal for a judge to attempt to resolve any conflicts of evidence contained in affidavits or to assess the credibility or plausibility of averments in them. On the other hand, in the words of Lord Diplock in Eng Mee Yong v Letchumanan [1980] AC 331 at 341E, the Judge is not bound:
“to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.”
[103] For these reasons, the assertion pleaded in paragraph 110 of the fourth amended statement of claim is unsustainable.
[104] In paragraph 113 Mr Smith and Mr Stokes plead that Delta continued to represent to them that physical works undertaken by Delta would allow for the further subdivision of Lot 9, which is the land in which they have an interest. No particulars are given of this. Even if it is correct, it is insufficient on its own to found a tort of deceit. Even if it could be construed as a false representation as to an existing fact (Delta’s intention) there is no assertion that Delta knew this to be untrue or had no belief in its truth. Nor, crucially, is there any allegation that Mr Smith and Mr Stokes were intended to have acted on any such representation, nor that they did so. Nor indeed is it clear what they might have been expected to do, but for whatever it was that Delta is thought to have said to them. I find this pleading so vague as to be meaningless in the context of the cause of action in deceit.
[105] Delta has established that the seventh cause of action cannot succeed. I enter summary judgment for Delta accordingly.
The seventh cause of action – strike out
[106] As summary judgment will be entered on the application of Delta on the seventh cause of action it is unnecessary to consider its alternative application to
strike out this cause of action. I record, however, that had it been necessary to do so,
32 Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC) at 14.
I would have made an order striking it out. Whilst generally a Court will proceed on the basis that pleaded facts, whether or not admitted, are assumed to be true, this does not extend to allegations which are entirely speculative and without foundation. In this case, it is plain from an examination of just two documents, an email sent by Mr Stokes and the consent document itself, that the allegation in paragraph 110 is speculative and without foundation. The allegation in paragraph 113 is described above. Although the Court is to exercise its jurisdiction to strike out sparingly, and only in clear cases, this is one of them. This course of action could not succeed at trial and Delta should not be required to face trial in this circumstance.
The eighth cause of action – summary judgment and strike out
[107] The eighth cause of action is in precisely the same terms as the seventh cause of action, save that the final paragraph in which Mr Smith and Mr Stokes allege, in the seventh cause of action, to have suffered loss is omitted. I enter summary judgment for Delta on this cause of action.
The ninth cause of action – summary judgment and strike out
[108] This cause of action is pleaded against both GBF and Delta (as well as NIL). It is discussed above, and the Court has struck out this cause of action against GBF indicating as well that had it been necessary to do so it would have entered summary judgment for GBF for the same reasons as applied to the application to strike out.
[109] The argument presented for Delta by Mr Sim was largely to the same effect as that presented by Mr Vinnell for GBF. I need not add any further discussion of the issues raised. The conclusions reached apply equally to Delta.
[110] Delta’s first application is that summary judgment be entered on the ninth cause of action. I am satisfied that for the reasons given earlier, the ninth cause of action cannot succeed against Delta and I enter summary judgment for it accordingly. Its alternative strike out application is dismissed.
Outcome
[111] I make orders as follows:
Mr Philpott and Mr Lindsay
(a) The application to strike out by Mr Philpott is dismissed.
GBF (b) The application to strike out by Mr Lindsay is dismissed. (c)
On the application of GBF, the ninth cause of action against it is struck
out. (d)
The application for summary judgment by GBF on the ninth cause of
action is consequently dismissed. (e)
The application by GBF to strike out the tenth cause of action against it
is dismissed. (f)
Summary judgment is entered for GBF on the tenth cause of action.
Delta
(g) Summary judgment is entered for Delta on the seventh cause of action.
(h)
The application by Delta to strike out the seventh cause of action is
consequently dismissed. (i)
Summary judgment is entered for Delta on the eighth cause of action.
(j)
The application by Delta to strike out the eighth cause of action is consequently dismissed.
(k)
Summary judgment is entered for Delta on the ninth cause of action.
(l) The application by Delta to strike out the ninth cause of action is
consequently dismissed.
Costs
[112] I make the following orders:
(a) All costs will be calculated on a 2B basis.
(b)Mr Lindsay and Mr Philpott will pay costs to NIL and AFL. Costs on only one notice of opposition and one set of submissions are allowed as NIL and AFL combined their opposition.
(c) Mr Smith and Mr Stokes will pay costs on each of the applications on which GBF and Delta have succeeded. There will be no costs on the applications by GBF and Delta which have been dismissed as these were parallel applications to those which succeeded.
(d)Any issues in relation to costs will be referred to the Registrar in the first instance or to me if not resolved.
J G Matthews
Associate Judge
Solicitors:
K J McMenamin & Sons, Christchurch
Morrison Kent, Wellington
White Fox & Jones, Christchurch
Anthony Hughes-Johnson QC, Christchurch
Anthony Harper, ChristchurchGallaway Cook Allan, Dunedin
Copy to:
Plaintiffs/First Counterclaimants Second Counterclaim Defendants Third Counterclaim Defendants
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