ARNDT V HIGGS HC HAM CIV 2008-419-99

ARNDT V HIGGS HC HAM CIV 2008-419-99 28 February 2008IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV 2008-419-99BETWEEN ROSS GORDON ARNDT Appellant AND BRIAN DAVID HIGGS Respondent Hearing: 26 February 2008 Appearances: David Taylor for Appellant Alan Hassall QC for Respondent Judgment: 28 February 2008JUDGMENT OF HARRISON JIn accordance with R540(4) I direct that the Registrar endorse this judgment with the delivery time of 9:00 am on 28 February 2008_________________________________________________________________________________ SOLICITORS Lamb Bain Laubscher (Te Kuiti) for Appellant Edmonds Judd (Te Awamutu) for Respondent COUNSEL AL Hassall QC; David TaylorIntroduction[1] Mr Brian Higgs has sued Mr Ross Arndt in the District Court at Hamilton. Originally he sought specific performance of an agreement for sale and purchase of two houses. He also applied for summary judgment. Subsequently Mr Higgs amended his claim to seek damages and discontinued his application for summary judgment. The proceeding will go to trial in the normal way. [2] At issue in this appeal by Mr Arndt is whether or not Judge Robert Wolff erred in exercising his discretion to allow Mr Higgs to file an amended statement of claim after the proceeding was set down for trial. Mr Arndt's counsel, Mr David Taylor, says the amendment adds a new cause of action. As a result, he says Mr Arndt has suffered irremediable prejudice and the Judge exercised his discretion wrongly. [3] Unfortunately Judge Wolff did not deliver a reasoned decision. Instead he issued a brief minute granting leave to file an amended pleading. The question remains, though, whether his decision reflects a reviewable error or was plainly wrong.Background[4] The parties entered into a written agreement for sale and purchase on 26 October 2006. Mr Arndt agreed to buy houses, sheds and carports owned by Mr Higgs and situated at two separate addresses in Te Awamutu. The purchase price was $50,000 with a deposit payable of $5,000. [5] Mr Arndt agreed to remove one house from a section at Mangapiko Street by 31 January 2007 and the other at Bridgman Road by 30 June 2007. The contract was expressly conditional upon Mr Higgs obtaining subdivisional approval for the two properties. The Waipa District Council issued a resource consent before 31 January 2007 when Mr Higgs confirmed to Mr Arndt his readiness, willingness and ability to settle the agreement.[6] However, on 8 February 2007 Mr Arndt's solicitors wrote to Mr Higgs' solicitors advising that the contract was at an end. The letter is not part of the District Court record but a copy was produced in argument here. It materially provided:At the time the agreement (drafted by your client) was signed by Ross Arndt, discussions took place between Ross Arndt and your client, in the presence of Paul Brown, when Ross Arndt brought to your client's attention that there was no provision for the agreement to be terminated if the Otorohanga District Council did not consent to the houses being removed onto the properties as intended by Ross Arndt at that time. Your client had advised our clients that he understood the situation and in the event consent was not received, the agreement would be at an end. The Otorohanga District Council has since denied its consent. This was communicated to and accepted by your client, therefore the agreement (if one exists) is at an end. [Emphasis added][7] Mr Higgs filed his application for summary judgment and statement of claim on 8 March 2007. The document failed to ascribe a status to what was plainly Mr Arndt's letter of repudiation, describing it as a communication that Mr Arndt 'would not complete the agreement'. Mr Higgs sought specific performance. [8] Mr Arndt swore an affidavit in opposition on 28 May 2007. He said this on the issue of applying to the Otorohanga District Council for consent to remove the houses into that jurisdiction:The only reason I did not lodge the applications and pay the deposit was because with the inspection carried out by the Otorohanga District Council and what they already knew of the properties and the District Plan Rules, they were of the view that I was wasting my time, and that I should save the cost of making the application.[9] Subsequently on 9 July 2007 Mr Taylor and Mr Higgs' then counsel filed a memorandum in the District Court, identifying the issue for determination at trial as follows:Whether the agreement between [the parties] was a solely written agreement that did not contain an oral term to the effect that the contract for the removal of the houses was conditional upon the consent to the relocation of the buildings by the Otorohanga District Council.Counsel further noted:It is common ground that the Otorohanga District Council did not approve, and so the only question is one of fact as to whether or not the contract contained such an oral term.[10] Mr Arndt filed a statement of defence on 26 July 2007 raising the affirmative defence that:The oral part of the agreement consists of an oral term to the effect that the contract was conditional upon the consent of the Otorohanga District Council to the relocation of the two houses into its district from the Waipa District Council. The Otorohanga District Council did not give its consent and accordingly the contract never became unconditional.[11] Subsequently Mr Higgs' solicitors instructed Mr Alan Hassall QC. He applied to amend the existing statement of claim. It sought to substitute a claim for damages for the original claim for specific performance. In addition to the balance of the purchase price owing of $45,000, Mr Higgs seeks general damages of $61,970 (its basis appears legally and factually problematic). Materially the amended statement of claim recites Mr Arndt's affirmative defence of the existence of an oral term requiring Council consent, and pleads:If the Court were to hold that the agreement was conditional upon the consent of the Otorohanga District Council (which is denied) [Mr Arndt] is not able to rely upon the fact that the Otorohanga District Council did not give its consent because [he] made no application for consent to the Otorohanga District Council and made no reasonable efforts to obtain such consent.[12] Judge Wolff's approval of this amendment on 16 January 2008 is the subject of Mr Arndt's appeal.Appeal[13] In support of Mr Arndt's appeal, Mr Taylor filed a comprehensive synopsis of written submissions together with copies of a number of authorities. He supplemented his submissions with forceful oral argument. However, for reasons which will become shortly apparent, it was unnecessary for me to call on Mr Hassall QC in answer. And while the authorities reinforce the overarching importance of proof of prejudice arising from an amendment to pleadings, none are on point here.[14] Mr Taylor accepts that leave should be granted to allow an amendment where it is necessary to do justice between the parties. Prejudice is a material consideration and if it is sufficiently severe the Court may refuse leave. Here, Mr Taylor says, Mr Arndt has suffered plain and irremediable prejudice in this way: (1) The Bridgman Road property has now been demolished but, if he had been made aware of Mr Higgs' intention to rely on a failure to take all reasonable steps to comply with a condition (assuming that the condition was a term of the contract), Mr Arndt would have been able to apply formally to the Otorohanga District Council for consent and have it refused before demolition. Accordingly, a defence based in contract would have been available to the amended pleading; (2) While Mr Arndt can plead, and will do so if necessary, that Mr Higgs is now estopped from raising the defence of failure to take reasonable steps, this defence is of a different nature, being based in equity, to that which would have been available before the Bridgman Road house was demolished; (3) Accordingly, Mr Higgs is now estopped from amending the pleading by virtue of the contents of counsel's memorandum dated 9 July 2007, the pleadings themselves which embodied that understanding, Mr Arndt's reliance upon the pleadings and the memorandum, and the demolition of the house which has deprived him of an available defence in contract. [15] In my judgment this line of argument is misconceived. In oral argument Mr Taylor conceded that the essential premise of Mr Hassall's amended pleading is legally correct; Mr Arndt was under an obligation to take all reasonable steps to obtain consent from the Otorohanga District Council to relocate the houses (if the contract was subject to such a condition). Mr Taylor also concedes the legal consequences: first, Mr Arndt's notice of termination sent on 8 February 2007 was unlawful – he could not set up the non-fulfilment of a condition when he had failed to take all reasonable steps to ensure its performance; and, second, his unlawfulrepudiation of his contractual obligations continued until Mr Higgs accepted his repudiation by abandoning his claim for specific performance in September 2007 and seeking damages, thereby cancelling the agreement: s 7(2) Contractual Remedies Act 1979. [16] Furthermore, and arguably more serious, the letter was misleading. It stated unequivocally that 'the Otorohanga District Council has since denied its consent'. This was wrong. Consent was never sought. Advice allegedly given by a Council officer to Mr Arndt that consent would not be given if an application was made is something quite different from the event actually represented by Mr Arndt's solicitors. [17] Against this narrative, there is no room for an argument of prejudice, for a number of independent reasons. First, Mr Arndt was in breach of his contractual obligations and wrongly repudiated the agreement. He is deemed to know his legal rights and obligations. It was within his power to apply to Council and cure his breach at any time prior to September 2007. Mr Higgs' election to accept Mr Arndt's repudiation and cancel the contract brought that right to an absolute end. Whether or not Mr Higgs' amended statement of claim added a plea that Mr Arndt failed to take all reasonable steps is beside the point. Mr Arndt cannot complain that he was prejudiced by Mr Higgs' express identification of his own breach and its legal consequences when electing to accept Mr Arndt's repudiation. It was then too late for Mr Arndt to rectify his default. [18] There is, in any event, a degree of unreality in Mr Taylor's argument. His suggestion that Mr Arndt would have taken a step diametrically inconsistent with his repudiation of the agreement at any time after 8 February 2007 stretches the bounds of credibility beyond belief. Filing an application with Council would have amounted to an unequivocal affirmation of a contract which he had disclaimed. To adopt Mr Taylor's own argument, but to the opposite effect, Mr Arndt would have been unable to approbate and reprobate at the same time. [19] Second, Mr Arndt has consistently asserted that the Council would have declined an application if one was formally made. Originally his solicitorsunequivocally represented to Mr Higgs that 'Council has since denied its consent'. He modified this assertion in his affidavit dated 28 May 2007. He then represented that Council had advised that following its inspection of the houses it concluded that Mr Arndt was wasting his time and money by filing a formal application. He does not give critical particulars such as identifying the employee, the nature of the communication, and its date and place. [20] The demolition or otherwise of the house in the interim will not affect the availability of primary records proving the investigation or of the Council officer to confirm his or her advice. If accepted, this evidence would establish that Mr Arndt's breach was of no causative effect because the application would have been declined. [21] Mr Taylor sought to explain away, even question, the accuracy of the contents of the letter in Mr Arndt's affidavit when faced with their unequivocal effect during argument. I need not emphasise the dangers of continuing with that approach if and when the case goes to trial. [22] Third, the contents of counsel's joint memorandum dated 9 July 2007 are immaterial. The document primarily recorded the common ground between counsel that Council did not approve or consent to an application to relocate the buildings. That is correct. It was wrong, though, in advising that consequentially ' the only question is one of fact as to whether or not the contract contained such an oral term'. That limitation is wrong but Mr Arndt cannot say he relied upon it to found an estoppel argument when he had decided some months earlier not to discharge his legal obligation to take reasonable steps to obtain consent. By then, as I have noted, he had decided to repudiate the contract because consent would not be forthcoming. [23] Fourth, and finally, the amendment sought is not strictly speaking a claim giving rise to a cause of action but a reply to an affirmative defence. Mr Higgs was not bound to file a reply at all. He could have raised at trial without prior notice an argument that Mr Arndt failed to take reasonable steps. Mr Arndt would have had no ground for complaint. Instead he has the benefit of express notice of Mr Higgs' contingent argument.Decision[24] On each and all of these grounds I am satisfied that the amendment allowed by Judge Wolff to Mr Higgs' statement of claim in the District Court did not and will not result in any prejudice to Mr Arndt. His appeal against the decision made in the District Court on 16 January 2008 is dismissed. [25] Mr Higgs is entitled to costs calculated according to category 2B together with reasonable disbursements. ______________________________________ Rhys Harrison J