Arranmore Developments Limited v Zhang
[2015] NZHC 2413
•2 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-005446 [2015] NZHC 2413
BETWEEN ARRANMORE DEVELOPMENTS
LIMITED Plaintiff/Respondent
AND
QIYUAN ZHANG Defendant/Applicant
Hearing: 2 October 2015 Appearances:
M J Fisher for Plaintiff/Respondent
H M Lim and M M Moon for Defendant/ApplicantJudgment:
2 October 2015
ORAL JUDGMENT OF VENNING J
Solicitors: Daniel Overton Goulding, Auckland
Forest Harrison, Auckland
Copy to: M J Fisher, Auckland
ARRANMORE DEVELOPMENTS LIMITED v ZHANG [2015] NZHC 2413 [2 October 2015]
[1] The defendant Qiyuan Zhang applies to set aside a judgment entered against her almost five years ago on 12 October 2010.
[2] In December 2007 Prema Developments Limited as vendor and the defendant as purchaser entered two agreements for sale and purchase in relation to two lots of land at Point View Park, Flat Bush. The agreements for sale and purchase recorded the defendant’s solicitors as Snedden and Associates. In January 2008 Snedden and Associates paid the deposits of $68,000 to the vendor’s solicitors’ trust account.
[3] On 3 June 2008 Prema assigned its interest as vendor to the plaintiff Arranmore Developments Limited and gave notice of assignment to Snedden and Associates.
[4] The lots were subject to subdivision. Settlement was due five working days after titles were available for searching. The titles duly issued and settlement was due on 22 May 2009. The defendant failed to settle. The plaintiff’s solicitors issued settlement notices on 4 June 2009. Snedden and Associates responded with a letter on 9 June 2009 in which they stated:
We refer to previous correspondence in this matter and to recent telephone discussions.
We advise that our client has been unable to obtain finance to complete this matter. Even if other terms were negotiated with the vendor we advise that due to our client’s current circumstances she will not be in a position to proceed with the purchase.
[5] On 25 August 2009 the plaintiff filed proceedings seeking specific performance of the agreement for sale and purchase by way of application for summary judgment. The application was called on 30 October 2009. There was no appearance by or on behalf of the defendant. Justice Hugh Williams entered summary judgment for the plaintiff and ordered the defendant to specifically perform the agreement for sale and purchase, after noting the defendant had been served but had not taken any steps to oppose. Leave was reserved to the plaintiff to apply to apply for further ancillary or other orders.
[6] The plaintiff subsequently exercised the leave and applied to the Court for an order setting aside the order for specific performance, cancelling the agreement for sale and purchase and judgment for liability for damages together with an inquiry into damages.
[7] As the plaintiff’s process server was unable to locate the defendant the plaintiff applied for an order for substituted service of that application. The plaintiff had previously published notice of the application in the New Zealand Herald.
[8] On 12 October 2010 when the matter came before Associate Judge Abbott he made orders dispensing with service rather than directing substituted service. The Judge then went on to rescind the order for specific performance, cancelled the agreement for sale and purchase and entered judgment for liability for damages against the defendant and adjourned the application for an inquiry into damages.
[9] Despite a number of attempts by the plaintiff to locate the defendant, the plaintiff was unable to do so and ultimately on 11 June 2011 the plaintiff discontinued the proceedings as it had not been able to locate the defendant.
[10] The plaintiff then subsequently settled the resale of the two lots at Point View Park in June 2011. The plaintiff’s loss over the two sections, after taking account of the forfeited deposits, is in excess of $230,000. In May 2015 the plaintiff became aware of the defendant’s whereabouts and commenced fresh proceedings seeking damages by way of summary judgment. The plaintiff relies on the judgment for liability obtained in October 2010.
[11] The defendant opposes the application for summary judgment upon the grounds, inter alia, that she was not served with any documents in the 2009 proceedings. She applies to set aside the judgment in the 2009 proceedings. She also raises two substantive defences:
(a) first, that the solicitor had no authority to confirm the contract as unconditional because her former partner, Mr Wang had instructed the solicitors on her behalf to do so but had no authority to do so; and
(b)secondly, because of an alleged misrepresentation by the real estate agent.
[12] The defendant has sworn two affidavits in support of the application to set aside the judgment. She says that she was not aware of and was not served with the
2009 proceedings. She refers to the affidavit of service sworn in those proceedings by Mr West, the process server, in particular a passage in the affidavit of service where Mr West deposes:
I effected service of the documents on the defendant, Quiyauan Zhang at
4/98 Anzac Street, Takapuna by handling the documents to him after he acknowledged his identity to me.
[13] She has also deposed in her second affidavit that at the relevant time between July and October 2009 bank statements were being sent to an address at Dockside Lane where she was living and those bank statements confirmed rental payments for that address at Dockside Lane.
[14] In relation to Mr West’s affidavit she makes the point that her first name is misspelt and, more significantly, that the process server referred to serving documents on “him”, and “he” when of course she is female.
[15] The defendant relies on r 12.14:
12.14 Setting aside judgment
A judgment given against a party who does not appear at the hearing of an application for judgment under rule 12.2 or 12.3 may be set aside or varied by the court on any terms it thinks just if it appears to the court that there has been or may have been a miscarriage of justice.
[16] Rule 12.14 applies to judgments obtained on summary judgment applications. The summary judgment application in this case was Hugh Williams J’s judgment for specific performance, which was itself set aside by Associate Judge Abbott in the judgment of 12 October 2010. It may be the appropriate rule is r 15.10 in the circumstances but nothing turns on that as the material wording is the same in both rules.
[17] The application is effectively advanced on the basis the default judgment was irregularly obtained as the defendant had not been served with the proceedings. The onus is on the defendant to establish that. If an applicant satisfies the Court that the proceedings were not served on them then, subject to an important point that applies in this case, summary judgment would have been irregularly obtained and even in this case, despite the lapse of time, would be liable to be set aside without consideration of the merits. The point is that Associate Judge Abbott made an order dispensing with service of the proceedings before entering the judgment for liability in October 2010 and it is that judgment which the defendant now seeks to set aside.
[18] On the basis of the evidence before him at the time Associate Judge Abbott concluded no purpose would be served in directing substituted service. There was a further affidavit from Mr West, the process server, of 11 October 2010 which set out in detail the steps he had taken to attempt to locate the defendant (and Mr Wang on a related matter). Despite Mr West’s inquiries, the defendant had not been located.
[19] For those reasons the Judge concluded no purpose would be served in an order for substituted service and dispensed with service under r 6.8. There was therefore no requirement to serve the defendant with the applications before the Court at that time. The Judge then went on to make the orders I have referred to, including entering judgment for liability. It thus cannot be said that the judgment of
12 October 2010 was irregularly obtained for lack of service.
[20] In my judgment it is therefore appropriate to deal with the current application in accordance with the principles that apply when the issue is whether the judgment should be set aside as a miscarriage of justice rather than on the basis the judgment was irregularly obtained.
[21] That requires the Court to consider whether the failure to take steps at an earlier time is reasonably explained, whether the defendant has a substantial ground of defence and whether the plaintiff will suffer irreparable harm if the judgment is set aside.
[22] The issue of the defendant’s explanation for failing to take steps takes me back to the first and principal issue, which is whether the defendant satisfies the Court that she was not served with the original documents in 2009. To that extent it addresses the same issue that would arise if the matter was to be dealt with on the basis of an irregularly obtained judgment.
[23] There are a number of features that are relevant to consideration of the argument for the defendant that she was not served. First, I note that her affidavit does not directly say that she was not served (although that is the gist of it). It is significant that rather than directly say that, the defendant says Mr West’s affidavit is incorrect because he refers to her as he, and because at the relevant time in August
2009 she was living at Dockside Lane.
[24] Importantly, Mr West’s affidavit of service on 29 October 2009, confirms service on Quiyauan Zhang by name (subject to the misspelling of her first name).
[25] Mr West has also sworn an affidavit for the purpose of this application, which confirms in more detail what took place in relation to service on the defendant. He says that on 27 August 2009 at 4/98 Anzac Street, Takapuna, he served on Qiyuan Zhang the summary judgment documents. He says he handed the documents to the defendant and that he believes the person served by him to be the defendant because:
(a) when I visited 4/98 Anzac Street, Takapuna I was greeted by a
Chinese woman and a Chinese man;
(b) I asked if they were Qiyuan Zhang and Pu Wang and explained that I
was there to serve legal documents. They refused to respond;
(c) I then asked if they both lived at the property, and stated that I had been given this address as the street address for Ms Zhang and Mr Wang;
(d) Ms Zhang and Mr Wang then admitted their identity and Ms Zhang accepted service.
[26] The error in the affidavit is explained as a word processing error as Mr Fisher suggested. That is consistent with the fact that Mr West also served Mr Wang with similar papers on the same day in related proceedings and swore an affidavit of service on him. Significantly, the original affidavit of service, confirmed by the
subsequent affidavit of service by Mr West, specifically referred to the defendant’s
surname and he refers to a man and woman in the second affidavit.
[27] While the defendant may have been paying rent at Dockside Lane and having bank statements sent there, the evidence discloses as at August 2009 she was the registered proprietor with Mr Wang of 4/98 Anzac Street, Takapuna. She would have had reason to be there. Further, Mr West’s evidence that he served Ms Zhang is consistent with a reporting email, a contemporary document of 28 August 2009 in which he confirmed service on Ms Zhang. In that email he reported in relation to the service on a number of defendants and relevantly said in relation to Ms Zhang:
Morning Gavin, with the exception of the defendants listed below all serves were completed yesterday.
…
4. at the Takapuna address, after some persistent discussion as to who lives here both Zhang & Wang (aka Wong) admitted their identity & accepted service. Other family members state Zhou [another and different person] does not live there. They have no idea where he is??
[28] As Mr Fisher submitted, Mr West had no reason to lie or to mislead the Court. Indeed in the later affidavit considered by Associate Judge Abbott Mr West confirmed he could not, at that time, locate Ms Zhang, the defendant. Against that the defendant’s evidence is simply a bare assertion, which appears to be based opportunistically on the typographical error in the first affidavit of service, and the fact she was paying rental for another address at the time.
[29] It is also apparent from the letter of her former solicitors Snedden and Associates, that the defendant was in no financial position to take any particular steps in response to the application for summary judgment at the time which is consistent with her failure to take steps.
[30] In my judgment this is a case where it is appropriate for the Court to apply the principles of Eng Mee Yong v Letchumanan1 which were approved by the Court
of Appeal in Krukziener v Hanover Finance Limited:2
1 Eng Mee Yong v Letchumanan [1980] AC 331.
2 ` Krukziener v Hanover Finance Limited (2008) 19 PRNZ 162.
[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart. The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel.
(footnotes omitted)
[31] The applicant/defendant fails to satisfy the Court that she was not served with the plaintiff’s application for summary judgment in 2009. On that basis the application, to the extent it relies on a lack of service, either as a basis to set aside the judgment ex debito justitiae, which for the reasons I have set out above I do not consider applies in this case, or to the extent that it is sought to explain a failure to take steps earlier, is not made out.
[32] I consider the remaining issues briefly. I consider the proposed defences to lack merit.
[33] It is said, as noted, that there are two particular defences. First, that no instructions were given to Snedden and Associates to confirm approval to make the contract unconditional and that Mr Wang had no authority on her behalf to instruct Snedden and Associates to that effect.
[34] As Mr Fisher submits, nothing turns on that on the face of the contractual documents in any event. The solicitor’s approval clause provided that in the event the solicitor for the purchaser failed to advise the solicitor for the vendor in writing that he or she disapproved the agreement, and gave valid reasons for disapproval within five working days the condition would be deemed to be waived. Disapproval could only have been given on conveyancing aspects of the agreement. Even if Mr Wang had no authority, clearly no such letter was given by the solicitors and there is
no suggestion of any valid conveyancing aspect to support one. The contract was unconditional in any event.
[35] Next, the defendant says she has a right to cancel the agreement based on the representation by the salesman that she was entitled to cancel the agreements at any time but any deposit would be forfeited.
[36] There are a number of points about that suggestion. The first is it does not appear that the defendant advised her solicitors, Snedden and Associates, or sought to rely on the matter at the time when the settlement notices were issued, as there was no suggestion in correspondence from the solicitors of that matter. Next, before obtaining a copy of the Snedden and Associates’ file, the defendant had said in an affidavit that:
I believe that I told Mr Snedden that I want to cancel the agreements.
However, after receiving the files, as Mr Fisher observes, she now deposes that:
I have subsequently told Mr Snedden that I did not wish to proceed with the purchase.
The difference in wording is material.
[37] More relevantly, the agent involved has deposed that while he cannot clearly recall the events of 2007, (not unreasonably given it was some eight years ago), he does not believe he would have advised the properties were being sold at a cheap price and represented good value, as the defendant asserts, and, more importantly, says:
I can confidently assert that I would not have advised the defendant that she was entitled to cancel the agreements with no other consequences for her than forfeiture of her deposit. The consequences of a purchaser’s default are legal issues on which I am not competent to advise and had the purchaser asked me a question of this nature I would have asked her to take advice from her lawyer. I therefore deny the defendant’s assertion …
[38] That is inherently more credible than the defendant’s suggestion that a real estate agent would make such a representation.
[39] Further, I note that in the case of Narayan v Arranmore Developments Limited3 the Court of Appeal considered the effect of a representation as to legal issues, which the defendant, (appellant in the Court of Appeal), purported to rely on to oppose judgment. The Court noted that even if the representation was made it would have been overtaken by the specific terms of the agreement. While Winkelmann J issued a dissenting judgment, on this particular point she also agreed
that the representation would have been overtaken by the specific terms of the agreement and so provided no defence. The Court was therefore unanimous on that point. A similar situation applies to the representation relied on by the defendant in this case.
[40] The last mater is the issue of irreparable harm to the plaintiff. The plaintiff, on its case, has been out of pocket on the damages since the resale of the properties in 2011. That is a considerable period of time through no fault of the plaintiff. It should not be prejudiced by further delay.
Result
[41] For those reasons the defendant’s application to set aside the judgment of
October 2010 on liability is dismissed.
Costs
[42] The plaintiff is to have costs on a 2B basis.
Venning J
3 Narayan v Arranmore Developments Limited [2011] NZCA 681.
0
2
0