Waitarere Rise Ltd v Re Rangi and Sj Rangi Hc Pmn

JurisdictionNew Zealand
CourtHigh Court
JudgeD.I. Gendall
Judgment Date16 March 2010
Neutral Citation[2010] NZHC 403
Docket NumberCIV-2009-454-872
Date16 March 2010

[2010] NZHC 403

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

CIV-2009-454-872

BETWEEN
Waitarere Rise Limited
Plaintiff
and
Robert Edward Rangi and Sarah Jane Rangi
Defendants
Apperances:

TM Horder - Counsel for the plaintiff

IA McCulloch & D Hickman - Counsel for first-named defendant

DJ O'Connor - Counsel for the second-named defendant

Summary judgment application by a vendor seeking specific performance of an agreement for sale and purchase it had entered into as with the defendants as purchasers — whether the defendant's inability to raise finance to complete settlement amounted to impossibility of performance so an order of specific performance was inappropriate.

Held: An accepted defence to a proceeding for specific performance existed where enforcement of the order would be “impossible”. Where a defendant raised an impossibility defence to a summary judgment application for specific performance, the plaintiff must establish that there was no arguable defence that there was a very substantial probability that the defendant would be unable to comply with an order for specific performance. Once the plaintiff had shown that there was a contract which, on its face, entitled the plaintiff to the remedy of specific performance, the evidential onus shifted to the defendant to demonstrate a tenable defence. The defendants were required to establish a very substantial probability that they would not be able to comply with an order for specific performance. Mere difficulty to pay on the part of a defendant as purchaser was unlikely to amount to a defence of impossibility.

There was substance in Waitarere's submission that the evidence of the defendants' inability to raise finance was insufficient to raise an arguable defence. The defendants' attempts would have been significantly affected by the size of the loan that was specified in their respective loan applications, and there was no evidence to support the defendant's assertion that the applications were rejected because they were now separated.

The sanctity of the law of contract required the Court to hold the parties to their bargain wherever this was possible. Furthermore, the defendants had already paid the deposit and thus partly performed the Agreement and damages would not be an adequate remedy, as this would place the burden of selling the property (perhaps on a falling market) back onto Waitarere and, given that Waitarere's financier evaluated its performance on the basis of settlement rates, this was likely also to have a detrimental effect on the Waitarere's continued ability to obtain refinancing for its development. Application for summary judgment successful.

JUDGMENT OF ASSOCIATE JUDGE D.I. Gendall

Introduction
1

The plaintiff seeks an order for summary judgment for specific performance of an agreement for sale and purchase it has entered into as vendor with the defendants as purchasers.

2

The defendants have each filed a notice of opposition. They accept that they have defaulted in completing settlement and are liable under the agreement, but oppose specific performance on the ground of impossibility of performance.

Background
3

In 2006, the defendants, Robert Edward Rangi (Mr Rangi) and Sarah Jane Rangi (Mrs Rangi) entered into two agreements for sale and purchase as purchasers with the plaintiff, Waitarere Rise Limited as vendor. The agreements were for two adjoining sections, Lots 11 and 12, in a large residential development at Waitarere Beach in Horowhenua. Each section had a purchase price of $207,000.00. The present application however only concerns one of those sections, Lot 12, and the agreement for sale and purchase for that section dated 25 July 2006 (“the Agreement”). The defendants have already paid a $20,700.00 deposit for Lot 12 under the Agreement, but they have defaulted in completing final settlement of this purchase. As to the other section, being Lot 11, Mr Rangi has himself completed settlement under the agreement to purchase this section in his own name alone with substantial vendor mortgage finance left in.

4

With respect to Lot 12, which this judgment addresses, on 15 April 2009 given the purchasers' settlement default under the Agreement, the plaintiff issued the defendants with a settlement notice. The defendants however have failed to settle.

5

Pursuant to cl 9.4 of the Agreement, the plaintiff now seeks against the defendants by way of summary judgment an order for specific performance of the Agreement. The outstanding amount of the purchase price to be paid by the defendants including penalty interest, is a total of approximately $206,512.00 being effectively $103,256.00 for each defendant.

6

The defendants claim that they are not in a position to proceed with settlement of the Agreement. Having separated about 15 months ago, they argue that their financial circumstances make specific performance of the Agreement impossible.

Principles
7

The present summary judgment application is brought pursuant to Rule 12.2(1) of the High Court Rules which provides:

12.2 Judgment when there is no defence or when no cause of action can succeed

(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the 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.

8

The principles of summary judgment have been recently summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd [2008] NZCA 187:

[26] The principles are well settled. 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; (1986) 1 PRNZ 183 (CA), at p 3; p 185. 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; [1979] 3 WLR 373 (PC), at p 341; p 381. 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).

9

An accepted defence to a proceeding for specific performance exists where enforcement of the order would be “impossible”. There is no dispute between the parties as to the legal principles that are applicable here. A well-cited description of the defence appears in I C F Spry The Principles of Equitable Remedies (7th ed, Lawbook Co, 2007) at 128-129:

It is clearly established that the courts will not require that to be done which cannot be done … But this is not to say that the mere anticipation of possible difficulties leads to a refusal of relief. If, on the materials before the court, performance may or may not be able to be completed, the various probabilities will be taken into account in deciding on the order that is most just in all the circumstances. Thus is may be most appropriate to order specific performance in the ordinary manner, so that if necessary the defendant may later approach the court for a modification or variation by reason of subsequent difficulties or may rely upon them in any subsequent proceedings in relation to the enforcement of the order. Again, if at the time of the original application there is shown to be a substantial risk that performance will not be possible, it may be most appropriate to make a conditional order or else to adjourn the proceedings until the position becomes more clear. Finally, if a sufficiently great likelihood is shown that performance will not be possible, and especially if no strong considerations of hardship appear on the part of the plaintiff, it may be most just to grant no order for specific performance at all, whether absolute or conditional, and so to confine the plaintiff to remedies in damages.

10

This formulation of impossibility of performance was adopted in Colson v Jensen HC Auckland CP652/90, 18 September 1990, Matarangi Beach Estates Ltd v Dawson (2008) 6 NZ ConvC 194, 667 (HC) and Ngai Tahu Property Ltd v Dykstra HC Christchurch, CIV-2009-404-809, 29 October 2009.

11

Based on these authorities, it follows that the defendants must establish a very substantial probability that they would not be able to comply with an order for specific performance. In Ngai Tahu Property Ltd v Dykstra, for example, the Court commented that:

[12] … Anything less than a very substantial probability that performance will be impossible is insufficient — anticipation of possible difficulties or even a demonstrated difficulty in finding purchase money is unlikely to constitute a defence of impossibility. In such cases and subject to any other overriding equitable considerations a Court in equity is likely to order specific performance in the ordinary manner (with or without conditions) — the defendant may then later approach the Court for a modification or variation of the order.

12

Mere difficulty to pay on the part of a defendant as purchaser is unlikely to amount to a defence of impossibility: Gilbert v Manninen (2009) 10 NZCPR 209 (HC) at [49], referring to Pasedina (Holdings) Pty Ltd v Khouri [1977] 1 BPR 9460.

13

Where a defendant raises an impossibility defence to a...

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