|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Court of Appeal of New Zealand |
![[AustLII]](/images/tiny-austlii.gif)
Court of Appeal of New ZealandLast Updated: 25 January 2012
IN THE COURT OF APPEAL OF NEW ZEALAND C.A.
75/87
BETWEEN BERNARD ALLIN HUTTON and
JANICE HELEN HUTTON
Appellants
AND ROGER GORDON PALMER
Respondent
Coram Cooke P.
Richardson J
Somers J
Hearing 29 and 30 August 1988
Counsel W.G.G.A.Young with Miss Maria Dewe for Appellants
B.McClelland QC with J.N. Williamson for Respondent
Judgment 30 November 1988
JUDGMENT OF THE COURT DELIVERED BY SOMERS J.
These are appeals from judgments given in the High Court at Christchurch the end result of which is that the appellants, Mr and Mrs B.A. Hutton, have been ordered specifically to perform a contract for the exchange of land made between them and the respondent, Mr R.G. Palmer, on 29 July 1983 but dated 9 August 1983. The first appeal is against judgments delivered by Savage J on 20 November 1984 and 24 March 1986 and the second is against a judgment of Hardie Boys J delivered on 14 July 1987.
In order to state and understand the issues it is necessary to summarise the facts and the major decisions in this complex case which has so far occupied 20 sitting days and other shorter periods in the High Court and has engaged the attention of not less than seven of its Judges at various times.
Mr and Mrs Hutton were lessees of farm land situated near Springs Junction under two renewable Crown leases, Nos 935 and 286. Mr Palmer owned a farm at Amberley and some other land at Springs Junction across the main road from that of the Huttons. He also had some interest in recovering sphagnum moss from a swamp near Runanga. On 9 September 1982 the Huttons entered into an agreement with a Mr Manifold as agent for a company to be formed by which, in consideration of a royalty, they gave him “full rights to the extraction and removal of all sphagnum pulp from the swamp sites” on the property. There were two swamps. The larger has three levels, the first comprising growing sphagum moss, the second decaying moss referred to as pulp, and the bottom layer being peat. The smaller swamp is a peat swamp only. In about June 1983 Mr and Mrs Hutton agreed to sell part of their interest in Lease 935 to Mr C.G. Royce for $60,000. Completion of this transaction required the consent of the Crown as lessor, a survey, and the surrender of Lease 935 and the issue of two new leases by the Crown in its place. The Huttons had also agreed with the Crown to exchange some small parts of their leaseholds for other Crown land.
In July 1983, as mentioned, Mr and Mrs Hutton entered into the agreement with Mr Palmer dated 9 August 1983. The parties agreed to exchange their properties; in the case of the Huttons their leasehold interests (less that part sold to Mr Royce) and in the case of Mr Palmer, his Amberley farm. Mr Palmer was to pay $45,000 by way of equality of exchange, a further $5,000 for a rock licence and yet a further $10,000 for a licence to mine peat from the larger swamp. Mr and Mrs Hutton undertook to use their best endeavours to obtain such a licence which is required under the Coal Mines Act for the recovery of peat but not for sphagnum moss or pulp.
The contract provided that possession would be given and taken on or before 20 December 1983 and contained the following three clauses particularly material to the case —
“8.This contract is subject to consent of the Land Settlement Board being obtained within the period referred to in clause 10 hereof and each party hereto shall within fourteen days from the date hereof make such application therefor as may be necessary and each party hereto shall do all such acts and things as may be necessary or expedient for the purposes of endeavouring to obtain such consent or securing compliance with the provisions of the Land Act 1948 and any regulations for the time being thereunder and each party shall bear his own legal and other costs whatsoever of and incidental thereto.
9.This contract is subject to the consent of the Administrative Division of the High Court and each party hereto hereby undertakes to do all such acts and things as may be necessary or expedient for the purpose of endeavouring to obtain such consent or ensuring compliance with the provisions of the Land Settlement Promotion and Land Acquisition Act 1952 and any regulations for the time being thereunder.
10.If any such consent referred to in clauses 8 and 9 shall not be granted by the 20 day of December 1983 or such later date as the parties agree on or shall be refused or shall be granted subject to conditions then this Agreement subject as hereinafter mentioned shall be void. ”
The words “subject as hereinafter mentioned” in the last line of Clause 10 are meaningless. There is nothing thereafter, or for that matter in earlier clauses, to which the words can refer.
Consent under the Land Settlement Promotion & Land Acquisition Act 1952 was given on 24 August 1983. Mr and Mrs Hutton's application for the consent of the Land Settlement Board to the transfer of their leasehold interests to Mr Palmer was made on 10 August 1983 and at about that time Mr Palmer forwarded to the Board his application to become transferee.
On 30 August 1983 Mr and Mrs Hutton entered into an agreement with Mr C.F. Bellaney as agent for a company to be formed under which in consideration of $100 and royalties they granted as “a profit in gross the exclusive right to extract and process sphagnum pulp and sphagnum moss” from the larger swamp with accompanying rights of access for a term of 10 years from 9 September 1982 (the date of the Manifold agreement) with a right of renewal for a further term of six years. Royalties were fixed in respect of pulp (but not moss) at varying rates during the term. The grantee undertook to make good damage caused by its operations and on the expiry of the grant to leave the area worked in grassed pasture. The company, called Sphagnum Products (NZ) Ltd., was incorporated on 16 September 1982 and purported to ratify the agreement on 28 September.
Mr Palmer then commenced proceedings against Mr and Mrs Hutton, Mr Bellaney and Sphagnum Products (NZ) Ltd. By his amended statement of claim of 19 December 1983 he sought a declaration that the agreement between the Huttons and Mr Bellaney and his company was not binding on him, specific performance of the exchange agreement, and damages.
On 18 November 1983 the Commissioner for Crown Lands wrote to Mr Hutton's solicitors about the sale to Mr Palmer as follows —
“I am pleased to inform you that the Land Settlement Board has approved the transfer of the above land (All RLF 287 and Part RL 935). As per my letter of even date regarding the transfer to C G Royce, my consent cannot be made available until the two new subdivision leases ex RL 935 have been registered.
Please note that:
The transferee's attention be drawn to Section 100 of the Land Act 1948 which states that no cutting for sale of timber is allowed without my prior written consent.
Rent is at present paid to 31/12/83 and there are no arrears. It should be noted that if registration is not effected by 1/1/84 the department will look to the transferee for payment of rent but that legally the responsibility for payment of rent rests with the registered licensee. In the event of any default by the transferee the transferor will be approached to pay any amount outstanding. ”
On 24 November the Commissioner qualified that letter by reference to an arrangement about fencing which was part of the exchange agreement between the Huttons and the Crown already mentioned. The Commissioner made it clear that compliance with that agreement was a condition of consent. Mr Palmer signifed his consent to that agreement on 13 July 1984.
Meanwhile on 26 October 1983 Mr Palmer applied for an interlocutory injunction requiring Mr and Mrs Hutton to cease all work on the swamp. In support of that application Mr Turner, a solicitor engaged on Mr Palmer's behalf, deposed that he was told by the Lands and Survey Department in Nelson that consent had been given on 26 October 1983 for the subdivision in terms of a scheme plan which had been lodged (that is a reference to the Royce transaction) and to the transfer from the Huttons to Mr Palmer. He added “it is further stated to me that formal advice of the consent will be forwarded next week”.
The application for an interlocutory injunction was heard by Hardie Boys J on 27 October 1983 and in a judgment delivered on 1 November 1983 he refused to make the order sought.
Mr Palmer's action, in so far as it related to the question of whether he was bound by the agreement with Mr Bellaney and to his claim for specific performance against the Huttons, was heard by Savage J over 8 days between 16 July and 2 August 1984. Although Mr Palmer in his amended statement of claim had pleaded that the Land Settlement Board had consented to the transfer to him on 26 October 1983 and Mr and Mrs Hutton in their amended statement of defence had pleaded that they did not know such fact and accordingly denied it, the issue was not raised at the hearing. Presumably it was either supposed that the Commissioner's letter was a sufficient consent to answer the contract or the Huttons did not wish to take the point preferring to have the contract enforced. The Judge records that although the Huttons had at first pleaded that Mr Palmer had repudiated the exchange agreement and that they were entitled to cancel it, in the event they accepted that the agreement was still in force and did not resist an order for specific performance if the contract was rectified to make it subject to the agreement with Mr Bellaney and to a finding that Mr Palmer was aware of that agreement when he entered into the exchange contract.
The Judge, in his reserved judgment delivered on 20 November 1984, concluded that Mr Palmer was not bound by the agreement between the Huttons and Bellaney and his purchase was not subject to it or to the earlier Manifold agreement. He decreed specific performance of the exchange contract. The time within which the agreement was to be carried into execution and other matters in relation to it were reserved and, of course, Mr Palmer's claim for damages remained to be dealt with.
On 25 January 1985 the Huttons' solicitors indicated that their clients would carry out their obligations under the exchange agreement and undertook to transfer the mining licence for peat when it was granted. Mr Palmer's solicitors suggested, in effect, that the provisions about the mining licence be abandoned because the price the Huttons would receive for it was approximately equivalent to the amount they would have to pay the Crown for its grant. On 19 February 1985 Mr Palmer's solicitors pressed for an interim settlement indicating that Mr Palmer's claim for damages would be in excess of $70,000. On 28 February they stated that Mr Palmer would not settle even on an interim basis in any way which involved him paying the Huttons the $60,000 mentioned in the exchange agreement or any part of it. They considered that Mr Palmer's claim for damages should first be determined to see whether on a balance of account Mr Palmer was obliged to pay anything at all.
In April 1985 Mr and Mrs Hutton moved for orders fixing a time and place for settlement of the exchange contract and giving them leave to rescind if Mr Palmer did not settle. In support of this application Mr Hutton deposed that he and Mrs Hutton had been in a position to complete on reasonable notice since the delivery of the judgment of Savage J. The remaining part of Mr Palmer's action, his claim for damages, was set down for hearing on 17 July, as was Mr and Mrs Hutton's application for orders as to the carrying out of the decree made against them.
On 11 July 1985 Mr and Mrs Hutton filed a third amended defence in the action. In it they denied that the Lands Settlement Board had consented to the exchange agreement on 26 October 1983 and further denied that all conditions precedent contained in that agreement were satisfied. The particulars of this plea referred to clause 8 of the exchange agreement, namely, that the contract was subject to consent of the Land Settlement Board being obtained within the period referred to in Clause 10, and to Clause 10 itself, already set out, which provided that if such consent was not granted by 20 December 1983 or a later agreed date or was refused or granted subject to conditions then the agreement should be void. Following these particulars there was the following plea —
“No unconditional consent to the land agreement was received from the Land Settlement Board prior to or since the 20th day of December 1983 with the result that the said contract is void in terms of clause 10 of the land agreement and sections 89(1) and 82(3) of the Land Act 1948. ”
Mr and Mrs Hutton also sought relief by way of counterclaim as follows: (1)a declaration that by reason of breaches of implied terms as to the preservation of the Amberley property they were entitled to cancel the exchange agreement; (2)in the alternative damages; (3)a declaration that the exchange agreement was void. They asked for relief under the Contractual Remedies Act 1977 and in other ways.
On 15 July Mr Palmer moved for an order striking out the pleading filed on 11 July. On 16 July a settlement was reached between the plaintiff and Mr Bellaney and his company. The hearing of Mr Palmer's claim for damages and the cross-claim of Mr and Mrs Hutton began the next day, 17 July 1985.
What then happened is described in the judgment of Savage J. The Judge asked Mr Young, of counsel for the Huttons, how he could justify an amended statement of defence after judgment. After hearing submissions he considered that a substantial question might arise on the issues raised in the amended statement of defence and records that it was arranged that Mr Young would file a notice of motion for the recall of the judgment already given. The following day, 18 July 1985, the Huttons moved for orders recalling the judgment delivered on 20 November 1984; granting them leave, nunc pro tunc, to file and serve the third amended statement of defence; alternatively directing that the order for specific performance made on 24 November 1984 be subject to the obtaining of all necessary consents including any consent required pursuant to the provisions of the Land Act 1948. It was agreed that the new motion should be reserved for argument at the conclusion of the evidence. In the result some of the evidence about damages was heard between 17 and 19 July 1985 and the action then adjourned.
The hearing resumed on 18 November 1985 and was concluded, with a five day interval, on 28 November 1985. The Judge records that Mr Hicks advised the Court on the first day of the resumed hearing that the Huttons had been granted legal aid in the intervening period and asked that Mr Young's motion recalling the judgment be heard immediately. Mr Young opposed that, indicating that he had only had some 10 minutes notice of the proposal. The Judge ruled that the matter would proceed as originally directed — that the evidence continue and all issues be argued at the conclusion of the evidence. When that time arrived there were four issues left for determination which the Judge records as being (1)the notice of a motion to recall the judgment and the motion to strike out the amended statement of defence; (2)Mr Palmer's claim for damages against the Huttons; (3)the Hutton's counterclaim for damages against Mr Palmer; (4)the form and terms of the decree for specific performance.
It is plain, and Mr Young so stated at the hearing of the appeal, that the Hutton's case as to the consent of the Land Settlement Board was argued as it had been pleaded, namely, that such consent not having been given by 20 December 1983 the exchange agreement became void in accordance with its terms.
In his judgment delivered on 24 March 1986 the Judge dismissed the application to recall judgment and struck out the amended statement of defence. He accepted, however, the alternative application by the Huttons that the decree be varied so as to provide that the Huttons were ordered to use their best endeavours to obtain the necessary consents under the Land Act 1948 and subject to those consents being obtained to specifically perform the exchange contract. He directed that settlement was to be completed within two calendar months of the date of judgment with leave reserved to the Huttons to apply for deferment of settlement if all necessary consents had not then been obtained. On Mr Palmer's claim for damages he awarded a sum of $1,500, in respect of one item and on the Huttons' counterclaim for damages awarded them $1,137.50. He adjourned the Huttons' counterclaim in respect of other heads of damage. He also directed the Huttons to reinstate the swamp, in particular to fill a trench which had been dug in order to drain it.
On 14 April 1986 the written consent of the Land Settlement Board was forwarded to the Huttons' solicitors. It was described in the accompanying letter as a “formal consent”. It is dated 26 October 1983.
In June 1986 settlement was arranged, but in the event did not take place. It will be necessary later in this judgment to refer in some detail as to what then occurred.
On 12 September 1986 Mr Hutton moved for orders rescinding the decree for specific performance or directing the same be rescinded unless, within a time specified by the Court, Mr Palmer provided an easement for a water supply at Amberley which it was contended was required under the exchange agreement and, in any event, staying the order for specific performance pending the hearing of an appeal.
On 22 September 1986 notice of appeal against the two judgments of Savage J was given.
On 12 November 1987 Jeffries J heard the application for a stay pending appeal. He refused a stay and extended the settlement date for a further 30 days with leave to apply. On 21 January 1987 Mr and Mrs Hutton again moved for orders rescinding or discharging the decree made by Savage J and in the alternative directing the same be rescinded unless within a specified time the water supply already mentioned was provided by Mr Palmer by way of easement. The application was accompanied by an affidavit by Mr Hutton and seven further affidavits were filed in relation to the application. It appears that the Huttons' mortgage arrangements, of which more will have to be said later, required them to get easements for the water supply and Mr Palmer was of opinion that licences to take water which he had obtained were a sufficient performance of the exchange contract. These applications came before Hardie Boys J on 9 April 1988 and in a reserved judgment delivered on 14 April he held that Mr Palmer's contractual obligations did not extend to the provision of registered easements to take water but merely the provision of a lawful supply. He also held that performance of the exchange contract by Mr and Mrs Hutton was not impossible and accordingly dismissed the application.
The second appeal in this case was against that judgment.
Five matters were advanced by Mr Young in support of the appeals. They were as follows, although stated in an order different from that in which they were advanced. First, that contrary to the finding of Savage J, Mr Palmer had instructed or authorised Mr Hutton to negotiate the agreement with Mr Bellaney and his company. Secondly, that upon its true construction the exchange agreement required Mr Palmer to provide registrable easements in relation to his house water supply at Amberley. Thirdly, that by reason of the provisions of Clause 10 of the exchange agreement it had become void on 20 December 1983, or alternatively, had become voidable and in the latter case that leave (if the same was necessary) be given to the Huttons to avoid the agreement. Fourthly, that in any event in the circumstances now existing, the decree for specific performance could or should not stand. Finally, that the sum of $1,500 awarded as damages to Mr Palmer was not recoverable. To these issues we now turn.
The primary issue determined by Savage J at the first hearing in July and August 1984 was whether Mr Palmer was bound by the agreements entered into by the Huttons with Mr Manifold before, and with Mr Bellaney after, the exchange agreement was made. This turned upon whether Mr Palmer knew of the first and authorised or instructed the Huttons to enter into the second. Mr Palmer denied knowledge of either; Mr Hutton deposed to the contrary and asserted that Mr Palmer had asked him to negotiate the second. In the end the issue was one of credibility.
Savage J carefully reviewed the evidence of the three principal witnesses, Mr Palmer, Mr Bellaney and Mr Hutton. Of the first, Mr Palmer, he said —
“Mr Palmer appeared a somewhat excitable man, who was inclined to speak fast and sometimes, I think, without thinking very carefully about what he was going to say. He was, in my view, at times somewhat illogical and some of the things he said were contradictory. He was rather dogmatic and sure he was right, though his memory was somewhat faulty; at the same time he was inclined to be suspicious of questions put to him, anticipating, I think, traps.
... He was however, in my view, within those limitations, an honest and truthful witness and basically I accept his evidence. It follows, as will become apparent, that I have accordingly preferred his evidence to some of that given by other witnesses, more particularly that of Mr Hutton.
”He said of Mr Bellaney —
“I came to the conclusion that he was quite prepared to say whatever he thought was in his best interests. I discount what he said where this is necessary in the light of what other witnesses said. ”
And of Mr Hutton —
“So far as Mr Hutton is concerned, I reached the conclusion that he had convinced himself of some of the things he said but not all; some I think he knew were false. Put plainly I disbelieved him on some matters and I preferred Mr Palmer's evidence as I have already recorded. ”
In his judgment following the second hearing in July and November 1985 the Judge again referred to Mr Palmer saying that he was “an almost incredibly bad witness who does not do justice to himself in giving evidence”. On that occasion the evidence related to his claim for damages. The Judge added to his assessment of Mr Palmer saying —
“I think Mr Palmer was prepared to misrepresent things to others and would talk
extravagantly without too much regard for reality; and, I think, was prepared to colour circumstances to suit what he thought was to his advantage. In result he found himself driven to say things, and I think he did this on occasions in his evidence, which cannot be accepted as correct. I also became satisfied that in managing his work and dealings he is very disorganised or, at all events, he appeared to be so; one might, in fact, say he was very much of a muddler and in result I found myself unable to put much weight on a good deal of his evidence about what was done, and when, in relation to the farm operations. ”
Mr Young took us through the material evidence of the witnesses at the first hearing and drew our attention to other surrounding circumstances and the Judge's further assessment of Mr Palmer in an endeavour to persuade us to reverse the finding made against the Huttons. We do not consider it necessary to set out the detail of the argument. It was persuasively put and, on the printed case, had considerable cogency.
The principles are not in doubt. An appeal such as the present is by way of rehearing and the Court has an obligation to come to its own conclusion. Running across that principle is another, namely, that an appellate Court is under the disadvantage that it has not seen or heard the witnesses. In a case which depends on an opinion as to conflicting testimony an appellate Court will not interfere unless it can be shown that the trial Judge has failed to use or has palpably misused his advantage; it ought not to reverse the conclusions at which he has arrived merely from its own comparison and criticisms of the witnesses and its own view of the probabilities of the case. S.S. Hontestroom v S.S. Sagaporack [1927] AC37, 47. Thus an appellate Court will interfere where the evidence accepted by the trial Judge is inconsistent with facts incontrovertibly established by other evidence or is patently improbable: Edwards (Inspector of Taxes) v Bairstow [1955] UKHL 3; [1956] AC 14, 39; Brunskill v Sovereign Marine & General Insurance Co Ltd [1985] HCA 61; (1985) 62 ALR 53.
The present case does not display any such features. It is one in which the Judge has weighed and stated the impression made upon him by the witnesses. There is no apparent rational explanation why the Huttons should have entered into the agreement with Mr Bellaney unless Mr Palmer agreed. Nor is there any such explanation as to why Mr Palmer, one of whose interests in acquiring Spring Creek was to extract moss, should ever have agreed to any such thing. In those circumstances it would be quite unsafe to interfere with the Judge's assessment.
Clause 14(b) of the exchange contract contains an undertaking by Mr Palmer “To supply water to the dwelling situated on (the Amberley property) by means of a one inch pipe”. Such a pipe has been installed from the source of supply on Forestry land on Mt Grey and thence along a roadside to the house. The Forestry Department and the Hurunui County Council have granted licences terminable on three month's notice as is their usual practice in such cases. The Huttons would have accepted this as a performance of Mr Palmer's obligations but their intended mortgagee insists upon the grant of easements. This point was evidently taken in June 1986 and formed the stumbling block to the settlement of the transaction that had then been arranged.
The evidence indicates that there was no existing connection to the water supply at the time the contract was entered into although there was a licence from the Forest Service. The latter indicated in March 1987 that it would grant an easement, although it is not clear whether this would be terminable in the same way as the licence. The County however will not give an easement.
We are in agreement with Hardie Boys J, who determined this point on 14 April 1987, that the contract did not require Mr Palmer to procure registered easements. His obligation was to supply water to the dwelling house by means of a one inch pipe. The circumstances existing when the contract was signed reinforce the ordinary meaning of the words — they contemplate the practical provision of water to the house.
The relevant provisions of the contract have already been set out. In short Clause 10 provides that if the consent of the Land Settlement Board “is not granted by 20 December 1983 or such later date as to the parties agree on or shall be refused or shall be granted subject to conditions then this Agreement ... shall be void”. Consent was required because s 89(1) of the Land Act 1948 materially provides that “A lessee ... shall not transfer ... his interest ... in the land subject to the lease ... without the consent of the Board ... ”. Both sides agreed that the consent referred to in the contract was such as would enable the exchange of land and lease to be lawfully effected. We take that to mean that the transfers of land and lease would be capable of registration. That state of affairs was not reached until 14 April 1986 when the unconditional consent was sent to the Huttons' solicitors.
It is not in doubt that at least until 18 April 1985, when the Huttons moved for orders giving directions as to settlement, they were treating the contract as still alive and that until the pleading of 11 July 1985 Mr Palmer could have entertained no other apprehension. In accordance with that pleading and the subsequent application to recall the judgment of 20 November 1984 it was submitted for the Huttons that the contract had become void on 20 December 1983. In this Court it was also submitted, in the alternative, that it had become voidable, that the decree was subject to the power to avoid and, if necessary, that leave to avoid should be given.
Mr Young's contentions on this part of the case were in the end summarised by him in this way. The contract automatically terminated on 20 December 1983. By acquiescence the parties extended time at least until July 1985. When that mutual state of acquiescence no longer existed the contract became void. Alternatively, the contract in substance became voidable when the contractual date of 20 December 1983 passed. Each party was then entitled to avoid the contract without notice or when a reasonable time for obtaining consent had elapsed. That time had been reached by 11 July 1985 or by November 1985 when the second hearing resumed. The filing of the amended statement of defence and its accompanying application for leave constituted all that was required by way of avoidance including the seeking of leave to avoid if that was necessary.
We have no doubt that these contentions must be rejected. The meaning of the word “void” in a provision such as that in suit was considered in Neylon v Dickens [1977] 1 NZLR 595. All three Judges held that it means exactly what it says — see [1977] 1 NZLR at pp 598, 603 and 605. It does not mean voidable. It may be, as Mr Young submitted, that neither the Huttons nor their advisers considered this point before the hearing which resulted in the making of a decree for specific performance. Even if that is the case it makes no difference. The Huttons' actions were such as to affirm, unambiguously, the continued existence of the contract.
In those circumstances the provisions of Clause 10 of the contract were spent. There was no time fixed for consent or for settlement. Instead both were required to be had within a reasonable time. The actions of both parties makes it clear that such time had not passed and, indeed, had not commenced to run by 11 July 1985 when the point was first raised. At that time a decree for specific performance had already been made and although contractual rights do not merge in the decree control of the contract thereafter lay with the Court acting upon equitable principles: see Johnson v Agnew [1980] AC 367, 394, 399. Reference may also be made to Halkett v Earl of Dudley [1907] 1 Ch 590, 601, Facey v Rawsthorne [1925] HCA 10; (1925) 35 CLR. 566, Stevter Holdings Ltd v Katra Construction Pty Ltd [1975] 1 N.S.W.L.R 459, and JAG Investment Pty Ltd v Strati [1981] 2 NSWLR 600. The assertion of control is based on the consideration that the making of a decree is a declaration by the Court that the contract is lawful, binding and should be performed and accordingly its future is for the Court to determine. In the case of rescission for breach the existence of such control by the Court has been stigmatized as nonsense by Meagher, Gummow and Lehane, Equity Doctrines & Remedies, 2nd Ed. 2053. It is not necessary to consider the merits of this stricture in such circumstances for the thrust of the appellants' case is that in the events that have happened it would be inequitable to enforce the decree. That issue obviously requires the adjudication of the Court.
Under this head Mr Young submitted that in all the circumstances as they now exist the order for specific performance ought not to be allowed to stand. We have emphasised the word “now” for the main thrust of the submissions made relates to the time that has elapsed since the decree was amended by the judgment of 24 March 1986 and the present circumstances of Mr and Mrs Hutton. Although not put in so many words the gravamen of the submission is that the decree now operates so harshly and oppressively on the Huttons that to allow it to stand would be unjust.
We propose to consider this point first as the position stood in March 1986. The contract was made on 29 July 1983 and provided for completion on 23 December 1983 although that time was not of the essence. As late as April 1985 the Huttons were seeking the assistance of the Court to enforce settlement and, so far as Mr Palmer was concerned, were still insisting on completion until 11 July 1985. The hearing that began on 16 July, and occupied 7 days in that month and one in August, was then adjourned and finally completed in November 1985. It resulted in the judgment of 24 March 1986 which amended the earlier decree by adding to it the requirement that the Huttons use their best endeavours to obtain all necessary consents. The Judge obviously accepted that the steps necessary to satisfy the conditions for the delivery of the Land Board's consent were purely mechanical. We have no doubt that was right.
It was suggested that Mr Palmer's unwillingness to settle and pay the sum due by him for equality of exchange and such other accounts as would be then due was a partial cause of earlier delays. But, as the Judge observed, settlement could not take place without the consent of the Land Board which was not received by the Huttons until April 1986.
We do not think there was undue delay. The period which elapsed between the manifested change of heart by the Huttons on 11 July 1985 and judgment in March 1986 was eight months. Most of it was accounted for by the time it took to have the case heard and the Judge's consideration of it. No doubt the hearing was extended because of claims by Mr Palmer which proved unfounded. It was also lengthened by the point taken for the Huttons that the contract had become void in 1983. That, too, was a bad point. But these delays were not significant in the case; the non-receipt of the consent of the Land Board would have prevented settlement.
For completeness we should add that the Amberley farm, stated in the contract to be worth $360,000 was valued in May 1986 at $224,000. This, no doubt, reflected the general downturn in farm values. We have no comparable values for the Springs Junction property but it may reasonably be assumed that it too had declined in value. It was not suggested that the change in the worth of the Amberley Farm affected the validity of the decree. Nor could it be. The risk in changes of value were assumed by the parties. Indeed, as will be seen, they expected to be able to settle in June 1986.
We are of opinion that the decree for specific performance as amended by the judgment in March 1986 has not been shown to have been wrongly made.
The judgment of 24 March 1986 directed that settlement was to be completed not later than two calendar months from that date with leave reserved to the Huttons to apply for deferment if all necessary consents had not been obtained. The evidence shows that, for various reasons, neither party was able to complete by 24 May although the consent had been received in April. Their solicitors agreed that settlement would have to be deferred until 12 June. On 6 June the Huttons' solicitor advised Mr Palmer's solicitor that his clients should be ready to settle the following week. On 10 June he sent a telegram to Mr Palmer's solicitors giving notice that settlement was required on 12 June and that “we are in a position to settle”. This was evidently received on 11 June. Mr Palmer paid $63,608.61 to his solicitors on 13 June and deposed that he packed his household effects on 12 June and had made arrangements to graze his stock elsewhere and would have vacated on 24 hours notice. On 16 June 1986 Mr Palmer's solicitors wrote to the Huttons' solicitors. The first paragraph of their letter is as follows —
“We refer to the writer's telephone conversation with Mr Carruthers regarding the above matter in which we advised that we are in a position to settle and are holding funds in our trust account for this purpose. We refer to your telegram dated 10 June 1986 giving notice that settlement was required on 12 June 1986 and note Mr Carruthers' advice that the Huttons will not in fact be in a position to settle today and that Mr Carruthers foresees a delay of approximately one week. ”
On 26 June Mr Palmer held a clearing sale of his plant and other farming items on the Amberley property. Mr Hutton had had his clearing sale on 24 May.
In the event the Huttons were unable to complete. It appears that after the exchange contract had been signed the Huttons had discharged a mortgage to the Rural Bank over the Springs Junction property and replaced it with a mortgage to Registered Securities Ltd (RSL) and had arranged that RSL would advance $164,000 on mortgage of the Amberley property to enable them to complete the exchange. It was on this footing that the Huttons expected to complete in June and indicated their readiness to do so. RSL, however, insisted that before it would make the advance registered easements would have to be obtained to protect the house water supply at Amberley.
It is not necessary to burden this overlong judgment with details of the evidence on this point. It is contained in affidavits read before Hardie Boys J at the hearing, on 9 April 1987, of the Huttons' application either to review or discharge the decree or, in effect, requiring Mr Palmer to provide the easements. We have already indicated our view that Mr Palmer's contractual obligations did not require him to do so.
The present position of the Huttons is that in order to settle they must discharge mortgages on the Springs Junction property amounting to $198,000 and pay stamp duty of $7,650. On settlement they would receive $45,000 from Mr Palmer by way of equality of exchange — the other two sums amounting to $15,000 may or may not be payable. They expected to receive $37,000 from Mr Royce to whom they sold part of Springs Junction early in 1983. The Amberley property was valued again in August 1988 at $175,000. It seems quite unlikely that they can borrow sufficient on the security of the Amberley property to complete. Mr Young was not able to say that completion was impossible — the Amberley property could be sold and the Court no doubt has power to direct its sale: see, for example, the form of order in Galloway v Galloway (1886) set out in 3 Seton's Judgments and Orders 2137-2138.
The evidence also indicates that Mr Hutton's liabilities other than those secured on the Springs Junction property amount to about $277,280 including a debt of approximately $250,000 to Wrightson Dalgety according to his affidavit sworn on 16 August 1988. The later sum is not explained. His debt to that firm in November 1986 was just over $50,000.
In addition to those matters there was a suggestion that to sustain the decree now would be to force on the Huttons a bargain substanially different from that into which they entered in 1983 and in wholly different circumstances. One matter mentioned was that while the Springs Junction farm may, and probably has, diminished in value it provides a non-farming source of income from the sale of sphagnum moss and eventually peat. As to the last point there is no evidence as to the commercial value of the sphagnum swamp. A valuation of 16 July 1984 indicated that the swamp —
“ ... does not add to any great extent to the fair sale value of the property as a whole at this present point in time but does add to both the appeal and saleability of the property, with the possibilities of perfecting a harvesting and drying method of this. ”
As to the peat swamp the valuers record their belief that it “adds little to the fair sale value of the property” although adding to its appeal and saleability.
That is the background against which it is submitted that the decree ought no longer to stand.
We are of opinion that this Court ought not to set aside the decree and now state why we have reached that conclusion. For the reasons already given we consider that Savage J was right to confirm (though amending) the order for specific performance in March 1986. The reason it was not carried into execution at the arranged time in June was that the Huttons could not meet the requirements of their intended mortgagee. We find it surprising that the demand for easements was not known earlier. There is no evidence of any attempt by the Huttons to borrow from some other source.
Next, we are not persuaded that if completion were had the Huttons would receive something different from that for which they bargained in 1983. The Amberley farm is now worth much less but it is the same farm.
Thirdly, we are of opinion that damages would not be an adequate remedy for Mr Palmer. It may be, perhaps it is probable, that if the transaction has to be completed Mr Hutton will become bankrupt. It is not possible to say what damages the Huttons would be found liable to pay Mr Palmer if the contract is not carried out but whatever their extent the Huttons' ability to pay must be questionable to say the least.
Finally, no part of the delay since June 1986 can be attributed to Mr Palmer. It has flowed from the Huttons' requirement for water easements and, on their failure to obtain these, from two further applications to the High Court and the present appeal.
We do not think it has been shown that the decree ought now to be rescinded.
By his amended statement of claim dated 19 December 1983 Mr Palmer, in addition to seeking an order for specific performance, claimed $50,000 for damages from Mr Bellaney, his company, and the Huttons “for his loss in respect of the land” at Springs Junction. This cryptic claim was particularised by pleadings on 19 March 1985, amended on 20 July 1985 and contained in final form in particulars given on, and assessed as at, 18 November 1985. Included in a total of $68,202.31 there was an item “Travelling costs $8,340”. The total was expressed as subject to a credit for interest on the moneys payable by Mr Palmer by way of equality of exchange — $21,816 or $16,322, depending on whether he had to pay $60,000 or $45,000. The calculations made by Mr Halliburton (Exhibit 8 at the second hearing) were attached to the last particulars and are stated as follows —
“Travelling Costs:
In addition, Mr Palmer has incurred costs in trying to protect his interest in the Springs Junction property. These costs relate soley to travelling costs in terms of vehicle running for Court appearances, dealing with the Mines Department, briefing by Counsel, associated attendances, and dealing with impounded stock.
Travelling to March, 1984 —
Amberley to Christchurch and return —
23 trips @ 120 km @ .40c per km — $1,104
Amberley to Springs Junction and return —
22 trips @ 340 km @ .40c per km — $2,992
Amberley to Greymouth and return —
1 trip @ 570 km @ .40c per km — $ 228 ----------
$4,324
Plus subsequent travelling Amberley to
Springs Junction and return — from
March 1984, to March 1985 — averaging
one trip every fortnight ... — $3,536
Briefings and further legal consultations and Court attendances —
Christchurch — 10 trips @ 120 km @ .40 per km — $ 480 -----
Total travelling costs — $8,340 ”
The Judge rightly held that this head of damages could not be set off against the purchase price and that Mr Palmer was not justified in refusing to settle until his claims were determined.
The Judge's conclusions on the claim for travelling costs are as follows —
“The amount claimed was $8,340. Mr Hicks accepted that some of this sum was in the nature of litigants' expenses and thus irrecoverable. These appear to me to relate the sums allowed in the calculations for trips to Christchurch. The actual calculation of the amount made by Mr Halliburton is not detailed in the sense that it does not show precisely when the various trips were made. It is clear that a number included in the calculation were prior to December 1983 and that others were in the period after the order for specific performance was made. Counsel appeared to be agreed that some allowance would have to be made for travelling in connection with visits to Mr Palmer's children. Mr Hicks accepted that the evidence did not establish Mr Palmer's loss with any precision and urged that a broad brush approach to the question should be adopted and a figure fixed.
In my view the claim for travelling expenses is in a somewhat different category to the others under this head. In my view it is not too remote in the sense that the journeys are clearly a natural and forseeable consequence of the failure to complete the settlement. Mr Palmer alredy had land at Springs Junction and so if he could not take possession of the Hutton land he would clearly have to continue making trips to it. Further, they are readily separable from the actual running of the farming enterprise and can in my view properly be assessed apart from the returns of the farming operation. At all events I propose to adopt Mr Hicks' submission and fix a figure. I do so after allowing for the periods in respect of which in terms of what I have already said Mr Palmer is not entitled to claim, and a deduction for likely visits to the children. I fix the sum of $1,500. ”
The Judge had earlier held that the Huttons were not in default in failing to complete the settlement. This is plainly right, for without the consent of the Land Board settlement could not take place. It follows that the ground upon which the Judge awarded damages — namely that the expenditure was a natural and foreseeable consequence of the failure to complete — cannot be upheld. There was no breach of contract to which they could attach. It is right to record that Mr McClelland made no submissions on this point.
This part of the appeal must succeed.
Conclusion
In the result, the appeal is allowed insofar as it relates to the award of $1,500 damages against Mr and Mrs Hutton but is otherwise dismissed. All questions of costs are reserved.
Somers J
Solicitors
Carruthers & Wetherall, Greymouth, for Appellants
Rhodes & Co, Christchurch, for Respondent
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/1988/226.html