Westpac New Zealand Limited v Manukau Road Holdings Limited
[2014] NZHC 1928
•11 August 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1004 [2014] NZHC 1928
UNDER Part of the High Court Rules IN THE MATTER
of an application for summary judgment
BETWEEN
WESTPAC NEW ZEALAND LIMITED Plaintiff
AND
MANUKAU ROAD HOLDINGS LIMITED
Defendant
Hearing: 11 August 2014 Appearances:
E C Gellert and B Johnston for the Plaintiff
A Kashyap for the DefendantJudgment:
11 August 2014
ORAL JUDGMENT OF THOMAS J
Solicitors:
Simpson Grierson, Auckland. A Kashyap, Auckland.
WESTPAC NEW ZEALAND LIMITED v MANUKAU ROAD HOLDINGS LIMITED [2014] NZHC 1928 [11
August 2014]
Introduction
[1] The plaintiff, Westpac New Zealand Limited, has applied for summary judgment against the defendant, Manukau Road Holdings Limited, for loss Westpac claims it has suffered following the on-sale of property. The defendant failed to settle pursuant to a sale and purchase agreement. This all took place in 2012.
Pleadings and evidence
[2] The evidence I have considered in this matter consists of an affidavit of Michael Phillips, senior manager of the plaintiff with personal knowledge of the transaction; and three reply affidavits, one from Mr Tuck, lawyer for the plaintiff who sets out the legal situation; one from Mr Pleciak, manager of Bayleys Real Estate who managed the sale of the property in question for Westpac; and one from Mr Chapman from Westpac.
[3] Evidence on behalf of the defendant consists of two affidavits from Mr
Krishnamurthi.
[4] The plaintiff’s claim is contained in the statement of claim dated April 2014. It claims loss as result of the failure of the defendant to settle the purchase of property.
[5] No statement of defence has been filed. That is not of course required in opposing a summary judgment application. The notice of opposition alleges that the defendant was induced to enter into the contract by a misrepresentation by the plaintiff. The notice of opposition states that the defendant has strong ground to mount a counterclaim against the plaintiff for return of the sum of $550,000 paid by the defendant as part payment of the purchase price.1 No statement of counterclaim
has been filed.
1 In any event contractual provisions which exclude a sight of set off will be enforced against a defendant who seeks to rely on a set off as a defence to an application for summary judgment. Grant v NZMC Ltd [1989] 1 NZLR 8 (CA); ASB Bank Limited v Lin [2013] NZHC 2528 at [34]. In this case the agreement between the parties included a no set off provision.
Background
[6] The property in question (property) was vacant commercial land at Gulf Harbour Auckland. Westpac had advanced considerable financing to the owner of the property, Gulf Harbour Marlin Limited. Around February 2012 Gulf Harbour Marlin Limited defaulted in its obligations to Westpac. Westpac appointed receivers. Westpac issued Property Law Act notices in respect of the property.
[7] The property was placed on the market. By this time Gulf Harbour Marlin
Limited owed in excess of $16 million to Westpac.
[8] The land in Gulf Harbour was subject to a scheme secured by covenants registered against it. The owners of land in Gulf Harbour are members of an association (Association) providing for the ownership, use, operation, maintenance, and repair of the common facilities in Gulf Harbour Marine.
[9] The property holds controlling member status within the Association. That controlling member status has the effect that the owner of the property holds the majority voting rights in any meetings of the Association and the committee, with the exception of special resolutions.
[10] It seems that, three years prior to the events in question in 2009, there was an attempt to challenge the controlling member status. The dispute went to arbitration and an arbitral award was delivered in September 2009 confirming the controlling member status. There was an appeal against that decision which was discontinued.
[11] Bayleys, on behalf of Westpac, marketed the property for sale by tender. Bayleys produced an information memorandum and tender document. There was a five week marketing campaign. The tender period closed and the defendant was the successful tenderer. The tender was accepted on or about 30 July 2012 with a settlement date of 18 October 2012. The agreement was signed by Mr Aaron Colthurst on behalf of the defendant, who was the sole director of the defendant. The purchase price was $3,500,000.
[12] The deposit was paid in two tranches. The first tranche was paid on 30 July
2012. Prior to payment of the second tranche, Mr Colthurst informed Bayleys by email that it seemed there was to be a fresh challenge by the Association to the controlling member status. Bayleys informed Westpac, who informed the receiver, who immediately instructed its lawyers to write a strongly worded letter to the Association. It seems that the challenge was not pursued.
[13] The defendant paid the second tranche of the deposit on 8 August 2012 but then failed to settle. There were some negotiations between the parties and on
30 November 2012 Westpac agreed to extend the date for expiry of the settlement notice. In consideration for that the defendant paid Westpac a further non-refundable sum of $200,000. The defendant failed to settle on the due date of 14 December.
[14] Eventually, after some to-ing and fro-ing, almost a year later than the original settlement date, on 6 September 2013 Westpac cancelled the agreement.
[15] Westpac sold the property by tender for the sum of $2.76 million. It seems that four months after, the property was sold for approximately $4,000,000.
[16] Westpac claims its loss on the resale, its holding costs, costs associated with resale and interest.
The Law
[17] The principles surrounding summary judgment are well known. Pursuant to rule 12.2 of the High Court Rules the Court may give judgement against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in a statement of claim.
[18] In Krukziener v Hanover Finance Limited the court said:2
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that here is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left
2 Krukziener v Hanover Finance Limited (2008) 19 PRNZ 162 at [26].
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 at 341 (PC). 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).
[19] The Court must be satisfied there is no defence, no real question to be tried. As noted by Summers J in Pemberton v Chappell a defendant must provide sufficient particulars to show that there is an issue worthy of trial. Hillyer J added that it is not sufficient to say that the action will be defended on the basis of facts which are not deposed to by or on behalf of the defendant.
Issues
[20] In this case is there a real question to be tried in respect of:
(a) A misrepresentation inducing the defendant to enter into the contract;
and/or
(b)A breach by the plaintiff of its duty to the defendant when it resold the property.3
Is there a real question to be tried in respect of a misrepresentation?
[21] The first question is whether there was indeed a representation. The evidence from Westpac was there was no representations were made to the defendant. The affidavit evidence from the Bayleys Agent was that he spoke to the director of the defendant (Mr Colthurst) who requested tender documents late in the piece, and that is confirmed by Bayleys’ report to Westpac included in the bundle of documents, and
then regarding payment of the deposit.
3 I will consider this issue because it is alluded to in the defence materials although conceded by
Mr Kashyap that it is the weaker of the two grounds of defence.
[22] Relevant as to whether there was indeed any representation are the provisions in the tender document and advertising material. In the information memorandum there are copies of the certificates of title for the property which include reference to the covenants. The information memorandum, however, makes no mention of the controlling member status. Furthermore, it focuses on an Environment Court decision and the development prospects for the property.
[23] The tender document make it clear, as one would expect in the case of a mortgagee sale, that there was no warranty by the vendor. Clause 18 of the tender document is a comprehensive clause which provides that the purchaser relies entirely on its own enquiries and investigations. Indeed clause 18.2 specifies that the purchaser shall not have any claim against the vendor or any other person in regard to such matters. Pursuant to clause 18.2 the purchaser must verify any information to its own satisfaction. Pursuant to clause 18.4, “the property is sold on an “as is where is” basis and accordingly no representations or warranties in relation to, or for the sale of, the property have been or are made to the purchaser by the vendor or any other person on behalf of the vendor”. The purchaser warrants that it has satisfied itself.
[24] The contemporaneous documentary evidence therefore strongly supports the
plaintiff’s position that no representations or warranties were made.
[25] Indeed, as I had pointed out to Mr Kashyap, the defendant’s case is somewhat unclear. There is some suggestion in one of the affidavits that the representation must have been a representation by omission. In other words, that Westpac or its agent deliberately withheld information that there was to be a challenge to the controlling member status. In one of the affidavits the defendant states that the plaintiff confirmed that it had disclosed all material information and that the defendant was not affected by any matter not disclosed. In his submission Mr Kashyap makes reference to a misrepresentation by the agent that the property had controlling member status and he says that it is unchallenged.
[26] In respect of any positive representations however, there is no evidence as to who made them, to whom, or when. There is no evidence from Mr Colthurst, the
director of the defendant at the time and the only person to whom the agent says he spoke. Indeed, in his submissions, Mr Kashyap appeared to concede that he did not have evidence of the representation.
[27] Furthermore, this is in my assessment a case where a robust approach is warranted. Not only does the defence concede there is no evidence of the representation but such a representation is, in my assessment, inherently unlikely and defies credibility in the situation of a mortgagee sale particularly given the comprehensive exclusion clauses in the agreement.
[28] But, even if there were some sort of representation, was it a misrepresentation either in the accepted use of the term or as misleading and deceptive conduct under the Fair Trading Act?
[29] There is no evidence that Westpac or its agent knew at the time of the agreement that there was any challenge to the controlling member status of the property. I say that given the background of an arbitral award three years previously where the appeal against that award was discontinued.
[30] Westpac says that the first it knew of the issue was when it received, by its agent, an email dated 2 August 2012, that is after the agreement was entered into, from Mr Colthurst to the agent. He starts with the words, “I am not sure whether you are aware of this” and I accept that that further supports Westpac’s position. It may well be, given that there was, it seems, a meeting of the Association to be held shortly after that email, that there must have been some stirrings at least amongst the Association around the time of the agreement.
[31] However I also accept the evidence that Mr Colthurst by his position as a director of other companies owning land in Gulf Harbour, was well placed to know about this.
[32] Westpac’s actions on being alerted to the issue support that its assertions that it knew nothing. Westpac immediately contacted the receivers who were obviously not aware of the situation either. Their lawyers wrote immediately to the Association
pointing out that they had not received notice of the meeting, pointing out the history of the matter and the arbitral award, and, in plain terms, putting the Association on notice that, if it pursued the matter, they would seek injunctive relief and all the costs associated with that. It seems that no further action was taken by the Association. However, importantly, the defendant then paid the second tranche of the deposit. That was on 8 August.
[33] I accept that can be seen as affirmation of the agreement. That is, with full knowledge of the position or misrepresentation, which, as I say, I do not accept in any event, the second tranche of the deposit was paid. The inference must be that there was an intention to affirm the agreement by that payment. That position is underscored by the $200,000 paid by the defendant in December 2012 as consideration for a further extension of its time to settle.
[34] What happened after that is further evidence that there is no real defence to the claim on the basis of misrepresentation. It was not until August 2013 that the defendant’s lawyers made reference to the issue of controlling member status. Their first letter suggested that some uncertainty surrounding the issue was causing a difficulty with the defendant’s financers. It was only their second letter dated 13
September 2013 after Westpac had cancelled the agreement that there was a suggestion of a misrepresentation.
[35] I am satisfied that there is no defence to the claim on the basis of misrepresentation. There is no evidence of a misrepresentation. If there were any such misrepresentation, the issue was comprehensively dealt and no further action to change controlling member status was taken. With full knowledge of a potential challenge the defendant paid the second tranche of the deposit and then a further sum of $200,000.
Did Westpac breach its duty to the purchaser when it re-sold the property?
[36] The defence suggested that Westpac was in breach of some sort of duty it owed to the defendant in selling the property for the amount it did. First, there was some reference to a statutory duty. Of course, Westpac had no statutory duty to the defendant. Its statutory duties are contained in the Property Law Act 2007 and the
duties are owed to the mortgagor of the property and the other parties listed in the legislation. The defendant does not fall within any such category.
[37] The duty owed by Westpac to the defendant was an obligation to act reasonably to mitigate its loss. The onus is on the defendant to show that Westpac breached its duty. The evidence is that Westpac undertook reasonable efforts on the resale of the property including advertising it in a number of publications, allowing a three week tender period, approaching the parties who had previously indicated an interest in the property. The fact that it was sold to a party who was not involved at the time of the defendant’s purchase is proof of the success of the advertising campaign. The evidence from the agent was that, in the agent’s opinion, the price
was the best reasonably obtainable.4 I note that the price was in accordance with the
agent’s earlier estimate of the mortgagee sale price.
[38] The fact that those purchasers then on-sold for a substantial profit some three months later is not evidence that the plaintiff did not act reasonably to mitigate its loss.
Decision
[39] For those reasons, I am satisfied that the defendant has no defence to the claim. I am satisfied, having reviewed the agreement, that the plaintiff is entitled to claim its loss on resale and all costs associated with that. I note it is claiming interest at 5 per cent rather than the rate to which it is entitled under the agreement.
[40] For those reasons judgment is given for the plaintiff in the amount set out in
its memorandum of today’s date. Costs on a 2B basis are also awarded to the
plaintiff.
Thomas J
4 Given the amount of the mortgagor’s indebtedness to Westpac, refer [7] above, it was in
Westpac’s interest to maximise the sale price.
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