HADFORD HOLDINGS LTD V JAY PATEL AND ANOR HC AK CIV 2008-404-007840

HADFORD HOLDINGS LTD V JAY PATEL AND ANOR HC AK CIV 2008-404-007840 9 September 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-007840BETWEEN HADFORD HOLDINGS LTD Plaintiff AND JAY PATEL First Defendant AND BIJAL BHINDI AND TUSHAR BHINDI Second DefendantsCIV 2007-404-007842AND BETWEEN HADFORD HOLDINGS LTD Plaintiff AND HIMAN BHINDI DefendantCIV 2007-404-007843AND BETWEEN HADFORD HOLDINGS LTD Plaintiff AND JAY PATEL Defendant Hearing: 4 September 2008 Appearances: S Singh for the Plaintiff in respect of all proceedings D G Collecutt in respect of the Defendant Jay Patel M Pitch in respect of the Defendants Bijal Bhindi and Tushar Bhindi Judgment: 9 September 2008 at 3:00 pmJUDGMENT OF ASSOCIATE JUDGE HOLEThis judgment was delivered by me on 9 September 2008 at 3:00 pm pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy RegistrarDate: .Solicitors/Counsel: Shean Singh, PO Box 10018, Mt Eden, Auckland D G Coldicutt c/o Parshotam & Co., PO Box 27-079, Mt Roskill, Auckland M Pitch, PO Box 105725, Auckland 1001Introduction[1] Each of these proceedings involves an application for summary judgment. At the hearing I indicated that there was no prospect of the application being granted as the affidavits showed contested evidence which was supported by contemporary documentation. [2] On 11 March 2006, 108 Redoubt Road Limited entered into a contract to sell 14 sections to the plaintiff. [3] In respect of CIV 2007-404-007840, by written agreement for sale and purchase dated 29 March 2007, the plaintiff sold lot 23 to Jay Patel and/or nominee for $415,000. By variation to that agreement dated 29 July 2007 (which was signed by all three parties) Jay Patel nominated Bijal Bhindi and Tushar Bhindi as purchasers. The initial agreement for sale and purchase between Mr Patel and the plaintiff was unconditional. [4] In respect of CIV 2007-404-007842, on 29 July 2007 the plaintiff entered into an agreement for sale and purchase whereunder lot 18 was sold to Himan Bhindi and/or nominee for $378,000. The contract was conditional upon the purchaser obtaining finance within five working days of the date of the contract. The contract was subsequently declared unconditional although the purchaser had not arranged finance. [5] In respect of CIV 2007-404-007843, on 30 May 2007 the plaintiff entered into a written agreement to sell lot 16 to Jay Patel and/or nominee for $415,000. The contract was unconditional. [6] In each case, the purchasers failed to settle their purchase. [7] Initially, the summary judgment applications sought specific performance of each contract.[8] The proceedings first came before me for hearing on 3 July 2008. On that occasion, it became apparent that the plaintiff's affidavit in each proceeding had been sworn before a member of the firm for whom counsel for the plaintiff worked. In these circumstances, the Court directed that the affidavits be re-sworn. At that time, I indicated that I doubted that specific performance was an appropriate remedy in the circumstances. [9] The plaintiff no longer seeks specific performance. In each case, the contracts were cancelled. Each section has been on-sold to a third party (which has a relationship with the plaintiff) for $330,000. In each case, a real estate agent has provided a brief certificate to the effect that the price of $330,000 represents a price consistent with current sales.Determination[10] The various defendants have sworn affidavits to the effect that they were persuaded to enter into their respective contracts by a real estate salesman acting for the plaintiff who assured them that he would be able to arrange appropriate finance for them or, alternatively, arrange for the section to be on-sold to a third party without loss to the defendant. In one case (CIV 2008-404-007842) when the condition as to finance was about to expire without finance having been arranged, the defendant deposes that a similar assurance was given to that defendant by the real estate salesman. [11] Affidavits in reply were sworn on behalf of the plaintiff. These affidavits deny the misrepresentation allegations. However, no affidavit evidence has been submitted by the real estate salesman. [12] I consider that the conflict in evidence as to whether or not there were misrepresentations made on behalf of the plaintiff requires viva voce evidence for its determination. There is contemporaneous documentation which tends to support the misrepresentation allegations. These are the agreements for sale and purchase.[13] The agreement for sale and purchase between 108 Redoubt Road Limited and the plaintiff involved 14 sections. The purchase price was $5,050,000. This indicates an average price per section of $360,714. [14] The agreements for sale and purchase entered into between the plaintiff and the various defendants approximately one year later show purchase prices varying between $415,000 and $378,000. In two cases they show the plaintiff having made a profit on re-sale in the sum of $55,000. The affidavit evidence of each defendant indicates quite clearly that none of the defendants had the financial ability to complete the contracts and that this was known to the agent of the plaintiff. [15] Accordingly, in accordance with the dicta contained in Pemberton v Chappell[1987] 1 NZLR 1 and subsequent authorities, it is apparent that this is not a proper case for summary judgment.Nomination (CIV 2008-404-007840)[16] The agreement for sale and purchase between the plaintiff and Patel was varied in the following terms:It is agreed by both the vendor and the purchase that: The nominated Purchaser will be Bijal Bhindi and Tushar Bhindi. The variation was signed by all parties.[17] The variation did not purport to vary clause 1.3(2) of the agreement for sale and purchase which provided that where the purchaser (Patel) executed the agreement with the provision for a nominee (as here), "the purchaser shall at all times remain liable for all the obligations on the part of the purchaser hereunder". [18] Counsel for Bijal Bhindi and Tushar Bhindi relied on Lambly v Silk Pemberton [1976] 2 NZLR 427 (CA) to argue that as the nominees were not parties to the contract, there was no privity of contract between them and the plaintiff. The point was not extensively argued before me. However, I think the wording of the documentation is clear to the effect that there has been no novation which wouldhave had the effect of substituting the nominees for the original purchaser. In these circumstances, I doubt that the plaintiff would be able to recover against the nominees as all that the variation did was to give them the right to call for the conveyance to them rather than Patel – see also s 4 Contracts (Privity) Act 1982. [19] For this reason, too, the application for summary judgment against Bijal Bhindi and Tushar Bhindi should not succeed.Damages[20] Even if summary judgment had been appropriate in respect of liability, it would not have been appropriate in respect of damages. [21] In each case, the plaintiff sought damages being the difference between the purchase price recorded in the agreement for sale and purchase between the plaintiff and the respective defendants and the ultimate sale price of $330,000 when each section was on-sold. The calculation accords with recognised principles. However, in these cases, I question if any loss has been sustained by the plaintiff arising out of the alleged breaches of contract. Assuming that the evidence for the defendants is accepted, it seems that the plaintiff entered into contracts with impecunious defendants with the knowledge that there was no prospect of the defendants completing the respective purchases. If it is established that there was never any prospect of the purchasers completing their purchase, then to enter into a contract with each purchaser was always going to be an exercise in futility. In such an event, it is difficult to see how the plaintiff could say it has sustained a loss giving rise to damages. The point was not argued before me and I reach no conclusion in respect of it. [22] Quite regardless of the matters raised in the previous paragraph, damages would not have been awarded in this case on a summary judgment basis because the on-sales for $330,000 each are questionable. It is known that the purchaser in each case has a relationship with the plaintiff. I appreciate that the market has fallen considerably in recent times. However, there is a huge variation in price between $415,000 and $330,000. The only support for the difference comes from a letterwritten by a real estate salesman. At least, the Court would require a competent valuation from a registered valuer in such circumstances.Application to join third party[23] This application has not been dealt with. The proceedings are being adjourned to a case management conference at which time the plaintiff will need to decide whether or not it wishes to continue its proceedings. The nature of the evidence would indicate that there is at least a possibility that the plaintiff may wish to discontinue, in which case it is pointless at this stage to consider joining a third party.Costs[24] The fact that the applications for summary judgment were unlikely to succeed must have been apparent to the plaintiff as soon as it became aware that each application was opposed. In each case, serious allegations of misrepresentation were advanced in the notice of opposition and supporting affidavits. An indication that summary judgment might not be the appropriate procedure was given to counsel at a case management conference by Abbott AJ. At the hearing on 3 July 2008, I also indicated that I doubted summary judgment was an appropriate procedure where specific performance was sought. [25] The plaintiff's counsel submitted that NZI Bank Ltd v Philpott [1990] 2 NZLR 403 should be applied and that costs should be reserved. The defendants sought costs on a 2B basis. [26] Philpott decided that in most cases where summary judgment was refused or an application for summary judgment was withdrawn, costs should be reserved until the result of the litigation is known. The reasons for this were explained in Wallace Corporation Ltd v International Marketing Corp Ltd HC AK CIV 2003-404-7227 28 February 2005, Heath J at paragraph [16]. He pointed out that large costs orders on an unsuccessful summary judgment application could act as a deterrent to plaintiffsto use a quick and effective means of obtaining relief through the summary judgment procedure. He said, at paragraph [20]:In effect, an order for costs may only be made if there is reason to believe that there has been no genuine verification of facts by the plaintiff and there is no ground for the stated belief that there is no defence.[27] At paragraph [22] he said:There must be evidence sufficient to impugn the oath of the duly authorised representative that he or she believes there is no defence.[28] That is the situation here. The plaintiff has persisted with a summary judgment applications which it knew or ought to have known had no prospect of success after the notices of opposition were filed. In the circumstances, these are appropriate cases for costs which will be awarded on the agreed 2B scale.Conclusion[29] Each application for summary judgment is declined. [30] In respect CIV 2008-404-007840 and 2008-404-007843, costs are awarded against the plaintiff in favour of the respective defendants to be calculated in accordance with category 2B together with appropriate disbursements. No costs are awarded in respect of CIV 2008-404-007842 as there was no appearance by the defendant. [31] The proceedings (including the application to join a third party) are all adjourned to a case management conference to a date to be fixed by the Registrar. _____________________ Associate Judge J D Hole