BETWEEN CRESCENT & DAN INVESTMENTS LIMITED Plaintiff AND MARYHILL EQUITIES LIMITED Defendant
[2024] NZHC 2575
•9 September 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1655
[2024] NZHC 2575
BETWEEN CRESCENT & DAN INVESTMENTS LIMITED
PlaintiffAND
MARYHILL EQUITIES LIMITED
Defendant
Hearing: 12 August 2024 Appearances:
R J Hollyman KC / N G Lawrence for the Plaintiff D G Hurd for the Defendant
Judgment:
9 September 2024
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Application for interim payment]
This judgment was delivered by me on 9 September 2024 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Duthie Whyte, Auckland, for the Plaintiff Kennelly Law, Auckland, for the Defendant
Copy for:
R J Hollyman KC / N G Lawrence, Auckland, for the Plaintiff D G Hurd, Auckland, for the Defendant
CRESCENT & DAN INVESTMENTS LIMITED v MARYHILL EQUITIES LIMITED [2024] NZHC 2575
[9 September 2024]
Introduction
[1] The plaintiff, Crescent & Dan Investments Limited (Crescent) applies for interim payment being a refund of one third of the deposit (five per cent of the total purchase price) paid by Crescent for the purchase of a commercial property at 547– 557 Don Buck Road, Westgate, Auckland, (legal description: Lots 16 and 17, DP169693, NA103C/106 and NA103C/107), (the Property) under the sale and purchase agreement dated 2 September 2022 (the Agreement) entered into with the defendant, Maryhill Equities Limited (Maryhill).
Background
[2] On 2 September 2022, Crescent and Maryhill entered into the Agreement for sale and purchase of the Property. The settlement date of the purchase was 30 June 2023.
[3] On 14 June 2023, Crescent purported to cancel the Agreement on the basis that Maryhill failed to bring material issues concerning the Property to Crescent’s attention in breach of certain warranties given by Maryhill in the Agreement. Crescent now seeks refund of its deposit.
[4] Crescent alleges Maryhill did not bring to Crescent’s attention two letters from Te Tupu Ngatahi (a collaboration between Auckland Transport and Waka Kotahi NZ Transport Agency) (TTN). The letters were dated 17 January 2022 and 12 September 2022 (the TTN Letters) and related to upcoming roadworks which potentially affected the Property. Crescent alleges that this was in breach of warranties given by Maryhill at 7.1(1) and 7.3(8) of the Agreement,
[5] Crescent alleges that the effects of the proposed designation on the Property described in the TTN Letters were serious and would result in acquisition by the relevant authority of approximately 542m2 of the Property, leading to a reduction by 55 per cent of the carparks available to the tenant, Placemakers. Maryhill rejects the allegations by Crescent and says that the effect of the TTN Letters was minor and they were not required to be disclosed to Crescent.
[6] Maryhill rejected Crescent’s purported cancellation of the Agreement, and instead treated the purported cancellation as a wrongful repudiation of the Agreement by Crescent. Maryhill required Crescent to complete its purchase of the Property in accordance with the Agreement.
[7] On 30 June 2023, Crescent did not settle the purchase of the Property. Maryhill issued a settlement notice to Crescent. The settlement notice expired, and Crescent did not settle the purchase.
[8] As a result, Maryhill cancelled the Agreement and forfeited the deposit paid by Crescent.
Crescent’s application for an interim payment
[9] Crescent seeks an order for Maryhill to repay Crescent $735,000, being the amount of the deposit which exceeds 10 per cent of the total purchase price of the Property.1
[10]The grounds on which the order is sought are, in summary:2
(a) The parties entered into the Agreement which required 15 per cent of the purchase price to be paid to Maryhill by way of deposit.
(b) On 13 September 2022, Crescent paid Maryhill $2,205,000 as a deposit.
(c) On 31 July 2023, Maryhill elected to cancel the Agreement and clause 11.4.(1)(b)(i) of the Agreement provides that if Maryhill elects to cancel the Agreement and retain Crescent's deposit, that it will not retain an amount exceeding l0 per cent of the purchase price for the Property.
(d) Despite cancelling the Agreement, Maryhill has not refunded Crescent the amount exceeding 10 per cent of the purchase price,
1 Plaintiff’s Application for Interim Payment dated 4 March 2024.
2 At [2].
being $735,000 (or 5 per cent of the total purchase price). The refusal to refund Crescent the amount exceeding 10 per cent of the purchase price is a breach of Maryhill 's obligations under cl 11.4(1)(b)(i) of the Agreement.
(e) There is no other reason which would justify Maryhill retaining the extra 5 per cent having now cancelled the Agreement and bringing proceedings against Crescent for damages.
(f) It is just and equitable that orders are made for an interim payment of $735,000.
Maryhill’s opposition
[11]Maryhill opposes the application on, in summary, the following grounds:3
(a) On or about 14 June 2023, Crescent purported to cancel the Agreement on the basis of alleged breaches by Maryhill of clauses 7.1(1) and 7.3(8). Maryhill denies any such breach. In any event, no such breach, if established, justified cancellation of the Agreement. Crescent’s purported cancellation was, in the circumstances, a wrongful repudiation of Crescent’s obligations under the Agreement.
(b) Following Crescent’s repudiation of the Agreement, Maryhill elected to keep the Agreement on foot and to require Crescent to complete the purchase of the Property. Crescent did not complete its purchase of the Property on the scheduled settlement date and Maryhill served a settlement notice.
(c) On 31 July 2023, Maryhill cancelled the Agreement as a result of Crescent’s failure to comply with the settlement notice and complete the settlement of the purchase. It did so under clause 11.4 of the Agreement without prejudice to any other rights and remedies
3 Notice of opposition by the defendant to plaintiff’s interlocutory application for interim payment dated 3 April 2024 at [3].
available to it at law (including under the Contract and Commercial Law Act 2017 (CCLA)) and in equity. Maryhill retained and forfeited the deposit paid by Crescent and advised that it would seek damages for all loses arising.
(d) The grounds on which Crescent’s application is based are those under r 7.70(1)(c) (if Crescent’s claim is for damages) or r 7.71(c) otherwise. In the circumstances detailed above and in (e) to (f) below, it cannot be said that on a trial of this proceeding, Crescent would obtain judgment for substantial damages (r 7.70(1)(c)) or that Crescent is likely to obtain judgment against Maryhill for a substantial sum of money apart from damages or costs (r 7.71(1)(c)).
(e) At law, cancellation of the Agreement did not, of itself, divest Maryhill of any property transferred or payment made pursuant to the Agreement, including the deposit paid. Clause 11.4(1)(b) of the Agreement, properly construed, does not oblige the vendor cancelling an agreement to immediately refund to the defaulting purchaser the portion of any deposit paid exceeding 10 per cent of the purchase price. Nor does it limit Maryhill’s rights as alleged by Crescent. On the contrary, it provides that on cancellation Maryhill, as vendor, is entitled to pursue either or both of the following remedies:
(i) forfeit and retain for Maryhill’s own benefits any deposit paid by the purchaser, not exceeding 10 per cent of the purchase price; and/or
(ii)sue Crescent for damages.
(f) In cancelling the Agreement, Maryhill elected to exercise both those remedies as well as its rights and remedies at law and in equity. By way of further defence and counterclaim, it has sued Crescent for damages for all loss and damage arising from Crescent’s failure to complete the purchase in accordance with the Agreement.
(g) Even if the Court were to determine that the criteria in r 7.70(1)(c) or r 7.71(1)(c) have been established, the amount of any interim payment ordered must relevantly take into account, any set-off, cross-claim or counterclaim in which the defendant is entitled to rely. Maryhill’s counterclaim seeks damages in a sum to be specified at/or prior to trial in respect of the loss and damage incurred by Maryhill as a result of Crescent’s failure to settle.
(h) Maryhill has arguable counterclaims for amounts exceeding Crescent’s claim. In those circumstances, it is inappropriate to require any interim amount to be paid even if, contrary to Maryhill’s contention, Crescent’s claim is otherwise properly based.
(i) There is no basis under the Agreement, or at law, for the recovery by Crescent of interest at the default rate on the interim payment amount. Although the Court has jurisdiction to order interest on an interim payment, the award of interest is the exception rather than the norm and is reserved for exceptional cases, which this case is not.
(j) Crescent has provided no evidence of its ability to repay any interim payment ordered. Maryhill disputes the financial capability of Crescent to repay the interim payment.
(k) In the circumstances, it is neither just nor equitable for the Court to make any order for interim payment in favour of Crescent.
Relevant clauses from the Agreement
[12] Clause 11.4(1) of the Agreement, which is central to the dispute between the parties, provides:
11.4If the purchaser does not comply with the terms of the settlement notice served by the vendor then, subject to clause 11.1(3):
(1)Without prejudice to any other rights or remedies available to the vendor at law or in equity, the vendor may:
(a)sue the purchaser for specific performance; or
(b)cancel this agreement by notice and pursue either or both of the following remedies, namely:
(i)forfeit and retain for the vendor’s own benefit the deposit paid by the purchaser, but not exceeding in all 10per cent of the purchase price; and/or
sue the purchaser for damages.
[13] Crescent alleges that Maryhill breached warranties given by Maryhill at clauses 7.1(1) and 7.3(8) of the Agreement which provide:
7.1The vendor warrants and undertakes that at the date of this agreement the vendor has not:
(1)received any notice or demand and has no knowledge of any requisition or outstanding requirement:
(a)from any local or government authority or other statutory body; or
(b)under the Resource Management Act 1991; or
(c)from any tenant of the property; or
(d)from any other party; ….
…
7.3 The vendor warrants and undertakes that at settlement:
…
(8)Any notice or demand received by the vendor, which directly or indirectly affects the property, after the date of this agreement:
(a)from any local or government authority or other statutory body; or
(b)under the Resource Management Act 1991; or
(c)from any tenant of the property; or
(d)from any other party,
has been delivered forthwith by the vendor to either the purchaser or the purchaser’s lawyer, unless the vendor has paid or complied with such notice or demand. If the vendor fails to so deliver or pay the notice or demand, the vendor shall be liable for any penalty incurred.
Legal principles
[14]Rule 7.69 of the High Court Rules 2016 (the Rules) provides:
7.69Application for interim payment
The plaintiff in a proceeding may, at any time after the time for the filing of a statement of defence by the defendant has expired, apply to the court for an order requiring the defendant to make an interim payment.
[15] An application for an interim payment may only be made once the time for filing a statement of defence has expired. An interim payment would generally only be sought where the defendant is contesting the claim. However, where the statement of defence is filed prior to the time limit, the full time period must expire before an application can be made under r 7.69.
[16]Rule 7.70 of the Rules provides:
7.70Order for interim payment in respect of damages
(1)A Judge may make an order under subclause (2) if, on hearing the application, the Judge is satisfied that—
(a)the defendant against whom the order is sought has admitted liability for the plaintiff’s damages; or
(b)the plaintiff has a judgment against the defendant for damages to be assessed; or
(c)on a trial of the proceeding, the plaintiff would obtain judgment for substantial damages against the defendant or, if there are several defendants, against 1 or more of them.
(2)A Judge may, within the limits in subclause (3), order the defendant to make an interim payment of an amount that the Judge thinks just.
(3)The amount must not exceed a reasonable proportion of the damages the plaintiff is, in the opinion of the Judge, likely to recover after taking into account--
(a)any relevant contributory negligence; and
(b)any set-off, cross-claim, or counterclaim on which the defendant may be entitled to rely.
[17]Rule 7.71 of the Rules provides:
7.71Order for interim payment in respect of sums other than damages
(1)A Judge may make an order under subclause (2) if, on hearing the application, the Judge is satisfied—
(a)that the plaintiff has obtained an order for an account to be taken as between the plaintiff and the defendant and for the payment of any amount certified to be payable on the basis of that account; or
(b)in the case of a claim for the possession of land, that even if the proceeding was finally determined in favour of the defendant, the defendant would still be required to compensate the plaintiff for the defendant’s use and occupation of the land before the determination of the proceeding; or
(c)that, on the trial of the proceeding, the plaintiff is likely to obtain judgment against the defendant for a substantial sum of money apart from any damages or costs.
(2)A Judge may order that the defendant pay an amount the Judge thinks just, after taking into account any set-off, cross-claim, or counterclaim on which the defendant may be entitled to rely.
(3)The order does not prejudice any contentions of the parties as to the nature or character of the sum to be paid by the defendant.
[18]The approach of the Courts under both rr 7.70 and 7.71 is a two stage one:4
(a)the first stage involves satisfying the Court that substantial damages, or a substantial sum of money apart from any damages or costs, are likely to be awarded against the defendant (the threshold issue); and
(b)the second stage involves a determination as to whether the Court should exercise its discretion to order the interim payment, and if so, for what amount.
[19] Set off, cross-claim or counterclaims by the defendant are relevant to both stages.5
4 Jessica Gorman and others McGechan on Procedure (Thomson Reuters, online ed) at HR7.70.02 and HR 7.71.01 and Cleaver v Dallimore (2001) 15 PRNZ 248 at [9].
5 Shanning International Ltd v George Wimpey International Ltd [1989] 1 WLR 981.
Analysis
[20]Issues to be determined in this judgment are:
(a)Has Crecent met the threshold issue for the Court to order an interim payment, being:
(i)under r 7.70(1)(c): “on a trial of the proceeding, the plaintiff would obtain judgment for substantial damages against the defendant or, if there are several defendants, against 1 or more of them”; or
(ii)under r 7.71(1)(c): “that, on a trial of the proceeding, the plaintiff is likely to obtain judgment against the defendant for a substantial sum of money apart from any damages or costs”.
(b)If so, whether the Court should exercise its discretion to order an interim payment which takes into account any set-off, cross-claim or counterclaim on which Maryhill is entitled to rely.
(c)If an interim payment is to be ordered, the amount of the interim payment.
The threshold issue
Crescent’s arguments
[21] Mr Hollyman KC, for Crescent, reiterates that the Courts approach under both rules 7.70(1)(c) and 7.71(1)(c) is two-staged as noted at [18]. He acknowledges that the onus of proof lies with Crescent. As to the standard of proof required of Crescent, he points to the statement of Lloyd LJ in the English case of Shearson Lehman Bros and others v Maclaine Watson & Co Ltd:6
Something more than a prima facie case is clearly required; but not proof beyond reasonable doubt. The burden is high. But it is a civil burden on a balance of probabilities, not a criminal burden.
6 Shearson Lehman Bros and others v Maclaine Watson & Co Ltd [1987] 1 WLR 480.
[22] Mr Hollyman submits that under cl 11.4(1)(b)(i) of the Agreement, if Maryhill cancels the Agreement and retains the deposit, it is only entitled to retain an amount not exceeding 10 per cent of the purchase price of the Property under the Agreement. He submits that as Crescent paid 15 per cent of the purchase price for the Property by way of deposit and Maryhill has cancelled the agreement under cl 11.4, then the extra 5 per cent, being $735,000, should be repaid to it.
[23] As to satisfying the threshold test, Mr Hollyman submits that Crescent’s entitlement to obtain the $735,000 is relatively unarguable as the contractual terms of cl 11.4(1)(b)(i) provide for this to occur and Maryhill is contractually bound to that position.
[24] Mr Hollyman relies on the judgment of Collins J in Bushpark Property Development (in liq) v Yang.7 He submits that that decision concerned a similar factual scenario to this case. In summary:
(a)The parties entered into a contract for the sale and purchase agreement of land with a 15 per cent deposit and extended settlement period.
(b)The purchaser defaulted on settlement and the vendor cancelled the contract and kept the full deposit.
(c)The contract had a clause (cl 9.4) which was in all material respects identical to cl 11.4(1)(b)(i) in this proceeding. The Court had to decide whether the vendor was entitled to keep the full 15 per cent deposit or whether it was only entitled to keep 10 per cent.
(d)Collins J decided that the effect of cl 9.4 was the maximum amount of the purchaser’s deposit that the vendor could retain upon cancellation was 10 per cent of the purchase price.8
7 Bushpark Property Development Ltd (in liq) v Yang [2012] NZHC 973, 13 NZCPR 381.
8 At [60].
[25] Mr Hollyman submits that this was the result, despite the vendor presenting evidence to the Court that there were compelling commercial reasons for the vendor to retain the full 15 per cent of the deposit.
[26] Mr Hollyman submits that in the light of the Bushpark decision, even if there are commercial reasons put forward by Maryhill as to why it should be able to retain the full 15 per cent of the deposit, Maryhill has already agreed in cl 11.4(1)(b)(i) that it will only retain 10 per cent upon cancellation and it is contractually bound by this clause.
Maryhill’s arguments
[27] Mr Hurd, for Maryhill, submits that Crescent does not meet the threshold issue for ordering an interim payment under rr 7.70(c) or 7.71(1)(c). He submits Crescent’s argument misconstrues cl 11.4(1)(b)(i) and ignores the broader contractual context, including s 42(1)(b) of the CCLA.
[28]Mr Hurd points to s 42(1)(b) of the CCLA which provides:
To the extent the contract has been performed at the time of cancellation, no party by reason only of the cancellation shall be divested of any property transferred or money paid under the contract.
[29] Mr Hurd submits that cl 11.4(1)(b)(i) does not overcome the effect of s 42 of the CCLA and does not impose a positive obligation on Maryhill to immediately refund any part of the deposit exceeding 10 per cent of the purchase price. He submits that the limitation imposed by cl 11.4(1)(b)(i) is on the right of the forfeiture and retention. He notes forfeiture in this context is the right of the vendor, without showing any loss, to confiscate and retain for its own benefit the forfeited amount. He submits that cl 11.4(1)(b)(i) on its correct construction limits the amount that can ultimately be forfeited (without reference to actual losses) to 10 per cent of the purchase price.
[30] Mr Hurd distinguishes the Bushpark case on the basis that this was a situation where there was a true forfeiture. He notes the vendor in that case although had earlier launched a counterclaim for damages for Bushpark’s failure to settle and obtain summary judgment on liability, they had not pursued the claim to a quantum hearing.
Consequently, the vendors had not sought to rely on their counterclaim for damages in answer to the liquidators’ claim for refund of part of the deposit. Mr Hurd submits that for Collins J, the issue was straightforward as the vendor had forfeited 15 per cent of the deposit, and had not sought to justify forfeiture/retention by reference to its counterclaim. Therefore, he submits the situation is clearly distinguishable from the present case where Maryhill alleges it has claims to have substantial counterclaims (discussed later in this judgment) on which it relies on an answer to Crescent’s claims.
[31] Mr Hurd also points to a later Bushpark judgment – Yang v Bushpark Property Development Ltd.9 In that case, the vendors sought to revive their earlier damages claim to set it off against the amount Collins J had ordered them to pay in the initial judgment. He submits that Faire J rejected the liquidators’ argument that Collins J had already determined that issue, and the proceeding was an abuse of process. He granted the vendors leave to continue the damages claim and challenge the liquidators’ refusal to allow them to offset any damages they obtained against the orders made by Collins J for refund of part of the deposit.
[32] In summary, Mr Hurd submits that it cannot be said that Crescent would, or is likely to, recover the excess of the deposit beyond 10 per cent of the purchase price or any other significant sum from Maryhill. Accordingly, Crescent has failed to establish the threshold issue that it would obtain judgment for substantial damages against Maryhill or would obtain judgment for a substantial sum of money, apart from any damages or costs, against Maryhill.
Conclusion on the threshold issue
[33] I am of the view that Crescent have failed to establish the threshold issue. The reasons for this view are:
(a)Mr Hurd’s argument that the 10 per cent limitation set out in cl 11.4(1)(b)(i) restricts the amount that can be “forfeited” by the vendor on the cancellation is, in my view, correct. The key point is that
9 Yang v Bushpark Property Development Ltd [2013] NZHC 2996.
forfeiture involves the vendor retaining only that portion of the deposit without the vendor demonstrating actual loss.
(b)Clause 11.4(1)(b) does not contain a positive obligation on the vendor to refund any part of the deposit which exceeds 10 per cent of the purchase price. In this respect it does not override s 42(1)(b) of the CCLA and under that section Maryhill are entitled to retain monies received under the contract before cancellation.
(c)Collins J’s judgment in the Bushpark decision, relied upon by Crescent, can be distinguished from the present case. It is a judgment dealing with forfeiture where the vendors were not pursuing a counterclaim in damages against the purchaser when the case was before Collins J. The decision of Faire J in the subsequent Bushpark case supports the view that a claim by the vendor can be set off against any entitlement of the purchaser where the agreement has been cancelled to receive a refund of the deposit to the extent that the deposit exceeds 10 per cent of the purchase price.
[34] The finding that Crescent has not established the threshold issue under rr 7.70(1)(c) and 7.71(1)(c) is sufficient to dispose of Crescent’s application for an interim payment. If, however, I am wrong on this issue, I continue on to consider whether the Court should exercise its discretion and make an interim payment in all the circumstances.
Exercise of discretion
[35] If the threshold issue is established, the issue of whether the Court should exercise its discretion to order an interim payment divides into two sub-issues:
(a)the amount of any set offs, cross-claims or counterclaims on which Maryhill is entitled to rely; and
(b)the ability of Crescent to repay the interim payment if it was ordered, should Maryhill be successful in the substantive proceedings.
The substantive proceeding and Maryhill’s counterclaims
[36] The outcome of the substantive proceeding depends on whether Crescent was entitled to cancel the Agreement or whether Crescent’s cancellation of the Agreement was wrongful, and therefore amounted to a repudiation of the Agreement. Following this, Maryhill elected to keep the Agreement on foot, and ultimately cancelled it due to failure by Crescent to settle after the issue of a settlement notice.
[37] The issue of whether Crescent was entitled to cancel the Agreement turns on whether Maryhill was in breach of warranties 7.1(1) and 7.3(8). If they were, the question then is whether such breach justified Crescent cancelling the Agreement.
[38] In reference to whether Maryhill breached the warranties, Mr Hurd points to Mr Smith’s evidence that Maryhill had no record of receiving the TTN Letter of 17 August 2022. He submits if this evidence was ultimately accepted at trial, it would mean that Maryhill could not be in breach of warranty 7.1 by not bringing that TTN Letter to Crescent’s attention as it had never received it. Maryhill acknowledges it received the second letter but is unclear when.
[39] As a second point, Mr Hurd submits that the letters were not “notices” within the relevant warranties. He relies on a line of cases in the High Court, endorsed by the Court of Appeal, in which the Court held that to be a “notice” a letter must be directive or require some action by the recipient. If the letter does no more than convey information, the Court found it not caught by the warranty. He relies on the authorities of Kaitaia Timber Company Ltd v Alternative Enterprises Ltd10 and endorsement by the Court of Appeal of that decision in Western Park Village Ltd v Baho.11 Mr Hurd submits that the letters merely contain information, they were not directive and they did not require any action by the recipient. Accordingly, he submits, Maryhill denies it was in breach of either of the relevant warranties Crescent relies upon.
10 Kaitaia Timber Company Ltd v Alternative Enterprises Ltd [2012] NZHC 2497, 14 NZCPR 177.
11 Western Park Village Ltd v Baho [2014] NZCA 630, (2014) 16 NZCPR 139.
[40] In response to the issue of whether the TTN Letters were “notices”, Mr Hollyman distinguishes the Kaitaia Timber case on for the following reasons:
(a)the issues covered by the notices which were in issue in respect of the breach of warranty were all historical issues and there had been no evidence of outstanding issues; and
(b)a clause in the agreement which Associate Judge Bell termed “an own judgment clause”, protected the Kaitaia Timber Company from the claim and therefore Judge Bell’s comments at [55] and [56] relating to the meaning of “notices” are obiter.
[41] As a third point, Mr Hurd submits that even if Maryhill was found to be in breach of the warranties in cl 7.1(1) and 7.3(8), those breaches would not justify Crescent cancelling the Agreement. He submits that the TTN Letters did not seek a compulsory permanent acquisition of 542m2 of the Property as alleged by Crescent and that is not what was proposed —none of the Property is to be permanently acquired. He submits that there may be short-term interference with the use of part of the 542m2 along the Don Buck Road boundary of the Property during the construction phase. However, he points to Mr Smith’s evidence that the tenant, Placemakers, regarded TTN’s correspondence as of no significant concern. Accordingly, Mr Hurd submits Crescent had no right to cancel the Agreement and its purported cancellation was a repudiation.
[42] In response to this issue, Mr Hollyman submits that the TTN Letters did create a serious issue with respect to the Property. He notes that at the time of making the decision to cancel, Crescent understood that 542m2 of the Property would be acquired, reducing the carpark space available to the tenant, Placemakers, by 55 per cent.
[43] In summary, Mr Hurd submits that the factors set out at [38], [39] and [41] meant that Maryhill has an arguable counterclaim against Crescent on the basis that Crescent wrongfully repudiated the Agreement and failed to settle it. Therefore, Crescent is liable to Maryhill for losses resulting from that failure. Mr Hurd estimates Maryhill’s losses at [18] of his submissions, and although re-sale of the Property has
not yet occurred (and therefore any loss on resale has not been quantified), the estimate of the total losses is in the vicinity of $3.285 million, an amount well in excess of Crescent’s claims in the proceeding. On the basis that these counterclaims must be taken into account under rr 7.70 and 7.71, Mr Hurd submits Maryhill has a reasonably arguable counterclaim exceeding Crescent’s claim. Accordingly, the Court should not exercise its discretion to order an interim payment.
Crescent’s ability to repay any interim payment
[44] Mr Hurd submits there is no, or no satisfactory, evidence before the Court demonstrating Crescent’s ability to repay any interim payment ordered. He points to Mr Hou’s reply affidavit which he submits broadly asserts, unsupported by any financial or other evidence, that Crescent is a solvent company.12 Mr Hurd submits that the acknowledgment that Crescent is funded by advances from Mr Hou and his wife raises the obvious inference that Crescent has no means of its own. He submits there is no evidence that Mr Hou and his wife have any obligation enforceable by Crescent to continue to fund Crescent or their financial capacity and willingness to do so.
[45] In response to this issue, Mr Hollyman points to the fact that Crescent was able to pay the substantial deposit of $2.205 million on signing of the Agreement. He submits that access to this level of resources imply that Crescent is solvent.
Conclusion on exercise of the discretion
[46] In my view, even if Crescent had established the threshold issue, the Court should not exercise its discretion to order an interim payment by Crescent. The reasons for this view are:
(a)Maryhill has a reasonably arguable substantial counterclaim against Crescent resulting from the alleged wrongful repudiation of the Agreement by Crescent and Maryhill’s subsequent cancellation of the
12 Affidavit of Shu Hou in support of application for interim payment dated 17 May 2024 at [17].
Agreement for failure by Crescent to settle. The counterclaim is based on the following arguments:
(i)There was no breach of warranties by Maryhill as evidence regarding receipt of the TTN Letters by Maryhill needs to be tested. In any event, arguably the TTN Letters were not notices, and even if they were, arguably the TTN Letters did not raise a serious issue in respect of the Property and hence were not required to be disclosed.
(ii)Even if there was a breach of the warranties in clause 7 by Maryhill, the breach was not sufficient to justify Crescent cancelling the Agreement as the effect of the TTN Letters was not significant in relation to the Property.
(b)Arguably Maryhill’s counterclaim exceeds the claim by Crescent, subject to Maryhill’s quantum of the loss being determined following re-sale of the Property. Therefore having regard to the counterclaim, an interim payment should not be ordered.
(c)Arguably, no satisfactory evidence is before the Court of Crescent’s ability to repay the interim payment should it be ordered.
Result
[47] As a result of the conclusions I have reached at [33] above, I am of the view that Crescent’s application for a interim payment should be dismissed. Crescent has, in my view, not met the threshold issue establishing that it is likely to be awarded on trial of the proceeding either substantial damages or a substantial sum of money (other than damages) from Maryhill.
[48] If I am wrong in the conclusion at [33], as a result of the conclusion I have reached at [46], the Court should not exercise its discretion to order an interim payment in favour of Crescent.
[49]Accordingly, Crescent’s application should be dismissed.
Orders
[50]I make the following orders:
(a)Crescent’s application for an interim payment of one third of the deposit paid (equal to five per cent of the total purchase price) is dismissed.
(b)Given the nature of the application for an interim payment, costs are more appropriately dealt with in the hearing of the substantive trial. Accordingly costs are reserved.
…………………………….. Associate Judge Taylor
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