Whitelaw v Shakespeare
[2023] NZHC 3166
•10 November 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-001429
[2023] NZHC 3166
BETWEEN CLIFFORD SEYMOUR WHITELAW and WILLIAM FRANCIS McENTEE as
executors of the estates of Ronald Leonard Nisbet and June Isobel Laura Nisbet
PlaintiffsAND
JULIA SANDRA SHAKESPEARE
Defendant
Hearing: 24 October 2023 Appearances:
M A Tapsell for the Defendant / Applicant A Murray for the Plaintiffs / Respondents
Judgment:
10 November 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 10 November 2023 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
DLA Piper, Auckland
Law & Associates, Auckland
WHITELAW v SHAKESPEARE [2023] NZHC 3166 [10 November 2023]
[1] The plaintiffs and the defendant entered into an unconditional sale and purchase agreement (the Agreement) for a property at Selwyn Road, Howick, Auckland (the Property). The defendant did not settle because she was unable to sell her own properties for the price she had expected. The plaintiffs cancelled the Agreement and sold the Property to a third party. The plaintiffs now sue the defendant for the shortfall and apply for summary judgment. The defendant opposes the entry of summary judgment.
[2] The defendant has applied for leave to serve a third party notice on the real estate agents engaged by the plaintiffs to sell the Property, and subsequently by the defendant to sell her own properties. The plaintiffs oppose leave being given.
[3] The defendant requires leave because the plaintiffs’ application for summary judgment is pending. The Court must decide whether to grant the defendant leave weighing matters such as: the inevitable delay to and complication of the plaintiffs’ summary judgment application; the relevance of the intended third party claim to the plaintiffs’ claim and the defendant’s defence; and the risk that if leave is not given the defendant will have to conduct two trials on the same issues with potentially inconsistent results.
Facts
[4] The plaintiffs are the executors of the estates of Ronald Leonard Nisbet and June Isobel Laura Nisbet (the Executors). In that capacity they were the registered owners of the Property. They listed the Property for sale in November 2021. Sally Dawson and Chris Morton of Unlimited Potential Real Estate Limited (UPREL) acted as their agents for the sale.
[5] The following account of what happened between 23 and 29 November 2021 is derived from affidavits sworn by Ms Shakespeare. The Executors have no direct knowledge of these events. The real estate agents have not filed any affidavit evidence.
[6] The defendant, Julia Shakespeare, viewed the Property on 23 November 2021. Ms Shakespeare deposes that during the viewing she advised the agents that she and her mother, Dulcie Shakespeare, owned two units on the same street which they would need to sell to be able to purchase the Property.
[7] Ms Shakespeare says that later that day, both agents viewed the units owned by her and her mother. She deposes that the agents advised them that the two units would sell quickly and that they “saw a four” in the sale price. She says that they verbally estimated the combined sale value of the two units to be $4.4 million.
[8] On 27 November 2021, Ms Shakespeare and her mother attended a second viewing of the Property. Ms Shakespeare deposes that during this viewing, Ms Dawson advised her that the Property was “… up there with the quality of central city apartments”, and there were seven other potential purchasers interested in the Property. Ms Shakespeare says that Ms Dawson presented her and her mother with a pre-populated offer of $2 million for the Property. Ms Shakespeare and her mother signed the offer for presentation to the Executors. Ms Shakespeare says that they did so without legal advice and believing that the offer was made on the condition that they sell their units.
[9] At the same time, Ms Shakespeare and her mother signed an agency agreement for UPREL to sell their units (the Agency Agreement). Ms Shakespeare deposes that she was not given a written appraisal for the units before signing the Agency Agreement or at any stage.
[10] Ms Shakespeare says that on 28 November 2021, Ms Dawson advised her that the Executors had not accepted their offer of $2 million and intended to proceed with the auction. She says, in her first affidavit, that Ms Dawson told her that she had asked the Executors for the figure they would accept to remove the Property from auction. She says that Ms Dawson informed her that the Executors had indicated that they would bring the auction date forward for $2.25 million, and would sell the Property and cancel the auction for $2.4 million.
[11] In her affidavit in reply, Ms Shakespeare deposes that Ms Dawson told her that the Property was worth at least $2 million, and then, due to the level of interest in it, was worth $2.4 million and would sell for well over $2.4 million at auction.
[12] Ms Shakespeare says that on 29 November 2021, the agents arrived at her and her mother’s home with the Agreement for them to sign. The offer price was stated to be $2.4 million. At Ms Dawson’s suggestion the Agreement named Ms Shakespeare as the only purchaser. Ms Shakespeare signed the offer for presentation to the Executors. Ms Shakespeare says that, again, she did not appreciate that her offer for the Property was not made conditional on the sale of the two units.
[13] The agents also presented Ms Shakespeare and her mother with a counter‑signed copy of the Agency Agreement for the sale of their own units.
[14] Ms Shakespeare and her mother did not take legal advice on either the Agreement or the Agency Agreement.
[15] After entering into the Agreement, the Executors cancelled the auction that had been scheduled for 14 December 2021.
[16]On or about 25 January 2022, Ms Shakespeare paid the required deposit of
$120,000. The amount required to settle the purchase on the settlement date was
$2,278,293.29.
[17] On 3 February 2022, the Executors notified Ms Shakespeare that a Certificate of Code Compliance had been issued for the Property.
[18] On 18 February 2022, Ms Shakespeare notified the Executors that she was not able to settle the purchase price on 25 February 2022.
[19] The parties then agreed to defer settlement until 22 March 2022, and if settlement did not occur on that date, then Ms Shakespeare would pay late settlement interest from 25 February 2022.
[20] On 4 March 2022, Ms Shakespeare requested to mutually terminate the Agreement. The Executors rejected that request.
[21] On 22 March 2022, in breach of the Agreement, Ms Shakespeare failed and/or refused to settle the purchase of the Property.
[22] On 23 March 2022, the Executors served a settlement notice on Ms Shakespeare requiring her to settle the purchase of the Property within 12 working days. Ms Shakespeare failed and/or refused to settle the purchase of the Property as required by the settlement notice.
[23] On 1 July 2022, the Executors cancelled the Agreement and retained Ms Shakespeare’s deposit.
[24]On or about 18 July 2022, the Executors relisted the Property for sale.
[25] On or about 14 March 2023, the Executors entered into a sale and purchase agreement with a third party for the purchase of the Property for $1,950,000.
[26]On or about 4 April 2023, the sale to the third party settled.
[27] On 26 June 2023, the Executors filed a statement of claim in this Court claiming damages for breach of the Agreement of $343,823.37 comprised of:
$330,000 (the difference between the original purchase price and the new purchase price, less the deposit of $120,000); $2,649.85 towards the Executors’ legal costs in relation to the cancelled transaction; and $11,173.52 for the Executors’ costs to stage the Property for the sale to a third party following the cancelled transaction. The Executors claim contractual interest at a rate of 14 per cent per annum pursuant to cls 1.5 and 12.4 of the Agreement.
Legal principles
[28] A defendant’s entitlement to issue a third party notice is governed by r 4.4 of the High Court Rules 2016:
4.4 Third parties
(1) A defendant may issue a third party notice if the defendant claims any or all of the following:
(a) that the defendant is entitled to a contribution or an indemnity from a person who is not a party to the proceeding (a third party):
(b) that the defendant is entitled to relief or a remedy relating to, or connected with, the subject matter of the proceeding from a third party and the relief or remedy is substantially the same as that claimed by the plaintiff against the defendant:
(c) that a question or issue in the proceeding ought to be determined not only between the plaintiff and the defendant but also between—
(i) the plaintiff, the defendant, and the third party; or
(ii) the defendant and the third party; or
(iii) the plaintiff and the third party:
(d) that there is a question or an issue between the defendant and the third party relating to, or connected with, the subject matter of the proceeding that is substantially the same as a question or an issue arising between the plaintiff and the defendant.
[29] However, a third party notice may be issued only with the leave of the Court if an application for summary judgment is pending under rr 12.2 or 12.3.1 Leave will not be granted lightly.2
[30] Where a plaintiff in a summary judgment application has a clear case to obtain judgment against a defendant, then a defendant will not be permitted to apply for a third party to be joined simply to obtain contribution or indemnity from such third party.3 The Court will not allow a defendant to delay the plaintiff the fruits of a judgment when liability is clear; to in effect grant the defendant a stay while issues of liability, indemnity, or contribution are determined by the Court as between the defendant and a third party.4
1 High Court Rules 2016, r 4.4(3).
2 Jessica Gorman (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR4.4.12] referring to Druids Friendly Society v Westpac Merchant Finance Ltd (1996) 9 PRNZ 644.
3 Druids Friendly Society v Westpac Merchant Finance Ltd (1996) 9 PRNZ 644 at 647 affirmed in
Downtown House (No 2) Ltd v Ensom [2019] NZHC 724 at [28].
4 Druids Friendly Society v Westpac Merchant Finance Ltd (1996) 9 PRNZ 644 at 647; and
Downtown House (No 2) Ltd v Ensom [2019] NZHC 724 at [28].
[31] However, in proper cases, leave will be given.5 For example, to prevent the same issues being argued in different proceedings before different judges, and possibly with different results.6
[32]In deciding whether to grant leave the Court will weigh factors including:7
(a)any delay and possible escalation of issues so far as the plaintiff is concerned;
(b)the strength of the plaintiff’s case;
(c)the prospect that the defendant will have to conduct two trials with possible inconsistent results; and
(d)the financial ability of the third party to meet any judgment against them.
Ms Shakespeare’s intended third party claim
[33] Ms Shakespeare’s draft statement of claim against UPREL is attached to her application for leave. Her claim concerns representations the agents are said to have made to her and her mother about the value and saleability of their two units on 23 and 27 November 2021; and representations they are said to have made about the Property during the second viewing on 27 November 2021.
[34] Ms Shakespeare claims that each of the representations (and/or a combination of two or more of them) induced her to offer $2.4 million for the Property. She claims that each of the representations were false, and that her mother’s units did not have a combined value of anything like $4.4 million and there was no immediate sale. The units ultimately sold many months later for $1.6 million.
5 Druids Friendly Society v Westpac Merchant Finance Ltd (1996) 9 PRNZ 644 at 647 referring to Mian Importer and Exporter Ltd v Alderson Storage Co Ltd HC Auckland CP596/87, 20 July 1987, and Burbery Mortgage Finance and Savings Ltd (in rec) v Haira HC Rotorua CP93/89, 16 October 1989.
6 Druids Friendly Society v Westpac Merchant Finance Ltd (1996) 9 PRNZ 644 at 647–648.
7 Druids Friendly Society v Westpac Merchant Finance Ltd (1996) 9 PRNZ 644 at 647–648.
[35] Ms Shakespeare pleads negligent misstatement, misrepresentation, misleading and deceptive conduct in breach of s 9 of the Fair Trading Act 1986, and unconscionable conduct in breach of ss 7 and 8 of that Act. She seeks judgment in the sum entered in favour of the Executors against her; or an order for indemnity or contribution towards any judgment against her; or unquantified damages.
The parties’ submissions
[36] In Ms Shakespeare’s statement of defence, she attributes all the agents’ representations (about both her units and the Property) to the Executors. In her notice of opposition to the application for summary judgment she says in the alternative that she has a third party claim against UPREL and she is entitled to contribution or indemnity from them for any damages he is found liable to play the Executors.
[37] Through submissions, Mr Tapsell accepts that the agent’s representations concerning Ms Shakespeare’s own units might not be of the class of acts to which the agents were held out as having general or apparent authority on behalf of the Executors to do, and therefore not binding on the Executors. However, he submits that the representations made by the agents concerning the value of the Property, and the interest of other potential buyers in it, do bind the Executors.8
[38] Mr Tapsell submits that whether the representations were innocently or fraudulently made, they induced Ms Shakespeare to enter into the Agreement and she is entitled, under s 35 of the Contract and Commercial Law Act 2017, to damages from the Executors in the same manner and to the same extent as if the representations were a term of the Agreement.
[39] Mr Tapsell submits that a joinder of UPREL is justified under r 4.4(1)(b), (c) or (d) of the High Court Rules. He says that if, as the Executors claim, the agents acted outside the Executors’ actual or ostensible authority when making the representations, then Ms Shakespeare will have a separate claim against UPREL. He submits therefore that in terms of r 4.4(1)(c) there are common issues that needs to be
8 Relying on Mullens v Miller (1882) 22 Ch D 194 at 199; and Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [11.2.2].
determined between the Executors and Ms Shakespeare, but also between Ms Shakespeare and UPREL. Those issues are:
(a)Did UPREL make the misrepresentations alleged by her?
(b)When making one or more of the misrepresentations, did UPREL act with the ostensible, apparent or general authority of the Executors?
[40] Mr Tapsell submits that the consequences of not making the order would be particularly severe as if leave is not granted, Ms Shakespeare risks losing her home and facing bankruptcy because of the delay in having her claims against UPREL determined. He submits that the consequence for the Executors of a joinder is one of “commercial inconvenience” which can be offset by interest pursuant to the Interest on Money Claims Act 2016 continuing to run on the Executors’ claims.
The Executors’ submissions
[41] The Executors submit that a joinder of the proposed third party will cause unreasonable delay to the determination of their application for summary judgment. They submit that their claim is straightforward and strong, and that the matters raised in Ms Shakespeare’s draft statement of defence amount to, at best, a counterclaim.
[42] The Executors submit that Ms Shakespeare’s alleged claim against UPREL is a standalone claim arising out of the agents’ alleged representations concerning her own properties. These alleged representations cannot be attributed to the Executors.
[43] Further, there is no suggestion that UPREL could not meet a judgment against it, and Ms Shakespeare’s evidence makes clear that she has sufficient assets to satisfy judgment against her and to pursue UPREL in a separate claim if she wishes.
Assessment
[44] In my view the following factors weigh against Ms Shakespeare having leave to join UPREL as a third party while the Executors’ summary judgment application is pending.
[45] First, the Executors’ claim against Ms Shakespeare is a straightforward claim for breach of contract by failing to settle on settlement date, with damages being the difference between the agreed sale price and the eventual resale price, as provided by the Agreement.
[46] Relevantly, Ms Shakespeare does not deny that she breached the Agreement or challenge the Executors’ basis for calculating damages. Her only ground for opposing summary judgment is her claim that she entered into the Agreement relying on false and misleading representations by the Executors’ agents.
[47] Ms Shakespeare does not explicitly plead a counterclaim in her statement of defence. However, in her notice of opposition to the Executors’ summary judgment application she pleads that the effect of the misrepresentations was to substantially increase the burden of the Agreement on her or make the benefit of the Agreement substantially different from that represented or contracted by her, entitling her to cancel the Agreement and have her deposit returned.
[48] As Ms Murray correctly submits, a counterclaim for damages for misrepresentation does not amount to a defence to an application for summary judgment by a plaintiff. But where a defendant claims to have been induced to enter into a contract by a plaintiff’s misrepresentation they may look to resist summary judgment based on an equitable set-off of a cross-claim.9 If the Court is persuaded that Ms Shakespeare has an arguable cross-claim, and the Executors’ claim and her cross-claim are so closely interrelated that it would be unjust to enter summary judgment on the Executors’ claim without bringing her cross-claim into account, it may refuse to enter summary judgment.10
[49] However, Ms Shakespeare does not need to join UPREL as a third party to be able to raise her cross-claim as a defence to the application for summary judgment. In fact, joining UPREL only confuses and contradicts her potential cross-claim against the Executors.
9 See, for example, Grant v NZMC Ltd [1989] 1 NZLR 8 (CA).
10 At 12–13.
[50] Any such cross-claim against the Executors will necessarily proceed on the basis that the representations were made by the real estate agents in their capacity as agents for the Executors and should be attributed to the Executors.
[51] Whereas a third party claim against UPREL in relation to the agents’ representations necessarily proceeds on the basis that the agents made the representations outside the actual or apparent authority of the Executors, in their personal capacity and/or as Ms Shakespeare’s agent or potential agent in relation to the sale of her and her mother’s units.
[52] As such, there is no injustice to Ms Shakespeare if she is not given leave to join UPREL as a third party in terms of her ability to defend the Executors’ summary judgment application. She can advance a cross-claim against the Executors based on her allegation that the agents made the misrepresentations and that they did so within the Executors’ authority. The third party claim, which represents the alternative (that the representations were not within the Executors’ authority) only cuts across that cross-claim.
[53] Second, Ms Shakespeare’s main complaint about the conduct of the agents concerns their representations about the value and saleability of her own two units. I view this as her main complaint because in her statement of defence and notice of opposition, she alleges that she made her offer to buy the Property relying on the following representations:
(a)That she and her mother could fund the purchase of the Property by selling their two units.
(b)That the value of the two units was around $4.4 million.
(c)That they had immediate buyers for the two units, which, being beachfront, were highly desirable and saleable.
(d)That the proceeds of sale received for the properties would easily cover the cost to purchase the Property.
(e)That to secure the Property, she needed to increase her offer of
$2 million to $2.4 million, and there was urgency in making the offer.
[54] She pleads that the representations were untrue and that “the combined value of the two properties was $1.6 million, leaving the defendant with insufficient funds to settle.”
[55] The draft statement of claim against UPREL is in substantially the same terms, with the addition that the agents are said to have told her that there were seven other buyers interested in the Property.
[56] Therefore, based on her own pleadings it was the fact that her units did not sell immediately or for anything near $4.4 million that meant she was unable to settle the purchase of the Property. Putting it another way, had she sold her units for $4.4 million as she expected, she would have been able to settle the purchase at the agreed price. The real issue is that she entered into the Agreement believing that her units would sell quickly for a combined price of around $4.4 million, giving her more than sufficient funds to buy the Property at a price of $2.4 million.
[57] Mr Tapsell sensibly concedes that the prospect of the agents’ representations about the value and saleability of Ms Shakespeare’s units being attributed to the Executors is not high. To attribute statements of an agent to a principal “the act relied on as binding the principal must be of that particular class of acts which the agent is held out as having a general authority on behalf of his principal to do”.11 A claim that the agents, when acting on the Executors’ behalf to market and sell the Property, were held out as having authority to opine on the value and saleability of a potential purchaser’s own properties faces considerable obstacles.
[58] On that basis, the potential for inconsistent judgments on the allegedly common issues identified by Mr Tapsell is more apparent than real. The allegations against the agents concerning their representations about the value and saleability of Ms Shakespeare’s units are relatively peripheral to the proceeding as between the Executors and Ms Shakespeare. Conversely, the representations the agents are alleged
11 Shortal v Buchanan [1920] NZLR 103 at 105 further cited in Ma v Li [2021] NZHC 792 at [57].
to have made concerning the Property in their capacity as agents for the Executors are not central to the claim against UPREL.
[59] Furthermore, it is unlikely that the Court determining the Executors’ summary judgment application will make any definitive findings on the issues highlighted by Mr Tapsell because of the threshold involved in summary judgment. The Court will be deciding whether the defendant has no reasonably arguable defence, and it will not resolve disputes of fact. There is no realistic risk therefore of the Court making a definitive finding as to whether the agents made the alleged representations or not.
[60] Finally, it is apparent from the draft statement of claim against the UPREL (and the notice of opposition to summary judgment) that the relief Ms Shakespeare seeks from UPREL is a contribution towards or indemnity of any liability Ms Shakespeare is found to have to the Executors. This Court has been clear that where a plaintiff in a summary judgment application has a clear case to obtain judgment against a defendant, then a defendant will not be permitted to apply for a third party to be joined simply to obtain contribution or indemnity from such third party.12
[61] Against these factors is the risk that if Ms Shakespeare is not given leave to join UPREL at this stage of the proceeding, and summary judgment is entered against her without her claim against UPREL being brought into account, she will face bankruptcy.
[62] Mr Tapsell submits that this is a risk. But Ms Shakespeare has not filed any evidence of her financial position, so it is difficult for the Court to make any assessment of the credibility of this assertion.
[63] Furthermore, there are other options for addressing this potential outcome (if proven to be credible by financial evidence), including asking the Court hearing the summary judgment application to exercise its discretion not to enter summary judgment against Ms Shakespeare or to apply for a stay of execution of any order made.
12 Druids Friendly Society v Westpac Merchant Finance Ltd (1996) 9 PRNZ 644 at 647.
[64] Weighing all these considerations, I am of the view that Ms Shakespeare should not be given leave to join UPREL to the proceeding while the Executors’ application for summary judgment is pending.
[65] To be clear, should summary judgment be refused it will be open to Ms Shakespeare to seek to join UPREL to the proceeding again. Leave will not be required provided the joinder meets the criteria in r 4.4. Many of the considerations that oppose a joinder now will not apply once the summary judgment application is determined. The proceeding will be on the ordinary track and a joinder of UPREL will not cause unreasonable delay to the Executors as it would now.
Result
[66]Ms Shakespeare’s application to join a third party is dismissed.
[67] As to costs, I am of the preliminary view that as the successful party, the Executors should be paid their costs on a 2B basis and reasonable disbursements. If the parties are unable to agree costs, they may file submissions of no more than four pages within 14 days.
Associate Judge Gardiner
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