Cap D'Amarres Residents' Association Inc v Centurion Management Services Limited HC Auckland CIV 2010-404-8369 [2011] NZHC 972 (18 August 2011)

Last Updated: 21 September 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV 2010-404-8369}

BETWEEN CAP D'AMARRES RESIDENTS' ASSOCIATION INC

Plaintiff

AND CENTURION MANAGEMENT SERVICES LIMITED

Defendant

Hearing: 11 August 2011

Appearances: S R Ebert for plaintiff

D S Alderslade for defendant

Judgment: 18 August 2011

_{JUDGMENT OF ASSOCIATE JUDGE BELL}

Pursuant to r 11.5 of the High Court Rules, this judgment was delivered at 4 pm on Thursday 18 August 2011.

Solicitors:

Billings, New Plymouth, [e-mail]

_{Chapman Tripp, Auckland} [e-mail]

CAP D'AMARRES RESIDENTS' ASSOCIATION INC V CENTURION MANAGEMENT SERVICES LIMITED HC AK CIV 2010-404-8369 18 August 2011

[1] The defendant applies for an order striking out the plaintiff’s statement of claim, on the grounds that the parties have entered into a settlement agreement following which the plaintiff ought to have filed a notice of discontinuance.

[2] The background to the litigation is that the plaintiff is a residents’ association for a gated community at 32 Rue d’Amarres, Gulf Harbour, Whangaparaoa, Auckland. The defendant provides secretarial and project management services to body corporates and residents’ associations of gated communities.

[3] The defendant was the property manager of the plaintiff up until 2010. The plaintiff held an annual general meeting on 10 September 2010. The plaintiff says that at that meeting those appointed to the plaintiff’s board were Ian Jones, Alan Flitcroft, Richard Flitcroft, Don Crow and Barne Jovicic.

[4] That election was challenged. The new board were what has been called the Flitcroft faction. The election was not without controversy. Another faction, called the Edwards faction in this proceeding, contested the validity of the election. Aware of the controversy as to the validity of the election, the defendant proposed that a new meeting be called to clarify the election of the board.

[5] There was a further general meeting on 8 November 2010. An election was held at that meeting and members of the Edwards faction are said to have been appointed to the new board.

[6] In the meantime, on 19 October 2010, the plaintiff’s lawyers, on instructions from the Flitcroft board, wrote to the defendant purporting to terminate its appointment as secretary of the plaintiff.

[7] On 16 December 2010, the plaintiff, through the Flitcroft faction, started this proceeding.

[8] In this proceeding, the plaintiff seeks a declaration that the defendant’s appointment as secretary and property manager of the association, was terminated on or about 19 October 2010, and seeks further orders for the defendant to deliver to it,

all documents and information that it holds on behalf of the association, an order for transfer of funds held by the defendant for the plaintiff to the plaintiff itself, and an order requiring the defendant to cease holding itself out as the secretary and property manager of the plaintiff.

[9] Amongst other things in its statement of defence, the defendant contested the validity of the election of the Flitcroft directors. It also contested the effectiveness of the termination of its appointment. The case was set down to be heard, the hearing to begin on 18 April 2011.

[10] On 28 February the defendant’s lawyers wrote to the plaintiff’s lawyers proposing terms for settlement of the proceeding. Correspondence followed, leading to a letter from the defendant’s lawyers dated21 March 2011, and a reply by the plaintiff’s lawyers on 23 March 2011. The proposal made by the defendant’s lawyers said:

2. In response, Centurion Management Services Limited (Centurion)

proposes settling the proceedings in CIV-2010-404-8369.

2.1 Centurion will deliver to your client as soon as reasonably practicable all documents and information that it holds on behalf of the Cap d’Amarres Residents’ Association Inc (the Association), including the “Records” as defined in paragraph 5 of the statement of claim;

2.2. Centurion will transfer all balances of accounts representing the Association’s money and all other funds and monies held by it on behalf of the Association to ASB 12-3050-0550581-00;

2.3 Centurion will immediately cease to hold itself out as Secretary or property manager of the Association;

2.4 Centurion, its directors and any other related entities, will not take any steps to prevent the Board of Directors of the Association purportedly appointed on 10 September 2010 from carrying out its duties to the Association, unless and until the issue as to who comprises the Board of the Association is resolved by Court order, arbitration or agreement, or by the appointment of a new Board at the 2011 annual general meeting or any earlier properly constituted general meeting;

2.5 Centurion agrees to pay $6,500 for costs in this proceeding;

2.6 The plaintiff will discontinue proceeding CIV-2010-404-8369 on the basis that no order as to costs is required.

2.7 Compliance by Centurion with paragraphs 2.1-2.5 above is without any admission of liability in relation to the allegations in the proceeding. Centurion continues to maintain that it has at all times acted in accordance with its obligations to the Association;

2.8 The plaintiff reserves all its rights in relation to allegations it claims to have against our client in relation to its conduct while acting as Secretary to the Association; and

2.9 Centurion reserves all its rights in respect of its purported termination by the first Board.

[11] The defendant’s lawyers replied by e-mail on 23 March 2011:

I have had to get around the 5 board members since receiving your letter at

4.31 pm Monday 21 March 2011. The Board’s decision is to accept the offer and, accordingly, we advise that we now have an agreement.

To implement the agreement please ask Centurion to:

1. deliver all records to the registered office of the Association at 32

Rue d’Amarres, Gulf Harbour, Whangaparaoa;

2. pay the $6500 into the Association’s bank account ASB 12-3050-

0550581-00;

3. Advise Billings (e-mail is fine) when the above costs and the transfer of all balances have been deposited into ASB 12-3050-0550581-00.

We will withdraw the proceeding with no issue as to costs on either side by memorandum to the court when we receive the confirmation in point 3 above and the records have been received. Thank you.

[12] Since then, the defendant has paid the agreed costs of $6,500. The defendant has transferred funds to the plaintiff’s bank account as agreed. It has transferred records to the plaintiff. It says it has transferred all records within the agreement. The plaintiff does not accept that the defendant has transferred all records. It contends that there are other documents and information in the defendant’s possession which have still to be delivered. The plaintiff’s lawyers have identified the relevant classes of documents in letters of 11 and 28 April 2011. There is no evidence of correspondence by the defendant or its lawyers specifically addressing these requisitions by the plaintiff.

[13] So far, no discontinuance has been filed. The fixture for 18 April 2011 was

vacated on the parties’ advice that the case had settled.

[14] The defendant contends that on the basis of the above facts, the plaintiff ought to have filed a discontinuance under the agreement. If the plaintiff is not satisfied with the defendant’s performance under the settlement agreement, it cannot use that as a ground for refusing to file a discontinuance under the settlement agreement, but ought instead to issue a fresh proceeding to determine whether the defendant has complied with the agreement.

[15] The approach followed on strike out applications is well established. The application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even though they may not be admitted. Before the Court may strike out a proceeding, the causes of action must be shown to be so clearly untenable, that they cannot possibly succeed. The jurisdiction is one to be exercised sparingly and only in a very clear case where the Court is satisfied it has the requisite material. The fact that applications to strike out raise difficult questions of fact and require extensive argument, does not exclude jurisdiction.

[16] In Speirs v Perry Developments Ltd,[1] Associate Judge Faire recognised that an agreement to settle civil proceedings could give grounds for a strike out application. He said:

[12] The problem that arises where an accord and satisfaction is advanced as the basis for the strike out application is that the issue involved does not specifically arise in respect of the facts pleaded in the statement of claim. It is therefore not a situation where the Court can simply accept as true the allegations in the statement of claim and then go on to determine whether they give rise to a cause of action. This practical difficulty, no doubt, is the reason why a strike out application based on an allegation that there remains no reasonable cause of action because of an accord and satisfaction in many cases will not be appropriate. That is because such a case will require the consideration of affidavit evidence. The Court will not be satisfied that the position is sufficiently clear for it to proceed with a strike out.

...

[14] I conclude, therefore, that I am only entitled to strike out this statement of claim if the defendants are able to establish that this is a clear case where an accord and satisfaction exists, such that there remains no cause of action or, in the alternative, to allow the proceeding to continue would be an abuse of process.

[17] It is also well established that a strike out application is not the appropriate procedure to determine disputed questions of fact. In this regard, I record that on this application there are these disputed questions which I am not able to resolve on the affidavit evidence, namely whether:

(a) the defendant has delivered to the plaintiff all documents and information that it holds on behalf of the plaintiff, including records as defined in the statement of claim; and

(b) the defendant has substantially performed that obligation. [18] The plaintiff’s case is that it is entitled to a strike out because:

(a) Upon the parties entering into the settlement agreement, the plaintiff was immediately required to file a discontinuance. The plaintiff was no longer entitled to maintain its original claims in the proceeding and if it wished to claim under the settlement agreement it would have to issue a fresh proceeding;

(b) In the alternative, it had sufficiently performed its obligations under the agreement and is entitled to require a discontinuance.

[19] The plaintiff’s submission was that it accepted the parties had entered into a binding agreement. However, it submitted that it was a conditional agreement. Its obligations under the settlement agreement to discontinue the proceeding were suspended until the defendant provided the records.

[20] Both parties agree that there was a settlement agreement, but differ on the effects of the agreement. There is helpful guidance from the judgment of Phillips JA in Osborn v McDermott:[2]

Thus, there are three possibilities, not two. First there is the mere accord executory which, on the authorities, does not constitute a contract and which is altogether unenforceable, giving rise to no new rights and obligations pending performance and under which, when there is performance (and only

when there is performance), the plaintiff’s existing cause of action is discharged. Secondly, at the other end of the scale is the accord and satisfaction, under which there is an immediate and enforceable agreement once the compromise is agreed upon, the parties agreeing that the plaintiff takes in satisfaction of his existing claim against the defendant the new promise by the defendant in substitution for any existing obligation. Somewhere between the two there is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance.[3]

[21] The defendant’s contention is that this case falls within the second possibility. The plaintiff’s submission is closer to the third possibility.

[22] In their agreement, the parties have not expressly addressed when the plaintiff

is required to file a discontinuance under 2.6 of the defendant’s letter of 21 March

2011. The approach taken to determine the meaning is set out in the judgment of

Tipping J in Vector Gas Ltd v Bay of Plenty Energy Ltd.[4]

[19] The ultimate objective in a contract interpretation dispute is to establish the meaning the parties intended their words to bear. In order to be admissible, extrinsic evidence must be relevant to that question. The language used by the parties, appropriately interpreted, is the only source of their intended meaning. As a matter of policy, our law has always required interpretation issues to be addressed on an objective basis. The necessary inquiry therefore concerns what a reasonable and properly informed third party would consider the parties intended the words of their contract to mean. The court embodies that person. To be properly informed the court must be aware of the commercial or other context in which the contract was made and of all the facts and circumstances known to and likely to be operating on the parties’ minds. Evidence is not relevant if it does no more than tend to prove what individual parties subjectively intended or understood their words to mean, or what their negotiating stance was at any particular time

[23] In my judgment the better view is that the mere entry into the settlement agreement did not immediately entitle the defendant to a discontinuance for the following reasons:

(a) There is no “full and final satisfaction” provision in the settlement

agreement. Instead what the defendant undertook to provide in its settlement makes up a large part of the relief the plaintiff was seeking

in the statement of claim. The one matter that the defendant was not conceding was that its appointment as secretary and property manager was effectively terminated on or about 19 October 2010, but nevertheless it undertook no longer to hold itself out as secretary and property manager of the plaintiff. Given the defendant’s concession in the settlement agreement that the plaintiff was entitled to relief by way of transfer of funds, delivery of records and the defendant ceasing to hold itself out as secretary and property manager, it is unbusinesslike and inefficient to treat the claims for relief in the statement of claim as discharged immediately on the parties entering into the settlement agreement, with the result that any claims arising out of the non-performance of the agreement should be the subject of a fresh proceeding.

(b) To construe the agreement as entitling the defendant to require a discontinuance to be filed independently of its own performance or obligations under the settlement agreement, is to treat clause 2.6 as an independent promise. That is against the normal trend to treat

promises as inter-dependent. Thus, Anson’s Law of Contract,[5] says:

But the tendency of the Courts is against construing a contract in this way unless the parties clearly intend to do so because such a construction means that both parties are inadequately protected from the risk of non-performance by the other. ... Normally however, the obligations of each party will be regarded as interdependent.... The clearest example of obligations which are dependent on each other arises if the parties agree that the performance of their respective promise shall be simultaneous, or at least that each shall be reach and willing to perform its promise at the same time. Then the obligation to perform each promise is dependent or conditional on this concurrence of readiness and willingness to perform the other; their mutual promises are concurrent conditions. ...

There is nothing in the terms of the settlement agreement that suggests the parties are not following that normal approach in

_{this case.}

(c) Clause 2.6 of the agreement, requiring discontinuance on the basis that no order as to costs is required, presupposes that the defendant will have paid the costs in 2.5 before the discontinuance. Otherwise an order for costs would be required under the agreement. Clause 2.6 is inconsistent with an interpretation that the defendant is entitled to a discontinuance immediately on the parties making their agreement.

(d) The parties’ reservation of their rights under 2.8 and 2.9 (which includes the plaintiff’s reserving its rights to claim delivery of documents it had sought from the defendant as secretary before issue of the proceeding), point to the plaintiff’s claim to delivery of the documents being preserved under the settlement agreement. It would be inefficient to hold that those rights have been suspended by requiring the plaintiff to discontinue the proceeding to await performance under the settlement agreement.

[24] For these reasons, this is a case of an accord and a conditional satisfaction. The plaintiff ’s existing causes of action were not discharged until the defendant had completed performance under the agreement by paying costs, transferring funds and delivering all documents and information it held on behalf of the plaintiff.

[25] The defendant’s second contention, that it has properly performed under the settlement agreement, cannot be resolved in this strike out application. That is because there is a disputed question of fact, unable to be resolved in this application, whether the defendant has delivered all the documents and information that were required to be delivered under 2.1 of the settlement agreement.

[26] The result is that, as I am unable to find that the defendant has complied with all its obligations under the settlement agreement, the plaintiff has an arguable case that it is entitled to withhold filing a discontinuance in the meantime.

[27] I make these orders:

(a) The defendant’s strike out application is dismissed;

(b) The defendant will pay the plaintiff costs;

(c) I call a case management conference on Thursday 25 August 2011 at

9.30 am to fix costs and to give further case management directions for this proceeding.

R M Bell

Associate Judge

---

[1] Speirs v Perry Developments Ltd HC Hamilton CIV 2005-419-1251, 15 December 2006
[2] Osborn v McDermott [1998] 3 VR 1 (CA) at [10].
[3] _{Followed by the New Zealand Court of Appeal in Humphries v Carr [2011] NZCA 314 at [12].}
[4] Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] 2 NZLR 444 at [19].

[5] Jack Beatson, Andrew Burrows and John Cartwright Anson’s Law of Contract (29th ed OUP, Oxford, 210) at 519.