TAWANUI DEVELOPMENTS LIMITED V D M HARNETT AND J C MALCOLM AND ANOR HC PMN CIV 2008-454-949 [2009] NZHC 1423 (13 October 2009)

IN THE HIGH COURT OF NEW ZEALAND
PALMERSTON NORTH REGISTRY
                                                                  CIV
2008-454-949



               BETWEEN                   TAWANUI DEVELOPMENTS LIMITED
                                         Plaintiff

               AND                       D M HARNETT AND J C MALCOLM
                                         First Defendants

               AND                       D M HARNETT
                                         Second Defendant


Hearing:       7
October 2009

Counsel:       A N Isac for Plaintiff
               G A Paine for First and Second Defendants

Judgment:      13 October
2009


                          JUDGMENT OF RONALD YOUNG J



[1]    On 5 May 2009 Associate Judge Gendall made an order for specific
performance against Mr Harnett and Mr Malcolm as trustees of the Poutama Family
Trust ("the Trust") and Mr Harnett personally as
guarantor. The order related to a lot
in a subdivision in the town of Sanson. Mr Harnett and his family trust signed a
contract with
the plaintiff to buy a section for $205,000. When settlement date came
they refused to settle.


[2]    In addition to the purchase
price of $205,000 there is a late interest payment
due and costs due by the defendants on that judgment.          Neither the trust
nor
Mr Harnett has made any payment.




TAWANUI DEVELOPMENTS LIMITED V D M HARNETT AND J C MALCOLM AND ANOR HC PMN
CIV 2008-454-949
13 October 2009

[3]     The plaintiff now applies for a writ of sequestration against the defendants as
trustees of the Trust and
Mr Harnett personally. By virtue of HCR 17.9 the Court's
leave is required for the issue of such an order.


[4]     Upon such an
order being made, the plaintiff asks that a sequestrator be
appointed and authorised to enter and take possession of the land and
chattels of the
Trust and Mr Harnett personally. They ask that the sequestrator be able to obtain the
rents and profits of the properties
until the liable parties purge their contempt by
complying with the specific performance order of 20 April 2009. They also seek
indemnity
costs. The amount owing at judgment was, including costs, $235,283.40.


[5]     Mr Malcolm does not oppose the making of such an
order on the basis that
the order does not extend to Mr Malcolm's personal assets or assets held in his name
in any capacity other
than as trustee of the Trust.         The plaintiff accepts this
restriction.


[6]     Mr Harnett did not appear in Court at the
hearing. He sent a letter saying that
he had been unwell and that he had been making strong efforts to sell trust property
to pay.
He said that he needed further time.


[7]     Having read the affidavits filed in support of the application I am satisfied
that
there has been wilful or reckless non-compliance by Mr Harnett and the Trust
with the Court's order. It is clear that the Trust has
significant property valued at
somewhere over $2 million. Mr Harnett's explanations as to why he has been unable
to sell any land
to pay the plaintiff or why he has been unable to raise finance, are
not credible. Mr Harnett has often suggested since May 2009
that Trust properties
are about to sell or the Trust is about to obtain a loan, neither has eventuated. More
than five months have
now passed since the making of the order by the Associate
Judge without any substantial progress toward settlement.


[8]     However,
having considered the High Court Rules I do not consider this
Court has jurisdiction to make a sequestration order in these proceedings.

[9]      Under the Rules applicable prior to 1 February 2009 a distinction was drawn
between the circumstances under which an order
for arrest and an order for
sequestration could be made. As to an order for arrest, r 608 provided:

         608     Power to issue
writ of arrest

         Where in any proceeding a party is ordered by the Court to do or abstain
         from doing any act (not
being the payment of a sum of money) and fails to
         obey the order, the party entitled to the benefit of the order may, by leave of
         the Court,
obtained on notice to the defaulting party, issue a writ for the
         arrest of that party.

[10]     An order for sequestration
could be made pursuant to r 610. That provided:

         610     Power to issue writ of sequestration

         (1)     Where any
person is, by any judgment or order, directed to pay
         money into Court, or to do any other act in a limited time, or to abstain
from
         doing any thing, and after due service of that judgment or order, refuses or
         neglects to obey the judgment
or order, the Court may, on the application of
         the person entitled to the benefit of the judgment or order, issue a writ
of
         sequestration against the estate and effects of the person in default.

         (2)     The sequestrator shall be appointed
by the Court and the provisions
         of rules 339 to 346 shall apply, with all necessary modifications, as if the
         sequestrator
were a receiver.

[11]     The difference between r 608 and r 610 is that a writ of arrest could not be
issued where the Court had
ordered a party to pay a sum of money. There was no
such restriction, however, under r 610 with respect to a sequestration order.
The
Rules, however, have now changed. Rule 17.87 has been amended so that the
restriction "not being the payment of a sum of money"
limitation applies now to both
orders for arrest and sequestration. The relevant Rules are found in subpart 7 of the
Rules.


[12]
    Firstly, r 17.84 provides as follows:

       17.84 Power to issue arrest order

       (1)      In this subpart, an original
court order means, whether or not the
       order is in a judgment, a court order to do or abstain from doing something
       that
is not paying a sum of money.

       (2)     If a party has been served with an original court order but does not
       comply,
a Judge may issue an order arresting the non-complying party on the
       application of a party entitled to the benefit of that
order.

[13]   Rule 17.87 defines the scope of the Courts power to issue a sequestration
order under the Rules as follows:

    
  17.87 Power to issue sequestration order

       (1)     If a party has been served with an original court order or an order to
       pay money into court but does not comply, the court may issue a
       sequestration order against the property of the non-complying
party.

[14]   Tipping J in Summer & Winter Fuels Ltd v Pickens  (1990) PRNZ 621 (HC)
considered a very similar factual circumstance to the current situation. He said:

       It seems to me that the change in
the wording of Rule 608 as against the
       former Rule 392 is deliberate. The present Rule excludes from writs of
       arrest
a failure to do any act which amounts in substance to the payment of a
       sum of money. I asked Mr Dawson what act the Defendants
were alleged to
       have failed to perform. He replied that they had failed to perform the
       contract. I then asked him how
they had failed to perform the contract and
       he replied that they had done so by failing to tender a cheque or to make
   
   other lawful tender on the required date for the required amount. While in
       form the decree in the present case makes no
reference to the payment of a
       sum of money it is beyond argument that in substance the only way the
       Defendants could
have performed the decree was by paying the Plaintiff the
       required sum of money on the relevant date. There was nothing else
for
       them to do in order to satisfy the decree.

[15]   I agree with the analysis and approach of Tipping J. In substance the
only
way the Trust and Mr Harnett could have performed the decree of specific
performance was by paying the $235,000 to the plaintiff,
a sum of money.


[16]   Counsel for the plaintiff's submissions were that (contrary to the final
sentence in the Summer & Winter
Fuels Ltd quote at [15]) since the changes to the
process for registration of transfers of land, the defendants have obligations
to
transfer land. Counsel submitted that now that the land transfer system takes place
through E dealing, an order for specific performance
requires the purchaser to
undertake additional steps beyond the mere payment of money in order to convey a

title into their names.
I do not see that the changes identified by Mr Rowe are
anything more than simple changes of process. The fundamental system to transfer
title to land remains.


[17]    I consider a decree for specific performance is in substance an order for the
payment of a sum of
money and the fact that there may now be some documents for
the purchaser to sign or attest to does not affect this fundamental point.


[18]    For the reasons given, therefore, I refuse the application.




                                                      
 _____________________________
                                                                        Ronald Young J
Solicitors:
A N Isac, Fitzherbert Rowe, Private Bag 11016, Palmerston North, email: [e-mail]
G A Paine, Barrister, Palmerston North,
email: [e-mail]