Wyatt Family Trust Holdings Limited v Wright

[2013] NZHC 2488

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-003139 [2013] NZHC 2488

UNDER

Section 72 of the District Courts Act 1947

IN THE MATTER

of an Appeal against a Decision of the District Court

BETWEEN

WYATT FAMILY TRUST HOLDINGS LIMITED

Appellant

AND

RAYMOND WILLIAM WRIGHT

Respondent

Hearing:	24 September 2013
Counsel:	G J Wyatt in person for Appellant K F Gould for Respondent
Judgment:	24 September 2013

JUDGMENT OF COLLINS J

Introduction

[1] The appellant (Wyatt) appeals a judgment of the District Court in which Wyatt’s claims against Mr Wright were struck out on the grounds that the claims had already been determined by the High Court and Court of Appeal or were otherwise untenable. The District Court ordered Wyatt pay indemnity costs to Mr Wright and also awarded costs on a scale 2B basis to the third parties (the Broughtons) against Mr Wright but ordered those costs also be paid by Wyatt.

[2] The issue I have to decide is whether the District Court was correct when it struck out Wyatt’s claims against Mr Wright, and ordered Wyatt to pay indemnity costs to Mr Wright and costs to the Broughtons.

WYATT FAMILY TRUST HOLDINGS LIMITED v WRIGHT [2013] NZHC 2488 [24 September 2013]

Background

[3] Wyatt owned a property at 1236 Weranui Road, Wainui, Auckland (the property). On 13 April 2007 Wyatt entered into an agreement (the agreement) to sell the property for $1,350,000 to “Jack Wright or Nominee”. A due diligence investigation condition in the agreement enabled Mr Wright to satisfy himself that the property was fit for his intended use. That condition was to be satisfied by 4.00 pm on 24 May 2007.

[4]   On 23 May 2007 Mr Wright nominated the Broughtons as purchasers under the agreement. On the same day the Broughtons gave notice that they were the nominated purchasers and that they were satisfied that the property was fit for their intended use.

[5]   The Broughtons proceeded on the basis that the agreement was unconditional and that settlement would take place at 4.00 pm on 24 May 2007. Wyatt, however, took a different view. It thought only Mr Wright could complete the due diligence investigation under the agreement. Wyatt therefore decided to treat the agreement as being at an end at 4.00 pm on 24 May 2007. Wyatt did this to enable it to try and accept an offer it had received which was $35,000 higher than the purchase price stated in the agreement.

[6] The Broughtons did not accept that Wyatt had validly terminated the agreement. They proceeded to try and complete the purchase of the property.

[7] The impasse was resolved three months later when Wyatt and the Broughtons reached the following solution:

(1)Wyatt agreed to complete the sale of the property to the Broughtons on 12 July 2007.

(2)The Broughtons agreed that if Wyatt successfully established in the District Court that it would have been entitled to resist an order for specific performance they would pay Wyatt the $35,000 Wyatt lost when it did not sell the property to the alternative purchaser.

(3)Wyatt agreed that if the District Court decided the Broughtons would have been entitled to an order for specific performance, Wyatt would pay the Broughtons actual and reasonable costs from 24 May 2007 until completion of the sale on 12 July 2007 and penalty interest at 11 per cent being the rate specified in the agreement.

[8]  Wyatt filed its statement of claim in the District Court on 27 August 2009. The Broughtons filed their statement of defence and counterclaim/setoff in October 2009.  In their counterclaim/setoff the Broughtons sought:

Late settlement interest on the total purchase price of $1,350,000 at the rate of 11 per cent per  annum  between  24  May  2007  and  12  July  2007 (49 days@$406.84 per day):  $19,935.62.

[9] This claim was based on cl 3.10(2)(a) of the agreement. Clause 3.10(2) provided:

If this Agreement provides for vacant possession but the vendor is unable or unwilling to give vacant possession on the possession date, then provided that the purchaser is not in default:

(a)The vendor shall pay the purchaser, at the purchaser’s election, either:

(i)compensation for any reasonable costs incurred for temporary accommodation for persons in storage of chattels during the default period; or

(ii))       an amount equivalent to interest at the interest rate for late settlement on the entire purchase price during the  default period;

(b)The purchasers shall pay the vendor an amount equivalent to the interest earned or which would be earned on overnight deposit lodged in the purchaser’s solicitor’s trust bank account on such portion of the purchase price (including any deposit) as is payable under this agreement on or by the possession date but remaining unpaid during the default period less:

(i)any withholding tax; and

(ii))  any  bank  or  legal  administration  fees  and   commission charges; and

(iii)any interest payable by the purchaser to the purchaser’s lender during the default period in respect of any mortgage or loan taken out by the purchaser in relation to the purchase of the property.

[10] Thus, cls 3.10(2)(a) and (b) appear to involve payments by both parties in the event of the vendor defaulting. Arguably the drafters of the agreement intended that the purchaser not get the benefit of both late penalty interest and any interest that the purchaser would receive on the balance of the purchase price.

[11] However, when Wyatt filed its defence to the counterclaim on 16 November 2009 it made no reference to the effect of cl of 3.10(2)(b) of the agreement.

[12] On 18 June 2010 Judge Hinton declined to give summary judgment to either party. He decided neither party had established their case to the requisite standard for summary judgment and that the proceeding needed to progress through to trial. Both parties appealed.

[13] On 20 October 2010 Lang J decided that as the Broughtons were the lawful nominees they were entitled to complete the due diligence requirements of the contract which they did within the specified time. Lang J gave judgment in favour of the Broughtons and dismissed Wyatt’s cross-appeal. As a result, the Broughtons obtained judgment for:

(1)$9,056.25 (being their actual and reasonable costs for the period in question);  and

(2)$19,935.62 (interest at 11 per cent for the 49 day period from 24 May 2007 to 12 July 2007).

[14] Wyatt then unsuccessfully applied to have Lang J recall his judgment on the basis that the Broughtons were not entitled to interest for late settlement. Lang J declined Wyatt’s application for recall.  In doing so, his Honour explained:[1]

[1] Broughton v Wyatt Family Trust Holdings Ltd HC Auckland CIV-2010-404-4303, 29 October 2010 at [7]-[8].

... In the District Court Wyatt advanced its application against Mr and Mrs Broughton on the basis that they were not entitled to interest for late settlement because of various contractual provisions. The argument for Wyatt on this point was set out in the written submissions that Mr Wyatt presented to the District Court. The issue was not, however, canvassed in the written submissions for Wyatt on appeal other than in an end note that

did not draw attention to the substantive nature of the dispute. Counsel for Mr and Mrs Broughton did not refer to the issue at all in his written submissions. It was not referred to, either, by Mr Wyatt or by counsel for Mr and Mrs Broughton during oral argument before me.

Moreover, at the conclusion of argument I specifically asked both Mr Wyatt and counsel for Mr and Mrs Broughton whether either party took issue with the manner in which the judgment sums were formulated. Mr Wyatt indicated that, subject to the arithmetic being correct, he had no matters to add. On that basis I issued my judgment in accordance with the amount for late settlement that Mr and Mrs Broughton sought.

Lang J reasoned that it was too late for Wyatt to raise the penalty interest issue.

[15] Wyatt also unsuccessfully sought leave from Lang J to appeal to the Court of Appeal.

[16]   Wyatt then applied the special leave from the Court of Appeal.  In declining to grant special leave the Court of Appeal recorded:[2]

... the penalty interest question, was only raised by Wyatt at the time of the recall application in the High Court and despite the agreement as to quantum which the parties had reached at the time of the substantive appeal in the High Court.

[2] Wyatt Family Trust Holdings Ltd v Broughton [2011] NZCA 87 at [15].

[17]     The Court of Appeal also said:[3]

Even if we had concluded there was a seriously arguable point on the merits, we agree with the Judge that the amounts at issue do not justify the cost and further delay that would be inevitable should leave be granted.

[3] At [18].

[18] On 9 March 2012 the District Court granted Wyatt’s application to have Mr Wright added as a second defendant to the proceeding. In its claim against Mr Wright, Wyatt pleaded:

(1)Under the terms of the agreement Wyatt was entitled to “interest that would have been paid on the purchase price if deposited on-call for 49 days”. Wyatt says the on-call deposit rate during the relevant period was 7.6 per cent and that it is entitled to $12,396.37 less the

costs and charges set out in cl 3.10(2)(b)(i)-(iii) of the agreement from Mr Wright.

(2)It was an implied term of the agreement that Mr Wright would withdraw from the sale and purchase agreement if he was not satisfied the property was fit for his intended use. Wyatt categorises this as an implied “good faith” condition.

(3)That Mr Wright had to personally give notice of fulfilment of the due diligence clause.

[19] In an oral judgment delivered on 16 May 2013, Judge Sharp struck out the proceeding against Mr Wright.

Was the District Court right  when  it  struck  out  the  proceeding  against Mr Wright?

[20] In my assessment Judge Sharp had to strike out the claims against Mr Wright. My reasons for reaching this conclusion can be succinctly stated.

First cause of action

[21] The first cause of action should have been fully and properly pleaded when Wyatt filed its defence to the Broughtons’ counterclaim/setoff in the District Court on 16 November 2009. Wyatt’s failure to properly raise this issue at that time ultimately resulted in the High Court ruling that Wyatt was precluded from later attempting to raise this issue against the Broughtons.

[22]  In my assessment, Wyatt is also precluded from raising this issue against Mr Wright because when Mr Wright validly nominated the Broughtons as the purchaser Mr Wright ceased to be the purchaser. The issues which arose from cl 3.10(2)(b) of the agreement were only applicable to Wyatt’s claim against the Broughtons as purchaser and were never enforceable against Mr Wright. Conversely, Mr Wright never had any claim against Wyatt under cl 3.10(2)(a) of the agreement because Mr Wright ceased to be the purchaser once the Broughtons were validly nominated as purchasers.

Second cause of action

[23] The second cause of action invites the Court to imply a term into the agreement, the effect of which would be that Mr Wright had a duty to withdraw from the agreement if he decided that the property was not fit for his intended use. The term which Wyatt argues for is contrary to the objective of the agreement which clearly enabled Mr Wright to nominate the Broughtons as purchasers at which point it was for the Broughtons to conduct the investigations contemplated by the due diligence clause in the agreement.

[24] I can see no rational basis upon which any Court could uphold Wyatt’s claim for an implied term of the kind that it argues for. Wyatt’s argument in relation to the second cause of action conflicts with every leading authority relating to the circumstances under which a term may be implied into a contract.[4]

Third cause of action

[4] Attorney-General of Belize v Belize Telecom Ltd [2009] 2 All ER 1127 (PC).

[25]  The third cause of action is the converse of the arguments that were rejected by Lang J and the Court of Appeal but inevitably involve a collateral attack on the reasoning contained in those judgments. The due diligence provisions of the agreement did not have to be exercised by Mr Wright in person. They could and were exercised by the Broughtons. Any attempt to relitigate these matters is an abuse of the Court’s processes because although Wyatt’s claim is now against Mr Wright, it is a collateral attack on the reasoning of the High Court and Court of Appeal in the judgments in favour of the Broughtons. In this respect the third cause of action has many of the characteristics of the appellant’s unsuccessful claim in W v

W which the Privy Council ultimately ruled constituted an abuse or process.[5]

Conclusion

[5] W v W [1999] 2 NZLR 1 (PC).

[26] Judge Sharp was entirely correct when she struck out all three causes of action, albeit for slightly different reasons to the ones which I have set out in the preceding paragraphs.

[27]     The appeal is dismissed.

Costs

[28] Judge Sharp ordered that Wyatt pay Mr Wright indemnity costs. In my assessment it was entirely reasonable for her to make that award in light of all the circumstances of this case. Wyatt’s case was inevitably going to fail and Wyatt’s conduct involved it acting frivolously and unnecessarily in bringing its proceeding against Mr Wright.

[29] In addition to ordering Wyatt pay Mr Wright indemnity costs, Judge Sharp also awarded the Broughtons scale 2B costs against Mr Wright but ordered those costs be paid by Wyatt.  Judge Sharp did not explain the reasons for this.

[30] I assume that this order was made on the basis that neither the Broughtons or Mr Wright should have been forced to defend themselves and in exercising her discretion Judge Sharp decided that Wyatt should pay the costs that Mr Wright would otherwise be liable to pay the Broughtons. Judge Sharp probably reasoned that if Wyatt had not commenced its proceeding against Mr Wright, the Broughtons would not have been added as a third party. When viewed in this way, the award of costs made against Wyatt in relation to the Broughtons’ costs was a legitimate exercise of the District Court’s discretion to award costs.

[31] In this Court the parties agree costs should be awarded on a scale 2 basis.  I am satisfied that an award calculated on a scale 2 category B basis is appropriate given the time involved in preparing for and defending the appeal.

D B Collins J

Solicitors:

Bruce C McNiece, Auckland for Respondent