WENDY ANNE MCHARDIE and ROBERT BRUCE MCHARDIE s AND DALJIT KAUR and JOBANDEEP SINGH s

[2024] NZHC 2734

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2024-419-77

[2024] NZHC 2734

BETWEEN

WENDY ANNE MCHARDIE and ROBERT BRUCE MCHARDIE
Plaintiffs

AND

DALJIT KAUR and JOBANDEEP SINGH

Defendants

Hearing:	10 September 2024
Appearances:	GHJ Brant and MK Benipal for the Plaintiffs No appearance for the Defendants
Judgment:	27 September 2024

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 27 September 2024 at 4.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Stace Hammond, Auckland

MCHARDIE v KAUR [2024] NZHC 2734 [27 September 2024]

Introduction

[1]    The plaintiffs seek summary judgment of their claim for breach of contract following the defendants’ failure to settle the purchase of a property in Matangi, Hamilton pursuant to a sale and purchase agreement entered into in 2021 (Original Agreement).

[2]    The plaintiffs entered into a new sale and purchase agreement in December 2023 (New Agreement) but are suing the defendants for the following losses arising from the failure to settle the Original Agreement:

(a)$2,080,000, being the difference between the sale price under the Original Agreement of $6,200,000 (less the deposit of $620,000) and the purchase price in the New Agreement of $3,500,000;

(b)resale costs of $87,514.74; and

(c)interests and costs.

[3]    The first named defendant originally filed a notice of opposition but it was withdrawn at the first call on 12 August 2024. The second named defendant has been served but has not taken any steps.

[4]    At the call on 12 August, Mr Brant therefore sought summary judgment on liability but advised that there were issues in respect of the quantum claimed. Mr Brant explained that his firm had been instructed following the filing of the statement of claim and considered that the quantum as pleaded in the statement of claim needed to be recalculated because:

(a)late settlement interest was claimed simply on the shortfall (the difference between the purchase prices) when, until settlement of the New Agreement in January 2025, the plaintiffs are entitled to interest on the unpaid portion of the purchase price;

(b)lease payments received by the vendor had been deducted from the principal sum when any income from the property ought to be offset against the interest accruing.

[5]    By minute dated 13 August 2024 I therefore granted summary judgment on liability but made directions for the filing of a further memorandum by the plaintiffs on quantum.1 The quantum memorandum has now been filed. I briefly set out the background before considering the various heads of loss below.

Background

Original Agreement

[6]    The plaintiffs entered into the Original Agreement with the defendants on or about 11 November 2021 with the following terms:

(a)the purchase price was $6,200,000 plus GST;

(b)the settlement date was 1 June 2023 or earlier by agreement;

(c)the deposit was to be paid in two tranches, the first of $248,000 when the agreement became unconditional and the second of $372,000 on   1 July 2022; and

(d)the interest rate for late settlement was agreed to be 15 per cent per annum.

[7]On or about 24 November 2021 the defendants paid the initial deposit of

$248,000 and, on 1 July 2022, the further deposit of $372,000, together totalling

$620,000.

[8]However, the defendants did not settle on 1 June 2023 as agreed.

1      McHardie v Kaur HC Hamilton CIV-2024-419-77, 13 August 2024.

[9]    On 26 September 2023, a settlement notice was issued requiring settlement by 12 October 2023. The defendants did not comply with the settlement notice.

[10]   As a result, on 24 November 2023 the plaintiffs cancelled the Original Agreement.

New Agreement

[11]   The plaintiffs entered into the New Agreement on 22 December 2023 with new purchasers on the following terms:

(a)purchase price of $3,500,000;

(b)deposit of $350,000;

(c)settlement date of 20 January 2025;

(d)agreement is conditional on agreement to lease the property for

$8,181.82 (GST excl) monthly from 20 February 2024 until the settlement date; and

(e)for commission to be paid to the real estate agent in the sum of $60,000.

[12]   The New Agreement became unconditional on 23 February 2024 following the plaintiffs agreeing to the lease of the property.

[13]The deposit of $350,000 under the New Agreement was paid on 4 March 2024.

Remedies available against the defendants

[14]   The Original Agreement is on the ADLS/REINZ (Tenth Edition 2019(2)) standard form. Clause 11.4(1) of that Agreement provides that where the purchaser does not comply with a settlement notice, the vendor may either sue for specific performance or:

(b)cancel this agreement by notice and pursue either or both of the following remedies, namely:

(i)forfeit and retain for the vendor’s own benefit the deposit paid by the purchaser, but not exceeding in all 10% of the purchase price; and/or

(ii)sue the purchaser for damages.

[15]The plaintiffs have cancelled and are pursuing both of the above remedies.

[16]   Clause 11.4(3) makes specific provision where resale is contracted within one year from the date by which the purchaser should have settled in compliance with the settlement notice.

[17]   Here, the settlement notice required compliance by 12 October 2023 and the date the New Agreement was entered into was 22 December 2023. Clause 11.4(3) therefore applies. This clause provides that the damages claimable by the vendor under cl 11.4(1)(b)(ii), as set out above, include all damages at common law or in equity and include (but are not limited to):2

(a)interest on the unpaid portion of the purchase price at the interest rate for late settlement from the settlement date to the settlement of such resale; and

(b)all costs and expenses reasonably incurred in any resale or attempted resale; and

(c)all outgoings (other than interest) on or maintenance expenses in respect of the property from the settlement date to the settlement of such resale.

[18]I discuss these categories below.

Interest on the unpaid portion of the purchase price (cl 11.4(3)(a))

[19]   Until the deposit from the New Agreement was paid on 4 March 2024, the unpaid portion of the purchase price was $5,580,000 ($6,200,000 less the deposit of

$620,000).

[20]   Following receipt of the deposit under the New Agreement the unpaid portion reduces to $5,230,000 ($5,580,000 less new deposit of $350,000). The defendant are still required to pay late settlement interest on the amount and not on the difference in

2      Original Agreement, cl 11.4(3).

the purchase prices until settlement actually occurs in January 2025 and payment under the New Agreement is received.

[21]   Following settlement in January 2025, interest is still payable at the late settlement interest rate of 15 per cent but on the reduced unpaid portion by that stage of $2,080,000 ($5,580,000 ‒ $3,500,000).

Treatment of lease payments

[22]   The plaintiffs set out a schedule calculating interest to 10 September 2024 (the date of the quantum hearing), until the settlement date for the New Agreement of    20 January 2025, and until payment. During the first two periods lease payments are being received. The plaintiffs submit the lease payments need to be deducted from the interest awarded rather than from the unpaid portion of the purchase price. This is on the basis that in Mana v Fleming the Court of Appeal commented that if a property is leased before settlement of the resale, the vendor must account to the purchaser for rents or retain them in lieu of its right to interest.3 The agreement in issue in Mana v Fleming was an earlier version of the ADLS agreement, with the Court referring to  cl 3.9(2),4 the equivalent to cl 3.12(2) of the Original Agreement in these proceedings. The Court of Appeal explained that this provision excludes double recovery through retaining both the benefit of income from a leased property together with contractual interest.5

[23]   Here, the plaintiffs claim the difference between the penalty interest accrued and the lease payments. I agree that this is the appropriate way to proceed as it allows the plaintiffs to recover the penalty interest due but prevents double recovery.

[24]   I have adjusted the periods for which interest is claimed to reflect the timing of this judgment. As the lease payments are monthly, I have done this on the basis of there being 30 days in a month for ease of calculation.

3      Mana v Fleming [2007] NZCA 324, (2007) 8 NZCPR 469 at [57].

4 At [57].

5 At [57].

[25]   Since payment of the deposit under the New Agreement, late settlement interest is accruing at $2,149.32 per day. The lease payments equate to $8,181.82 per month divided by 30 days equalling $272.73 per day. The outstanding late settlement interest payment per day is therefore $1,876.59 ($2,149.32 ‒ $272.73) up until settlement on 20 January 2025.

[26]   For the period from the date of judgment to the date of settlement of the New Agreement, I have calculated the daily amount that will accrue taking both interest and the lease payments into account so that if the defendants pay the judgment sum prior to the settlement date on 20 January 2025 it will be clear how much is owing.

[27]   No lease payments will be paid after settlement so they will no longer need to be taken into account. On this basis, the daily late settlement interest payable will reduce to $854.79 per day (($2,080,000 × 15 per cent) ÷ 365). I include orders in respect of interest on this basis below.

Costs, expenses, outgoings and maintenance (cl 11.4(3)(b) and (c))

[28]   The plaintiffs have grouped the items they claim under cl 11.4(3)(b) and (c) together. These include the following costs for maintaining the property in the interim or preparing the property for resale:

(a)tree/hedge maintenance (31 October 2023) of $3,869.57;

(b)chemicals (31 October 2023) of $1,811.23;

(c)costs for digger works cleaning up property for resale (including transporting digger to and from property) (12 November 2023) of

$7,200; and

(d)spraying the property (30 November 2023) of $1,581.25.

[29]In addition, the plaintiffs claim:

(a)the costs of the property auction (20 October 2023) of $13,052.26; and

(b)real estate commission (19 March 2024) of $60,000.

[30]   The total amount claimed in these categories is $87,514.31. I accept that these amounts are properly claimed as costs and expenses of the resale or maintenance of the property, therefore falling within the categories set out in cl 11.4(3)(b) and (c) of the Agreement.

[31]   Late settlement interest does not apply to these amounts but interest under the Interest on Money Claims Act 2016 is claimed from the dates of the invoices as recorded above. However, interest should only be awarded from the date of payment and the evidence does not record when payment was actually made. Rather than seeking further evidence, I use the date of filing the proceedings, 3 April 2024, as an approximate date because the affidavit of Mr McHardie in support records the invoices as having been paid by that time.

Costs

[32]   Costs and disbursements on a 2B basis are claimed as set out in schedule C. The steps claimed are appropriate and so an award is made on that basis below.

[33]   The disbursements claimed are exclusive of GST and include filing and service fees. The filing fee for sealing these orders is claimed prospectively as is usual but the new rate of $65 including GST is not claimed. I have adjusted this so the correct amount is awarded.

Result on quantum

[34]   Further to the order made on 13 August 2024 granting summary judgment on liability, the defendants are to pay the plaintiffs the following amounts:

(a)$2,080,000, being the unpaid portion of the purchase price under the Original Agreement following payment of the purchase price under the New Agreement;

(b)interest at the late settlement rate of 15 per cent on the unpaid portion of the purchase price from the settlement date of the Original Agreement to the date of payment as set out in schedule A;

(c)maintenance and resale costs of $87,514.31;

(d)interest on the maintenance and resale costs under the Interest on Money Claims Act from the date the proceedings were filed of 3 April 2024 until payment as set out in schedule B;

(e)costs on a 2B basis of $11,233 plus disbursements of $1,903.48 for a total of $13,136.48 as set out in schedule C.

Associate Judge Sussock

SCHEDULE A

Late settlement interest calculations

Interest at late settlement rate on unpaid portion of the principal sum

Amount

(i) Interest from 1 June 2023 to 3 March 2024

Unpaid portion of principal: $5,580,000

Purchase price ($6,200,000) – deposit paid ($620,000)

Daily interest calculation:

$5,580,000 × 15 per cent

$837,000 interest per year

$837,000 ÷ 365 days

$2,293.15 interest per day

Total ($2,293.15 × 277 days):

$635,202.55

(ii) Interest from 4 March 2024 to 27 September 2024

Unpaid portion of principal: $5,230,000

$5,580,000 – deposit from re-sale ($350,000)

Daily interest calculation:

$5,230,000 × 15 per cent

$784,500 interest per year

$784,000 ÷ 365 days

$2,149.32 interest per day

Total ($2,149.32 × 208 days):

$447,058.56

Total Interest 1 June 2023 to 27 September 2024:

$1,082,261.11

Less: Lease Payments made on 20th of month in advance

Lease payment calculation:

Lease: $8,181.82 per month

Duration: February 2024 to September 2024

20 February to 19 March 2024 = $8,181.82
20 March to 19 April 2024 = $8,181.82

20 April to 19 May 2024 = $8,181.82

20 May to 19 June 2024 = $8,181.82

20 June to 19 July 2024 = $8,181.82

20 July to 19 August 2024 = $8,181.82

20 August to 19 September 2024 = $8,181.82

20 September to 19 October 2024 = $8,181.82

Net income (from land) to be offset against interest:

$65,454.56

Net interest as at 27 September 2024:

(Interest ‒ net income)

$1,082,261.11 ‒ $65,454.56

$1,016,806.55

Interest from 28 September 2024 calculated as follows:			Amount
(i) Interest from 28 September 2024 until 20 January 2025
Daily interest:		$2,149.32 interest per day
Less: daily lease income		$272.73
Total daily interest ($2,149.32 ‒ $272.73):			$1,876.59 per day
(ii) Interest from 20 January 2025 until payment
Daily interest calculation:
$2,080,000 × 15 per cent	$312,000 interest per year
$312,000 ÷ 365 days	$854.79 interest per day
Total daily interest:			$ 854.79 per day

SCHEDULE B

Costs and expenses at resale and maintenance

Description of Item	Amount	Interest from 3 April 2024 to 27 September 2024	Total
a) Property brokers — costs of the auction	$13,052.26	$383.10	$13,435.36
b) Clark & Son Ltd — tree/hedge maintenance	$3,869.57	$113.58	$3,983.15
c) Farm source — chemicals	$1,811.23	$53.16	$1,864.39
d) Regal Haulage NZ Ltd – costs for getting digger to/from the property and digger works cleaning up property for sale	$7,200.00	$211.33	$7,411.33
e) Ohaupo Agricultural Ltd — spraying the property	$1,581.25	$46.41	$1,627.66
f)   Property brokers — commission	$60,000.00	$1,761.09	$61,761.09
Total	$87,514.31	$2,568.67	$90,082.98

SCHEDULE C

2B Legal costs and disbursements

Costs
Item	Days	Amount
Costs 2B	$2,390 per day
Step
1	Commencement of proceeding by plaintiff	3	$7,170.00
12	Appearance at mentions hearing or callover	0.2	$478.00
22	Filing Interlocutory Application	0.6	$1,434.00
22	Filing Interlocutory Application for Substituted Service	0.6	$1,434.00
28	Obtaining Judgment without Appearance	0.3	$717.00
Total costs:	4.7	$11,233

Disbursements
Item	Amount
Filing fees:
Application for summary judgment application	$1,147.50
Application for substituted service	$282.61
Service fees:
Service of proceedings on first defendant	$136.85
Application for summary judgment documents	$140.00
Judge’s minute and summary judgment documents containing court date	$140.00
Sealing fee	$56.52
Total disbursements:	$ 1,903.48
Total legal costs and disbursements:	$ 13,136.48