Linwood v Ranchhod [2018] NZHC 2532 (27 September 2018)

Last Updated: 2 October 2018

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-430 [2018] NZHC 2532

BETWEEN	COLIN MACKAY LINWOOD Plaintiff
AND	LAXMI RANCHHOD Defendant

Hearing:	18 September 2018
Appearances:	Mr D Calder for plaintiff Mr J Delaney for defendant
Judgment:	27 September 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1] The plaintiff, Colin Linwood, and the defendant, Laxmi Ranchhod, are a married couple. They separated some time ago. Mr Linwood sues Ms Ranchhod seeking orders for specific performance of a mediated settlement agreement relating to their relationship property. He seeks summary judgment pursuant to pt 12 of the High Court Rules 2016. Ms Ranchhod opposes that application.

[2] The issues for determination are whether the mediated settlement agreement has been breached by Ms Ranchhod, and if so, whether an order for specific performance should follow (and the form that any such order should take).

[3] The factual background is not complex.

[4] Mr Linwood and Ms Ranchhod married in mid-1994 and separated in early 2015. As I understand it they have a relatively young child.

LINWOOD v RANCHHOD [2018] NZHC 2532 [27 September 2018]

[5] On 27 January 2015, apparently with the assistance of their solicitors, they executed an agreement which was clearly intended to put in place arrangements for their imminent separation. This recorded their intention to separate; the arrangements being made for the purchase of a second home; that Mr Linwood would have exclusive possession of the second home; that Ms Ranchhod would have exclusive possession of the former family home; and the financial arrangements to facilitate this. The recitals recorded that the agreement was “... not an agreement to settle all differences between them pursuant to s 21 of the Property (Relationships) Act 1976”. In subsequent correspondence both parties indicated that they wished to get on and resolve all relationship property issues and acknowledged that in order to do so they would need to sell the family home.

[6] Despite, I am assuming, genuine efforts by both parties, the couple were unable to resolve all issues relating to the division of their relationship property.

[7] Through their solicitors they arranged to take part in a mediation and agreed on a mediator. The mediation took place on 6 September 2016. Both parties’ solicitors were in attendance.

[8] At the conclusion of the mediation they entered into a comprehensive settlement agreement. On its face, this document is compliant in all respects with s 21 of the Act. Neither party contends otherwise. Insofar as the family home was concerned, they agreed:

4.1 The family home will be sold to best advantage as soon as is practicable but with any settlement date for any sale to be not sooner than expiration of the school year unless they agree otherwise.

4.2 That they will endeavour to reach agreement via their lawyers with respect of real estate agent/s, setting of sale price, methodology of sale or in respect of any other matter incidental to the sale of the home to best advantage provided that in the event any issue incidental to the sale of the home arises that their respective lawyers cannot resolve between them then any such differences shall be referred to an independent and senior property lawyer in the Wellington region agreed upon by the lawyers of the parties and failing agreement to such appointment to such an independent solicitor by the President of the New Zealand Law Society or his nominee with the costs of any such appointment to be shared equally.
4.3 That in the event of an offer for the property being received which one party wishes to accept and the other does not then any offer within 3% of the then current market value of the property as determined by a registered valuer jointly appointed by their respective lawyers and in the event of disagreement over the appointment of the registered valuer any disagreement shall be referred the New Zealand Law Society to nominate a valuer with the cost of any such referral to be shared equally.

4.4 That until 30 January 2017 Colin acknowledges that he will be solely responsible for the payment of mortgage interest, rates and insurance and thereafter Laxmi will meet the outgoings of the property.

4.5 That following the sale of the property the following payments shall be made from the gross sale proceeds:

1. any commission on the sale

2. any legal fees for the conveyancing

4. $278,000 to the ANZ Bank on account of repayment of the secured mortgage

4. one half of the then net balance to Laxmi

5. The then balance available after payment of any sums then due to the bank to Colin provided that, out of such sum to Colin, the solicitor acting on the sale shall deduct $125,000 and pay such sum to Laxmi’s solicitors

Provided that If Colin has paid any costs incidental to obtaining code compliance or other regulatory consent in relation to the property (both parties having agreed that such code compliance or regulatory consent is or may be required) then Colin shall be reimbursed by Laxmi out of her share of the proceeds for one half of any such costs AND Colin shall also be reimbursed out of Laxmi’s share of the proceeds for one half of the mediator’s fee. For the avoidance of doubt Colin shall be entitled to draw down on the flexi loan facility subject to him being solely responsible for any sum over and above a total of $278,000 and Laxmi acknowledges that she shall not be entitled to drawdown on the flexi loan.

[9] Other relevant provisions in the agreement were:

(a) clause 5 in which the parties agreed to execute all necessary documentation and take all other necessary steps to ensure the agreement could be implemented;

(b) clause 8 in which both parties acknowledged that they had received independent legal advice before signing the agreement;
(c) the attestation clauses where the parties’ solicitors certified having advised them as to the implications of the agreement before they executed it.

[10] For whatever reason or reasons, the family home was not sold by 30 January 2017 and the parties could not agree on a sales process. Both parties blame the other for this. No useful purpose would be served by examining this issue here, much less attributing blame between the parties.

[11] In mid-2017, Mr Linwood, through his solicitors, invoked the default provision in cl 4.2 of the mediated settlement agreement. When it appeared that the parties would not be able to agree on a suitable “senior property lawyer” as an expert to determine the sales process, Mr Linwood’s solicitors invited the President of the Law Society to appoint someone. On 14 September 2017, the President appointed Mr Richard Caughley of Morrison Kent.

[12] Mr Caughley was careful to engage with both parties as is evident from correspondence following his appointment and his determination dated 19 March 2018. It is obvious from the terms of that determination that Mr Caugley looked carefully at the various options for the sale of the property “to best advantage”, and developed a comprehensive protocol for the same.

[13] I mention at this stage that between the date of the Law Society’s appointment of Mr Caughley in September 2017 and the issue by Mr Caughley of his determination in March 2018, Ms Ranchhod’s solicitors instructed Mr Delaney to act on her behalf. On 22 November 2017 Mr Delaney wrote to Ms Ranchhod’s solicitors setting out a proposal for the sale of the property. The striking feature of this proposal is that it is not very dissimilar from Mr Caughley’s determination.

[14] Returning to Mr Caughley’s determination. It is unnecessary to set this out in full because it emerged during the course of the hearing that Ms Ranchhod objects to only three aspects of it.
[15] Mr Linwood’s case — and the basis upon which he seeks summary judgment
— is that the settlement agreement, together with Mr Caughley’s determination as to the process for the sale of the family home, are enforceable.

[16] On those bases, Mr Linwood seeks comprehensive orders for the enforcement of the agreement and the determination.

[17] On Ms Ranchhod’s behalf Mr Delaney does not challenge the enforceability of the mediated settlement agreement, and, as I have already indicated, does not take issue with the process for the sale of the family home as directed by Mr Caughley except in three respects. But he submitted that, in relation to those three aspects of the determination, Mr Caughley had exceeded the jurisdiction which the parties had conferred on him.

[18] In relation to this issue, both Mr Calder and Mr Delaney referred me to the English Court of Appeal’s judgment in Barclays Bank plc v Nylon Capital LLP.¹

[19] Counsel drew my attention to the Court of Appeal’s reinforcement of the elementary proposition that the jurisdiction of an expert engaged by two parties to determine an issue or issues between them is a matter of contract. Naturally enough Mr Calder emphasised those aspects of the judgment which suggested that the courts will approach the interpretation of such an agreement liberally and Mr Delaney focussed attention on those aspects which emphasised the need to identify a clear contractual foundation for an expert’s jurisdiction. In the end, I do not see this exercise as being different from any other exercise in contractual interpretation. What it demands is a careful but not overly pedantic analysis of the words that the parties used in recording their joint intention having regard to the factual background and assisted by any relevant and admissible parol evidence. I would prefer to rely on New Zealand authority in this regard.²

¹ Barclays Bank plc v Nylon Capital LLP [2011] EWCA Civ 826, [2012] Bus LR 542.

2. Glaister v Amalgamated Dairies Ltd [2003] 1 NZLR 829, at 840-843, per Heath J as cited in Greymouth Petroleum Acquisition Co Ltd v Petroleum Resources Ltd HC Auckland CIV-2003-404-6984, 22 December 2003, at [39]; Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60]–[63]; Green & Hunt on Arbitration Law & Practice (online Looseleaf ed, Thomson Reuters) at [EX1.5(4)].

[20] The key term of the mediated settlement agreement is of course cl 4.2.

[21] For Mr Linwood, Mr Calder emphasised that the parties had chosen to confer jurisdiction on an expert to determine all matters “...incidental to the sale of the home
...” and submitted that these words were wide enough in their scope to include all matters usually contained in a listing authority and the Auckland District Law Society standard agreement for sale and purchase including such matters as the real estate agency, the level of commission, the marketing budget, the sale price, the conveyancing solicitors and the “dressing” of the property for sale (in short all of the matters determined by Mr Caugley).

[22] He also submitted that, even if on a proper interpretation of cl 4.2, those words were not sufficiently broad in their scope to cover all or any of those elements. Ms Ranchhod was on notice that Mr Caughley intended to deal with all those matters and elected not to raise an issue, thereby acquiescing in his jurisdiction.

[23] For Ms Ranchhod, Mr Delaney began by making three general submissions.

[24] First, he invited me to approach this case having regard to the fact that it involves a dispute between a couple concerning their relationship property. He did not contend that this Court did not have jurisdiction to deal with Mr Linwood’s summary judgment application. But he reminded me that this is the type of dispute that the Family Court deals with all the time. In the end, his submission was effectively that in dealing with the matter the Court should not adopt what he referred to as “a commercial approach” but rather an approach that recognised that it was addressing a family matter.

[25] I am not sure how far this submission takes matters. In the end, Mr Linwood has elected to commence his proceeding in this Court. There is no question that this Court has jurisdiction. It seems to me that the Court must deal with it like any other case.

[26] Second, he submitted that the pre-separation agreement between the couple dated 27 January 2015 precluded Mr Caughley from making any determination that
was inconsistent with the terms of that agreement. His argument was that the term which conferred on Ms Ranchhod the right to occupy the family home continued in force. In this context he submitted that the recital to the agreement by which the parties acknowledged that the agreement was not intended to settle all relationship property issues meant that it was in fact a final resolution of those relationship property issues with which it dealt, leaving only any remaining relationship property issues to be resolved. On this basis, he submitted that, to the extent that Mr Caughley had determined that Ms Ranchhod was not entitled to continue to occupy the family home, his determination was unlawful and unenforceable.

[27] I do not accept that submission. The pre-settlement agreement was plainly intended by the parties to establish a holding position so that they could separate and begin the process of disentangling their lives. That is why they expressly acknowledged that it was not intended to settle all differences between them concerning relationship property. On its face it was not an agreement which complied with the requirements of s 21 of the Property (Relationships) Act 1976. In my view, it was clearly open to the parties subsequently to enter into a comprehensive settlement agreement relating to relationship property which contradicted the pre-settlement agreement.

[28] Finally, Mr Delaney submitted that as the mediated settlement agreement did not expressly provide that, if it became necessary for the parties to engage an expert pursuant to cl 4.2 to resolve any issues they were unable to resolve, they would be bound by any such determination. On that basis, he contended that neither party was bound by Mr Caughley’s determination.

[29] I do not accept that submission either. Although Mr Delaney is correct in saying that there is no provision to the effect that the parties would be bound by a determination, I have no hesitation in concluding that such an obligation can and should be implied into their mediated settlement agreement. The entitlement of either party to require expert determination arises only when they are unable to reach agreement. It was obviously intended as a mechanism to overcome any impasse that they might have as to the process for the sale of the family home. In my view, it goes without saying that the parties agreed that they would be bound by the outcome of any
expert determination. In the absence of any such implied term not only would the clause itself be of no practical value to the parties, it would have the effect of rendering the mediated settlement agreement a mere “agreement to agree” and therefore practically unenforceable.

[30] Focusing more directly on the determination, Mr Delaney for Ms Ranchhod invited me to read down the scope of the jurisdiction which the parties conferred on Mr Caughley so as to exclude jurisdiction to determine three matters:

(a) Mr Caughley’s determination that the real estate agency — Harcourts
— should be allowed to charge commission at the rate of 2.5 per cent of the purchase price plus GST;

(b) His determination that the firm of solicitors who acted on the conveyancing would be either any firm that could be agreed between the parties or, in the absence of agreement, his own firm of Morrison Kent; and

(c) His determination that Ms Ranchhod would be obliged to leave the family home within two weeks of the determination and the closely related determination that the property be “dressed for sale” by the real estate agent up to a figure of $2,500 plus GST for a five-week period.

[31] With respect to the question of the commission rate, Mr Delaney pointed to the evidence that Ms Ranchhod had already negotiated a rate of 1.9 per cent with Harcourts and that she was understandably reluctant to agree to a higher rate. He acknowledged that, regrettably, Ms Ranchhod had not informed Mr Caughley of this prior to the date of his determination.

[32] In my view, the questions of the real estate agency to be engaged and rate of commission was well within Mr Caughley’s jurisdiction. It is perhaps unfortunate that Mr Caughley was not made aware that the very agency he nominated had earlier agreed to a lower rate of commission, but this cannot affect his jurisdiction.
[33] As to the identification of the solicitors to act on the conveyancing, Mr Delaney referred me to a publication by the New Zealand Law Society entitled Property Transactions and E-Dealing Practice Guidelines which includes the following passage:³

You and the other lawyer should appoint an independent lawyer acceptable to both parties to act on the transaction, if:

i. you and the other lawyer cannot agree who is to act; or

ii if either party refuses to give approval for one of you to act.

[34] I do not regard the Law Society’s publication as having any particular significance in this context. It is clearly intended to provide guidance to practitioners in relation to which firm should act on a transaction in conventional circumstances. It would have been an inapt guide for Mr Caughley to rely on here. What he did in his determination was to give the parties the opportunity to agree on a firm to act, but indicate that in the absence of an agreement his firm, which was entirely independent of the parties, could act. That seems entirely appropriate to me, and well within his jurisdiction.

[35] I have reached the view that cl 4.2 of the parties’ mediated settlement agreement was not broad enough in its scope to confer on an expert jurisdiction to determine when Ms Ranchhod should leave the family home.⁴ As Mr Delaney submitted, important components of the background against which the agreement was entered into were:

(a) Shortly before the couple separated they entered into an agreement which effectively conferred on Ms Ranchhod the right to remain in the family home prior to its sale;

(b) Nothing in the mediated settlement agreement expressly contradicted that;

3. Property Transations and E-dealing (online ed, New Zealand Law Society, 2012 updated April 2015) at [4.2(f)].

⁴ As specified in cl 10(e)(i) of the expert determination.

(c) By reason of cl 4.4 of the mediated settlement agreement, from 30 January 2017 Ms Ranchhod was responsible for paying all outgoings on the property and it seems unlikely that the parties anticipated that she would be required to vacate the property and yet remain solely responsible for those outgoings;

(d) Ms Ranchhod was day to day care of the couple’s child.

[36] It seems to me that the component of the determination requiring the property to be dressed for sale must stand or fall with cl 10(e)(i) which dictated when Ms Ranchhold had to vacate the property. As I understand it, the dressing of a property for sale involves changing the furniture and decoration. Ms Ranchhod’s continued occupation of the property is inconsistent with that exercise.

[37] Accordingly, in my judgment, those aspects of Mr Caughley’s determination were outside the jurisdiction which the parties had conferred on him. Nor do I accept that Ms Ranchhod can be regarded as having acquiesced in Mr Caughley determining when she should vacate the property.

[38] During the course of the hearing I put to both counsel the question of whether Mr Caughley’s determination was severable in the sense that if I concluded that he did not have jurisdiction to make certain orders, it was open to me to award summary judgment to the plaintiff which reflected that. Both Mr Calder and Mr Delaney submitted that it was open to me to do so. Of course, it is not open to the parties to litigation to confer jurisdiction on the Court where it has none, but I am satisfied that r 12.2 of the High Court Rules 2016 is wide enough in its scope to enable me to make such an order.

[39] For those reasons I am prepared to make an order for specific performance requiring Ms Ranchhod to comply with the parties’ mediated settlement agreement dated 6 September 2016 and Mr Caughley’s determination dated 19 March 2018 with the exceptions of those components of the expert determination at cls 10(e)(i) and 10(e)(iii).
[40] I am also prepared to make an order that if Ms Ranchhod neglects or refuses to sign any documents within three working days of the same being presented to her for signing, then the Registrar of the High Court at Wellington is to sign any necessary documentation on Ms Ranchhod’s behalf (any documents necessary to give effect to the determination) as modified including:

(a) a listing agreement;

(b) an agreement for the sale and purchase and any subsequent offer or counter offer or variation; and

(c) any documents necessary to complete settlement of the sale of the property.

[41] I did not hear counsel on costs and I therefore reserve the same. In case it is of any assistance, I will indicate that my preliminary view is that as both parties have had a measure of success and costs should probably be left to lie were they have fallen. However, if counsel are unable to agree as to costs, as I would expect them to be able to do, then they may file memoranda and I will deal with them on the papers.

Associate Judge Johnston

Solicitors:

Gibson Sheat, Wellington Grant Brittain, Tauranga