Erceg v Balenia Ltd [2009] NZCA 48; [2009] NZCCLR 32 (3 March 2009)

Last Updated: 11 January 2012

IN THE COURT OF APPEAL OF NEW ZEALAND

CA553/2008

[2009] NZCA 48

BETWEEN IVAN VLADIMAR JOSEPH ERCEG
Appellant

AND BALENIA LIMITED
Respondent

Hearing: 29 January 2009

Court: Chambers, Robertson and Arnold JJ

Counsel: L Ponniah and P G Revell for Appellant
G J Kohler for Respondent

Judgment: 3 March 2009 at 11 am

JUDGMENT OF THE COURT

A The appeal is dismissed.

2. The application for leave to admit the appellant’s affidavit of 28 October 2008 is dismissed.

100. The appellant must pay the respondent:
     • (i) Costs for a standard appeal on a band A basis;
     • (ii) Costs on his application for leave to adduce further evidence as if that were a standard application for leave to appeal on a band A basis; and
     • (iii) Usual disbursements.
       

REASONS OF THE COURT

(Given by Chambers J)

Table of Contents

Para No
Sale of three super-yachts [1]
Issues on the appeal [9]
Did the case go awry procedurally? [12]
Material non-disclosure by Balenia [14]
Balenia’s affidavits in reply [19]
Refusing to allow Mr Erceg to file affidavits in reply [34]
Refusing Mr Erceg an adjournment [38]
Was Mr Erceg bound to pay the deposit in the absence of a certificate
from Clyde? [41]
Was Balenia entitled to sue before making time of the essence? [51]
Should Balenia have been granted specific performance? [55]
Concession in the High Court? [58]
The appropriateness of specific performance [63]
Form of the order for specific performance [73]
Result [74]

Sale of three super-yachts

[1] In February 2004 the respondent Balenia Limited and Sensation Yachts Limited entered into a vessel construction agreement (the VCA) whereby Sensation agreed to design and build five luxury super-yachts for Balenia. Sensation was to complete the first yacht by April 2005 and the last by May 2007.
[2] Various disputes arose. They were referred to arbitration. The arbitrator made no fewer than three partial awards, but even then not everything in dispute was settled. A further hearing before the arbitrator was scheduled for 15 October 2007. But, prior to that hearing, in late September 2007, Balenia and Sensation reached a settlement agreement. A third party to that agreement was Ivan Erceg, the appellant. Mr Erceg was at that time a director and the sole shareholder of Sensation.
[3] We set out later in these reasons the precise terms of the settlement agreement, so far as relevant. But the essence of the agreement was this. Balenia had been paying instalments to Sensation as work on the yachts proceeded. But, as at September 2007, only three yachts had been built, and none of them was finished. Under the agreement, Balenia was to sell the three partially completed yachts to Mr Erceg for USD 21.5 million. Mr Erceg was to pay “a 10% deposit ... to Balenia within 7 working days of Balenia providing evidence to the satisfaction of Clyde & Co (London) that it has clear title to SY32, SY34 and SY35 [the three partially completed yachts]”: cl A4(a). Clyde & Co were Sensation’s London solicitors and are experts in shipping law. Mr Erceg was to pay the balance as soon as all documentation necessary to discharge the VCA had been completed. One of the purposes of the settlement agreement was to discharge both parties to the VCA from any further obligations under it. Further, neither was to have any claim against the other with respect to past breaches of the VCA. The arbitration was cancelled.
[4] The thinking behind cl A4(a) was this. Ownership of the yachts was complicated. Obviously, Sensation, as the builder, originally had title, but under the terms of the VCA Balenia acquired title to the yachts “to the extent of payments made by [it] on account of the Purchase Price”. Under the VCA, Balenia had paid substantial instalments to Sensation, and had accordingly acquired title to the extent of those payments. Now title was to pass to Mr Erceg, who intended to on-sell the yachts, if he could. Mr Erceg needed reassurance that Balenia had clear title to the yachts that were to be sold to him.
[5] Shortly after the settlement agreement was made, Balenia supplied evidence of title to Clyde. Clyde raised queries; Balenia attempted to deal with them. But by May 2008 there was still no certificate from Clyde. Tony Nicholson, Balenia’s solicitor, wrote to Clyde expressing Balenia’s concern about the fact Clyde had still not issued its certificate. John Leonida, the solicitor at Clyde dealing with the matter, replied on 29 May in these terms:

We are currently not advising Sensation. At this time I can only direct you to contact Sensation direct.

[6] On 17 June, Mr Nicholson wrote to Mr Erceg and Sensation. In that letter, he explained the steps Balenia had taken to satisfy Clyde as to title. He referred to the fact that Clyde had now advised that they no longer had instructions. He called for immediate settlement, settlement being well overdue. He received no reply.
[7] On 27 June, Balenia filed proceedings in the High Court at Auckland: HC AK CIV2008-404-3853. Balenia utilised the summary judgment procedure, on the basis that Mr Erceg had no arguable defence to Balenia’s claim for specific performance of the settlement agreement. A defended hearing of that application took place before Associate Judge Hole on 21 August. On 1 September, the judge delivered a judgment, granting Balenia specific performance and requiring Mr Erceg to pay the deposit within seven days. The judge also ordered Mr Erceg to complete forthwith all documents required for Balenia to pass title to him or his nominee and, on completion of that, to pay the balance due in terms of the settlement agreement.
[8] Mr Erceg has not complied with the judgment. Instead he has appealed to us.

Issues on the appeal

[9] Mr Ponniah, for Mr Erceg, made two principal submissions on the appeal. The first is that the case went awry procedurally in the High Court, with the consequence that the summary judgment should be set aside.
[10] Mr Ponniah’s second argument was that Balenia had not established that Mr Erceg had no arguable defence, as then required by r 136(1) of the old High Court Rules. He submitted Mr Erceg had three arguable defences, all of which had been wrongly dismissed by Associate Judge Hole. The suggested defences were:

• (a) Mr Erceg was not bound to pay the deposit in the absence of a certificate from Clyde.
• (b) In any event, Balenia was not entitled to sue before making time of the essence.
• (c) Balenia should not have been granted specific performance: even if entitled to sue, the court should have awarded it only damages. There was insufficient information before the court to assess such damages on a summary judgment basis.

[11] Mr Erceg also applied to this court to adduce further evidence under r 45 of the Court of Appeal (Civil) Rules 2005. This court heard that application on 2 December last year. It delivered a judgment on 5 December: [2008] NZCA 535. The court refused leave for an affidavit from Mr Leonida. It did not give leave “at this stage” with respect to an affidavit from Mr Erceg, sworn on 28 October 2008. The court ruled that that affidavit would “form part of the record available for consideration by this court on the forthcoming appeal”, but its admission would be ultimately for the court hearing the substantive appeal. We deal with whether that affidavit should be admitted when discussing the alleged procedural irregularities.

Did the case go awry procedurally?

[12] Mr Ponniah submitted the appeal should be allowed because the proceeding had gone awry procedurally. He submitted four things had gone wrong. In chronological order, they were:

• (a) Balenia was guilty of material non-disclosure in its affidavits in support of its summary judgment application.
• (b) The judge wrongly allowed Balenia to file affidavits in reply. They should not have been permitted because (i) they were late and (ii) they contained new material. Had those affidavits not been permitted, the application for summary judgment would not have succeeded.
• (c) Having allowed in Balenia’s affidavits in reply, the judge wrongly refused to permit Mr Erceg to file affidavits in reply to Balenia’s reply affidavits.
• (d) The judge wrongly refused Mr Erceg an adjournment.

[13] We shall consider those submissions in turn.

Material non-disclosure by Balenia

[14] There was no dispute between counsel as to a plaintiff’s disclosure obligations on a summary judgment application. Mr Kohler, for Balenia, noted, however, in his submissions that “it [was] not clear from the notice of appeal or [Mr Ponniah’s] submissions precisely what documents or information it [was] said ought to have been included but was not in the initial affidavits”. We agree with that submission. Mr Ponniah’s submissions contained a section headed “Material non-disclosure”. It contained six detailed paragraphs (paragraphs 26-31) setting out the law. But nowhere in that section was it set out what it was Balenia was said not to have disclosed which it should have.
[15] At the hearing, however, Mr Ponniah clarified that his concern under this head was that Mr Nicholson had not disclosed all the correspondence passing between him and Clyde prior to Clyde’s email of 29 May 2008.
[16] We see nothing in this complaint. First, Clyde had been solicitors for Sensation/Erceg. In all probability, any correspondence between Mr Nicholson and Clyde prior to 29 May 2008 was copied to Sensation. Even if it was not, Mr Nicholson could reasonably have assumed it would have been copied; further, Mr Erceg could have asked Clyde for it if Mr Erceg considered it relevant.
[17] In any event, even now we cannot see the relevance of any correspondence between Mr Nicholson and Clyde in that period. At the hearing before Associate Judge Hole, Balenia made no secret of the fact it had not been able to secure a certificate as to title from Clyde. Its argument was that, in the circumstances as they had developed, it did not require such a certificate. If that argument is sound, correspondence with Clyde prior to 29 May 2008 is irrelevant. If Balenia’s argument is not sound, however, then the summary judgment claim will fail on substantive grounds.
[18] We do not uphold Mr Ponniah’s first complaint under this procedural head.

Balenia’s affidavits in reply

[19] Mr Ponniah submitted Associate Judge Hole had wrongly permitted Balenia to file two affidavits in reply, one by Mr Nicholson and the other by Franklin Taylor. There were two bases for the complaint.
[20] First, it was said they were filed late and in breach of the timetable direction Harrison J had given on 9 July last year.
[21] In order to understand this complaint, we need to provide some procedural history. Balenia, on 27 June last year, filed not only an interlocutory application for summary judgment but also an interlocutory application for an interim injunction. By that latter application, Balenia sought to restrain Mr Erceg and Sensation from interfering in any way with the three yachts which were the subject of the settlement agreement. Asher J granted an interim injunction on 7 July. It was to hold the position until the matter could be more fully argued.
[22] The case came before Harrison J two days later. By consent, the interim injunction was extended until further order of the court. Harrison J then gave procedural directions with respect to the application for summary judgment. It is clear from His Honour’s minute that Mr Revell, who appeared before Harrison J on behalf of Sensation and Mr Erceg, wished to file further affidavits. His Honour directed that “any further affidavits [were to be filed] by 23 July 2008”. Balenia was then to file any affidavits in reply by 8 August 2008. His Honour directed a priority fixture for “the first available date after 8 August”.
[23] On 24 July, Mr Revell sent an email to Mr Kohler:

I have to apologise that I misdiaried the last day for supplementary materials from Sensation for tomorrow 25th July, instead of yesterday 23rd. You will have something from us today (Lawrence [Ponniah] and client working on it at present). Clearly you should then have an extension of two days to file a reply. There is plenty of leeway til the hearing date for that.

[24] On 29 July, Mr Kohler sent Mr Revell an email, noting it was now the 29th and still his side had “received nothing”.
[25] No written reply to that email was received until 8 August. On that date Mr Ponniah wrote to Mr Kohler advising that no further affidavits were to be filed after all. Mr Ponniah, in that letter, said he was confirming “Mr Revell’s advice to Mr Kohler” to the same effect. There is no evidence, however, to support the assertion that Mr Revell had earlier advised Mr Kohler that no further affidavits were to be filed on behalf of Sensation/Erceg. Mr Kohler advised us from the bar that he had not known prior to receiving Mr Ponniah’s letter that there were to be no further affidavits. We asked Mr Revell, who appeared before us as Mr Ponniah’s junior, whether he could recall telephoning Mr Kohler to advise there would be no further affidavits. He frankly admitted he could not remember. In these circumstances, we find that on 24 July Mr Erceg’s solicitors advised there would be “supplementary materials” from Sensation/Erceg and that it was probably not until 8 August that that advice changed.
[26] Mr Taylor’s affidavit, in reply, was filed and served on 15 August and Mr Nicholson’s on 18 August. The summary judgment hearing was scheduled for 21 August. Mr Ponniah’s advice that Sensation/Erceg would not after all be filing further affidavits was given 12 working days after it should have been given. Mr Taylor’s affidavit was filed five working days after the date nominated by Harrison J, and Mr Nicholson’s six working days after. In the circumstances of Sensation/Erceg’s default, we are not prepared to categorise these reply affidavits as “late”. It was entirely appropriate that Balenia should wait until it saw all of Sensation/Erceg’s material before replying. The affidavits were filed promptly after Balenia’s lawyers discovered there was to be nothing further from the Sensation/Erceg camp. Associate Judge Hole was not obliged to reject those affidavits on the grounds they were late.
[27] We turn now to the second basis for complaint. Mr Ponniah submitted the affidavits contained new material. By this, Mr Ponniah meant that, contrary to r 141B of the old High Court Rules, the reply affidavits were not “limited to new matters in the affidavit of the party opposing the application”. We do not accept that submission. Paragraph 4 of Mr Taylor’s affidavit was a response to Mr Erceg’s paragraph 8. Paragraph 5 was a response to paragraphs 6 to 8 of Mr Erceg’s affidavit and his exhibit B. Paragraphs 9 and 10 represent a further response to the chart Mr Erceg prepared and annexed as exhibit B. Mr Taylor’s affidavit does not infringe r 141B.
[28] Mr Ponniah raised a number of concerns about Mr Nicholson’s reply affidavit. In essence, however, the complaints are two-fold:

• (a) The affidavit raises “new issues”;
• (b) The affidavit contains “unsupported statements of personal belief”.

[29] We reject complaint (a). The notice of opposition and Mr Erceg’s affidavit made clear that he and Sensation were relying on two principal defences:

• (a) Balenia had not satisfied Clyde as to Balenia’s title to the yachts it was selling to Mr Erceg: notice of opposition, paragraphs 1-6;
• (b) In relation to SY35, Balenia had paid only a deposit with the consequence that Balenia had no title interest in that yacht: notice of opposition, paragraphs 7 and 8.

[30] In his affidavit, Mr Nicholson correctly identified the issues which arose from the notice of opposition and Mr Erceg’s affidavit: see paragraph 3. He then went on to deal with title issues generally (paragraphs 4 and 5). He then turned to Clyde’s letter of 13 December 2007, a copy of which had been annexed to Mr Erceg’s affidavit. He referred to his reply to that letter: paragraph 8. He then went on to explain how he had attempted to satisfy Clyde as to Balenia’s clean title: paragraphs 9-20. In our view, the affidavit was an appropriate response to the matters Mr Erceg had raised by way of defence.
[31] We also reject complaint (b). Mr Nicholson, as Balenia’s solicitor, had a detailed knowledge of Balenia’s affairs. In addition, he had been the person involved in attempting to satisfy Clyde as to Balenia’s title.
[32] In our view, neither affidavit infringed r 141B. The judge was correct to admit and consider both.
[33] As a matter of interest, we also record that, as it turns out, the result of this appeal would have been the same even had we excluded consideration of Balenia’s two reply affidavits.

Refusing to allow Mr Erceg to file affidavits in reply

[34] Mr Ponniah next submitted that, if Balenia’s reply affidavits were correctly admitted, the judge wrongly refused to allow him to file further affidavits in response to them.
[35] We reject this submission. First, Mr Ponniah never made a formal application to adduce further evidence. He could not, as he held no sworn affidavits to be adduced. His real concern was to obtain an adjournment: we deal with that issue below.
[36] Secondly, the rules do not provide for replies to replies. We have already held that Balenia’s reply affidavits did not infringe r 141B. We are not saying a judge could never permit replies to replies, but the circumstances where that was appropriate would be rare. There must be an end to the filing of evidence on a summary judgment application. This was certainly not one of those rare occasions where the judge should have permitted replies to replies, even if such reply to reply affidavits had been sworn (which they had not been). As this court observed in [2008] NZCA 535, Mr Erceg had made a tactical decision not to file additional evidence in response to Balenia’s initial affidavits: at [5]. Having made such a tactical decision, Mr Erceg could not later change his mind and decide to file further affidavits after all.
[37] This conclusion also dictates the answer to whether Mr Erceg’s second affidavit should be admitted on the appeal. It should not be, and we so rule. Mr Erceg had his opportunity to respond to Balenia’s affidavits. We know from Mr Revell that Messrs Ponniah and Erceg were working on Mr Erceg’s second affidavit on 24 July and that Mr Revell expected it to be completed that day: see at [23] above. Obviously, a tactical decision was then made not to file it. Mr Erceg must live with his election. In no way could he now satisfy the well-known test for the admission of fresh evidence on an appeal. In this regard, see the discussion in [2008] NZCA 535 at [15].

Refusing Mr Erceg an adjournment

[38] Mr Ponniah’s final submission under the procedural head was that the judge had wrongly refused Mr Erceg an adjournment. The fact of the matter is, however, the judge did offer Mr Erceg an adjournment. In a report the judge provided for us under r 46 of the Court of Appeal (Civil) Rules, he advised that he had indicated he was prepared to adjourn the hearing “until the following Monday” (25 August). The reason the judge was prepared to grant an adjournment was that he knew Mr Ponniah held a draft affidavit from Mr Erceg; he thought an adjournment of that length would be sufficient time for Mr Erceg to be able to swear it. The judge had apparently indicated to counsel that, in view of “the late affidavits filed by Balenia”, he thought he “would have difficulty in refusing” an application from Mr Erceg to file a further affidavit. In prospectively adopting that stance, we think the judge was being unduly kind to Mr Erceg. For the reasons given above, we do not consider, in the circumstances, Balenia’s reply affidavits were “late”; nor do we think this was one of those rare cases where a reply to reply affidavit was warranted. Be that as it may, as the judge says in his report, his offer to adjourn was not taken up. Mr Ponniah elected to proceed with the hearing. This appeal point evaporates on that ground alone.
[39] But, in any event, once it is determined that Balenia’s reply affidavits were in order and that Mr Erceg had no legitimate entitlement to file affidavits in response to Balenia’s reply affidavits, the whole basis for adjournment disappeared. It was simply a case of Mr Ponniah advancing his legal submissions based on the pleadings and the affidavit material before the court. That he did.
[40] We are not satisfied this proceeding did go awry procedurally. The first ground of appeal accordingly fails.

Was Mr Erceg bound to pay the deposit in the absence of a certificate from Clyde?

[41] It is common ground that Clyde never declared itself satisfied that Balenia had clear title to the yachts, as provided for in cl A4(a). Balenia argued in the High Court, however, and again before us, that it could proceed without Clyde’s certificate. That was because Mr Erceg was in default of his obligation to keep Clyde instructed. Clause B2 of the settlement agreement read as follows:

Each party will complete and execute all documents reasonably required to give effect to the agreement and shall take all reasonable steps and act with all reasonable speed to complete the settlement. Clyde & Co will need to advise promptly precisely what documents it requires pursuant to [cl A4(a)].

[42] Mr Kohler submitted that Mr Erceg had breached that clause by withdrawing instructions from Clyde, which prevented Clyde giving the certificate. The certificate was entirely for Mr Erceg’s benefit; cl A4(a) was in effect just a standard condition requiring a solicitor’s approval as to title. Case law was clear, he said, that a party could rely on the failure of a condition only if he or she had performed the duty to achieve fulfilment of it to the contractual standard. In this case, Mr Erceg had not.
[43] In the High Court, Associate Judge Hole accepted Mr Kohler’s legal analysis. He found that Mr Erceg’s obligation under the settlement agreement was to give Clyde “instructions to enable it to carry out the obligations imposed on it in terms of [cl A4(a)]”. Mr Erceg had not done that, and accordingly was in breach of the settlement agreement: at [32]. As a consequence, Mr Erceg could not rely on the absence of Clyde’s certificate as a defence to Balenia’s claim.
[44] Before us, Mr Ponniah challenged the judge’s reasoning. He submitted the judge had been wrong to treat cl A4(a) as akin to a solicitor’s approval clause. The “solicitor’s approval clause” cases were therefore irrelevant. Further, he noted that cl A4(a) contained no time limit for performance. Finally, he submitted that the burden of satisfying Clyde “never left Balenia”. The only obligation which fell on Mr Erceg was to “instruct Clyde to perform its role”, which he did.
[45] We deal with Mr Ponniah’s submissions in turn. First, Mr Ponniah submitted that cl A4(a) was not akin to a solicitor’s approval clause because Clyde was “acting as an independent referee”. This meant, he said, that Clyde had obligations to both parties; this differed from the normal solicitor’s approval clause, where “the solicitor concerned acts entirely in the interest of the purchaser”. We reject that submission, as Associate Judge Hole did.
[46] First, cl A4(a) was inserted solely for the benefit of Mr Erceg. Mr Ponniah submitted to the contrary on the basis that Balenia “also benefited” from cl A4(a) in that it was able “to extract itself from an obligation to purchase vessels” under the VCA and “was able to sell partially completed vessels to a third party for USD 21.5 million”. Those were undoubtedly advantages Balenia got, but it got them, not from cl A4(a), but rather from the settlement agreement as a whole. One tests whether a clause or condition is for the benefit of a particular party by asking whether, if that clause were removed, the other would complain. Of course, Balenia would not have complained if the need to satisfy Clyde had been dropped. Mr Ponniah’s test would mean that no clause or condition would ever be declared for the sole benefit of one party. His submission in this regard was, with respect, misconceived.
[47] Secondly, the fact Clyde had to act reasonably and in good faith, which we accept it did, does not mean that Clyde was not acting as the purchaser’s solicitor. Clyde clearly considered they were acting as the purchaser’s solicitor: see their letter of 13 December 2007. A solicitor's obligation to act reasonably and in good faith is one which falls on any solicitor faced with obligations under a solicitor’s approval clause: Provost Developments Limited v Collingwood Towers Limited [1980] 2 NZLR 205 at 210 (CA).
[48] Mr Ponniah’s next point was that cl A4(a) contained no time limit for performance. It is true that this clause did not contain a specific time by which the purchaser’s solicitor had to indicate approval. In that, it differed from many solicitors’ approval clauses. This did not mean, however, that in this case the parties were not concerned with timely settlement. That was the purpose of cl B2. Under that clause, Mr Erceg had the obligation to instruct his solicitors, Clyde, “to advise promptly what documents it [required]” under cl A4(a). Clause B2 likewise put an obligation on Balenia promptly to provide Clyde with evidence as to its title. Effectively, therefore, there was a “time limit for performance”; it may not have been a specific date and time, but that does not matter. This is not a ground for distinguishing the “solicitor’s approval clause” cases.
[49] Mr Ponniah’s final submission under this head was that the burden of satisfying Clyde “never left Balenia”. The only obligation which fell on Mr Erceg was to “instruct Clyde to perform its role”, which he did. We cannot accept that submission. It is clear Mr Erceg did instruct Clyde, but the only inference that can be drawn from Clyde’s email of 29 May 2008 is that, at some time after December 2007, Mr Erceg either withdrew his instructions or failed to meet his financial obligations to Clyde, with the consequence that Clyde considered its instructions withdrawn. No other inferences are reasonably available on the evidence. Mr Nicholson, in his first affidavit, referred to Clyde’s email of 29 May 2008 and advised that nothing further had been heard from Clyde since then. Mr Erceg at no stage chose to provide any alternative explanation for Clyde’s stance. Nor did he elect to file an affidavit from Clyde within the time specified by Harrison J. Mr Erceg’s obligation was wider than simply “instructing Clyde to perform its role”. Under cl B2, he had to “take all reasonable steps and [to] act with all reasonable speed to complete the settlement”. By retracting Clyde’s instructions, either directly or effectively, he breached that clause. In those circumstances, he cannot now rely on the failure of the condition requiring Clyde’s approval.
[50] In our view, the judge was right to find that Mr Erceg was bound to pay the deposit despite the absence of a certificate from Clyde. The condition failed as a result of Mr Erceg’s own default. The law in these circumstances is clear: see Burrows, Finn & Todd Law of Contract in New Zealand (3ed 2007) at [8.2.5] and McMorland Sale of Land (2ed 2000) at [5.03], and the cases there cited.

Was Balenia entitled to sue before making time of the essence?

[51] Mr Ponniah’s second substantive argument was that Balenia was not entitled to sue before making time of the essence. He submitted that, in the absence of appropriate notice making time of the essence and allowing a reasonable time for remedy, the time for payment had not arrived.
[52] This defence was not raised in the notice of opposition. It is not referred to in Associate Judge Hole’s decision, from which we infer the argument was not run before him.
[53] Notwithstanding that, we deal with the point, as we are satisfied the argument is not well founded. We have already found that Mr Erceg cannot rely on cl A4(a) because of his default in withdrawing Clyde’s instructions. He was therefore bound to settle. Mr Nicholson’s letter of 17 June 2008 constituted a notice requiring settlement. Mr Erceg did not comply with it.
[54] Mr Ponniah submitted Mr Erceg should have been given a reasonable time to “remedy any alleged default” – for instance, by reinstructing Clyde. We do not accept that. Mr Erceg, by his default, had lost the benefit of the solicitors’ approval clause. Balenia was now entitled to insist on settlement, which it did. In any event, there is no evidence that Mr Erceg took any steps to reconfirm Clyde’s instructions.

Should Balenia have been granted specific performance?

[55] Mr Ponniah’s final submission was that the judge had wrongly granted Balenia specific performance of the settlement agreement. Mr Ponniah submitted the appropriate course should have been to declare Mr Erceg in breach of the settlement agreement and order him to pay damages. Obviously, those damages would have had to be fixed at a later hearing.
[56] A further point raised by Mr Ponniah related to the form of the order for specific performance. Mr Ponniah submitted that, even if specific performance was the appropriate remedy, the order should not have been to pay the deposit but rather should have “related to the achievement or satisfaction of [cl A4(a)]”.
[57] Mr Kohler, in reply, submitted that this submission was not open to Mr Erceg, as he had conceded in the High Court that, if the other grounds of defence failed, then specific performance was the appropriate remedy. As a fallback, Mr Kohler submitted that in any event the judge’s decision to grant specific performance was appropriate.

Concession in the High Court?

[58] Associate Judge Hole recorded in his judgment at [37]:

At the end of the hearing, both parties agreed that the most appropriate remedy, if summary judgment was to be granted, was an order for specific performance.

[59] Mr Ponniah submits he made no such concession. He is supported in his recollection by an affidavit sworn by a staff solicitor of his, Bethany Harper. Ms Harper was present as an observer at the High Court hearing. This court granted leave for her affidavit to be admitted: [2008] NZCA 535 at [20]- [21]. She said at paragraph 13 of her affidavit:

I can recall that issue [of the appropriateness of specific performance as a remedy] being raised during the hearing. Mr Ponniah was at considerable pains to express to His Honour that he had no instructions to make such a concession and that he did not make it. Further, I can recall clearly during a break that Mr Ponniah expressed to Mr Kohler his anxiety that his position relating to specific performance was that it was not an appropriate remedy and that he was unsure if this was clear to the judge. Mr Kohler reassured Mr Ponniah that his position had certainly been made clear to him (Mr Kohler) and that he was sure the judge had understood it.

[60] Mr Kohler strenuously disputes that version of events. He considers that what the judge said in his judgment correctly reflected counsel’s submissions.
[61] Associate Judge Hole has dealt with this matter in his r 46 report. He has advised as follows:

I recall that I did raise a concern as to whether specific performance was an appropriate remedy (as I have stated at paragraph 37 of my judgment). It was my understanding that neither counsel thought that judgment on liability was appropriate. I do not recall counsel for Mr Erceg being “at considerable pains to express that he had no instructions to make such a concession and that he did not make one”. Certainly, he did not concede that I should make an order for specific performance when his client was denying liability. However, as I have stated in paragraph 37 of my judgment, I was under the impression that he acknowledged that if summary judgment were to be granted then specific performance was the most appropriate remedy.

[62] These misunderstandings occur from time to time. We prefer to make no factual findings as to what occurred at the hearing, as none of the participants has been cross-examined. Further, in the case of Messrs Ponniah and Kohler, their accounts are unsworn and were given from the bar. We incline to the view that Mr Ponniah must have said something to indicate that specific performance seemed appropriate, if he failed on other defences. Why else would he have expressed to Mr Kohler anxiety as to “his position relating to specific performance”? Why else would he be “unsure” as to the impression he had left with the judge? But we make no findings and we move on to consider the substantive point, namely the appropriateness of specific performance in these circumstances.

The appropriateness of specific performance

[63] The judge acknowledged that specific performance would not be offered if there was an adequate alternative remedy in law: at [36]. In this case, however, he did not consider damages would be an adequate alternative. In brief, these were his reasons:

• (a) The settlement agreement was fair;
• (b) It was a commercial contract entered into by commercial entities, both of whom were legally advised;
• (c) Hardship would not result to Mr Erceg if specific performance were ordered;
• (d) If specific performance were not ordered, the inevitable effect would be a reopening of all the disputes which the settlement agreement was designed to cure, a reopening neither party sought.

[64] Mr Ponniah took issue with only one of those considerations, namely the question of hardship to Mr Erceg. The main thrust of his argument was that the judge had ignored three countervailing considerations.
[65] We deal first with the question of hardship to Mr Erceg if specific performance were ordered. Mr Ponniah submitted the judge’s reasoning on this point was “contradictory”. Mr Ponniah highlighted the following passage in the judge’s reasoning (at [36]):

The only hardship possibly accruing to [Mr Erceg] is that he might not receive unencumbered title to the three super yachts. In this regard, the remedy was in [Mr Erceg’s] hands: he failed to avail himself of it.

[66] In actual fact, and with respect to the judge, that comment was in error. Mr Erceg does not face that possible hardship. Balenia must at settlement provide unencumbered title. If it cannot do so, Mr Erceg would be entitled not to settle. All that Mr Erceg has lost is the entitlement to have Clyde’s certificate as to title prior to payment of the deposit. The judge’s fundamental proposition, namely that no hardship would result to Mr Erceg if specific performance were ordered, is the correct one.
[67] We deal now with the three countervailing considerations Mr Ponniah said the judge had failed to take into account. First, Mr Ponniah submitted there had been delay on Balenia’s part. He submitted there was an “unexplained” delay from 13 December 2007 until May 2008, “during which no substantive response was provided by [Balenia] to [Clyde’s] 13 December 2007 letter”. We reject that submission. The uncontradicted evidence from Mr Nicholson was that he (and Balenia) had endeavoured to answer all Clyde’s queries fully and promptly. In the end, however, “things got to the stage” where the “perception” in the Balenia camp was “that the matter was being deliberately dragged out to get more time to Ivan Erceg as he had been unable to sell SY24 or otherwise raise the necessary money”. On the evidence before us, there was no disentitling delay on Balenia’s part.
[68] Mr Ponniah’s second point was that Balenia was “in serious breach of its performance obligations under the settlement agreement” and accordingly did not come to equity with clean hands. That is a reference to Balenia’s alleged failure to satisfy Clyde. For reasons earlier given, we reject the assertion that Balenia was in breach of the settlement agreement. It became impossible for Balenia to satisfy Clyde because Mr Erceg, in breach of the settlement agreement, had withdrawn instructions from Clyde.
[69] Thirdly, Mr Ponniah submitted that specific performance should not be ordered while the condition in cl A4(a) remains unfulfilled. In this regard, he quoted the following extract from Burrows at [8.2.3]:

This class of conditions [namely, conditions relating to the performance of contractual obligations] are those which serve to suspend some right or duty under a binding contract until the condition is satisfied (or the condition is waived by a party entitled to waive it). While the parties are awaiting the outcome of the condition, there is a binding agreement and neither is free to resile from it. Equally, the contract cannot be enforced by either party while the condition remains to be fulfilled.

[70] Mr Ponniah relies on the last sentence. The proposition in Burrows is, of course, correct. But the learned authors are not there considering the situation where a party fails to achieve the fulfilment of the condition not through a default on that party’s own part but because the other party has made performance of it impossible. As the learned authors go on to make clear at [8.2.5], in those circumstances the condition is treated as having been satisfied.
[71] Accordingly, we reject all Mr Ponniah’s submissions on this topic. We endorse the judge’s reasoning. To his reasons we would add one more. Clause B4 of the settlement agreement reads as follows:

... If Sensation* does not make the payments required of it under the settlement agreement then Balenia would be entitled to cancel the settlement agreement and continue with its current claim against Sensation. Alternatively it could sue on the settlement agreement itself. Obviously Sensation would be in the same position were Balenia to fail to comply with its obligations.

*This reference to Sensation is obviously wrong; the parties must have meant “Mr Erceg”, as only Mr Erceg was required to make payments under the settlement agreement.

[72] We see it as significant that Mr Erceg expressly agreed that, if he defaulted, he could be sued on the settlement agreement itself. It is implicit in that acknowledgement that specific performance would be available.

Form of the order for specific performance

[73] Mr Ponniah’s final point was that the form of the order of specific performance was inappropriate. He submitted that the judge, rather than ordering Mr Erceg to pay the deposit, should rather have made an order “relating to the achievement or satisfaction of [cl A4(a)]”. We do not agree. For the reasons given above, the condition contained within cl A4(a) is treated as having been satisfied. It is too late now for Mr Erceg to try to resuscitate Clyde’s role. Mr Erceg has lost the benefit of that. In these circumstances, Mr Erceg’s obligation now is to pay the deposit and then complete settlement. The form of the order for specific performance was appropriate.

Result

[74] We have rejected all of Mr Ponniah’s submissions in support of the grounds of appeal. Accordingly, we dismiss the appeal.
[75] Clearly, Balenia must have costs on the appeal. This court, when dealing with the application for leave to admit further evidence, did not deal with costs. We do so now. We consider that the leave application, which required a separate hearing, should be treated, for costs purposes, as if it were a standard application for leave to appeal. It would have necessitated about the same amount of work for Balenia’s counsel as an application for leave to appeal would have done. The time allocations for steps 1-5 in Schedule 2 of the Court of Appeal (Civil) Rules seem appropriate.

Solicitors:
Corban Revell, Waitakere City, for Appellant
Burton & Co, Auckland, for Respondent