Vincent Street Trustee Ltd v De Jongh HC Auckland CIV 2010-404-691
[2010] NZHC 1082
•18 June 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-000691
BETWEEN VINCENT STREET TRUSTEE LTD Plaintiff
ANDBRENT ANDREW DE JONGH AND STEWART HAMILTON LAW Defendants
Hearing: On the papers
Appearances: S McAnally for Plaintiff
No appearance for Defendants
Judgment: 18 June 2010 at 10:00 am
JUDGMENT OF ASSOCIATE JUDGE BELL
This judgment was delivered by me on 18 June 2010 at 10:00 am pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar
Date: ………………….
Solicitors:
Keegan Alexander, PO Box 999, Auckland
VINCENT STREET TRUSTEE LTD V BRENT ANDREW DE JONGH AND STEWART HAMILTON LAW HC AK CIV-2010-404-000691 18 June 2010
[1] The vendor entered into an agreement on 19 March 2007 to sell the defendants an apartment, unit 1409, in the plaintiff’s development at 152-156
Vincent Street, Auckland, for $316,000. Settlement was to take place on
9 December 2009 but the defendants defaulted. The plaintiff issued a settlement notice and the defendants remained in default. On an application for summary judgment, the plaintiff obtained an order for specific performance of the agreement on 31 March 2010. The defendants have not complied with the order.
[2] Inquiries by the plaintiff disclose that the defendants have sold their home in
Wellington and have left for overseas indefinitely.
[3] The plaintiff has now applied without notice for these orders:
a) An order discharging the specific performance orders of the judgment of Lang J given on 31 March 2010;
b)An ancillary declaration that the sale and purchase agreement between the plaintiff and the defendants dated 19 March 2007 is rescinded;
c) Directions for further conduct of the case.
[4] In making this application to the Court, the plaintiff is following authorities such as Austins of East Ham Ltd v Macey [1941] Ch 338, 341, Singh v Nazeer [1979] Ch 474, 480 and Johnson v Agnew [1980] AC 367 (HL), 399. The judgment of Sir Wilfred Greene MR in Austins of East Ham Ltd gives the basis for this approach:
The contract is still there. Until it is got rid of, it remains as a blot on the title, and the position of the vendor, where the purchaser has made default, is that he is entitled, not to annul the contract by the aid of the court, but to obtain the normal remedy of a party to a contract which the other party has repudiated. He cannot, in the circumstances, treat it as repudiated except by order of the court and the effect of obtaining such an order is that the contract, which until then existed, is brought to an end. The real position, in my judgment, is that, so far from proceeding to the enforcement of an order for specific performance, the vendor, in such circumstances is choosing a remedy which is alternative to the remedy of proceeding under the order for specific performance. He could attempt to enforce that order and could levy an execution which might prove completely fruitless. Instead of doing that, he elects to ask the court to put an end to the contract, and that is an alternative to an order for enforcing specific performance.
[5] The New Zealand judgment which endorses this approach most fully is the judgment of Associate Judge Osborne in Pegasus Town Ltd v Wong HC Christchurch CIV-2008-409-2087 15 March 2010. The approach taken by these authorities is that, when a vendor plaintiff is faced with further default by a defaulting purchaser after the plaintiff has obtained an order for specific performance, the plaintiff must come back to Court and obtain a fresh order of the Court discharging not only the Court order but also the agreement for sale and purchase. The Court is said to exercise its discretion on equitable principles.
[6] In my second judgment in Arranmore Developments Ltd v Zeeland Developments Ltd HC Auckland CIV-2009-404-004342, 15 June 2010, I took another view. I noted that the Court of Appeal had indicated that the issue remained open in Alexander v Gitmans CA11/04 17 March 2004 at [21].
[7] My view is that, when there is a fresh or ongoing default after the Court has issued an order for specific performance, the normal rules of contract law govern the cancellation of the agreement for sale and purchase: see s 7(1) of the Contractual Remedies Act 1979:
7 Cancellation of contract
(1)Except as otherwise expressly provided in this Act, this section shall have effect in place of the rules of the common law and of equity governing the circumstances in which a party to a contract may rescind it, or treat it as discharged, for misrepresentation or repudiation or breach.
[8] Where the purchaser has entered into possession under the agreement, s 33 of the Property Law Act 2007 will apply, but in other cases, any right to cancel for a fresh or ongoing breach after an order for specific performance has issued, is governed by ss 7 and 8 of the Contractual Remedies Act.
[9] If the order for specific performance does not allow the plaintiff to cancel, it will be necessary to come back to Court to have the order discharged, because the order binds both parties to perform the agreement, and without a further order of the Court, the vendor remains bound and is not free to cancel. But when the vendor comes back to Court to seek an order for discharge of the earlier order, the only
inquiry to be made by the Court is whether the vendor has a right to cancel the agreement for sale and purchase, applying normal contract rules for cancellation of contracts (including ss 33 of the Property Law Act 2007, where applicable).
[10] In taking this position, my views are close to those of the authors of Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4th ed LexisNexis by Meagher, Hayden and Leeming at [20-265] 697-700.
[11] Applying that approach to the present case, I am satisfied that the plaintiff is entitled to cancel the agreement for sale and purchase under s 7 of the Contractual Remedies Act 1979. There has been an ongoing repudiation by the defendants under s 7(2). Their conduct in selling their property in Wellington and departing for overseas indefinitely makes it clear that they do not intend to perform their obligations under the agreement. Likewise, under s 7(3)(c), it is clear that they will not perform. The breach of obligation under s 7(3)(c) will result in a substantial loss of benefit to the vendor. Accordingly, the vendor’s right to cancel is clear.
[12] This judgment simply recognises the vendor’s right to cancel. The Court does not itself cancel the agreement for sale and purchase.
[13] The plaintiff has applied without notice to the defendants. It is appropriate to deal with this application without the defendants having been served. They took no step in the proceeding in which summary judgment was obtained, although they were duly served. From the inquiries made by the plaintiff, I accept that it is not practical to direct service of the application on them. I bear in mind that on the approach I have taken, the plaintiff is entitled to cancel the agreement for sale and purchase without prior notice to the defendants and the discharge of the order for specific performance is more in the nature of a routine and procedural application.
[14] Given that the defendants have left the jurisdiction without appointing any agents to attend to this matter or giving any forwarding address, for the purpose of s 8(1) of the Contractual Remedies Act, it is not reasonably practical for the plaintiff to communicate with the defendants. The defendants cannot reasonably expect to receive notice of the cancellation because of their conduct in relation to the
agreement for sale and purchase by leaving the country in the way that they have. An overt act reasonable in the circumstances might be for the vendor’s lawyers to give notice of the cancellation to the defendants’ former lawyers who formerly held conveyancing instructions.
[15] Following cancellation, the plaintiff is now likely to resell the apartment. After the resale it may wish to claim damages for any shortfall incurred, plus any other damages it might be entitled to. In that case, the plaintiff will need to file an amended pleading. At that stage, it may wish to apply to the Court for further directions for the conduct of the proceeding.
[16] For future, the plaintiff’s lawyers may care to note that in cases where the purchaser has not entered into possession under the agreement, the following provision may be inserted in an order for specific performance to save applications such as this:
After the date fixed for settlement in this order, if the plaintiff shall give the defendant a written notice of its intention to cancel the agreement within 12 working days and further gives a notice of cancellation on the expiry of the
12 working days, the parties shall not be required to comply with those parts of this order requiring settlement of the agreement, unless the defendant files an application in Court within the 12 working days of receiving the first notice and the application seeks an order declaring that the plaintiff is not entitled to cancel the agreement.
[17] I make the following orders:
a) Paragraphs (a)(i)-(ii) and (b) of the orders of Lang J of 31 March 2010 are discharged, but not the order for costs;
b)It is declared that the plaintiff is entitled to cancel the agreement for sale and purchase between the plaintiff and the defendants dated 19
March 2007;
c) The proceeding is adjourned without any new date being given, to allow the plaintiff to resell the apartment. After resale, the plaintiff may apply for further directions;
d) The plaintiff is entitled to costs on this application on a 2B basis, plus
disbursements as approved by the Registrar.
R M Bell
Associate Judge
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