11 Maunganui Road Ltd v Evaroa

JurisdictionNew Zealand
CourtHigh Court
JudgeJudge Faire
Judgment Date20 Sep 2010
Neutral Citation[2010] NZHC 1715
Docket NumberCIV 2010-404-001678

[2010] NZHC 1715

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2010-404-001678

Between
11 Maunganui Road Limited
Plaintiff
and
William Mataiopo O Takau Ariki Evaroa and Kathryn Lesley Evaroa
First Defendants

and

Malcolm Ellerslie Eden and Raewyn Mayvis Eden
Second Defendants
Counsel:

RJ Hollyman and S McLaughlin for plaintiff CA Murphy for defendants

Application for summary judgment seeking an order for specific performance of an agreement for sale and purchase — the defendants all entered into agreements for the sale and purchase of apartments in a high rise property developed and sold by the plaintiff. The agreements were subsequently cancelled due to variations in design between the plans and actual building. Orders were sought for the specific performance of all three sale and purchase agreements — whether the cancellation orders were justified due to misrepresentation or breach of contract under the Contractual Remedies Act 1979.

Held: For cancellation of the agreements to be valid under s7 CRA there had to be either a misrepresentation inducing entry into the contract, or a breach of stipulation of the contract which was (a) essential to the defendants or (b) substantially reduced the benefit/increased the burden/made their position substantially different under the contract. In analysing the position as to whether essentiality was implied in respect of a term where a breach was alleged, the issue became one of construction. The status of the term concerned depended upon the express terms of the contract and the circumstances of its making. None of the alleged misrepresentations or breaches of contract advanced by the defendants were expressed as being essential terms or requirements for them in the contract.

The question of substantiality was raised by the application of s7(4)(b) CRA (right to cancel — effect of misrepresentation or breach). Substantiality was not something that was capable of any more precise definition than that contained in the Act itself. The assessment required under s7(4) could take into account both subjective and objective factors. It was possible for a term to be held essential though relatively minor; the significance of a stipulation which was the subject of breach may well be coloured by the significance of the breach itself.

An affidavit from a registered valuer for MR Ltd concluded that there was little, if any, valuation effect flowing from the matters which were the subject of the defendants' complaints. There was no evidential foundation for the proposition that an issue of weathertightness would justify a cancellation in terms of s7(4) CRA, or to suggest that clauses concerning a potential reduction in size of the units (including deck) provided a ground for cancellation — it was excluded by express terms in the agreement. There was also nothing to suggest that a limited right of access was a specific matter of contemplation by the parties given that it would only be in the event of a fire or other emergency when other persons might need to use a fire-safe path that ran by the deck. Even if the misrepresentations and breaches of contract alleged had occurred there was no arguable defence based on the components of essentiality. Finally the agreement made express provision for variation and therefore there was no defence that would justify a cancellation either based on the proposition that it was essential that there be no columns within the apartment or, in the alternative that they got something substantially different from that which was contemplated by the agreement.

In relation to an election of affirmation, (a) an election arose where one party had breached the contract and the innocent party, knowing of the breach, made an unequivocal choice between two inconsistent courses of action; (b) The election bound the innocent party when it was known to the other party, and did not depend on detrimental reliance; and (c) Whether there has been an election was determined by an objective assessment of the party's actions, and may be imputed irrespective of actual intention or subsequent rationalisation. The question may be put thus: “was the party led by the defendants to suppose that he was still bound”. It followed that election could operate strictly and may not at all be what was subjectively intended by the electing party.

Bearing in mind the application made to the DBH sought an investigation of matters, there was doubt as to whether affirmation was an answer to the defendants' cancellation notices. As the case was determined on other grounds, an answer was not necessary on this point.

Order for specific performance in respect of the contracts was granted.

JUDGMENT OF ASSOCIATE Judge Faire [on application for summary judgment]

The application
1

The plaintiff applies for summary judgment against the first and second defendants.

2

In respect of the first defendants, an order for specific performance is sought in respect of a sale and purchase agreement relating to apartment P25 in the unit title complex at Mt Maunganui known as Eleven, together with interest in accordance with clause 6.3 of the agreement for sale and purchase. In addition, the plaintiff seeks specific performance against the first defendants in respect of apartment P26 in the unit title complex at Mt Maunganui known as Eleven, together with interest in accordance with clause 6.3 of the agreement for sale and purchase.

3

In respect of the second defendants, the plaintiff seeks specific performance of a sale and purchase agreement relating to apartment N9B in the unit title complex at Mt Maunganui known as Eleven, together with interest in accordance with clause 6.3 of the agreement for sale and purchase.

The court's approach to a plaintiff's summary judgment application
4

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. The rule permits the entry of judgment in respect of part of a claim, as was made clear by the amendment introduced by r 5 of the High Court Amendment Rules 2009 (SR 2009/75). The obligations imposed by the rule have been examined by a number of authorities.

5

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).
6

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.

7

That position was further reinforced in Australian Guarantee Corporation (New Zealand) Ltd v McBeth3 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

8

Hypothetical possibilities in vague terms, unsupported by any positive assertion or corroborative documents advanced by defendants will not frustrate the obligation on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v Oremland. 4

9

In Tilialo v Contractors Bonding Ltd5 the court raised a caution and said:

The Courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories. That

does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.
10

A court is not required to accept uncritically any or every disputed fact: Eng Mee Yong v Letchumanan. 6 However the court will not reject even dubious affidavit evidence, even though there must be suspicion as to the good faith of the deponent, if there is an essential core of complaint that supports a defence. In essence, the inquiry is whether or not the person's assertion passes the threshold of credibility: Pemberton v Chappell; 7Orrell v Midas Interior Designs. 8

11

In Tilialo v Contractors Bonding Limited9 it was...

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