Yu v Bradley
[2018] NZHC 2312
•4 September 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV- 2017-404-001125 [2018] NZHC 2312
BETWEEN JING JUN YU
First Plaintiff
ANDREW INVESTMENTS (2004) LIMITED
Second Plaintiff
AND
DALE GORDON BRADLEY and JILLIAN ANNE BRADLEY
Defendants
Hearing: 31 May 2018 Appearances:
Jane Anderson QC and Julia Adams for the Plaintiffs
Rachael Reed QC and Jordan Grimmer for the DefendantsJudgment:
4 September 2018
JUDGMENT OF MOORE J
This judgment was delivered by me on 4 September 2018 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
YU & ANOR v BRADLEY & ANOR [2018] NZHC 2312 [4 September 2018]
Introduction
[1] The plaintiffs entered into a sale and purchase agreement on 13 November
2016 to purchase the property at 471 Whitford-Maraetai Road from the defendants (“the agreement”). Settlement was to occur on 15 February 2017. Issues arose and by mid-April 2017 both parties had purported to cancel the agreement. When the defendant vendors refused to return the deposit, the plaintiffs initiated this proceeding and sought summary judgment.
[2] Associate Judge Doogue declined to grant summary judgment on
16 November 2017.1 The plaintiffs now seek leave to appeal to the Court of Appeal.
Factual background
[3] The agreement was based on the ninth edition of the standard Real Estate Institute of New Zealand Inc/Auckland District Law Society agreement for sale and purchase of real estate (“ADLS agreement”).
[4] Before the date of settlement, the plaintiffs raised various issues about the property; the condition of the waste water system, the removal of a fence, and boundary misrepresentation. They sought to begin a cl 8 procedure to resolve compensation for these breaches, and maintained a right to cancel in respect of the boundary misrepresentation. They also argue their ability to begin a cl 8 process in respect of the boundary misrepresentation was obstructed by the defendants, who refused their valuer access onto the property. The plaintiffs eventually cancelled the agreement (or purported to) by letter of 10 March 2017, on the basis at settlement the defendants were not ready, willing and able to settle in accordance with cl 11(2).
[5] The defendants contest this version of events. They issued a settlement notice on 20 February 2017. By that time the plaintiffs had inspected the property. On the basis of the plaintiffs’ purported cancellation, they were of the view the plaintiffs had
evinced an intention not to settle. On 13 April 2017 they took the plaintiffs’
1 Yu v Bradley [2017] NZHC 2816.
cancellation as a repudiation and cancelled the agreement. In reliance on cl 11.4 of the agreement, the defendants retained the $230,000 deposit paid under the agreement.
The impugned decision
[6] The key issues before Associate Judge Doogue, in resolving whether the defendants had a defence to any of the causes of action, were whether either the plaintiffs or defendants were entitled to and validly cancelled the agreement. At the time of their purported cancellations, each considered they were ready, willing and able to perform the contract. Associate Judge Doogue concluded:
(a) It was not reasonably arguable the defendants did not prevent the valuer obtaining access to the property. However, even without access an estimate of the likely financial loss was possible because the valuer had survey plans and diagrams and inspected the property from the neighbouring address.2
(b)Consequently, it was arguable the plaintiffs could not complain they were prevented from complying with the time limit at cl 8.1 for seeking compensation because of a breach of contract on the part of the defendants.3
(c) It was thus arguable the plaintiffs’ justification for cancellation, i.e. non-compliance with cl 8, was insufficient and as a consequence was not covered by the Supreme Court’s decision in Property Ventures Investments Ltd v Regalwood Holdings Ltd.4
(d) It was arguable that even if the plaintiffs had an entitlement under the
Fencing Act 1978 and a wastewater claim, that did not on its own justify non-compliance with the defendants’ settlement notice. There was thus
2 At [33], [52].
3 At [54].
4 At [59], referring to Property Ventures Investments Ltd v Regalwood Holdings Ltd [2010] NZSC
47, [2010] 3 NZLR 231.
no need to consider the other set-offs separately; they did not materially affect the plaintiffs’ entitlement to seek cancellation.5
[7] He went on:6
“… it is reasonably arguable for the defendants that responsibility for the plaintiffs' failure to comply with the requirements of cl 8 rested with them alone. Because they did not successfully invoke the provisions of cl 8 in the time allowed for that to happen, they were not entitled to insist on a deduction from the settlement amount required under the contract. The fact that they did so meant that they were evincing an intention not to settle in accordance with the contract. An entitlement thereby arose on the part of the defendants to cancel the contract, which they did. If it is arguable that the contract was correctly cancelled by the defendants, then it is not open to the plaintiffs to seek the return of the deposit. Stating matters conversely, it is arguable that the defendants have the right to retain the deposit.”
Legal principles
[8] Section 56 of the Senior Courts Act 2016 (“the Act”) provides for the jurisdiction of the Court of Appeal to hear appeals. Section 56(3) deals with its jurisdiction to hear appeals on interlocutory applications, providing no appeal lies from any interlocutory decision of the High Court unless the High Court grants leave to appeal to the Court of Appeal, or s 56(4) applies:7
“No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.”
[9] In a recent decision, Li v Chief Executive, Ministry of Business, Innovation and Employment, Palmer J summarised the approaches taken in two earlier decisions considering s 56(3).8 He broadly agreed with Fitzgerald J in Finewood Upholstery
Ltd v Vaughan that “the requirement for leave to appeal interlocutory decisions should
5 At [80]-[81].
6 At [82].
7 Subsection (4) applies to appeals against orders for strike out and summary judgment, for which no leave is required. Under Senior Courts Act 2016, s 56(5), leave may also be sought from the Court of Appeal if declined in the High Court.
8 Li v Chief Executive, Ministry of Business, Innovation and Employment [2018] NZHC 1171, citing
Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 and A v Minister of Internal Affairs
[2017] NZHC 887.
filter out appeals on unmeritorious grounds and insignificant points”, an approach he considered was consistent with Dobson J’s emphasis in A v Minister of Internal Affairs on the importance of the decision at stake.9 But he went on to comment that:10
“… the wider purpose behind s 56(3) is to lessen tactical delays and enhance the efficiency of the administration of justice. The text of s 56 can be considered to reflect the Supreme Court’s rejection in Siemer of different classes of interlocutory decisions, as well as its emphasis on a discretion to decline to hear interlocutory appeals. Its identified reasons for declining or accepting such appeals, in the court’s discretion, are instructive.”
[10] He then set out an approach to s 56 drawing together the text, purpose, context and case law, which I gratefully adopt, and which was discussed by counsel at the hearing. An application to appeal an interlocutory decision under s 56(3) is likely to be granted if:11
(a) the appeal is not likely to be overtaken by the substantive hearing or cannot otherwise be considered as effectively in the context of an appeal of the substantive decision; or
(b)the appellant is likely to be prejudiced by a postponement to the substantive appeal;12 or
(c) the appeal may be dispositive of the case in law or as a practical matter;
and
(d)the arguments in the appeal are capable of bona fide and serious argument; and
(e) the issue on appeal concerns a decision of sufficient significance to the parties or a question of law or general principle of sufficient importance
as to outweigh the cost and delay of the appeal.
9 At [19].
10 At [20], citing Siemer v Heron [2011] NZSC 133, [2012] 1 NZLR 30 at [30].
11 At [21].
12 This requirement considers the ability of the appellant to challenge the interlocutory ruling in an appeal against the High Court’s substantive determination, drawing on Siemer v Heron, above n
10, at [32].
[11] Refined to it essentials, the test is:13
“… an application to appeal an interlocutory decision under s 56(3) is likely to be granted where: (a) there is good reason to consider it before, or separately to, the substantive appeal [for one of the reasons listed at [10](a)-(c) above]; and (b) it is sufficiently meritorious in substance and relates to a sufficiently important issue as to outweigh the costs and delay of appeal.”
[12] I turn now to address the application with reference to both requirements.
Is there a good reason for the appeal to be considered before or separately to the substantive appeal?
[13] In my view there is little doubt this question must be answered in the affirmative.
[14] Because both summary judgment and any post-trial decision determine the substance of the proceeding, an appeal against a decision declining to grant summary judgment will be overtaken by the substantive decision. But in my view the remaining two stage one factors are engaged; first prejudice from postponement and second whether any appeal will be dispositive.
[15] First is the question of whether the plaintiffs would suffer prejudice if this matter was postponed. The summary judgment procedure serves an independent function and purpose in the trial process. As Ms Anderson QC, for the plaintiffs, pointed out, it brings the benefit of time and cost savings if a proceeding is resolved before a substantive hearing. In that regard, the appellant is likely to be prejudiced by a postponement to the substantive appeal, by which time any benefits of the summary judgment procedure will be squandered.
[16] Additionally, an appeal concerning an application for summary judgment, if successful, will be dispositive. This conclusion is reinforced by the fact that appeals against a decision of the High Court granting summary judgment may be brought
without leave.14
13 At [22].
14 Senior Courts Act 2016, s 56(4)(b).
[17] As Palmer J observed s 56 rejects any notion there are different classes of interlocutory decisions. However, in the ordinary course of applications for leave to appeal a summary judgment, the first limb of the test will always be satisfied. This is because determination of the appeal may be dispositive of the case in law, and ordinarily postponement to the substantive appeal will be likely prejudice the appellant.
[18] It thus follows whether leave should be granted in this case turns on the second stage considerations of merit and importance.
Is the appeal sufficiently meritorious and important?
[19] Ms Anderson submitted Associate Judge Doogue erred in finding the defendants had a reasonably arguable defence to the claim. She alleged the following errors:
(a) finding it was reasonably arguable that “responsibility for the plaintiffs’ failure to comply with the requirements of cl 8 rested with them alone”, a conclusion which failed to recognise the significance in breach of contract of the defendants’ refusal to allow a final inspection;
(b)concluding the evidence supported a finding that the purchasers could (or should) have given a compliant cl 8 notice without their valuer first inspecting the property;
(c) disregarding the purchasers’ “in time” cl 8 notice in respect of the wastewater system and the fence, and wrongly holding no cl 8 notice was given before close of business on 14 February 2017; and
(d)as a result of the above errors, holding it was reasonably arguable the defendants were ready, willing and able to settle when they issued their settlement notice on 20 February 2017.
[20] In my view the arguments for summary judgment on appeal are not capable of bona fide and serious argument. This is an appeal against a determination declining
to grant summary judgment. If leave was granted, the onus would be on the appellants to satisfy the Court of Appeal there is no reasonably arguable defence to the plaintiffs’ cause of action. Therefore in determining whether to grant leave, I must consider whether there was a genuinely arguable error in Associate Judge’s Doogue finding the defendants have an arguable defence. It does appear at this stage, without the benefit of hearing evidence, that the plaintiffs’ case is strong. Nevertheless, I am not satisfied the arguments on appeal are capable of serious argument; there are simply too many factual and legal issues in dispute to satisfy this limb.
[21] Ms Reed QC, for the defendants, submitted there are a number of arguable defences available. She questioned whether:
(a) there was in fact a misrepresentation;
(b)the plaintiffs properly elected to seek compensation under cl 8 in their letter as it is arguable they reserved their claim to compensation or right to cancellation, and made their claim to compensation conditional on the neighbours being willing to sell the encroached land;
(c) the decision in Property Ventures applies, because on the defendants’ case the refusal to allow inspection was not causative of the plaintiffs’ ability to provide a reasonable estimate of loss arising from the misdescription; and
(d)the breach of the fencing and wastewater warranties are sufficiently material to give rise to an equitable set off.
[22] Associate Judge Doogue concluded it was beyond argument there is a substantial dispute as to whether or not the plaintiffs were materially misled by the marketing information they had been provided with.15 I agree. Any screening mechanism for claims under cl 6.4 covered by cl 8 of the agreement has been
satisfied.16
15 Yu v Bradley, above n 1, at [14].
16 The cl 8 mechanism responds to the concern expressed by the majority in Property Ventures
Investments Ltd v Regalwood Holdings Ltd, above n 4, at [75]: “It should also not be beyond the
[23] I do not accept there is an arguable error in the Judge’s application of Property Ventures in the context of the summary judgment application. In that case, the purchaser had provided a notice seeking compensation but did not particularise the amount. The majority rejected the suggestion to fit with cl 6.4 (then cl 5.4) the claim needed to be for a specified sum, stating:17
“[I]n a case such as the present, a vendor who does not permit a purchaser access to the property in order to inspect it and see what works are necessary to remedy the vendor's default can hardly expect the purchaser to particularise its claim. …
… for the reasons just given, in the present case Property Ventures had done enough to raise its claim. Its inability to quantify the claim resulted from Regalwood's unfortunate lack of co-operation. The fact that Property Ventures referred to its claim as one for compensation does not mean that it must be characterised only in that way and not as a claim to a set-off. The claim must be raised in substance; that is all that is required. Its legal character is relevant to its justification but not to whether it has been adequately made.”
[24] Ms Anderson submitted this finding is apposite: the defendants cannot rely on the plaintiffs’ failure to particularise their misrepresentation claim before settlement as a basis for cancellation, because the cause of any failure by the plaintiffs was the defendants’ non-co-operation. The procedure for raising a claim for compensation at cl 8.1 involves giving a notice which must:
(a) comprise a genuine pre-estimate of the loss suffered by the purchaser;
and
(b)be particularised and quantified to the extent reasonably possible at the date of the notice.
wit of the drafters of standard-form real estate contracts to devise a mechanism which will enable speedy resolution of bona fide and reasonable purchasers' claims for equitable compensation or set-off and protect each of the contracting parties whilst doubt about the correct position remains” (emphasis added).
17 At [78]-[79].
[25] Associate Judge Doogue was of the view that the procedure is “not a particularly stringent one”, noting “if the estimate which the purchaser adopts ultimately turns out to be too little, that is not fatal to its position”.18 He went on:19
“The procedure which the parties are required to follow is that they will either agree on the extent of the deduction from the settlement money that is required on account of compensation or they will invoke the processes in cl 8 which cater for the situation where the parties are unable to agree on the matter. If they do invoke the dispute mechanism, and it later turns out that a greater amount of compensation was required than was directed by the person carrying out the interim assessment, that will be no bar to the purchaser claiming a higher amount. That is because cl 8.4(6) states that the amount of compensation determined to be payable shall not be limited by the interim amount. The process is designed to provide for the retention of an amount that approximately represents the loss of the purchaser, and is not intended to represent a last opportunity to assess the amount of contribution required.”
[26] Because all that was required of the purchasers was to particularise and quantify the amount “to the extent reasonably possible”,20 Associate Judge Doogue concluded it was arguable the plaintiffs could have complied with cl 8.1 despite the defendants’ non-co-operation. He was particularly persuaded by the fact the valuer was able to view the property from the neighbouring address. The valuer’s estimate at that stage was the range of loss was likely to be $100,000 to $125,000. When the valuer was able to properly inspect the property five days later, on 20 February 2017, he arrived at the same conclusion. Accordingly, Associate Judge Doogue considered it was arguable the plaintiffs were not ready, willing and able to settle when they issued a settlement notice on 16 February 2017, and the defendants rightfully cancelled on the basis of their repudiation. Given that, a decision about whether the defendants’ conduct prevented the plaintiffs from complying with the requirements of cl 8 is a matter appropriately dealt with at a full hearing.
[27] In my view there are two reasons why the Judge’s determination on this point is not capable of serious argument on appeal:
(a) First, while Property Ventures Investments Ltd involved similar facts to the present case on this point, the Supreme Court was not dealing with
18 Yu v Bradley, above n 1, at [36].
19 At [37].
20 At [39].
cl 8 of the most recent ADLS agreement. Its findings are instructive in a general way and perhaps even decisive, but for present purposes it is arguable the interpretation advanced by the defendants is correct. For summary judgment to be given the Judge would have been required to conclude its application was inarguable. This extends to the argument that the defendants could not cancel when they issued a settlement notice because they continued to demand settlement in full. It is not reasonably arguable that the Judge erred in his finding on this. It is available to the defendants to argue the plaintiffs failed to trigger the cl
8 procedure by claiming a right to compensation for all matters in dispute on or before the last work day prior to settlement, and so the defendants are entitled to demand on settlement in full.
(b)Secondly, whether the defendants’ position is correct will turn in large part on factual enquiries which can only be properly resolved at trial. These include why the plaintiffs only sought to inspect the property at
3:00 pm the day before settlement, whether there was adequate time before then to inspect the property, the nature of the refusal by the defendants, and the extent to which the neighbouring property provided a sufficient vantage for the valuer to make a genuine estimate of loss. On appeal the plaintiffs will not be able to navigate past these obstacles.
[28] Relatedly, I disagree it is arguable the Judge fell into an error of fact in not accepting the uncontradicted affidavit of evidence of the valuer that he was not able to formulate a genuine pre-estimate without visiting the property. The Judge did not reject the valuer’s evidence out of hand. Rather, he noted that despite this claim the valuer did provide a pre-estimate, and that it was arguable the valuer did not need to be on the property to meet the low threshold at cl 8.1: a “yardstick” made in good faith and particularised to the extent reasonably possible. Notably the valuer conceded that from the neighbouring property he was able to “form the impression that the fence would [compromise] the ambience and amenity value of the property to some degree”.
[29] I am fortified in this conclusion by the further argument available to the defendants that the plaintiffs failed to elect to seek compensation in accordance with
cl 8. In their settlement notices the plaintiffs sought compensation without prejudice to their right to cancel, and went further in advising:
“the above compensatory claim will not apply if the neighbour will not sell the encroached land. We will make an approach to the neighbour to enquire as to whether they are willing to sell. If they are not willing to sell then our client will exercise its rights pursuant to section 7.”
[30] As the Supreme Court stated in Property Ventures Investments Ltd:21
“[A] purchaser who has come to this fork in the road is faced with only two possible routes, cancellation or performance, and once the latter is chosen is bound to perform in accordance with the contract when called upon. There is no intermediate road available. Nor can the purchaser suspend an election without risking default. It risks being taken to have affirmed the contract but defaulted in performance.”
[31] The defendants seek to argue the plaintiffs’ failure to elect compensation or cancellation placed them in default and gave the defendants a right to cancel. That this defence is arguably available to the defendants is not capable of bona fide argument.
[32] Finally, there is no arguable error in Associate Judge Doogue’s conclusion concerning the particularisation of the claims in respect of the fencing and wastewater system. As he observed, it is arguable it was always intended that the plaintiffs would seek a composite set-off, so the failure to particularise the boundary claim was fatal to the compensation claim. Even if I am wrong about that, the Judge’s conclusion is fortified by the fact it is arguable those claims in isolation were not sufficiently substantial to give rise to an equitable set off.22 Moreover, there are questions of fact underpinning the claim for compensation in respect of the fencing and wastewater system which are not appropriately resolved through the summary judgment procedure.
[33] Overall this is not a case where, despite there being good reason for an appeal in terms of the criteria set out in Li, leave to appeal should be granted. No aspect of Associate Judge Doogue’s conclusion that the defendants have an arguable defence is,
in terms of the Li criteria, capable of bona fide and serious argument on appeal. It is
21 Property Ventures Investments Ltd v Regalwood Holdings Ltd, above n 4, at [72].
22 At [68]-[69], citing Grant v NZMC Ltd [1989] 1 NZLR 8 (CA).
more appropriate that these issues be resolved by a Judge with the benefit of full argument and comprehensive evidence. Such an approach will also avoid the additional costs and delay that would result from an appeal on the summary judgment application.
Result
[34] The application for leave to appeal is dismissed.
Moore J
Solicitors/Counsel:
Ms Anderson QC, Auckland
Grove Darlow & Partners, Auckland
Ms Reed QC, AucklandPowle & Hodson, Auckland
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