Travama Trust Company Limited v Dunlop

[2016] NZHC 2375

IN THE HIG H COURT O F NEW ZEALAND HAMILTON REGISTRY

CIV-2016-419-150 [2016] NZHC 2375

IN THE MATTER

of an application for possession and other

orders

BETWEEN

TRAVAMA TRUST COMPANY LIMITED

Plaintiff

AND

FRANCIS JAMES DUNLOP Defendant

Hearing:	6 October 2016
Appearances:	Mr I Williams for Plaintiff Mr F J Dunlop in person
Judgment:	11 October 2016

JUDGMENT O F ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

11.10.16 at 10 a.m., pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

TRAVAMA TRUST COMPANY LIMITED v DUNLOP [2016] NZHC 2375 [ 11 October 2016]

[1]      The  plaintiff in this  case  seeks  summar y judgment agai nst the  defendant arising out of an agreement for sale and purchase which the parties entered into (the agreement) on or about 3 April 2012.   The agreement which was exhibited to the affidavit in support of the application that Mr Arthur Anae filed on behalf of the trust contai ned the following principal provisions:

(a)      The purchase price was $700,000 (the Purchase Price); (b)           A deposit of $100,000 was payable with:

(i)       $50,000 upon execution of the Agreement; and

(ii)      $50,000  upon   possession   of  the   Property   being taken.

(c)      Possession was to be given and taken by the Defendant on or before

12 April 2012;

(d)Pending settlement  the Defendant  was to pay to the Plaintiff $500 per week in advance from the date of possession;

(e)The Defendant was liable to pay, until settlement of the Agreement, all rates and insurances that the Plaintiff was liable to pay in respect of the Property;

(f)       The  Defendant  was  to  pay  power,   licence  costs  and  all  oth er

incidental costs that were the Defendant’s responsibility;

(g)       Settlement  of the balance  of the Purchase Price, interest and other moneys, if any, were to be paid by the Defendant in cleared funds on

16 December 2013 (the Settlement Date).

[2]      The defendant went into possession of the premises which was a hotel at

Kihi kihi in April of 2012.

[3]      By exchange of correspondence in October and November 2013, the plaintiff and the defendant agreed that:

(a)      the Settlement Date was varied to 31 March 2014;

(b)      the amount payable by the Defendant referred to in paragraph 6(d)

above  was  increased  to  $1,000  per  week  effective  16  December

2013;

(c)the Defendant agreed to pay the P laintiff a further $10,000 for delay in settlement on the Settlement Date.

[4]      On or about 31 March 2014 the defendant advised that he was unable to settle and sought an extension of the Settlement Date to 1 Jul y 2014.

[5]      On or about 17 April 2014 the plaintiff issued a settlement notice under the

Agreement.

[6]      By agreement made partly orally and partly i n writing between the plaintiff and the defendant i n April 2014 it was agreed that the Plaintiff would take no steps in reliance on the settlement notice referred to in paragraph 12 above until 30 June

2014;

[7]      On or about 30 June 2014 the defendant advised the plaintiff that he was unable to settle the Agreement.

[8]      On or about 16 Jul y 2015 the plaintiff’s solicitor issued a settlement notice and a notice under s 29 of the Property Law Act 2007 requiring settlement under the Agreement withi n 12 worki ng days.

[9]      On  or  about  12  August 2015  the  defendant’s  solicitors  advised  that  the

notices referred to in paragraph 15 above were defective and:

(a)      requested the Settlement Date be extended to 15 September 2015;

(b)      advised that if the Defendant was unable to settle on 15 September

2015 that the Defendant would deliver up possession of the Property.

[10]      On  or  about  14  March  2016  the  plaintiff  served  the  defendant  with  a settlement  notice  and  a  notice  pursuant to  s  29  of the  Property  Law  Act 2007 requiring settlement withi n 12 working days.

[11]     All of these matters have been verified by the affidavit of Mr Anae and have not been denied by the defendant.

[12]      The plaintiff now seeks to recover possession of the property.  The plaintiff seeks a declaration that the agreement is cancelled and further seeks an order for

possession of the property.   As well the plaintiff seeks the payment of rent and outgoings which as at the date of issue of the proceedings in May of 2016 amounted to $197,111. Since the proceedings were issued this fi gure has increased as was established at the hearing before me on 6 October 2016.   In addition the plaintiff seeks interest and costs.

[13]      The  agreement  in  this  case  was  a  standard  REINZ/ADLS  (8 th   edition) agreement which had engrafted on to it the licence pursuant to w hich the defendant was entitled to occupy pendi ng settlement.

[14]     As counsel for the plaintiff, Mr Ian Williams noted in his submissions on behalf of the plaintiff, the defendant did not contradict any of the above assertio ns of fact which were put forward by the plainti ff.  As Mr Williams put it:

6.Mr  Dunlop  does  not  contest  the  essence  of  Travama’s  claim  for summary  judgment.    He acknowledges  he  entered  the  Agreement and that the settlement date was varied.  He does not deny failing to settle despite receiving the settlement  notices, particularly the third notice, upon which Travama’s first cause of action is based.  Further, there is no denial of the facts  requisite  for the claim  of debt (the second cause of action).

7.Rather  Mr  Dunlop  asserts  an  affirmative  defence  (perhaps  two defences).  He claims that:1

Upon  taking  possession  the  property  was  found  to  have  many defects  in  its  structure  which  made  it  impossible  to  operate  or finance

And:2

The plaintiff was aware of the considerable works being carried out by the defendant and from many oral and other communications the defendant reasonably believed he would be given time to bring the project to a successful conclusion.

8.These  propositions  seem  to  challenge  Mr  Dunlop’s  obligation  to settle  and  Travama's  right  to  call  for  settlement  by  serving  a settlement   notice   on   14   March   2016   (under   cl   10.1   of   the Agreement).

9.There  may be an alternative  claim  by way of set-off  (it  is by no means  clear  that  this is more than an explanation  behind  the first defence), as it is also said:3

1      Notice o f oppositio n dated 22 June 2016 at [4 ] [Bo D 13].

The  amounts   claimed   as  rent,   interest,   rates  and  other expenses  [a reference  to the second  cause  of action]  have been  more  than  offset  by  substantial  expenditure  at  the premises to carry out renovations.

[15]     It is not the function of the Cour t to assist a litigant to develop defences which  he  has  not  hi mself put  forward.    However,  the  factual  material  which a defendant such as the defendant in the present case puts forward would appear to provide at least a foundation for an arguable defence, then the Court ought to review that material in a sympathetic way w hen deter mi ning the question of w hether it can be the basis for an ar guable defence.

[16]     In the present case, the defendant essentially suggests t hat the fact that he spent substantial sums of money on allegedly i mproving the premises which he was renti ng under the long-ter m agreement for sale and purchase, should give rise to some protection for his position w hen the vendor/lessor takes steps to te r mi nate the arrangement.

[17]     The purchaser/lessee must be able to demonstrate that any such ri ghts arise from the contractual arrangements that the parties have entered into.   They do not arise as a matter of general law.

[18]     At its hi ghest, the evidence w hich the defendant provides would establish, if it were  accepted,  that the  defendant infor med  the  plaintiff of  his  view  that  the premises were below standard and required substantial effort and  expendi ture to reinstate them and si milarly kept the plainti ff i nfor med about the extent of the work which the defendant was undertaki ng in the premises as it took place.

[19]     The  plaintiff filed  an affidavit which set out the  histor y of the  dealings between  the  par ties  in  considerable  detail  and  referred  to  such  contemporary documents as had come i nto existence.  It has to be borne in mi nd that during much of the histor y between the two parties, the defendant was represented by solicitors.

[20]     Neither  the  agreement  itself  or  the  correspondence  and  other  exchanges between the parties which the plaintiff produced in support of the application make

any reference at all to an agreement on the part of the parties that the defendant would be recompensed for the expenditure that he mi ght make on the hotel to bring it up to standard.

[21]     The onl y mention that is made of the detailed work that the defendant was undertaking is to be found i n the letter which he sent to the plaintiff on 31 March

2014 to which I have made reference.   While it may be supposed that the purpose

that the defendant had i n mind i n mentioni ng these various works was to influence the plaintiff to view them more favourably, and to be disposed to deal with hi m with more  clemency  than  their  contract  envisaged,  nowhere  i n  the  letter  does  the defendant set out any expectation that his expendi ture has given rise to any rights on his behalf as against the plaintiff.

[22]     The reason for that, no doubt, is that the defendant fully understood that he had no such entitlement under the for mal contract which he had entered into with the plaintiff and w hich he was, presumably, advised about by his own solicitor.

[23]   It is correct that the defendant considers that there were numerous communications  between  hi mself  and  the  plainti ff  about  the  i mprovements  that could be required to the hotel but in no case does the defendant actually specifically state that there was an agreement on the part of the plaintiff to provide further ti me to  complete  the  agreement  for  sale  and  purchase  or  that  there  would  be  some accounti ng  between  the  parties  should  the  defendant  be  unable  to  settle  the agreement and be removed from possession of the property.

[24]     Even if the defendant’s account of matters was considered to be the correct one, the advice that he gave after entering into possession of the hotel that he was carrying out substantial repairs, could not be a matter which affected the quality of the agreement pursuant to which he entered possession in the first place.  It could not be   said,   for   example,   that   the   discussions   between   the   parties   about  any improvements to  the  hotel gave rise to a collateral contract which governed  the exercise of the rights of the parties under the for mal agreement for sale and purchase. In my view it is not feasible, either, to contend that the circumstances relied upon by the defendant were background matters which gave rise to an implied term that the

defendant would be given more ti me to complete settlement of the contract because of the fact that he had made repairs to the hotel or that the plaintiff would in some other way be obliged to recognise the expenditure that the defendant had made on the premises.  It is impossible to spell out an ar guable basis for alleging that there was a clear understanding between the parties in this regard.  The requirement that such an i mplied ter m be capable of clear expression is one of the tests which the courts are to apply when considering w hether or not a ter m is to be i mplied into an

agreement.4

[25]     The fact that the defendant decided to carry out i mprovements to the property before he owned it does not, of itself, give rise to any entitlement for reimbursement from the vendor.   A purchaser in the position of the defendant cannot unilaterally change the nature of the obligations of the parties by undertaking i mprovements in the way that the defendant did in this case.   Nor do I consider that it would be satisfactory to view the evidence of the defendant as amounting to any assent on the part of the plaintiff to:

a)        the proposition that the plaintiff assented to the defendant carr ying out renovations to the building;

b)and assented to unspecified extensions of ti me for settlement i n order to enable the defendant to complete the renovations.

[26]     Not only would adopting such views be contrary to the agreeme nt for sale and purchase but it is also inconsistent with the fact that during the ti me when the defendant was seeki ng to obtai n extensions of ti me, no mention was made of the fact that such extensions were sought for any other reason other than that the d efendant was unable to settle by payi ng the purchase price.  As well, the defendant has not put forth forthright evidence that the plainti ff actually agreed to extend ti me because of the renovation program w hich the defendant had star ted.   He does no  more  than depose that he obtained a reasonable belief that he would be given ti me to complete the “project”.  The fact that the defendant mi ght have come to such concl usions is of

itself of no significance.  His obligation is to poi nt to evidence w hich would justify

4       BP Refinery(Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR.

the  Court comi ng to  the  concl usion that that was  what the  parties  agreed  to  or intended.  He has not put forward particularised evidence stating, if not the verbati m statements made on each side, but a summary of the effect of what each side said during the alleged exchanges.   He  has put forward a generalised assertion which because of i ts lack of specificity as to w hat was said, by w hom and on what occasion necessarily  has  to  be  treated  with  scepticism.    I  should  add  that  the  alleged discussions  are  nowhere  corroborated  by  statements  in  the  for m  of  emails  or correspondence or other writing.

[27]     No  basis  is  suggested  either  for  the  plaintiff  being  responsible  to  the defendant  for  the  state  of  the  premises  which were  sold.    There  is  no  express warranty to  that effect despite  the  parties  entering into  a  comprehensive  formal written agreement.   There is no assertion that the condition of the premises was misrepresented to the defendant.

[28]     It is not therefore arguable that because the plaintiff is in breach of its own obligations under the agreement for sale and purchase (whether modified or varied by an implied ter m or a collateral contract for example) which has the effect of depriving the plaintiff of the right to cancel the agreement:  Patcroft v Ingram.5

[29]     Mr Williams also addressed me on the question of w hether the matters that the defendant put forward mi ght be viewed as giving rise to an equitable set-off. Such a set-off can affect the process of settlement of land transactions.   It may i n certain circumstances  entitle  the  clai mant (that is  the  defendant  in  this  case  as purchaser) to decline to settle on receipt of a settlement notice for the full purchase price  but i nstead  to  i ndicate  a  willingness  to  settle  at a  fi gure  representi ng an

abatement of that price:  Property Ventures Ltd v Regalwood Holdings limited. 6

[30]     However because of the lack of evidence to support such a defence I do not consider that that aspect of the matter needs to be considered further.  In summar y, there is no basis for assumi ng that there is an equitable set-off available to the

defendant because no basis on which it mi ght be clai med has been established by the

5       Patcroft v Ingram  [2011] 3 NZLR 433.

6       Property Ventures Ltd v Regalwood Holdings limited  [2010] 3 NZLR 231 at [75].

evidence.  In the second place, no evidence has been provided of what the extent of that set-off would be and of the figure at which the defendant would be entitled to settle the transaction.  As I poi nted out to Mr Dunlop at the hearing of this matter, the shortage of evidence cannot be supplemented by the assertions of fact which he set out in his memorandum of submissions delivered at the hearing before me on 6

October 2016.

[31]     The position therefore is that the defendant, in seeking to i ndefi nitel y defer settlement, is not taking an option w hich is open to hi m.  He was required to either cancel the contract or go ahead and settle.  There is no third way available to hi m.7

[32]     The correct conclusion i n this case is that there is no reasonabl y arguable basis founded on the facts for the defendant to say that the plaintiff is not now enti tled to re-assume possession of the hotel.  Given t he lack of any statement of a coherent basis  for  defence  on the  part of  the  defendant and  the  fact  that in its statement of claim, which has been verified as required by the rules, the plaintiff has sought remedies including a declaration that the contractors cancel, it would not be appropriate for the Court to withhold that remedy.

[33]     In summar y therefore, the relief which the plaintiff seeks for a declaration that the contract is cancelled, and an order for the defendant to deliver up possession of the Alpha Hotel ought to be made, the defendant having no ar guable defence.

[34]     It follows  from the  foregoi ng concl usions  that the  defendant is  not able, either, to resist the claim for the payment of rental and outgoings and that therefore the plaintiff ought to be enti tled to judgment as sought in the statement of claim in that behalf as well.

Orders

[35]     For the foregoi ng reason the cour t makes the following orders:

a)        A  declaration   that   the   Agreement  is   cancelled   (including   the lease/licence created by the Agreement;

7 Holmes v Booth (1993) 2 NZ ConvC 191,633 (CA) at 191,649-191,650.

b)An order that the plaintiff is entitled to, and the defendant is to deliver up, withi n 10 working days of the date of this judgment possession of the Alpha Hotel, being the land comprised and described in computer freehold  register  SA 59B/580  and  situated  at 13  Havelock Street, Kihi kihi, Waikato.

c)        Judgment in the amount of $222,561.30.

d)       Reserving the plaintiff’s right to pursue any clai m for damages or

further outgoings payable under the Agreement

[36]     The defendant is to pay costs to the plaintiff on a 2B basis together with disbursements as fixed by the Registrar.

J.P. Doogue

Associate Judge