IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	
CIV-2017-409-000842
[2018] NZHC 3094	

BETWEEN	MOUNT GREY DOWNS LIMITED
Plaintiff	
AND	PINOT PROPERTIES LIMITED
First Defendant	
AND	STEPHEN CHARLES COHEN
Second Defendant	

Hearing:	5 November 2018	
Appearances:	R W Maze for Plaintiff/Applicant
A D Marsh for Defendants/Respondents	
Judgment:	27 November 2018	

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
(plaintiff’s summary judgment application)

Background – the contract

[1]	The first defendant, Pinot Properties Ltd (Pinot), owns a property at 205 Manchester Street, Christchurch which was severely affected by the Canterbury Earthquake Sequence. Pinot was required by the Canterbury Earthquake Recovery Authority (CERA) to make the building safe.

[2]	In September 2011, Pinot entered into a contract with Mount Grey Downs Ltd (Mount Grey) in relation to the work required on the buildings (the contract). The contract provided for payment as follows:

MOUNT GREY DOWNS LIMITED v PINOT PROPERTIES LIMITED [2018] NZHC 3094 [27 November 2018]

PAYMENT

All GST invoices will be forwarded for payment to the address upon this agreement on or before the 26th of the month. All invoices will be clearly set out to show individual trade’s hours, plant and equipment hours and sub contractors, material costs.

Information as day/time-sheets, copies of Sub contractors and materials will support all invoices submitted for payment.

The supporting documents

Introduction

[3]	The defendants, as a separate ground of defence, assessed that Mount Grey failed to comply with its duties under the contract’s audit provision (as set out above at [2]). It was common ground between counsel that the audit provision imposed a date upon Mount Grey which was in the nature of an auditing arrangement.

[4]	Pinot’s director, Stephen Cohen, (the second defendant) acknowledged in signing the contract on behalf of Pinot that he also personally guaranteed any debt outstanding to Mount Grey.

[5]	Mount Grey subsequently undertook work on the property. It issued invoices to Pinot for that work (identified by Mount Grey as Job No. 4562) up to 31 July 2012. It asserts that it was entitled to payment for invoiced sums totalling $474,009.18 (including GST). Mount Grey acknowledges that Pinot has paid $112,782.83 (including GST) on account of its debt. Pinot made payment in March and May 2012 of $111,282.83 together with a further payment of $1,500 in April 2013. It is common ground that Pinot has made no payment since then.

[6]	The affidavit evidence thereafter contains a difference between the deponents
– not able to be resolved in this summary judgment context – as to whether Pinot has paid any sum beyond the $112,782.83 figure on account of the 205 Manchester Street contract. For Mount Grey, Mr Chronican exhibited a 10 May 2012 email he sent to Mr Cohen. It refers to payments of $55,000 having been paid by Vero (Pinot’s insurer) on 205 Manchester Street. Mr Chronican does not in his affidavit state that there is an error in the email. However, the accountant who undertakes work for Mount Grey, Claire Barker, deposes that the $55,000 was in fact paid for a different job (on the

Provincial Tavern). Mr Cohen referred to this evidence of Ms Baker and deposed that her evidence is incorrect. He states that the work (paid for with the $55,000 payment) was done at 205 Manchester Street. Mr Cohen exhibits a statement of account dated 30 November 2012 presented by Mount Grey to Vero – it shows four payments made on Job No. 4562 in the period December 2011/January 2012, totalling $56,000 (rather than the $55,000 referred to by Mr Chronican and Ms Barker). Mount Grey’s lawyer, Michael McDonald, in a letter to Pinot’s lawyer dated 28 March 2013, also identified the four sums totalling $56,000 as having been paid.

[7]	On this evidence it is arguable that Pinot has paid on account of the debt an additional $56,000 which Mount Grey has not taken into account on its claim.

Mount Grey’s claim

[8]	Mount Grey claims a balance of principal owing under the contract of
$366,267.31, together with interest of $642,577.43.

[9]	Mount Grey seeks summary judgment against both defendants.

The defendants’ opposition

[10]	By their notice of opposition and evidence, the defendants accept that the contract existed between the parties but assert they have arguable defences in that:

(a)	Mount Grey made a pre-contractual representation (being an estimate of total charges) which precludes Mount Grey from claiming anything further than the $112,782.83 already paid;

(b)	there are disputes as to whether the contracted work was done;

(c)	there are disputes as to whether Mount Grey’s invoices were properly issued; and

(d)	there is a question as to the extent to which particular invoices have or have not been met.

Plaintiff’s summary judgment application – the principles

[11]	The starting point for a plaintiff’s summary judgment application is r 12.2(1) High Court Rules, which requires that the plaintiff satisfy the Court that the defendant has no defence to any cause of action in the statement of claim or to a particular cause of action.

[12]	I summarise the general principles which I adopt in relation to this application:

(a)	Commonsense, flexibility and a sense of justice are required.1

(b)	The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.2

(c)	The Court will not hesitate to decide questions of law where appropriate.3

(d)	The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements in affidavits.4

(e)	In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.5

(f)	In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation – the defendant is

1	Haines v Carter [2001] 2 NZLR 167 (CA) at [97].
2	Pemberton v Chappell [1987] 1 NZLR 1 (CA).
3	European Asian Bank AG v Punjab & Sind Bank [1983] 2 All ER 508 (CA) at 516.
4	Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21 (SC).
5	Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC).

under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the Notice of Opposition.6

(g)	In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.7

(h)	The need for judicial caution in summary judgment applications has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required for the protection of the integrity of the summary judgment process.8

(i)	Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.9

The alleged estimate

Introduction

[13]	As I have determined that summary judgment cannot be entered for the plaintiff by reason of the defendants’ having arguable defences through Mount Grey’s alleged estimate and issues as to Mount Grey’s supporting documentation, I will deal with this ground of defence first.

6	Middleditch v NZ Hotel Investments Ltd (1992) 5 PRNZ 392 (CA).
7	Jowada Holdings Ltd v Cullen Investments Ltd CA248/02, 5 June 2003 at [28].
8	Bilbie Dymock Corporation Ltd v Patel & Bajaj (1987) 1 PRNZ 84 (CA).
9	Pemberton v Chappell, above n 2.

The evidence

[14]	The main evidence for Mount Grey was provided by its Project Manager, Martin Chronican. In his affidavit, Mr Chronican identified the contract and gave evidence as to invoicing and payments and some discussions between the parties. He refers to discussions with Mr Cohen concerning time-sheets. In one paragraph he identifies a discussion concerning the question of an estimate:

32. On the 21st of May 2012, I met with Mr Cohen in the evening. He essentially accused MGD of costing too much – not that we were not charging according to the contract. He referred to an estimate he had obtained from Fulton Hogan for work at 205 Manchester Street.

[15]	A director of Mount Grey, Glenn Johnstone, provided a supporting affidavit. He confirms passages in Mr Chronican’s evidence. He adds:

14. From my perspective, Mr Cohen was  simply  complaining  that  someone else might have done this more cheaply.

[16]	The defendants’ opposition evidence was entirely contained in an affidavit of Mr Cohen. Mr Cohen deals in some detail with the background to the contract. He refers to his prior knowledge of Mr Chronican. He continues:

13.	I re-established contact with Mr Chronican while he was doing work for Denis Harwood at a building opposite my office from about 2008. After September 2010 onwards I saw him occasionally as he was working on an adjoining building.

14.	He approached me sometime after February 2011 and asked if there was any work he could be doing. We discussed the demolition and site clear for the old Provincial Hotel on Cashel Street through the plaintiff. Through our discussions he became aware that we needed make safe work on the building.

15.	Before that, on 10 June 2011 I had obtained an estimate from Fulton Hogan for the work to be completed. Attached hereto marked “B” is a copy of their estimate. As can be seen, their estimate at the time was for $140,000.00 to $160,000.00.

16.	Mr Chronican told me that he thought that the plaintiff could complete the work for significantly less than that. In his view, there was no reason why the work could not be done for less than $100,000.00 plus GST and disbursements.

17.	Although I hoped that the costs for the work would be met from the insurance proceeds to be paid out, I was aware that if the insurers met these costs they would be taken into account as part of the overall

insurance claim settlement for the building. As a result, the cheaper estimate given by Mr Chronican was obviously a more attractive option for me.

18.	As the property was subject to bank finance, and as any insurance payments paid had to be paid to the bank, we had to ensure that the works to be completed were kept within a certain range. The bank had approved an amount of up to $150,000.00 plus GST being paid towards this work.

19.	Mr Chronican was well aware of this. He knew that the work would have to be completed for no more than $150,000.00 plus GST. Attached hereto marked “C” is a copy of an email from him to me dated 10 May 2012 which clearly indicates his knowledge of the bank being happy with that amount.

20.	As a result of the verbal estimate received from Mr Chronican, I signed the contract dated 1 September 2011. While this was based on certain rate schedules, the background to this was as outlined above and I certainly did not expect that the work would require anything more than $150,000.00 plus GST as a maximum. My belief was that the make safe work would be completed for less than $100,000.00 plus GST – for example attached hereto marked “D” is an email that I sent to Nigel Bunn and Gerard Walsh at ASB Bank on 22 September 2011 stating that the budget estimate was $100,000.00.

[17]	In signing the contract for Pinot, Mr Cohen recorded that he was authorised to enter the agreement on behalf of Pinot “subject to Vero confirmation 23 September 2011”. While none of the deponents has given evidence in further explanation of that condition, it is to be inferred from the evidence as a whole that Pinot wanted confirmation from its insurer (Vero) as to Vero’s satisfaction with some or all of the contractual arrangements.

[18]	Mr Cohen’s exhibit “C” is an email he received from Mr Chronican on 10 May 2012 in which Mr Chronican stated:

205 Manchester Street Vero have only paid $55K. Invoice no 3724104K including GST could be paid by them as it is under the 150K plus GST.

[19]	Mr Cohen’s exhibit “D” is an email which he sent to the ASB Bank on 22 September 2011 dealing with the work to be undertaken on the property. The email records:

As the work advances, I will account for this and complete the budget estimate. Budget Estimate under $100K Fulton Hogan have estimated $140K to $160K see attached.

[20]	Having provided more narrative evidence in his affidavit, Mr Cohen proceeded to then respond to particular paragraphs in Mr Chronican’s affidavit. This included:

55.   At paragraph 32, Mr Chronican refers to a meeting that he had with   me on 21 May 2012. I did accuse the Plaintiff of charging too much. I referred not only to the estimate that we had obtained from Fulton Hogan, but also to the initial estimate from Mr Chronican himself that the work could be completed for under $100,000 plus GST. I could not see any justification for the amounts that were being invoiced.

[21]	Mr Cohen in turn replies to aspects of Mr Johnstone’s evidence, including:

57. At paragraph 14 of his affidavit, Mr Johnston (sic) claims that it appears that I was simply complaining that someone else might have done the job more cheaply. That is not correct. Mr Chronican had estimated to me that the work could be done for less than $100,000.00 plus GST. I had already received an estimate from Fulton Hogan that the work could be completed for $140,000.00 to $160,000.00. Mr Chronican was aware that the total budget for the works was $150,000.00 plus GST. That was the basis upon which the contract was entered into.

[22]	Mount Grey did not file any evidence in reply. There is therefore no evidence to contradict Mr Cohen’s paragraph 55 (above at [21]), dealing with the detail of the 21 May 2012 discussion.

Assessment of the evidence

[23]	In his evidence for the defendants concerning the alleged estimate of cost, Mr Cohen provides a reasonable level of substantiation. He identifies and exhibits the detailed (three page) estimate he had obtained three months earlier from Fulton Hogan, estimating the cost at $140,000 to $160,000. He deposes that Mr Chronican had approached him asking whether there was work Mr Chronican could be doing. He deposes that Mr Chronican stated that he thought that Mount Grey could complete the work  for  “significantly  less  than  that”,  being  an  apparent  reference  back  to the
$140,000 to $160,000 range. He says that Mr Chronican stated that, in his view, there was no reason the work could not be done for less than $100,000 plus GST and disbursements. Mr Cohen exhibits his contemporaneous correspondence with his bank in which he identifies a budget estimate of $100,000. Mr Cohen further deposes that Mr Chronican was well aware of the $150,000 (plus GST) figure approved by Pinot’s bank for the work.   Mr Chronican’s 10 May 2012 email to the Bank (as

exhibited by Mr Cohen) incorporates Mr Chronican’s recognition of the figure of 150,000K plus GST.

[24]	This is not a case in which there is a conflict of evidence as such on the estimate allegation. Mr Cohen’s evidence of an affirmative defence has not been responded to. In accordance with the principles applicable on summary judgment, it is not open to the Court to reject any aspect of Mr Cohen’s reasonably detailed evidence. There is nothing inherently improbable in the pre-contract discussions which Mr Cohen narrates or in Mr Cohen’s description of the 21 May 2012 discussion.

The significance of the pre-contract discussion

[25]	Responsibly, Mr Maze for Mount Grey did not submit that the Court could disregard the defendants’ evidence as to Mount Grey’s provision of an estimate. Rather, Mr Maze attacked the defence on a number of levels.

[26]	First, Mr Maze submitted that it would stretch credulity beyond breaking point to suggest that a person of Mr Cohen’s business experience would treat an oral indication as “a binding estimate” and fail to include it in the documented contract. In the event the Court would find at trial that Mr Chronican made the pre-contract statements as alleged by Mr Cohen, the questions which would arise as to the reasonableness of Mr Cohen’s acting in reliance on those statements (without documenting them as between the parties either within the contract or outside it) are matters which are not capable of resolution in a summary judgment context. They call for the consideration of evidence at trial.

[27]	Secondly, Mr Maze submitted that Mr Cohen’s evidence as to what Mr Chronican said during the pre-contract discussion was, at its highest, a statement of opinion or “puff”. Mr Maze cited a single authority, namely the Privy Council decision in Bisset v Wilkinson.10 In that case, a vendor’s statement to a prospective purchaser (that the carrying capacity of land was 2,000 sheep) was held to be an honest statement of opinion and not a representation of actual capacity, the land having not previously been used as a sheep farm. The decision is frequently cited for the proposition that

10	Bisset v Wilkinson [1927] AC 177.

statements or representations are not actionable if they are merely honest statements of opinion recognised as such.11 But, in all such cases, the very conclusion that a statement is opinion and not representation is fact-dependent.

[28]	In Bisset v Wilkinson itself, Lord Merrivale observed that in such cases the relevant facts will include:12

…the material facts of the transaction, the knowledge of the parties respectively, and their respective positions, the words of representation used and the actual condition of the subject-matter spoken of.

[29]	Mangawhai Developments Ltd (in rec) v Rolls is a recent decision of this Court in which the authority of Bisset v Wilkinson was recognised but the Privy Council decision was distinguished on the facts. Brewer J held, upon trial, that pre-contractual representations as to sections having “clear sea views, expansive lake views and in close proximity to the town and beach at Mangawhai” were actionable, with consequences both in terms of the Contractual Remedies Act 1979 and the Fair Trading Act 1976.13 The Court found that although the plaintiff’s agent who made the representations had not seen the subdivision, the circumstances in which the statements were made were such that they went beyond statements of mere opinion.

[30]	Mr Marsh, for the defendants, also invoked a line of authority beginning with J & JC Abrams Ltd v Ancliffe, in which the New Zealand courts have recognised that a party providing an estimate may in some circumstances be liable in tort for negligence in providing information before a contract is entered into.14

[31]	In Mr Marsh’s submission, any determination as to whether the pre-contractual discussions between Mr Chronican and Mr Cohen went beyond mere opinion or “puff” is one which may be reached only after examination of the facts at trial. I agree. At that point, as submitted by Mr Marsh, it may be arguable that the defendants have

11 See the commentary in J Finn & others (ed) Burrows, Finn & Todd on the Law of Contract in New Zealand, 6th ed, at 11.2.1(c).
12	Bisset v Wilkinson, above n 10, at 183.
13 Mangawhai Developments Ltd (in rec) v Rolls HC Auckland CIV-2009-404-4253, 10 November 2011.
14 J & JC Abrams Ltd v Ancliffe [1978] 2 NZLR 420 (HC), affd on appeal [1981] 1 NZLR 244 (CA); Fraser v Stacey HC Wellington CP 898/88, 12 October 1990; Kirk v Vallant Hooker & Partners [2000] 2 NZLR 156.

actionable rights based on one or more of misrepresentation, negligent misstatement, misleading and/or deceptive conduct under the Fair Trading Act, or breach of implied terms. Factual matters, such as whether the defendant’s reliance on the estimate was reasonable, fall to be determined on full evidence (and following discovery) at trial.

[32]	In Fraser v Stacey, McGechan J following trial found that a builder, who had provided an inaccurate estimate, was “entitled” to a margin (of “inaccuracy”) of one- third beyond his estimate but not entitled to recover contract sum increases beyond that figure.15 The permissible margin was fact-dependent.

[33]	By the nature of the impugned conduct, the appropriate extent of any margin recognised beyond the original estimate will be a matter for the determination of a trial Court on the particular facts of the case.

Conclusion

[34]	By reason of the evidence as to Mr Chronican’s pre-contractual statements, Mount Grey has not satisfied the Court that the defendants have no defence to the contractual debt claims. This, I emphasise, is not a finding that there is significant strength in the defendant’s claims as to actionable consequences of an inaccurate estimate. Mr Maze has identified a number of aspects of the current defence which are open to critique – but the time for assessment of the evidence as a whole will be at trial.

[35]	As in Fraser v Stacey, a trial court is likely to find that the plaintiff is entitled to a margin beyond its estimate. Here Pinot’s evidence is that the key statement referred to “less than $100,000 plus GST and disbursements”. Mount Grey accepts that $112,782.83 has been paid.16 In addition, it is on the evidence arguable that Pinot may have paid an additional $56,000 (including GST).17 It is therefore arguable that Pinot has paid a total of $168,782.83 (or $146,767.68 exclusive of GST).

15	Fraser v Stacey, above n 14, at [25] – [26].
16	Above at [5].
17	Above at [6] – [7].

[36]	On those figures, the margin between estimate and total paid might reasonably be found to be unacceptable and to give rise to a valid defence.

Other grounds of defence

[37]	In view of the above finding, it is unnecessary that I consider the other matters which Mr Marsh has submitted amount to arguable defences. It is appropriate that detailed consideration of those, as with the estimate defence, awaits trial.

[38]	Had I not dismissed the summary judgment application by reference to the estimate argument, I am likely to have dismissed it also on the ground that Mount Grey has arguably not done all that was required to entitle it to payment under the contract.

[39]	Set out at [2] above are the contractual “payment” provisions. The second paragraph (the audit provision) was recognised by both Mr Maze and Mr March as given Pinot an auditing entitlement. It may be interpreted as entitling Pinot to call for and inspect the identified information (day/time-sheets, copies of sub-contractor and materials) before payment of any invoice becomes due.

[40]	Mount Grey in this proceeding asserts a particular construction of the audit provision. It refers to a form of day-sheet (day-sheet) which Mr Chronican deposes he showed to Mr Cohen at the time the contract was discussed. The day-sheets contain a summary of hours worked by individuals. Mount Grey’s argument is that Pinot thereafter had to accept that degree of information. It is common ground that Mount Grey’s “day-sheets” are compiled by reference to more detailed time-sheets. But those detailed time-sheets are not in evidence. They were not provided to Pinot. Pinot’s lawyer, on 7 March 2013, in a letter to Mount Grey’s lawyer, recognised that Pinot had received “a general summary of the work undertaken”, (that is in the form of the day- sheets) but with “no detail provided as to precisely how much work or time has been required in relation to each aspect”.

[41]	It is arguable that the audit provision, properly construed, required Mount Grey to make detailed time-sheets available in support of its invoices. It is firstly arguable that Mount Grey breached the obligation, with the consequence that the claim under

each invoice will not become due for payment until the arguable breach has been remedied (by provision of detailed time-sheets).

[42]	An alternative conclusion to that reached in the previous paragraph is that this is one of those rare cases in which summary judgment should be refused as a matter of the Court’s discretion.18 Here there is a reasonable need, in the interests of the just determination of the parties’ rights, to allow the defendant to first obtain discovery of the plaintiff’s detailed time records which the plaintiff has not itself voluntarily discovered to this point.

Costs

[43]	Counsel addressed me on costs at the conclusion of their submissions. It was accepted that the usual practice outlined in NZI Bank Ltd v Philpott should apply.19

Orders

[44]	I order:

(a)	The plaintiff’s summary judgment application is dismissed;

(b)	The defendants’ statements of defence are to be filed and served within 10 working days, with each party by that date to comply with their duties of initial disclosure, if not already completed;

(c)	The Deputy Registrar is to issue the notice of first case management event as required under r 7.3 High Court Rules;

18	See A C Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR12.2.11].
19	NZI Bank Ltd v Philpott [1990] 2 NZLR 403, (1990) 3 PRNZ 695.

(d)	The costs and disbursements of the plaintiff’s summary judgment application are reserved.

Associate Judge Osborne

Solicitors:
SB Law incorporating R A Fraser & Associates, Christchurch Saunders Robinson Brown, Christchurch