Taylor v Jaydee Home Solutions Limited

[2012] NZHC 167

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2011-485-423 [2012] NZHC 167

BETWEEN  ALLAN SYDNEY TAYLOR AND ALEXANDER TAYLOR

Plaintiffs

ANDJAYDEE HOME SOLUTIONS LIMITED Defendant

Hearing:         27 January 2012 (Heard at Wellington)

Counsel:         K. Smith - Counsel for Plaintiff

D. Marriott - Counsel for Defendant

Judgment:      16 February 2012 at 3:30 PM

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 16 February 2012 at

3.30 pm under r 11.5 of the High Court Rules.

Solicitors:           Peter C Gilbert, Solicitors, PO Box 2420, Wellington

Burton & Co, Lawyers, PO Box 8889, Symonds Street, Auckland

AS TAYLOR AND A TAYLOR V JAYDEE HOME SOLUTIONS LIMITED HC WN CIV-2011-485-423 16

February 2012

Introduction

[1]      This is an application for summary judgment on a counter claim brought by the defendant as counterclaim plaintiff. In this application the defendant seeks an order for vacant possession of a residential property at 26 Donnelly Drive, Wainuiomata  (the  property).    The  property  is  owned  by  the  defendant  but  is currently occupied by the plaintiffs under a long term Sale and Purchase Agreement between the parties.

[2]      The defendant’s counterclaim is opposed by the plaintiffs, but the defendant maintains for the purposes of the present summary judgment application that the plaintiffs have no arguable defence to that counterclaim.

Background

[3]      On  4  December  2002,  the  plaintiffs  entered  into  a  Sale  and  Purchase Agreement (―the Agreement‖)  with the defendant to purchase the property.   The purchase price was $105,0950.02.   The plaintiffs were required to pay a deposit under the Agreement of $1,990.00 which was paid. The balance of the purchase price was to be paid in instalments over the following 30 years, in accordance with an Instalment Payment Schedule, appended to the Agreement.  Each instalment was calculated to include provision for outgoings on the property as well as interest and part repayment of the principal sum outstanding.

[4]      In June 2010, negotiations commenced between the parties to complete the sale early by bringing forward the final settlement date under the Agreement.  Clause

11.4 of the Instalment Payment Schedule sets out the procedure for early settlement. However, no agreement was ever reached as to this early settlement due to a dispute between the parties over calculation of the final settlement price.  In the meantime, the plaintiffs had ceased instalment payments, this occurring soon after they entered into these negotiations. The last payment under the Agreement was made to the defendant on 21 May 2010.  The plaintiffs are now over 20 months in default under the Agreement.

[5]      In February 2011, the defendant served a default notice on the plaintiffs under the Agreement and pursuant to ss 28 and 29 of the Property Law Act 2011.

The notice requested payment of arrears and reinstatement of future instalments due under the Instalment Payment Schedule. This request and the additional demands  to resume payment, were not complied with. Accordingly, the defendant brings this present counterclaim action seeking an order for vacant possession of the property.

[6]      The Agreement at clauses 10.1, 10.2 and 10.3 of the Instalment Payment Schedule sets out the events which constitute defaults under the Agreement and the remedies available as follows:

10.        Default

10.1      The following are events of default on the part of the Purchaser for the purposes of this Schedule:-

(i)       The bankruptcy of or composition with creditors by the

Purchaser.

(ii)    The failure to pay an Instalment or to pay or reimburse Rates, Taxes and insurance premiums or to pay any other moneys as they fall due.  A payment shall fall due if it is not paid within the time allowed after the date specified for its payment.

(iii)     The failure by the Purchaser to give the Vendor vacant possession of  the  property,  if  the  Vendor  is  entitled  to obtain vacant possession.

(iv)    The purchaser parting with possession of, charging or encumbering the property without the prior written consent of the Vendor.

(v)      The   Purchaser  assigning  or   charging  the   Purchaser’s

interest under the Contract.

(vi)     Any default under the General Conditions of Sale referred to in the Agreement for Sale and Purchase.

10.2     Upon the happening of an event of default then subject to sub- clause (x) hereof:-

(i)        The  whole of the  Current Balance Price  will become immediately  due  and  payable  and  the  Vendor  may enforce the Vendor’s rights as an unpaid Vendor in respect of that money in whatever way the Vendor thinks fit; and

(ii)       May  rescind  this  contract  of  sale  and  thereupon  all moneys (but not exceeding 10% of the Current Balance Price) theretofore paid shall be forfeited to the Vendor as liquidated damages; and

(iii)       May re-sell the Land either by public auction or private contract subject to such stipulations as it may think fit and any deficiency in price which may result on and all

expenses attending a re-sale or attempted re-sale shall be made good by the Purchaser and shall be recoverable by the   Vendor   as   liquidated   damages   the   Purchaser receiving credit for any payments made in reduction of the purchase money.   Any increase in price on re-sale after deduction of expenses shall belong to the Vendor; and

(iv)        May sue for specific performance.

(v)       The  Purchaser  must  give  vacant  possession  of  the property to  the  Vendor  in  a  clean,  orderly,  neat  and attractive condition; and

(vi)       The   Purchaser   must   remove   any   caveat   or   other notification of interest upon the title to the property; and

(vii)      The Purchaser acknowledges that the Vendor may forfeit and keep the deposit and all Instalments paid under the Contract (but not exceeding 10% of the Current Balance Price) as liquidated damages for non-performance of the Contract.

(viii)     The Purchaser irrevocably appoints the Vendor as the Purchaser’s attorney in relation to this Agreement and Schedule.    The Vendor as attorney until all the Purchaser’s obligations hereunder whether before or after settlement have been fulfilled:-

(a)        may perform any of the Purchaser’s obligations to the Vendor, sign any documents on behalf of the Purchaser and do anything it considers necessary or desirable to protect the Vendor’s interests;

(b)        is not obliged to exercise any of its powers as an attorney; and

(c)        will not be responsible for any damage, loss or costs to the Purchaser or any other person.

(ix)       The Purchaser will promptly confirm anything done by

the Vendor as the Purchaser’s attorney.

(x)       Notwithstanding the foregoing provisions of this clause the Vendor shall before exercising his rights under this clause serve on the Purchaser a notice of the full amount then outstanding under this Agreement.  If the Purchaser shall within fourteen (14) days thereafter obtain at the Purchaser’s  expense   and   provide   to   the   Vendor   a valuation of the property which provides evidence that the Purchaser’s equity in the property exceeds Ten per cent (10%) of the valuation then the Vendor shall allow the Purchaser sixty (60) days from receipt of the valuation to arrange a sale of the property at a price no less than the valuation.  If the Purchaser shall achieve an unconditional sale within the sixty (60) day period then the Vendor will take all steps necessary to give effect to the sale and after payment of all expenses of sale and all monies due under

this Agreement as at the date of settlement the Vendor shall allow to the Purchaser the net equity in hand.

10.3     The Purchaser shall be liable for all reasonable costs arising out of the event of default as consist of legal costs and disbursements, accounting fees  and  the  costs  and  expenses of  the  Vendor  in enforcing  the  provisions  of  clause  10.2  specifically  and  the Contract generally (―the reasonable enforcement charges‖).

Summary Judgment Principles

[7]      Rule 12.2(1) of the High Court Rules provides that this Court may give judgment against a counterclaim defendant (in this case the plaintiffs) if the counterclaim plaintiff (in this case the defendant) satisfies the Court that the counterclaim defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.  The principles relevant to that assessment  were  summarised  by the Court  of  Appeal  in  Krukziener  v Hanover Finance Ltd: [2008] NZCA 187, [2010] NZAR 307 at [26]; adopted more recently by the Court of Appeal in Cockburn v CS Development No 2 Ltd [2010] NZCA 373, (2010) 24 NZTC 24,431 at [26] and Mitchell v Trustees Executors Ltd [2011] NZCA

519 at [35]:

The principles are well settled. 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; (1986) 1 PRNZ 183 (CA), at p 3; p 185. 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 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; [1979] 3 WLR 373 (PC), at p 341; p 381. 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).

Counsels’ Submissions and My Decision

[8]      The defendant’s main evidence in support of its counterclaim consists of the Agreement  itself  dated  4  December  2002,  including  the  Instalment  Payment Schedule. It relies on Clause 10.2 of that Schedule as the basis for termination of the Agreement and its claim to vacant possession.

[9]      In addition, ss 28-30 of the Property Law Act 2007 set out the requirements that a vendor must fulfil before they are entitled to cancel an Agreement of this nature. These apply notwithstanding a contractual right to rescind, which in this case is  contained  in  Clause  10.2(ii)  of  the  Instalment  Payment  Schedule  in  the Agreement.  Section 28 Property Law Act 2007 provides specifically:

[28]     Restriction on vendor's right to cancel agreement, etc, if purchaser in possession

(1)   This section applies –

(a)     to any right –

(i)         to cancel an agreement for sale and purchase of land; and

(ii)         that is exercisable by the vendor because of a breach of the agreement by the purchaser; and

(b)   only  after  the  purchaser  has,  under  the  agreement, entered  into possession of the land.

(2)   The vendor may exercise the right to cancel the agreement—

(a)   only   if   subsection   (3)   has   first   been   complied   with;   and

(b) only in 1 of the 2 ways specified in subsection (4). (3)   This subsection has been complied with if—

(a)    the  vendor serves on the  purchaser a  notice that complies with section 29; and

(b)  at  the  expiry of  the  period  specified  in  that  notice,  the  breach complained of has not been remedied.

(4)   The 2 ways (referred to in subsection (2)(b) and in section 29(2)(b)) of exercising the right to cancel the agreement are—

(a)    by obtaining from a court an order for possession of the land (in which case the agreement is cancelled from the making of, or from a later time specified for the purpose in, the order); or

(b)   by re-entering the land peaceably (and without committing forcible entry under section 91 of the Crimes Act 1961).

[10]     A vendor, in this case the defendant, can only exercise the right to cancel the Agreement if it serves an appropriate notice on the purchasers and at the end of the expiry period specified in the notice, the breach has not been remedied. Here, the defendant served a notice on the plaintiffs dated 16th February 2011, compliant with s 29 of the Property Law Act. It specified the breach complained of and outlined steps necessary to remedy the breach, stating the amount of instalments due to date. The notice expired 14 working days after it was served, during which time the

plaintiffs did not restore the instalment payments. Therefore, s 28(3) is satisfied and

the vendor’s right to cancellation is triggered subject to s 28(4).

[11]     Cancellation can be effected by one of two means, either by a Court order for possession or by peaceable re-entry – s 28(4) Property Law Act 2007. The defendant has elected the former option in bringing this present action.  In its present summary judgment application before me, the defendant confirms that it seeks only an order for vacant possession of the property, costs and nothing more.

[12] This claim for an order for vacant possession is based on Clause 10 of the Instalment Payment Schedule, which as I have noted sets out the defendant’s entitlements in the event of default. As set out at [6] above clause 10 lists certain events as constituting a default. The defendant relies on the plaintiffs’ failure to pay instalments since May 2010 (which before me was acknowledged), as amounting to a default under clause 10.1(ii), enabling it to exercise the options outlined in clause

10.2. Clause 10.2(v) entitles the defendant to vacant possession of the property. As default is clearly triggered here, the defendant claims that the plaintiffs have no arguable defence.

[13]     Although it is not necessary for an order for vacant possession, the effect of clause 10.2(ii) of the Instalment Payment Schedule in the Agreement needs to be addressed. This clause apparently entitles the defendant to cancel or rescind the contract in the event of default on the part of the plaintiffs. The defendant purported to do so in October 2011. However, to cancel or rescind a contract of this type, the statutory requirements of the Property Law Act 2007 must first be complied with as the plaintiffs are purchasers in possession of the property. Section 32 Property Law Act 2007 states that an express or an implied term of a contract has no effect if it conflicts with ss 28-31.  Contracting out is prohibited.  Therefore, an attempt to grant the vendor a right to rescind automatically on default in circumstances such as the present is invalid. The remedy in Clause 10.2(ii) must be conditional on obtaining from the Court an order for vacant possession or peaceably re-entering the property, neither of which had occurred up to the date of the present hearing. Therefore, at this stage the Agreement is still in force.    It has not as yet been validly rescinded/cancelled.

[14]     The plaintiffs’ defences to this counterclaim for possession by the defendant include  their  (unsubstantiated)  suggestion  that  they  are  now  able  to  pay  the instalment amounts specified in the 16th February 2011 default notice. The plaintiffs essentially claim that summary judgment for vacant possession should not be granted where a default notice can be complied with. They contend that this ought to be the case whether or not that default notice has expired. I cannot accept this assertion however. The time period set down in the default notice provides formal notice of the last available opportunity to remedy the default. An ability to pay arrears after

the notice has expired does not affect the rights of the defendant to an order for vacant possession. The plaintiffs’ subsequent ability to pay (of which there is no conclusive evidence before me in  any event)  is not an arguable defence to the counterclaim as I see it.  And it is interesting to note that the plaintiffs have lived in the property (and continue to occupy it) since May 2010 effectively ―rent free‖ and, despite numerous warnings, have still failed to pay any part of the steadily accumulating instalment arrears.

[15]     A further defence raised by the plaintiffs is that they are not in ―default‖ here for the purposes of Clause 10.1 of the Schedule. The plaintiffs claim that they had an understanding with the  defendant  that instalment payments would be  suspended while settlement negotiations for the intended early final settlement were ongoing. This understanding allegedly came into existence in May 2010 when they were first approached to complete early settlement. The plaintiffs claim that thereafter they were not required to continue the instalment payments, assuming that such payments would be subsumed into the final settlement figure.

[16]     The defendant disputes that any suspension of the instalment payments was ever agreed upon, or even contemplated by the parties. This is evidenced by their repeated demands for the instalments to continue after payments had ceased. In addition, an email from the plaintiffs dated 23 September 2010 suggests payments were in fact stopped on their part unilaterally, and it seems clear on the material before the Court that no mention of any agreement to suspend payments was made until well after the event, at the earliest in March 2011.

[17]     In my view, even if an agreement to suspend did exist (for which there is little  supporting  evidence),  it  had  expired  soon  after  the  parties  entered  into

negotiations in May 2010. As I see the position, the repeated requests to reinstate payments  and  to  satisfy  the  arrears  suggest  quite  clearly  that  the  plaintiffs’ obligations under the Agreement were still operative, and no suspension or grace period was allowed.   And, in any event, any agreement for the suspension of payments would certainly not  as  I see it  amount to an indefinite suspension, a suspension which has been spanning here over 20 months of default with the defendant in the meantime itself paying all rates on the property and meeting any mortgage or other payments it had incurred in retaining the property.

[18]     Finally, before me counsel for the plaintiff endeavoured to argue that the defendant here has acted with an absence of candour and fairness.  Despite this, it is clear that unconscionability has not been pleaded by the plaintiffs and nor does any basis for submissions of unfairness appear in any of the affidavits filed.   In any event, in my view, while such a claim might have some relevance to proceedings in relation to the disbursement of proceeds of sale of the property according to the provisions of the Agreement and Instalment Payment Schedule, it has no bearing on the defendant’s claim for possession arising out of the failure to make instalments.  I am quite satisfied here there was nothing harsh or unconscionable about the requirement to make those payments and nor is there any allegation before me to that effect.

[19]     And, in any event, in reality, the plaintiffs’ position as I see it is of their own making.  They have had every opportunity to avoid the position they find themselves in as a result of non-compliance with, the defendant’s notices, yet have refused or been unable to take the necessary steps to do so.   Had they continued to make payments, as they were required to do under the Agreement, they could have continued in possession of the property undisturbed and been able to enjoy all of the rights conferred by the Agreement, regardless of how long it took to negotiate early settlement, if at all. I reject any argument of unconscionability advanced by the plaintiffs here.

[20]     In conclusion, I repeat that I am satisfied that the plaintiff’s failure to make instalments constitutes a default under the Instalment Payment Schedule. The defendant is entitled to vacant possession of the property in accordance with clause

10.2 (v) and has provided the appropriate default notice under ss 28 and 29 Property

Law Act 2007.  It must be noted at this point, however, that this does not affect any relief that may be available to the plaintiffs under s 33 Property Law Act 2007.

[21]     Before vacant  possession  is  ordered  here,  mention  must  be made of  the minute  of  Mackenzie  J  of  21  July  2011.  The  plaintiffs  in  the  hearing  before McKenzie J sought an interim injunction preventing the defendant from retaking possession of the property. Mackenzie J granted that injunction conditional on the plaintiffs making payment of all weekly payments due under the Agreement (from the date on which payment ceased until the date of the hearing) and then continuing those  instalment  payments  as  they were  due.  I  am  satisfied  that  the  injunction granted by Mackenzie J is no longer operative, as clearly the conditions under which it was issued have not been met. The minute of 21 July 2011 does not preclude an order for vacant possession in the present case.  But in any event, so far as it may be necessary, for all the reasons outlined above, I now make an order discharging that interim injunction dated 21 July 2011.

Conclusion

[22]     For all the reasons outlined above it will be apparent that the defendant in this case has satisfied the onus upon it to show that the plaintiffs have no defence to the defendant’s claim against them for the order sought for vacant possession of the property.

[23]     Accordingly, I award summary judgment on its application in favour of the defendant and now order that the plaintiffs within ten (10) working days of the date of this judgment are to provide to the defendant vacant possession of the property in a clean, orderly, neat and attractive condition.

Costs

[24]     The issue of costs also arises in the present case. Rule 14.6(4) of the High Court Rules allows the Court to order a party to pay indemnity costs, if the party is entitled to indemnity costs under a contract or deed. Clause 9.2 of the Instalment Payment Schedule in the Agreement states that:

9.2    The Purchaser shall pay all the Vendor’s legal costs and disbursements and other  costs  and  disbursements arising from or  referable to  the  purchasers default under the contract on a full indemnity basis.     (emphasis added)

[25]     I therefore order the plaintiffs to pay to the defendant its reasonable legal costs on this application on a full indemnity basis including disbursements as approved by the Registrar.

‘Associate Judge D.I. Gendall’