Angland v Mower [2016] NZHC 1014 (18 May 2016)

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BETWEEN	JOHN SHEARER ANGLAND First Plaintiff TREVOR JOHN BURT Second Plaintiff MICHAEL TONG CHEE CHIN Third Plaintiff
AND	THOMAS ELWIN MOWER Defendant PHILLIP BOYD WILSON First Counterclaim Defendant RONALD W ANGLAND & SON (sued as a firm) _{Second Counterclaim Defendant}

Hearing:	12 May 2016
Appearances:	H C Matthews for Defendant C M Wakelin for Second Counterclaim Defendant
_Judgment:	_{18 May 2016}

[1] On 11 August 2012 all the parties to this case signed a settlement agreement, with the exception of Mr P B Wilson, the first counterclaim defendant. The claims involving Mr Wilson were settled in July 2013. One provision of the 2012 settlement agreement provides for the proceedings to be discontinued. The plaintiffs have filed a notice of discontinuance, but Ronald W Angland & Son (RWAS) has declined to file a notice of discontinuance of his claim against Mr Mower. Mr Mower applies for an order striking out the counterclaim by RWAS. RWAS

[2] The settlement agreement was written by hand at the conclusion of a settlement conference in the court. It records, in Recital 4:

The parties have reached settlement and wish to record the broad heads of agreement with the intention of entering into a full settlement deed. Pending that deed this agreement is binding on the parties.

[4] The first four operative clauses of the agreement set out in detail the basis of settlement of the claims of the plaintiffs against Mr Mower. One of the terms of that aspect of the settlement was a requirement that Mr Mower be paid a sum of money. After those provisions, the agreement contains the following passage:

On payment of $1.5MUS having been made to Tom [Mower] in full he shall take reasonable steps for the judgment held by him against John [Angland]

(a) He shall use his best endeavours to take reasonable steps to remove, cause to be satisfied or otherwise expunge such judgment; and

On payment having been made in full the Proceedings shall be discontinued without costs.

This agreement is in full and final settlement of the Proceedings between the parties and shall be and remain confidential to them and their advisers.

This passage contains three paragraphs. The first contains the terms of an obligation on Mr Mower to take specific steps in relation to Mr Angland and Hossack. The second and third apply to the entire terms of settlement. For ease of reference in this judgment I refer to the first of these paragraphs as the Mower/Angland settlement.

[5] The settlement obligations between the plaintiffs and Mr Mower have been put into effect. Mr Mower did not exercise the option in clause 1 and has been paid US$1,500,000. However, RWAS has not filed a discontinuance of its counterclaim against Mr Mower because it maintains that he has not performed his obligation under the settlement agreement. RWAS asserts a right to continue to pursue its counterclaim.

[6] The judgment referred to in the Mower/Angland settlement is a judgment of the Second Judicial District Court of Nevada in the United States. It is a judgment entered by default in favour of Mr Mower against the first plaintiff in this proceeding in New Zealand, John Angland, and Hossack Station Limited. Both the Nevada case and this case in New Zealand arose from the arrangements between the parties concerning Mr Mower’s purchase of shares in Hossack Station Limited. The Nevada judgment required Hossack Station Limited and John Angland to pay to Mr Mower US$2,240,432.10 plus interest.

[7] On 4 December 2014 Mr Mower’s lawyer in Las Vegas, Nevada filed in the Nevada Second Judicial District Court a document titled “Satisfaction of Judgment”. It reads:

FOR AND IN CONSIDERATION of settlement funds, received by Plaintiff, satisfaction is hereby acknowledged of the Judgment which was entered on December 18, 2008, a copy of which is attached hereto as Exhibit 1. Interest is included in this satisfaction of judgment.

[8] The document is then signed by Mr Mower’s lawyer and below his signature the document is endorsed by a Notary Public for the State of Nevada with a statement that Mr Mower’s lawyer has acknowledged that he is the attorney for Mr Mower and has authority to acknowledge satisfaction of judgment.

[9] Mr Matthews, counsel for Mr Mower, says that this proceeding has been entirely settled, and that if RWAS maintains that Mr Mower has not performed an obligation imposed on him by the agreement, the avenue to a remedy lies in a new proceeding for breach of the settlement agreement. He also says that by filing the Satisfaction of Judgment in the Nevada Court Mr Mower has complied with his obligation under the Mower/Angland settlement.

[10] Mr Wakelin, counsel for RWAS, says the settlement agreement was conditional on Mr Mower performing his obligation under the agreement and RWAS

has no obligation to discontinue the proceeding, indeed may continue with it, unless and until Mr Mower does so. He also says that the Mower/Angland settlement imposed on Mr Mower a primary obligation to take reasonable steps to have the Nevada judgment set aside, with a secondary obligation to take steps to cause the judgment to be satisfied only if his endeavours to have the judgment set aside were unsuccessful. He says Mr Mower has not followed this course.

(a) Is the settlement agreement conditional on Mr Mower taking the steps required of him by the Mower/Angland settlement or is it an unconditional settlement agreement?

(b) If it was conditional on Mr Mower taking the steps required of him by the Mower/Angland settlement, has he done so, with the result that the RWAS counterclaim should be struck out?

[12] Rule 15.1 of the High Court Rules sets out the circumstances in which the Court may strike out all or part of a pleading. The ground primarily of relevance to the present application is that proceeding with the counterclaim would be an abuse of process, as it has been settled. Equally it might be said that the cause of action of RWAS as pleaded in its counterclaim is no longer reasonably arguable. In Heinz- Wattie Limited v Hamburg Sudamerikanische Dampfschiffahrts-Gesellschaft, the Court considered an application to strike out a proceeding alleging damage to goods in transit when there was a contractual discharge of liability in the bills of lading for

I can see no reason in principle why, in an appropriate case, such a contractual limitation bar should not be treated as an abuse of process. The position is analogous to that which I considered in Partridge v Bellevue Nominees Ltd & Anor (High Court, Auckland, CP335/93, 26 March 1998).

¹Heinz-Wattie Limited v Hamburg Sudamerikanische Dampfschiffahrts-Gesellschaft (1999)

[13] After referring to the Limitation Act 1950 provisions which prevent the bringing of actions after the expiration of certain nominated periods of time, the learned Judge continued:²

That should be contrasted with the contractual position in the instant case. That provides for the discharge of liability. If liability is discharged it must follow that there is no cause of action.

[14] The learned Judge therefore found that as a matter of principle there is no reason why a contractual limitation bar should not be treated as either an abuse of process or as evidence that at the time of filing no reasonable cause of action then existed. However, the Judge added the caveat that as with any application to strike out, whether on the grounds of an abuse of process or on the grounds that no reasonable cause of action exists, a proceeding should only be struck out where the

[15] I therefore consider the application as brought under either of these two grounds in r 15.1.

First issue: Is the settlement agreement conditional on Mr Mower taking the steps required of him by the Mower/Angland settlement term or is it an unconditional settlement agreement?

[16] It is necessary to record the terms of the settlement agreement in further detail. There are five numbered operative clauses, and the three paragraphs quoted in [4].

[17] The structure of the settlement agreement was first to grant to Mr Mower an option to buy 20 per cent of the shares in Hossack Station Limited, and secondly, in

_{the event of his not exercising that option, for him to be paid a sum of
money by a}

³At [24], applying Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267. The Court also noted Ronex Properties Limited v John Laing Construction Limited & Ors [1983] QB 390, [1982] 3 All ER 961 (CA Civ) at 966 which held that this basis for a strike out would be reserved only for a very clear case.

date just under two years after the agreement was signed, with provision for interim security and other covenants in relation to the operation of Hossack in the meantime.

[18] Whilst these provisions have no direct relevance to RWAS, I refer to them because of the wording in the two clauses which provide for them. The option is created by clause 1, the opening paragraph of which reads:

At the option of Tom [Mower] (to be exercised within two months from the date hereof) settlement of the Proceedings and issues between the parties will be completed upon ...

[19] The second means of settlement is contained in clause 2, the opening paragraph of which reads:

[20] Both of these clauses provide for the issues between the parties to be settled by one or other of the stated methods. The parties include the plaintiff, John Angland in his personal capacity, and the second counterclaim defendant, RWAS, of which he is the principal. Thus in each capacity he agreed that by one or other of the stated pathways, the issues between him and the other parties were to be settled. In each capacity he was represented by different counsel.

[21] Clauses 3, 4 and 5 contain further provisions relating to these aspects of the overall settlement and are of no present relevance. The three paragraphs I have set out in [4] above follow. Unlike the prior provisions these three paragraphs are not in separate numbered clauses. The agreement is written on lined paper, and these paragraphs follow on from the earlier portion of clause 5, but after a blank line. Each seems to have been intended to be a separate provision, though not numbered. Both counsel accepted this to be the position.

[22] The obligations imposed on Mr Mower in the Mower/Angland settlement, and the provision in the following paragraph, apply whether he exercised the option to buy 20 per cent of the shares in Hossack Station, in which case he was to receive a payment of US$1,500,000 or he did not exercise it and was to pay US$1,200,000. This is because the phrase “on payment having been made in full” in both

paragraphs is apt to describe either payment. Counsel accepted that this is the correct interpretation of the agreement.

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 (but 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.

[24] I accept, as does Mr Matthews, Mr Wakelin’s submission that the settlement agreement is in the third of these categories, namely accord and conditional satisfaction. First, in terms of the Judge’s description, there are clear statements in the document which support a conclusion that it created an existing and enforceable agreement for performance, according to its tenor. These are:

(a) In Recital 4 the parties record that they have reached settlement and wish to record broad heads of agreement with the intention of entering into a full settlement deed, but pending that deed being entered the agreement is binding on the parties.

(b) Both operative clauses 1 and 2 expressly set out alternative bases on which the proceedings and issues between the parties will be settled, as

⁴Osborn v McDermott [1998] 3 VR 1 (VSC) at 10. Applied in Humphries v Carr [2011] NZCA

(c) The final sentence of the agreement provides “This agreement is in full and final settlement of the proceedings between the parties and shall be and remain confidential to them and their advisors”.

(d) The document sets out obligations on all parties to effect the agreed terms of settlement.

[25] As well, all parties were separately represented by counsel in relation to entering the agreement, and all obligations were supported by consideration. Apart from the issue now raised over whether Mr Mower has done as required of him, and the consequent refusal by RWAS to discontinue its counterclaim, all parties have performed their obligations and the balance of the proceeding has been discontinued.⁵

[26] Secondly, another term shows, in my view, that the agreement did not operate to discharge any existing cause of action unless and until there had been a certain element of performance. The paragraph after the Mower/Angland settlement provides that the proceeding is to be discontinued without costs “on payment having been made”. This express agreement that the proceeding would not be discontinued until one or other of the predicated settlement payments had been made points to a conclusion, in my view, that the settlement agreement did not operate to discharge the existing causes of action unless and until that occurred.

[27] To that extent, I accept the submission by Mr Wakelin that the settlement agreement is properly categorised as an accord and conditional satisfaction. Where I differ from Mr Wakelin, however, is on the terms of that condition. The agreement requires discontinuance “on payment having been made in full”. It could have provided, but did not provide, that the proceeding would be discontinued only after Mr Mower had taken the steps required on his part in relation to the Nevada

[28] Further, when the obligations in the Mower/Angland settlement and the succeeding paragraph are examined, it is apparent that such a condition was not intended. For ease of reference in the present context, I set these out again:

On payment of $1.5MUS having been made to Tom [Mower] in full he shall take reasonable steps for the judgment held by him against John [Angland]

(a) He shall use his best endeavours to take reasonable steps to remove, cause to be satisfied or otherwise expunge such judgment; and

On payment having been made in full the Proceedings shall be discontinued without costs.

[29] It will be observed that these make provision for two distinct steps to be taken, both after payment to Mr Mower. First, on his having been paid US$1,500,000 he is required to take steps in relation to the Nevada judgment. Secondly, on payment having been made, the proceedings are to be discontinued without costs. Payment triggers both events: both are to occur “on payment” which on its ordinary meaning requires the stated steps to be taken promptly, if not contemporaneously. It is inconsistent with a requirement for two steps to be taken at the same time that one of those steps must be taken before the obligation to take the other arises.

[30] For these reasons I find that the accord and satisfaction was not conditional on Mr Mower taking the steps required of him by the Mower/Angland settlement. It was conditional upon payment being made to Mr Mower but became unconditional when that occurred.

[31] For the sake of completeness I record that Mr Wakelin referred the Court to an observation of the Court of Appeal in Humphries v Carr.⁶In relation to a term in the settlement agreement being considered by the Court, stating it was a full and final settlement, the Court said this term must be read in light of the terms of the agreement as a whole which take effect according to their tenor.⁷I have adopted this

_{approach to my interpretation of the subject agreement. Apart from the
fact that}

Mr Wilson did not sign it and issues relating to him remained outstanding, it resolved all issues in the case and in no fewer than four paragraphs declared the case settled, that the agreement was binding, and the agreement was made in full and final settlement. It contained specific obligations and these have been honoured by all other parties (including Mr Angland in his capacity as the first plaintiff). Mr Wilson signed a settlement agreement later. All other parties have discontinued. Considering the agreement as a whole, I am satisfied that it was entered in full and final settlement.

Second issue: If it was conditional on Mr Mower taking the steps required of him by the Mower/Angland settlement, has he done so with the result that the RWAS counterclaim should be struck out?

[32] Mr Wakelin presented detailed argument in support of his contention that the filing, by Mr Mower, of a notice of satisfaction of the Nevada judgment did not comply with his obligations under the Mower/Angland settlement. The primary thrust of his argument is that the agreement imposed on Mr Mower an obligation first to take reasonable steps to have the judgment set aside, and only if unsuccessful to then file a satisfaction. In his affidavit in support of his opposition to this application Mr Angland sets out in detail the effects on him and on his practice which the entry of the judgment has, in his view, caused. He maintains that as a result of discussions prior to the settlement agreement being entered Mr Mower was well aware that he was promising to use his best endeavours to have the Nevada judgment set aside. He says that he would not settle with Mr Mower unless he could be assured that Mr Mower would, as he puts it, take full responsibility for undoing the damage he had caused the firm and him.

[33] Mr Wakelin mounts an argument that the agreement should be interpreted by taking into account its purpose and its context, and the background to its execution to which Mr Angland refers. He cites the summary of the relevant principles of contract interpretation by Toogood J in New Zealand Carbon Farming Ltd v Mighty

⁸New Zealand Carbon Farming Ltd v Mighty River Power Ltd [2015] NZHC 1274 at [53] and

[34] Mr Wakelin further submits that Mr Mower is estopped from denying an obligation to first apply to set aside the judgment, based on the principles of estoppel by convention. He cites the summary of the principles in National Westminster Finance NZ Ltd v The National Bank of NZ Ltd.⁹

[35] Because of the conclusion I have reached in relation to the first issue, the result of this application is that the counterclaim by RWAS will be struck out. It is not, therefore, necessary to reach a conclusion on the arguments presented by counsel on the second issue. The Mower/Angland settlement stands, and if RWAS wishes to pursue an allegation of breach of that agreement it appears to be able to bring a separate proceeding against Mr Mower. Mr Wakelin acknowledged that this course was open to his client. If followed, it seems that his foreshadowed causes of action will be for breach of contract, based on interpretation of the agreement under the principles of interpretation to which I have referred, and in estoppel. The remedy which Mr Wakelin says would be sought would be a mandatory injunction requiring Mr Mower to take all reasonable steps to have the Nevada judgment set aside. I will therefore only briefly discuss the arguments presented by Mr Wakelin.

[36] The evidence before the Court on this application in relation to the context in which the agreement was signed was sparse and insufficient for a final view to be formed on interpretation of the settlement agreement. I refrain from any further comment on that aspect of Mr Wakelin’s argument.

[37] As I understand the argument in relation to estoppel by convention, it is said that when the agreement was entered there was an underlying assumption by both Mr Angland and Mr Mower that both parties intended to have the judgment expunged. He says this is clear from the use of the phrases “... shall take reasonable steps for the judgment...to be set aside ...”, and “... use his best endeavours to take reasonable steps to remove... or otherwise expunge such judgment...”, in the context of which the phrase “... cause to be satisfied...” is anomalous as it is an entirely different action with a different result. Mr Wakelin relies on the statement of points which must be established by a party claiming the benefit of an estoppel by

convention which is set out in National Westminster Finance NZ Ltd v The National

(1) The parties have proceeded on the basis of an underlying assumption of fact, law, or both, of sufficient certainty to be enforceable (“the assumption”).

(2) Each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction.

(3) Such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them.

(4) The proponent was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption being regarded as true and binding.

(5) The proponent would suffer detriment if the other party were allowed to resile or depart from the assumption.

(6) In all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.

[38] The argument, however, appears to founder on the first point listed. The underlying assumption of fact on which Mr Wakelin relies, a mutual intention that Mr Mower would seek first to have the judgment set aside, is not an assumption of fact. Rather, it is a mutual intention to take future action. But, as Tipping J pointed

out,¹¹estoppel by convention has its origins in recitals to a deed or other instrument

which customarily set out the factual background to the covenants in the deed. Each party is estopped from resiling from the factual propositions traversed in the recitals even if they are wrong, because they have been accepted as factually correct by the parties as the basis upon which they have entered the deed.

[39] Had it been necessary to form a final view I would not have found an estoppel by convention.

[41] Mr Mower seeks costs. Mr Matthews says this should be on a full indemnity basis. He cites r 14.6(4) which provides for the Court to order indemnity costs if the other party has acted vexatiously, frivolously, improperly or unnecessarily, in commencing, continuing or defending a proceeding or a step in a proceeding.

[42] Mr Wakelin accepts that in the event of Mr Mower’s application succeeding there would be an award of costs against RWAS, but opposes costs being awarded on an indemnity basis.

[43] I have considered Mr Matthews’ application but am not prepared to award costs on an indemnity basis. In my view it cannot be said that RWAS has acted as asserted by Mr Matthews. In order to decide this application it has been necessary to interpret the entire settlement agreement in order to reach the conclusion that although it was conditional until Mr Mower was paid, it then became an unconditional full and final settlement requiring the parties bound by it to file notices of discontinuance. I heard careful argument from both counsel on this issue. I am satisfied that this is a case where costs should be awarded on a 2B basis.

_{[44] I so direct, with disbursements also fixed, if necessary, by
the Registrar.}

High Court of New Zealand Decisions

Angland v Mower [2016] NZHC 1014 (18 May 2016)