PERKINS & ORS V WHANGAREI CITY ASSEMBLY OF GOD TRUST BOARD HC WHA CIV 2010-488-000065

PERKINS & ORS V WHANGAREI CITY ASSEMBLY OF GOD TRUST BOARD HC WHA CIV 2010-488- 000065 1 April 2010IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY CIV 2010-488-000065BETWEEN STEPHEN RAYMOND PERKINS AND JANE EVELYN PERKINS AND WEBB ROSS JOHN TRUSTEES LIMITED AS TRUSTEES OF THE STEPHEN & JANE PERKINS FAMILY TRUST Plaintiffs AND WHANGAREI CITY ASSEMBLY OF GOD TRUST BOARD Defendant Hearing: 15 March 2010 Counsel: D M Grindle for plaintiffs T J Savage for defendant Judgment: 1 April 2010 at 9:00amJUDGMENT OF ASSOCIATE JUDGE ABBOTTThis judgment was delivered by me on 1 April 2010 at 9:00am, pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy RegistrarSolicitors: Webb Ross, Private Bag 9012, Whangarei 0148 for plaintiffs Urlich McNab Kilpatrick, PO Box 633, Whangarei 0140 for defendant[1] The plaintiffs are the owners of land and buildings at the corner of Mill Road and Donald Street, Whangarei (the property). They are suing the defendant (incorporated under the Charitable Trusts Act 1957) for damages following failure of the defendant to complete a purchase of the property. [2] The parties entered into an agreement for sale and purchase in October 2007. Settlement was due to take place in February 2009. The defendant was unable to obtain finance. The plaintiffs initially served a settlement notice, but subsequently allowed the defendant time to obtain the required finance, and discussed possible changes to the agreement to try to assist the defendant to complete the settlement. When it could not do so, the plaintiffs served a further settlement notice, and cancelled the agreement when the defendant did not comply with the notice. [3] The plaintiffs seek summary judgment. They say that the defendant has no possible defence to the claim. The defendant has filed notice of opposition, advancing various matters which it says constitute a defence both to liability for, and to the quantum of, the claim. [4] Counsel for the plaintiffs asked for summary judgment to be entered at the first call of the application on the ground that the matters raised by way of defence were patently unsustainable. I heard argument from counsel, but did not have opportunity in the hearing to consider the factual basis for the defences being raised (it was one of several matters being heard that day). Having now done so, I have come to the view that there is no defence available to the defendant.History[5] The plaintiffs are trustees of the Stephen and Jane Perkins Family Trust (the trustees). They are the registered proprietors of the property in that capacity. [6] On 16 October 2007 the plaintiff Stephen Raymond Perkins (Mr Perkins) signed an agreement to sell the property to Whangarei City Assembly of God Trust Board (the Board) & or nominee for $2,400,000. The agreement was in standardform (REI ADLS eighth edition) with the addition of some special conditions. It provided for payment of a deposit of $200,000 and for settlement on or before 20 February 2009. It also provided for an interest rate of 15% per annum for late settlement. [7] The agreement was subject to two conditions (neither of them as to finance). On 9 November 2007 the Board confirmed that the agreement was unconditional and paid the deposit of $200,000. [8] On 19 February 2009 the trustees' solicitors sent a settlement statement, tax invoice and settlement requirements to the Board's solicitors. The Board failed to settle. On 23 February 2009 the trustees' solicitors serve a settlement notice. [9] The Board did not comply with the settlement notice. A pastor of the Whangarei Assembly of God Church, Donald Bruce James, has filed an affidavit in support of the Board's opposition. He says that the Board thought that it had financing in place for the purchase, but that funding was withdrawn with the world financial crisis in 2008 and 2009. He added that the Board has continued to look for alternative funding, and remained hopeful of obtaining it, but that funding was still not available at the date of swearing his affidavit (10 March 2010). It seems that a substantial factor in the Board's inability to raise finance is that the property has decreased in value substantially since the agreement was signed. [10] The parties had discussions through 2009, which included discussion of possible changes to the agreement to assist the Board to complete. In November 2009, however, the trustees' patience came to an end. Their solicitors wrote to the Board's solicitors on 20 November 2009 saying that the trustees could no longer afford to wait indefinitely for the Board to find its finance. The letter stated:Because of your clients' continued inability to perform, our clients now withdraw all previous concessions. Our client now require settlement of the sale according to the terms of the agreement for sale and purchase. We have instructions to issue a settlement notice to this effect.[11] On 3 December 2009 the trustees' solicitors served a settlement notice, giving the Board 12 working days to complete the purchase (in accordance with theterms of the agreement for sale and purchase). That notice expired on 21 December 2009. [12] The Board was unable to comply with that notice. On 18 January 2010 the trustees' solicitors wrote to the Board's solicitors cancelling the agreement and requiring payment of the difference between the purchase price and the valuation of the property as at the date of settlement stated in the agreement (21 February 2009).Principles for summary judgment[13] The Court may award summary judgment against a defendant if the plaintiff can show that the defendant does not have a defence to a cause of action in its statement of claim (r 12.2 of the High Court Rules). [14] The essential question for the Court to decide is whether there is "any real question to be tried": Pemberton v Chappell. 1 When approaching this question the Court balances the need to avoid any prejudice to a defendant against the need to take a robust and realistic approach when justified by the facts of the case. [15] Although it is for the plaintiff to satisfy the Court that there is no reasonable basis for a defence, if the plaintiff establishes a prima facie case the defendant needs to show an evidential basis for any assertions which could provide a tenable defence in order to resist the claim.The plaintiffs' claim[16] The trustees have established a prima facie case. The Board has failed to settle as required by the agreement. After allowing the Board further time, the trustees made time of the essence by serving their second settlement notice and, having given notice of cancellation of the agreement, they now have an entitlement to damages. They have provided valuation evidence to establish the value of the property as at the date of breach (being the date they failed to settle as provided in1 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.the agreement). They have a clear contractual right to interest for late settlement at the rate of 15% per annum.Opposition out of time[17] Counsel for the trustees submitted that the Court did not need to consider the defences because the defendant's notice of opposition was filed inside the 3 working days stipulated by r 12.9 of the High Court Rules. The notice of opposition and affidavit in support were not served until 5:15pm on the day after they were due (as required by r 12.9). [18] Counsel for the trustees could not point me to any specific prejudice suffered by them as a result of the late filing. The purpose of the High Court Rules is to ensure just, speedy and inexpensive determination of matters. They should not be applied if they would cause injustice. If the Board has an arguable defence, it should not be denied the right to argue that defence for the sake of a little over a day's delay.The defences that have been advanced(a) No link to the agreement [19] The first argument advanced by the Board is that the trustees have not established that it is the party named as purchaser in the agreement. [20] There is no merit in this point. The purchaser is named as Whangarei City Assembly of God Trust Board. An entity named Whangarei City Assembly of God was incorporated under the Charitable Trusts Act 1957 on 16 June 1995 with registered identifier 681507. That entity changed its name to Whangarei Assembly of God on 11 March 2009. Although the defendant is named as Whangarei City Assembly of God Trust Board, it is described as a duly incorporated society number 681507. I am in no doubt that it is one and the same person.(b) Trustees' authority [21] The next matter raised was that the trustees had not shown that Mr Perkins had legal authority to enter into the agreement for the trustees. Counsel for the Board referred to the fact that the agreement had been signed only by Mr Perkins, and there was no evidence of ratification by the other trustees. [22] There is no legal requirement for all trustees to sign. They can act through one who is duly authorised. Mr Perkins has filed an affidavit saying that he is authorised to speak on behalf of the trust, and that the trust entered into the agreement for sale and purchase. It is also significant that until the trustees cancelled it, both parties treated the agreement as valid. The Board paid the deposit and spent months attempting to raise finance on the strength of it. There is nothing in the evidence to call into question Mr Perkins' statement that the trust entered into the agreement. (c) Trustees' ability to settle [23] Counsel for the Board submitted that the Board had an arguable defence in that the trustees had not shown that they were ready, willing and able to settle prior to cancelling the agreement. He said that the trustees had not discharged their mortgage, had not signed any conveyancing documents, and had not tendered a settlement statement after calling on the Board for settlement in December 2009. [24] There is nothing in this point. The first step for settlement was for the purchaser to tender a transfer for signature (McMorland, Sale of Landpara 11.12(b)) 2 . The trustees were clearly wishing to settle and, given an indication that the Board was ready, would have provided the requisite settlement statement as they had in February 2009. It makes no sense to suggest that their failure to do so, notwithstanding the lack of any steps by the Board to complete, allows the Board to avoid the consequences of its failure.2 D W McMorland Sale of Land (2nd ed, Cathcart Trust, Auckland, 2000) at [11.12(b)].(d) Failure to give reasonable notice [25] Counsel for the Board next contended that the trustees were required to give the Board a reasonable time to comply with the notice, and given the history of ongoing negotiations, 12 working days was unreasonable. [26] The 12 working days period given is a generally accepted period for a vendor's settlement notice. However, even if it could be argued that that was not determinative (because the reasonableness of the period must still be addressed according to the circumstances of the case), it cannot be said that the Board was not given reasonable notice. Even if it is arguable that the trustees affirmed the agreement by their conduct following expiry of their first settlement notice (and I doubt this) the reasonableness of the time given for settlement under the second notice must be determined in the overall context. The Board had some 16 months from date of signing of the agreement in which to find finance, and was then allowed a further 9 months after it failed to settle. The Board was warned on 20 November 2009 that a second settlement notice would be issued and was given further time after the settlement notice expired on 21 December 2009; the agreement was not cancelled until 18 January 2010. The trustees have been more than reasonable in allowing the Board time to settle. (e) Disputes as to quantum [27] Counsel for the Board also contended that the Board had arguable defences as the quantum of the claim. The first was that the trustees' loss should be calculated at the date of cancellation (18 January 2010) rather than the date of breach (20 February 2009, being the date for settlement). The second was that there was need for an enquiry into the valuation relied upon by the trustees, in light of a valuation five months earlier by the same valuers that was $250,000 higher. Thirdly, counsel argued that the trustees should have to deduct an "occupation rent" as they had been in possession throughout. [28] As a general rule, damages for breach of contract are assessed at date of breach. However, this general rule is subject to the overriding principle that as far aspossible an innocent party will be put in the same position as if the breach of contract has not occurred: McElroy Milne v Commercial Electronics Limited.3 It has been said in relation to loss for wrongful repudiation of an agreement for sale and purchase that value at date of breach will adequately compensate the vendor for loss in many but not all cases: in some cases it may be necessary to use the value at a later date to adequately compensate the vendor, but, in other cases, it will not provide adequate compensation and damages need to be addressed at some later date, such as date of trial: Thomson v Rankin.4[29] Counsel for the Board, by contending for calculation of loss as at the date of the later cancellation, would seem to be wishing to take advantage of an improvement in market conditions (although there is no evidence of value at 18 January 2010). However, it is not for the party in breach to determine the most favourable date for calculation of loss. The focus is on the appropriate date to compensate the innocent party adequately. As Cooke said in McElroy Milne v Commercial Electronics, even in cases of market deterioration, the wrongdoer has to accept the consequences of failure to carry out its responsibilities. 5 The date will not be shifted from date of breach to benefit the defaulting party: Turner v Superannuation & Mutual Savings Ltd.6[30] The Board's other arguments on quantum can be answered briefly. First, the trustees' valuer made it clear that the drop in market rental between September 2008 and February 2009 was attributable to a drop in market rentals in that period (from $140 per square metre to $120 per square metre). Further the valuers expressly notes the valuations that their opinion as to market value may change due to market conditions. Secondly there is no legal basis for the Board's contention that the plaintiffs should pay an "occupation rent". The trustees were entitled to remain in possession of the property until settlement.3 McElroy Milne v Commercial Electronics Ltd [1993] 1 NZLR 39 (CA).4 Thomson v Rankin [1993] 1 NZLR 408 (CA) at 41.5 McElroy Milne v Commercial Electronics Limited, above n 3 at 44.6 Turner v Superannuation & Mutual Savings Ltd [1987] 1 NZLR 218 (CA).Residual discretion[31] Mr James said in his evidence that the Board does not have sufficient assets to pay the trustees' claim, and will need to go into liquidation if a settlement cannot be reached. This can be taken as an argument for the Court to exercise its residual discretion not to order summary judgment on the basis that an injustice would result:Sudfeldt v UDC Finance Ltd.7 Even if the liquidation of the Board is a matter of concern for the community (whether the church congregation or a wider community), that does not bring this case within the very limited range of cases where the Court is justified in refusing summary judgment even where there are no arguable defences: Inner City Properties Ltd v Mercury Energy Ltd. 8Decision[32] I find that none of the matters advanced on behalf of the defendant gives rise to an arguable defence. The trustees are entitled to summary judgment, in accordance with their statement of claim, for: a) The sum of $972,222 for loss of bargain; b) The sum of $299,917.81, for interest on the unpaid purchase price from 21 February 20009 to 18 January 2010, at the rate of 15% per annum (as provided in the agreement); and c) The sum of $12,529.68, for interest on the judgment sum from 18 January 2010 to 15 March 2010 at the rate of 8.4% per annum (pursuant to the Judicature Act 1908). [33] The plaintiffs are also entitled to costs of $6,560 and disbursements of $1,140, as follows: a) Costs at scale 2B High Court Rules;7 Sudfeldt v UDC Finance Ltd (1987) 1 PRNZ 205 (CA).8 Inner City Properties Ltd v Mercury Energy Ltd (1998) 13 PRNZ 73 (CA) at 77.Item Description Time (in days) 1 Commencement of proceedings 3 days 5.1 Preparing summary judgment application and supporting affidavits 0.6 5.3 Preparation for hearing 0.25 5.4 Appearance at hearing 0.25 4.1 days x $1,600.00 Total $6,560.00 b) Disbursements; Filing fee $1,100.00 Sealing fee $40.00 Total $1,140.00 [34] The plaintiffs sought survey costs of $2754.00 as a further disbursement. They have not provided any documents to support that claim, nor shown the justification for it. I reserve leave for the plaintiffs to provide such justification or support. The Registrar is to determine whether to allow this further disbursement in the usual course. ____________________Associate Judge Abbott