JONES V L & Y HOLDINGS (HOLDING) LIMITED HC AK CIV 2010-404-001667

JONES V L & Y HOLDINGS (HOLDING) LIMITED HC AK CIV 2010-404-001667 28 July 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2010-404-001667BETWEEN ALLAN LLOYD JONES AND MARIE EVELYN JONES Plaintiffs AND L & Y HOLDINGS (HOLDING) LIMITED Defendant Hearing: 27 July 2010 Counsel: IC Bassett for plaintiffs Q Wang for defendant Judgment: 28 July 2010 at 4:30pmJUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]This judgment was delivered by me on 28 July 2010 at 4:30pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar DateSolicitors: Malloy Goodwin Harford, PO Box 9892, Newmarket for plaintiffs ForestHarrison, PO Box 828, Auckland for defendantThe application[1] The plaintiffs apply for summary judgment. The primary relief sought is: a) A declaration that a sale and purchase contract has been cancelled or is at an end; and b) Return of a deposit of $121,320 which the plaintiffs have paid. [2] The application is based on five alternative causes of action, namely: a) Cancellation because of breach of contract based on the Contractual Remedies Act 1979, ss 7(3)(b) and 7(4)(a) and (b) and, possibly s 7(3)(c) coupled with s 7(4)(a) and (b); b) Return of money where there has been a total failure in consideration (money had and received); c) Misleading conduct constituting an alleged breach of the Fair Trading Act 1986, s 9; d) Misrepresentations justifying a cancellation of the contract pursuant to the Contractual Remedies Act 1979, ss 7(3)(a) and 7(4)(a) and (b); and e) An allegation that the forfeiture of the deposit provision in the contract is a penalty and therefore the plaintiffs are entitled to relief under the Contractual Remedies Act 1979, s 9.The court's approach to a plaintiff's summary judgment application[3] Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that a defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.[4] The correct approach to an application for summary judgment by a plaintiff was recently summarised in Krukzeiner v Hanover Finance Ltd1 where the court said:The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried:Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left 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).[5] In Pemberton v Chappell2 the court also commented on the position where a defence is not evident on a plaintiff's pleading and said:If a defence is not evident on the plaintiff's pleading I am of opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff's right to have his case proceed to judgment without tendentious delay and a defendant's right to put forward a real defence.[6] That position was further reinforced in Australian Guarantee Corporation (New Zealand) Ltd v McBeth 3 where the court said:Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not, the plaintiff's verification stands unchallenged and ought to be accepted unless it is patently wrong "No defence means 'no bona fide defence, no reasonable ground for defence and no fairly arguable defence'."1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 (CA) at 26.2 Pemberton v Chappell [1987] 1 NZLR 1(CA) at 3.3 Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59.The opposition[7] The defendant opposes the application for summary judgment. In summary it advances the following matters in opposition: a) The defendant has not breached the contract; b) Alternatively, if the defendant has breached the contract the breach did not entitle the plaintiffs to cancel because the term was not either an essential term (the Contractual Remedies Act 1979, s 7(4)(a)) or was not substantial (the Contractual Remedies Act 1979, s 7(4)(b)); c) There was no misrepresentation but, even if there was, the plaintiffs did not rely on any representation by the defendant and have no basis to claim that they were induced to enter into the contract by such representation; d) The plaintiffs failed to settle the contract. The defendant was entitled to cancel the contract and did so. In such circumstances the defendant was entitled to forfeit the deposit; and e) There are material evidential matters which are disputed. The case is not suitable for resolution on a summary judgment application.Background[8] The plaintiffs are the trustees of the Myra Jones Family Trust. The defendant company is a development company. [9] This proceeding concerns a retail unit, Shop 14, in the "King's Square" development in Broadway, Newmarket, Auckland. That development was the final stage of the defendant's staged development of projects at the Newmarket site. The defendant's initial stage at the site involved 43 units known as Stage 1 or the Terrace Development. There were 373 apartments and retail units with associated car parksin the defendant's stage 2A and 2B development known as Queen's Lodge. The King's Square development involved 150 apartments, retail units and car parks. Marketing for the sale of apartments and retail units off the plans for the Stage 3, or King's Square development, was launched in August 2006. [10] The plaintiffs and the defendant entered into a preliminary agreement on 10 August 2006 then a further a more detailed agreement on 28 August 2006 which provided for the purchase of Shop 14 by the plaintiffs from the defendant. [11] Outline plans were used in both agreements. Both agreements contain provision for the defendant to alter, amend or revise any plans attached to the agreements. The particular clauses will be referred to later in that is judgment. [12] Two payments, representing the deposit, were made on 10 and 25 August 2006 totalling $121,320 by the plaintiffs. That was paid into the defendant's solicitor's trust account. [13] The contract required approval by the defendant's financier. The defendant confirmed satisfaction of that clause on 1 September 2006. [14] Construction commenced in late 2006. On 15 May 2009 the engineer to the contract issued a certificate of practical completion. On 18 May 2009 the defendant's solicitors advised the plaintiffs that a certificate of title had issued and that a practical completion certificate had issued and that a code compliance certificate had issued. They sought settlement on 25 May 2009. [15] On 20 May 2009 the defendant's solicitors advised the actual measurement of the unit to be purchased by the plaintiffs. That was important because it involved an adjustment to the purchase price. That advice was followed the following day, on 21 May 2009, by the defendant's solicitors issuing a settlement notice to the plaintiffs' solicitors. No issue turns on the adjustment of the purchase price. [16] The plaintiffs gave notice, by their solicitors, that they would not settle unless a column, which had been placed in Shop 14, was removed. On 26 May 2009 theplaintiffs' solicitors gave notice to the defendant cancelling the agreement and demanded a refund of the deposit paid of $121,320. That notice was based on an alleged breach of contract by the placement of a column inside the shop. [17] On 27 May 2009 the defendant rejected the plaintiffs' notice and issued a further settlement notice. On 16 June 2009 the defendant issued its cancellation notice based upon an allegation that the plaintiffs had failed to settle. [18] The plaintiffs say that they had no physical entry to Shop 14 until about mid- May 2009. They further say that they did not know about the column in Shop 14 until 21 May 2009.The column[19] The outline plans which were attached to both agreements did not make reference to or in any show a column positioned in Shop 14. [20] As early as May 2004 architectural plans prepared for the defendant depicted a structural column in the retail window display area of Shop 14. Within 13 working days after the plaintiffs signed the agreement to purchase the plan which was submitted for the resource consent depicted the structural column in the retail window display area of Shop 14. The substance of the column changed from a concrete column to a circular steel column. Its visual effect, however, seems to have changed little because the tubular steel section is now encased in a box. It measures 600 mm by 880 mm. That should be contrasted with other columns within other tenancies which measure approximately 400 mm by 500 mm. It is common ground that the increase in size of the column in Shop 14 was caused by the housing of service pipes within the void around the structural column. The column-face parallel to the shop front glazing measures 880 mm. This width constitutes 20.75 per cent of the glazed shop front of Shop 14. The plaintiffs' architect, Mr Jakovi, describes the position and size of the column as follows:The overall length of Shop 14's shop front (glazed area) measures 4,240 mm. The column face parallel to the shop front glazing measures 880 mm and this width constitutes 20.75% of the glazed shop front. Due tothe column's close proximity (530 mm) to the shop front glazing and because of the largest dimension (880 mm) is parallel to the glass line, the column greatly reduces sightline into the internal retail space.[21] The defendant's architect made reference to the column as follows:The column's visual and physical presence in the "shop front zone" of the space means that for some retailers the layout planning and the design of the store's presentation may be a challenge.Further he concludes:The presence of the column in Shop 14 is not ideal in terms of its location and size. The effects of the column, however, do not render the Shop 14 to be unsuitable for retailing purposes and although it may present a challenge to some retailers, the column can be integrated into a shop front design to give impact.[22] The presence of the column is therefore the factual matter that has caused the plaintiffs to give their cancellation notice and to seek the return of the deposit. The causes of action which have been pleaded by the plaintiffs are designed as alternative ways by which the plaintiffs can be released from the purchase contract and recover their deposit. What is required for the purposes of this summary judgment application, therefore, is to determine whether the presence of the column justifies one or other of the causes of action which have been pleaded and, having regard to the principles applicable to an application for summary judgment.Evidential conflict[23] Mr Wang, in his written submission, drew attention to a number of matters where either the facts or the opinions expressed by the deponent were in conflict. He noted the following: a) There was a conflict between the architects as to the functionality and appeal of the shop caused by the presence of the column; b) There is a conflict between the deponent valuers. The plaintiffs' expert valuer concluded a 15 per cent reduction in value while the defendant's valuer concluded a 3 per cent reduction in value; andc) Although there was not a direct conflict of evidence on the point, the significance of the plans which were attached to the agreement and the existence of construction plans which were in existence at the same time do not lead to the conclusion that there was a misrepresentation as to the state of the shop at the time the sale and purchase contract was signed.Additional defendant's evidence[24] I heard short argument from counsel concerning the admissibility of three additional affidavits on the defendant's behalf. A formal application had been filed. It had first been called before Lang J, who directed that it be heard at the same time as the substantive application. In a separate judgment which I release with this judgment, I concluded that I should read the additional evidence. That conclusion, nevertheless, meant that the thrust of the plaintiffs' case concentrated on the proposition that the defendant was in breach of contract by presenting Shop 14 with a column which was not provided for in the outline plans attached to the contract. That breach was a breach of a stipulation in the contract which was essential to the plaintiffs and which, in terms of the Contractual Remedies Act 1979, s 7(4)(a) justified the plaintiffs giving notice cancelling the contract. [25] The balance of the causes of action although relied upon by Mr Bassett were not pressed as being separate and independent justifications for the entry of summary judgment. That position, in view of the evidence that was adduced, is entirely understandable and is appropriate, in my view. That is because the conflicts in the evidence itself makes it impossible to give any final determination on the balance of the causes of action. They are all matters which can only be properly determined at trial.Does the column represent a breach of an essential term?[26] Although I have expressed this question in terms of a breach of contract, the question would apply equally to the issue of whether or not the presence of thecolumn amounts to a misrepresentation of a matter which was essential to the plaintiffs and thereby justifying cancellation. Indeed, Mr Bassett recognised that, on this aspect, the test is the same for the breach of contract cause of action as it is for the misrepresentation cause of action, which is the fourth of the five causes of action to which I have made reference in [2] of this judgment. [27] The Contractual Remedies Act 1979, s 7 makes provision for the cancellation of a contract. For the purpose of this analysis the following parts of s 7 are applicable: [28] Subsection 3 provides:7 Cancellation of contract(3) a party to a contract may cancel it if— (b) A [term] in the contract is broken by another party to that contract [29] Subsection 4 provides:(4) Where subsection (3)(b) of this section applies, a party may exercise the right to cancel if, and only if,— (a) The parties have expressly or impliedly agreed that , the performance of the [term] is essential to him;[30] That defendant's position put simply is that there is no reference to the column as such in the contract. Further, clause 5.2 of the contract permits the defendant to amend, revise or alter the outline plans. [31] It was common ground that the principal clause which requires consideration is clause 5.2. Although submissions initially referred to other clauses in the contract as both counsel refined their argument and, in particular, in the defendant's case Mr Wang conceded that the position was governed by clause 5.2 specifically. [32] To gain a proper perspective of the position, however, it is necessary to look at clauses 5.1 and 5.2 which provide:5. CONSTRUCTION OF PROPERTYVendor to build5.1 The vendor shall after the Agreement is unconditional, with all due diligence, application and speed, (subject to delays beyond the control of the Vendor and the requirements of any Relevant Authority), proceed with and complete the construction of the Development and the Property Generally in accordance with the Outline Plans and Preliminary Specifications, subject to clauses 4.14, 5.2 and 6.1 and in good, proper, sound and professional manner.Alterations to Outline Plans and Preliminary Specifications5.2 The Vendor reserves the right to amend, revise or alter the Outline Plans and Preliminary Specifications in such a manner as the Vendor considers appropriate having regard to the circumstances, and the Purchaser shall not be entitled to claim any compensation, damages, right of set off or to make any objection ore requisition based on any such amendment, revision or alteration whether pursuant to clause 5.3 of the General Conditions or otherwise. If any materials set out in the Outline Plans and Preliminary Specifications of the Property are not readily obtainable or are prohibited by any law, the Vendor shall substitute such materials with materials that are of a value and quality as near as reasonably practicable to the specified materials.[33] Clause 5.1 imposes an obligation on the defendant to:complete the construction of the Development and the Property Generally in accordance with the Outline Plans and Preliminary Specifications, subject to clauses 5.2 and in good, proper, sound and professional manner.[34] Mr Wang acknowledged that the right to amend, revise or alter the outline plans provided for in clause 5.2 permitted one or other of the acts of amending, revising or altering to take place after the date of the signing of the contract. That concession, in my view, is properly made and follows from the plain words used in clause 5.2. Mr Wang, however, did not concede that the defendant's commitment to have a column in Shop 14 occurred prior to the sale and purchase contract. In that respect, his submission runs counter to the plans which had been prepared prior to the contract and which date back to as early as May 2004. However, it is not necessary to make a final determination on that question on this application. That is because the important question is whether in the first place the contract provided for no column as a condition of contract in Shop 14.[35] Columns are not specifically referred to in the plan attached to the contract or in the terms of contract itself. That, however, is not fatal to the plaintiffs' position because, as I have recorded, the Contractual Remedies Act 1979, s 7(3) and (4) relate to an express or implied agreement concerning the performance of a stipulation. [36] Mr Bassett drew attention to the analysis of implied terms undertaken inVickery v Waitaki International Ltd4 where the court said:But three broad classes are obviously terms implied by rules of law in certain kinds of contract (eg sale of goods), terms deduced by implication or interpretation from the express terms of the contract, and terms held to be implied to give business efficacy to the contract.[37] Mr Bassett adopted the second of those classes of cases and submitted that there was, in this contract, a basis for deducing by implication or interpretation that the contract contained a term that there would be no column in Shop 14. Mr Bassett drew attention to the following specific points: a) The outline plan attached to the contract showed no column; b) Clause 5.2 deals with changes to the plans. It, however, has no application to these facts because the column was in contemplation before the contract was signed and there could be no question of an amendment, revision or alteration to the plans caused by the need to have a column; c) The contract discloses that it is a contract for a retail shop with window frontage exposed to a public walkway; d) Issues of area are tightly controlled by clauses 4.15 and 4.16 which evidences the parties' intention to ensure that the value and quality of the shop are maintained as the development is built; e) Clause 5.1 requires completion in accordance with the plans in a good, sound and professional manner; and4 Vickery v Waitaki International Ltd [1992] 2 NZLR 58 (CA) at 64.f) A consideration of the outline plans reveals that this particular shop has a narrow frontage window which makes restrictions on that frontage even more crucial when considering quality and value of the shop itself. [38] Mr Bassett relied on the same points to establish that the building of Shop 14 without a column was essential to the plaintiffs. [39] Both counsel referred me to Progeni Systems Ltd v Hampton Studios Ltd5where the dictum of Jordan CJ in Tramways Advertising Pty Ltd v. Lunar Park (NSW) Ltd was pronounced:6the truth of a representation will be essential when the representation is of such fundamental importance to the representee in his consideration whether to enter into the proposed contractual relationship that without it he would not have contracted with the representor either at all or on those particular terms.[40] What must be determined is the intention of the parties at the time of the contract. It is not a case of looking at the consequences of the breach: Wilson v Hines.7[41] The question of whether the parties agreed that the existence, or non- existence, of the column was essential to the plaintiff??? is a question of construction. It is answered objectively and not by reference to the parties' subjective intentions: James Development Ltd v Mana Property Trustee Ltd.8 The court added that where essentiality is to be implied rather than expressed, it is determined by a construction of the contract as a whole. The question then is whether, as a matter of construction, the parties agreed that performance of the stipulation was essential, such that any departure from it conferred a right to cancel. [42] I have viewed the matters advanced by Mr Bassett collectively, but am not satisfied that they justify a conclusion that the non-existence of a column in Shop 14 was essential the plaintiffs. Because I reach that conclusion, it follows that the5 Progeni Systems Ltd v Hampton Studios Ltd HC Christchurch CP 105-86, 11 August 1987.6 Tramways Advertising Pty Ltd v. Lunar Park (NSW) Ltd (1938) SR (NSW) 632 at 634.7 Wilson v Hines (1994) 6 TCLR 163.primary basis advanced by the plaintiffs for summary judgment is not made out. It follows from that conclusion that the appropriate course for this case to follow now is for trial of all the causes of action. [43] There has been extensive evidence. I had the opportunity in discussing with counsel the way forward and, in particular, the entry of that is case into the High Court Pilot Scheme. A check with the Scheduling Office and with the Civil Liaison Judge indicated that trial time for this proceeding was available on 6 September 2001. Accordingly, it is now possible for me to make a number of orders to ensure the speedy and expeditious trial of this proceeding.Orders[44] I order as follows: a) The application for summary judgment is dismissed; b) A statement of defence and counterclaim, if there is to be one, shall be filed and served by c) If there is a counterclaim, a statement of defence to the counterclaim shall be filed and served by d) Each party shall file and serve affidavits of documents by e) The proceeding is set down for a five-day trial to commence on 6 September 2010; f) The plaintiffs' briefs of evidence shall be served by g) The defendant's briefs of evidence shall be served by. In all other respects rr 9.2 to 9.16 shall apply.8 James Development Ltd v Mana Property Trustee Ltd [2009] NZCA 483 at 24.Costs[45] In line with the position adopted in NZI Bank Ltd v Philpot 9 t I reserve costs on the summary judgment application.9 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).