Solomona v Solomona HC Auckland Civ-2010-404-1247
[2011] NZHC 559
•27 May 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-1247
BETWEEN TRENTHAM MOKOTALO SOLOMONA Plaintiff
ANDCHARLES JOHN MUTI SOLOMONA Defendant
Hearing: 21 October 2010
28 October 2010
Counsel: A W Johnson for Plaintiff/Respondent
F Power for Defendant/Applicant
Judgment: 27 May 2011 at 4:30 PM
RESERVED JUDGEMENT OF ASSOCIATE JUDGE SARGISSON (Application to set aside Judgment)
This judgment was delivered by me on 27 May 2011 at 4.30 pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date ..........................
Solicitors:
Martelli McKegg Wells & Cormack, PO Box 5745, Auckland
Rennie Cox, PO Box 6647, Auckland
TRENTHAM MOKOTALO SOLOMONA V CHARLES JOHN MUTI SOLOMONA HC AK CIV-2010-404-
1247 27 May 2011
Introduction
[1] Trentham Solomona, the plaintiff, commenced a proceeding against his brother, Charles Solomona, the defendant, in 2008. The proceeding (filed under CIV-2008-404-3478) had its origin in a dispute between the two over the implementation of an agreement they had come to in 2006 that Charles could purchase Trentham’s share of the former Solomona family home at 36 Dryden Street, Grey Lynn.
[2] At a Judicial Settlement Conference held in September 2009, the brothers agreed to settle the dispute and they entered into a settlement agreement. Trentham performed his side of the bargain and transferred his interest in the property to Charles, but Charles had second thoughts and declined to pay the agreed price under the terms of settlement.
[3] Ultimately, on 4 May 2010, Trentham obtained summary judgment in this proceeding against Charles. Charles was ordered to specifically perform the settlement agreement. To that end, he was ordered to sell the property and to pay the price owed out of the proceeds.
[4] Charles now seeks an order under r 12.14 of the High Court Rules setting aside the summary judgment.
[5] Rule 12.14 of the High Court Rules outlines when a court may set aside a summary judgment if the applicant did not appear at the hearing. It states:
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.
[6] Trentham opposes the application.
Issue for determination
[7] It is for an applicant to establish on the balance of probabilities that there has been or may be a miscarriage of justice to warrant the exercise of the discretion to either set aside or vary a summary judgment. Generally, an applicant will have to show that it has a substantial defence that it has been unable to put to the Court, but the Court may have regard to other circumstances. In Russell v Cox, McMullin J emphasised that the discretion in the then equivalent of r 12.14 is unrestricted.[1]
[1] Russell v Cox [1983] NZLR 654.
[8] The issue for determination in the current application is whether Charles has demonstrated that the summary judgment, and in particular the order for specific performance has, or appears to have, resulted in a miscarriage of justice. The issue turns on a single question: whether Charles has a substantial ground of defence to an order for specific performance? If such a defence is arguable, it is common ground that justice would require that summary judgment be set aside as there are no counter-veiling factors that should stand in the way of an order to set aside the summary judgment. This is not a case where there was an inexcusable failure to appear at the summary judgment hearing, or where other factors of the kind referred to in Paterson v Wellington Free Kindergarten Association Inc, as relevant to the
exercise of this discretion, require consideration[2]. Counsel for Trentham accepts that
there has been no undue delay in making the application to set aside. Nor is this a case where Trentham will suffer and irreparable injury if the order for specific performance is set aside.
[2] Paterson v Wellington Free Kindergarten Association Inc [1966] NZLR 975 at 983; Russell v Cox [1983] NZLR 654 at 659.
[9] For reasons that I will expand later in this judgment, I am satisfied that Charles has a substantial ground of defence to an order for specific performance, and that the order of specific performance should therefore be set aside.
Background
[10] Some years ago the two brothers and their father, Mr Solomona, co-owned the Dryden Street property. All three were registered as joint proprietors on the title
of the property, and remained so after Mr Solomona passed away in July 1983. The title (certificate of title NA48C/1047) remained unchanged for some eighteen more years. In 2002, a memorial was entered on the title recording that Mrs Solomona’s interest of Mr Solomona had passed to the two brothers by way of survivorship and they became the joint registered proprietors.
[11] Several years passed, and in a deed dated 20 February 2006, the brothers agreed that Charles was to purchase Trentham’s half interest in the property. Charles became the sole registered proprietor when Trentham transferred his interest in the property to Charles in March 2006, pursuant to the agreement. But Charles failed to perform his side of the bargain and pay the agreed to purchase price. In order to resolve the impasse Trentham commenced this proceeding on 11 June 2008.
[12] Meanwhile on 28 August 2008, Mrs Solomona, the brothers’ mother, lodged a caveat (identified as caveat number 7052688.1) against the title to the property claiming an interest in the property under a constructive trust. Her apparent position is that on the death of her husband, Mr Solomona, she became entitled to a beneficial share of the property and that the share has been subject to a constructive trust ever since his death in 1983.
[13] On 11 September 2009, the brothers attended a judicial settlement conference, though Mrs Solomona did not. In a settlement agreement of the same date, the brothers agreed that Charles would pay a reduced price for Trentham’s share of the property and raise the funds to make payment, either by using the property as security or by selling the property if unable to raise the necessary funds. Charles was to have until 31 January 2010 to put the home on the market.
[14] Under the agreement, the brothers also agreed to recognise that Mrs Solomona has an interest in the property. To recognise this, Trentham agreed to place $50,000 of the sum generated from the sale of his interest into trust for her.
[15] Again Charles did not perform his side of the bargain. At a chambers hearing on 10 February 2010, counsel advised on Charles’ behalf that Charles now considered the settlement agreement to be unlawful.
[16] In a further endeavour to resolve the impasse, Trentham commenced this proceeding by way of statement of claim and an application for an order for specific performance.
[17] Charles was served with the proceeding on 2 March 2010. He assumed, mistakenly, that it was notice of the original proceeding and that his counsel had received it. Neither he nor his counsel appeared at the hearing on 4 May 2010. As a result, summary judgment was entered against him by Associate Judge Abbott on 11
May 2010. Essentially the judgment requires that the property be put on the market and auctioned if not sold within two months and that the defendant pay the plaintiff the $210,000 owing from the proceeds of the sale. Leave was granted to seek further or ancillary orders if necessary to give effect to this order for specific performance.
[18] On 25 May 2010, Charles applied for an order setting aside and staying the summary judgment under r 12.14 and r 17.24 respectively. The application under r
17.24 was subsequently abandoned by memorandum filed on 3 November 2010.
The application
[19] The dispute giving rise to the current application centres on the interest claimed by Mrs Solomona as described in the caveat.
[20] The parties dispute whether Mrs Solomona has such an interest. For the purpose of the application, Charles contends that the claimed interest affords him with substantial defences to the application for summary judgment. Therefore, the summary judgment should be set aside. Counsel framed the defences as follows:
(a) Mrs Solomona arguably has a beneficial interest in the home by operation of the intestacy rules under the Property Relationships Act
1976, and her exclusion from the settlement agreement rendered the agreement illegal. Had the Judge known this, he would not have granted an order for specific performance of the illegal settlement agreement;
(b) Charles has a counterclaim for rectification of the certificate of title to
record Mrs Solomona’s interest.
(c) Charles did not voluntarily consent to the settlement agreement because he was physically and emotionally shattered, and pressured into signing the agreement. This has implications for the validity of both the settlement agreement.
[21] Counsel for Trentham argues to the contrary that Mrs Solomona plainly has no interest in the property. He submits that the contention that the settlement agreement is illegal, and the claimed right of rectification, are therefore wholly without merit. He also points out that Judge Abbott’s minutes, dated 5 August 2009 and 14 September 2009, refer to Mrs Solomona’s alleged interest and her caveat. He argues, with some apparent justification, that that there is no substance to the third defence alleged by Charles as the evidence falls well short of raising any real possibility of duress, undue influence or unconscionable bargain. Furthermore, that Charles was represented by counsel at the settlement conference.
[22] It is not necessary for me to resolve these issues. For reasons I will come to, Mrs Solomona’s caveat is dispositive of the issue I am required to determine namely, whether Charles has a substantial ground of defence to an order for summary judgment.
The Caveat
[23] In a case management telephone conference on 11 November 2010, I directed that the parties make further submissions with reference to the caveat. Counsel for Charles subsequently filed memoranda expanding on his submission that Mrs Solomona has a constructive trust over part of the home. In response, counsel for Trentham filed memoranda expanding on his submission that Mrs Solomona does not have a proprietary interest in the home. He submitted that her caveat is therefore irrelevant to the current proceedings, and that the caveat, while requiring later attention, is irrelevant for the present application. On reflection, I disagree.
[24] While the basis for the interest claimed in Mrs Solomona’s caveat appears weak, not least because Mr Solomona died some 28 years before she appears to have raised any claim, I am satisfied that the very existence of the caveat provides Charles with an arguable defence under s 141 of the Land Transfer Act 1952. The material provision is section 141(1). It states:
141 Effect of caveat against dealings
(1) Subject to the succeeding provisions of this section, so long as a caveat under section 137 remains in force, the Registrar shall not make any entry on the register having the effect of charging or transferring or otherwise affecting the estate or interest protected by the caveat.
[25] Section 141(1) prevents Charles from registering a transfer of his interest in the property to a purchaser while Mrs Solomona’s caveat remains on the certificate of title. Charles cannot therefore comply fully with the court’s order for specific performance that he sell the property. He could not perfect a sale. And if he cannot perfect a sale he will also be unable to make payment as ordered from the proceeds of the sale.
[26] In Maxted v Klee, Hutchison J affirmed that it is inappropriate to order specific performance where the party subject to the order is not entitled to perform the act required therein.[3] Specific performance is, or arguably is, similarly inappropriate here.
[3] Maxted v Klee [1953] NZLR 450.
[27] I am satisfied that this situation gives rise to an arguable substantial ground of defence. Such a defence calls for exercise of the discretion conferred by r 12.14.
[28] Nothing in this judgment is to be taken as indicating that Mrs Solomona does or does not have the interest that she claims. While I do not overlook that the parties expressly recognised such an interest in their settlement agreement, whether or not Mrs Solomona has an interest by reason of her husband’s prior interest going back many years is not something on which I need, or should, express any view. It is
sufficient to note that:
(a) The observation in Horne v Horne that a court ought not to compel specific performance where doing so would amount to a breach of trust, would seem apposite and if that is so, the provision in the settlement agreement to hold $50,000 on trust for Mrs Solomona would be no substitute;[4]
[4] Horne v Horne (1906) NZLR 1208
(b)It is a matter for Trentham, on advice from counsel, to decide how he should deal with the question of the validity of the interest claimed on the caveat, and the possible removal of the caveat from the certificate of title if indeed the interest claimed is not valid. Plainly, any proceeding challenging the caveat will have to be served on Mrs Solomona.
Orders
[29] The application to set aside summary judgment entered on 4 May 2010 in this proceeding is granted.
[30] Costs are reserved. If there are any reasons why costs should not follow the event then counsel for Trentham may file and serve a memorandum within 10 working days, setting out those reasons. Failing this, Trentham is to pay costs on
the application on a 2B basis plus disbursements as fixed by the Registrar.
Associate Judge Sargisson
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