Cartref Remuera Trustee Limited v Le
[2024] NZHC 668
•22 March 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1341
[2024] NZHC 668
BETWEEN CARTREF REMUERA TRUSTEE
LIMITED as trustee of the CARTREF REMUERA TRUST
PlaintiffAND
THACH SON LE
First Defendant
HERMAN YU
Second Defendant
Hearing: 27 November 2023
(further submissions 29 November and 6 December 2023)
Appearances:
PJ Wright and JAR Barrow for the Plaintiff
P Shackleton and N Kang for the First Defendant
Judgment:
22 March 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 22 March 2024 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Snedden Law, Auckland Meredith Connell, Auckland
Forest Harrison Lawyers, Auckland Shortland Chambers, Auckland
Britomart Chambers, Auckland Kitchener Chambers, Auckland
CARTREF REMUERA TRUSTEE LTD v LE [2024] NZHC 668 [22 March 2024]
Introduction
[1] On 11 October 2022 the plaintiff, Cartref Remuera Trustee Limited (Cartref), was granted summary judgment by default against the first defendant, Thach Son Le for $1,576,728.98.
[2] Mr Le’s liability to Cartref is for an unpaid deposit under a sale and purchase agreement for a property in Remuera, plus interest and costs. The sale and purchase agreement was executed between the plaintiff and the first defendant on 24 September 2020 as a backup agreement to a contract subject to a due diligence condition. When that contract did not proceed, the sale and purchase agreement was declared unconditional. Mr Le failed to pay the deposit and so the vendor cancelled.
[3] Cartref initiated summary judgment proceedings against Mr Le on 5 August 2022 regarding the unpaid deposit, almost two years later. Mr Le failed to respond and summary judgment was granted by default. As no address for service was filed by Mr Le, no documents were served on him following service of the initiating documents until a sale order was obtained from the Court on 28 June 2023. This order directed the sale of all of Mr Le’s land and chattels to meet the liability that by that date was $1,710,566.30.
[4] Mr Le applied on 13 July 2023 to set aside the default judgment and stay the execution of the sale order.
[5] No evidence has been filed by Mr Le’s wife, Mrs Beinui Yatfong Flora Le, despite her involvement as set out in the factual background below. Cartref relied on this failure in its written submissions.
[6] At the hearing, Mr Shackleton appeared as counsel for Mr Le, having recently stepped in because of the unavailability of original counsel. Mr Shackleton explained that after realising Cartref was relying on the failure of Mrs Le to give evidence, he had made enquiries. From these it became clear there were difficulties in obtaining evidence from Mrs Le as there had been a recent medical diagnosis complicating matters. A discharge summary from Auckland Hospital dated 24 October 2023 was provided by counsel as evidence of this.
[7] After discussion with counsel for both Mr Le and the plaintiff, I directed that the first defendant was to file an affidavit from the relevant medical practitioner annexing the discharge summary.
[8] An affidavit has been filed by the medical practitioner so the evidence of Mrs Le’s medical diagnosis is now before the Court. It is unfortunate that this evidence was filed at such a late stage but now that this evidence has been filed, the application needs to proceed on the basis that Mrs Le is unable to give evidence. This is because whether Mrs Le is able to give evidence is not something that can be determined summarily in this application to set aside. For the purposes of this application, I do not therefore draw any adverse inference from the fact Mrs Le has not given evidence. Furthermore, I admit Mr Le’s evidence of what Mrs Le told him as admissible hearsay.1 There was no discussion at the hearing about the reliability of Mrs Le’s account to Mr Le given her medical condition. For the purposes of this application I can only go so far as to consider this evidence in the context of the contemporaneous documents annexed to the affidavits filed.
[9] To determine Mr Le’s application, I begin by setting out the relevant legal principles and the factual background before considering the following questions:
(a)Does Mr Le have a substantial ground of defence?
(b)Is Mr Le’s delay in responding to the proceedings reasonably explained?
(c)Would Cartref suffer irreparable injury if the judgment were set aside?
Relevant legal principles
[10] Rule 12.14 of the High Court Rules 2016 provides that a summary judgment obtained against a party who does not appear at the hearing may be set aside if it appears to the Court that there has or may have been a miscarriage of justice on any terms it thinks just.
1 Evidence Act 2006, s 18.
[11] In Sinclair v Thomson, Paterson J held that the following three factors will tend to be important when considering an application to set aside a judgment:2
(a)whether the defendant has a substantial ground of defence;
(b)whether the delay is reasonably explained; and
(c)whether the plaintiff would suffer irreparable injury if the judgment were set aside.
[12] Counsel for Mr Le emphasised that, as the Court of Appeal observed in Russell v Cox, these matters are not necessarily prerequisites to the exercise of the Court’s discretion.3 Rather they are merely factors on which any application to set aside a judgment may genuinely be regarded as relevant to determine where the justice of the case lies.
[13]As the Court of Appeal held: 4
The test against which an application to set aside a judgment should be considered is whether it is just in all the circumstances to set aside the judgment, and the several factors mentioned in the judgments discussed should be taken, not as rules of law, but as no more than tests by which the justice of the case is to be measured, in the context of procedural rules whose overall purpose is to secure the just disposal of litigation.
[14] In Equiticorp Finance Group Ltd v Cheah, the Court of Appeal commented that where a defendant seeks to set aside a summary judgment regularly obtained on the basis that they have an actual or arguable defence, it will normally be necessary for the defendant to adduce material which leads the Court to conclude that the plaintiff has not satisfied the Court that there is no defence to the claim.5
2 Sinclair v Thomson (2001) 15 PRNZ 187 at [18].
3 Russell v Cox [1983] NZLR 654.
4 At 659.
5 Equiticorp Finance Group Limited v Cheah [1989] 3 NZLR 1 (CA) at 8.
Stay of sale order
[15] In addition, Mr Le seeks a stay of execution of the sale order pursuant to r 17.29 of the High Court Rules. This rule provides the Court with the ability to order a stay of enforcement of a judgment if a substantial miscarriage of justice would likely result from enforcement.
[16] Mr Le’s position is that if the summary judgment is set aside, it is inevitable that a stay of the sale order would be granted pending determination of the substantive proceeding.
[17] If the summary judgment is set aside, I agree the execution of the sale order must also be stayed. It does not however appear necessary to rely on r 17.29 to do so as r 12.14 provides the Court with the power to set aside or vary the summary judgment orders made on any terms the Court thinks just. Those terms could include staying the execution of the sale order. I do not therefore separately consider r 17.29 and the legal principles applying to its exercise.
Factual background
[18] The proceeding concerns a ‘backup’ sale and purchase agreement in relation to a property at Upland Road, Remuera, Auckland (Property).
[19] On 20 September 2020, Cartref as the registered proprietor of the property, entered into a sale and purchase agreement with Herman Yu (Prior Agreement). The purchase price was $12 million and it was conditional on due diligence within five working days of the date of the agreement.
[20] On 24 September 2020, Cartref entered into a backup agreement with Mr Le (Backup Agreement) for the same price. Mr Le’s evidence is that the Backup Agreement was conditional on finance but this is not what is recorded on the written agreement itself.
[21] The Backup Agreement records that the purchase price was $12 million, with the deposit to be 10 per cent of the purchase price ($1.2 million). On the cover page
of the Backup Agreement under the heading “Conditions” and beside “Finance required (subclause 9.1)”, the option “No” is circled and Mr Le has initialled it along with David Snedden (Cartref’s lawyer) for the vendor.
[22] The Backup Agreement included a further term of sale cl 21.0, the backup clause, recording that the Backup Agreement was conditional on the cancellation or termination of the Prior Agreement.
[23] On 25 September 2020, Mr Yu’s solicitors advised that the due diligence condition in the Prior Agreement was not satisfied, and the Prior Agreement was therefore cancelled. Notice was then given to Mr Le’s solicitor that the Backup Agreement was now unconditional.
[24] Later that same day, Mr Yu’s solicitor contacted Cartref’s solicitor and advised that Mr Yu had changed his mind and asked for confirmation that the Prior Agreement was unconditional and was on foot. Cartref’s solicitor advised that the Prior Agreement could not be reinstated. As a consequence, Mr Yu offered to enter into a further backup agreement. That agreement was entered into on 1 October 2023 (Second Backup Agreement).
[25] Mr Le failed to pay the deposit of $1.2 million so the Backup Agreement was cancelled in accordance with cl 2.2 after three working days’ notice.
[26] Cartref then sought to rely on the Second Backup Agreement but Mr Yu’s solicitors said that Mr Yu’s offer was only open for three working days and had not been accepted within the required time period. Cartref disputes that there was such a time limit on the offer.
[27] On 5 August 2022, Cartref applied for summary judgment against Mr Le and Mr Yu for the unpaid deposits under the Backup and Second Backup Agreements. Mr Le did not respond so judgment was entered against him by default on 11 October 2022.
[28]Mr Yu filed a notice of opposition and a defended hearing was held.
[29] Associate Judge Lester issued his decision on 21 February 2023, declining to grant summary judgment as he was unable to determine in the context of summary judgment proceedings whether Mr Yu’s offer was only open for three working days or whether it had been accepted within the three working days, including because of issues as to whether the real estate agent was Cartref’s or Mr Yu’s agent.6
[30] Cartref ultimately entered into a further sale and purchase agreement for the Property on 13 October 2020 with a third party for $11.5 million. That agreement settled and the Property was transferred on 16 March 2021.
Does Mr Le have a substantial ground of defence?
[31] Cartref’s claim against Mr Le is based on his failure to pay the deposit under what Cartref says was an unconditional sale and purchase agreement. Mr Le submits there was no unconditional sale and purchase agreement because his understanding of the Backup Agreement was such that he had no risk of such liability. Mr Le’s evidence is that the Backup Agreement was conditional on him and Mrs Le securing finance and that they would not be required to make any payments, as their position was merely in the queue.
[32] As background to the signing of the Backup Agreement, Mr Le says that in August 2020 his wife told him about the Property after a mutual friend of the couple and a registered real estate agent at Barfoot and Thompson, Frances Li, referred the Property to Mrs Le. Mr Le deposes that he and his wife had known Ms Li for several years, that Ms Li had arranged the sale of an earlier property for them, and they had developed a strong level of trust in her.
[33] Mr Le says that throughout their communication with Ms Li before the Backup Agreement was signed, Mr and Mrs Le consistently indicated to Ms Li that any purchase of the Property would need to be conditional on Mrs Le securing funds from China.
6 Cartref Remuera Trustee Limited v Le [2023] NZHC 256.
[34] Mr Le says that his wife was eventually persuaded to purchase the Property by Ms Li who assured them that any agreement would be conditional on Mr and Mrs Le successfully securing funds from China. Mr Le says his wife then asked him to sign the sale and purchase agreement for the Property.
[35] Mr Le accepts that after a brief viewing of the Property he signed the Backup Agreement on 24 September 2020. Mr Le’s version of the Backup Agreement has “(BACK UP)” written at the top of the first page.7
[36] Mr Le explains that as a result of his limited proficiency in English, he was only able to recognise his name and the name of the street listed on the Backup Agreement. Despite this, he says that given their discussions with Ms Li and their consistent approach in the past, of which he says Ms Li was aware, he understood that the Backup Agreement was subject to finance. Mr Le says that he never would have signed the Backup Agreement otherwise.
[37] In addition, Mr Le says that the Backup Agreement was signed without him having an opportunity to receive legal advice on the terms.
[38] After his wife advised that she was unable to secure funds from China, Mr Le says that he and Mrs Le engaged in discussions with Ms Li regarding the cancellation of the Backup Agreement. In these discussions Ms Li assured Mr Le that everything would be fine as another party had expressed interest in the Property. She also recommended that Mr and Mrs Le consult a lawyer regarding the cancellation of the Backup Agreement. Mr Le’s evidence is that his wife then sought advice from Mairangi Bay Law Ltd (MBL) who had helped them on another transaction previously. Mr Le says that the legal assistant, Wenhui Li, explicitly assured Mr Le’s wife that they would assist in cancelling the Backup Agreement and that no additional costs would be incurred, apart from a cancellation fee of $250. Mr Le says that this communication took place through WeChat but as his wife has since changed her phone, she does not have a record of those conversations.
7 I note that the copy of the Backup Agreement annexed to Mr Sneddon’s affidavit for the plaintiff does not have “Back up” at the top but it is also not a complete copy of the Backup Agreement.
Non est factum
[39] The parties agreed that Mr Le’s submission that he did not understand the document he signed is a plea of non est factum (although counsel for Mr Le submits it may found further defences as well). Non est factum is explained as a defence that may be raised by a person who has executed a document under some mistake as to its effect arising from an erroneous (but not necessarily fraudulent) explanation of its content and meaning.8 The plea amounts to a denial of consent to the transaction that would otherwise be evidenced by the signature.
[40] As Stephen Todd and Matthew Barber say in Burrows, Finn and Todd on the Law of Contract in New Zealand, in the contractual setting this means the denial of the creation of the contract which the writing appears to evidence.9 The authors comment that modern cases have extended the potential application of the plea of non est factum to situations where the alleged reason for not understanding the written contract is that it is in a language the signatory cannot read, although that by itself is not enough. In this discussion Burrows, Finn and Todd on the Law of Contract in New Zealand referenced the decision of the Court of Appeal in Golden Garden Ltd v Zhao
— which Mr Le relies on as being analogous to this case.10
[41] In Golden Garden v Zhao, the High Court had entered summary judgment for payment of a deposit of $730,000 after rejecting the evidence of the director for Golden Garden Ltd as to her English proficiency. After hearing further evidence introduced on appeal, the Court of Appeal found that the evidence of the director’s English proficiency could not safely be “disregarded as failing to meet the threshold of credibility”.11
[42] The Court of Appeal held that if this evidence were accepted it could provide an arguable defence as the document was fundamentally different than what the
8 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, Lexis Nexis, Wellington, 2022) at [10.6.2(a)] citing Hasham v Zenab [1960] AC 316 (PC) at 355 and Saunders v Anglia Building Society [1971] AC 1004, [1970] 3 All ER 961 (HL).
9 Burrows, Finn and Todd on the Law of Contract in New Zealand, above n 8, at [10.6.2(a)] citing
Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 at 121.
10 Golden Garden Ltd v Zhao [2017] NZCA 227.
11 At [50].
director said was intended and she arguably was misled by the agent.12 The Court held further that director was arguably not negligent in signing the agreement because she was entitled to rely on the agent’s explanation of it.
[43] In this case Mr Le has given evidence as to his lack of proficiency in English. Evidence has also been filed in reply by a tenant of Mr Le’s and a surveyor engaged by Mr Le to assist with subdivisions. These both confirm that Mr Le does not possess sufficient English language skills either in reading or speaking to have any real comprehension beyond basic conversation in English.
[44] Ms Li’s evidence is that throughout the viewing and later signing of the Backup Agreement she spoke Cantonese to Mr Le and that her husband, Ian Thornhill, who is also a real estate agent at Barfoot and Thompson, spoke to Mr Le in English.
[45] An affidavit has been filed by Mr Thornhill in which he deposes that Mr Le told them that he did not need a finance clause because Mrs Le would send funds from China, that Mr Le agreed for the agents to present a cash unconditional back up offer, and that Mr Le understood this clearly.
[46] In addition, Mr Thornhill gives evidence that Mr Le understands English well and that he has spoken to Mr Thornhill in English from time to time. Mr Thornhill acknowledges that Ms Li also discussed the Backup Agreement with Mr Le in Cantonese.
[47] In his reply evidence, Mr Le says that at the viewing and when Ms Li and Mr Thornhill came to his home with the Backup Agreement, Mr Le had no interaction with Mr Thornhill due to his English proficiency. He says that he spoke to Ms Li but only in Cantonese. Mr Le’s evidence is that Mr Thornhill did not participate in the discussion other than greetings when they arrived and left.
[48] Cartref in its written submissions responded to Mr Le’s evidence in reply by proposing therefore to leave Mr Thornhill’s evidence to one side for the purposes of the application to set aside. If Mr Thornhill’s evidence is put to one side, the only
12 Golden Garden Ltd v Zhao, above n 10, at [45].
affidavit evidence on the explanation of the terms of the Backup Agreement given to Mr Le is the evidence of Ms Li and the evidence of Mr Le. This evidence together with Mr Le’s proficiency in English is directly in dispute.
[49] Cartref relies on a passage from Stokesay Holdings Ltd v Walker where Associate Judge Lang (as he then was) observed:13
The assertions of parties made after the event will often carry little weight. They are likely to be motivated by a realisation, hitherto unappreciated, of the consequences of a failure to act earlier. In the present case Mr Walker only filed his application to set aside the judgment after he knew that Stokesay was endeavouring to execute its judgment by means of a writ of sale. Mr Walker’s assertions must obviously be treated with caution. I therefore propose to measure those assertions against the other undisputed evidence, together with such contemporaneous documentary material as is now before the Court. In my view this is the most realistic means of determining whether in fact Mr Walker does have a substantial defence to Stokesay’s claim.
[50] I agree that this can often be the case so I turn now to the contemporaneous documents annexed to the affidavits to see whether these assist in determining whether Mr Le has an arguable defence.
Contemporaneous documents
[51] Ms Li annexes copies of the contemporaneous WeChat messages in Chinese with both Mr and Mrs Le to her affidavit with translations by Ms Li beside each one.
[52] After the Backup Agreement was signed on 24 September 2020, the WeChat print out records that Mrs Le sent a message to Ms Li on 25 September 2020 saying “There is something to discuss with you” and then asking Ms Li to “please tell me about the exact content and details of the back up offer”. There was then a 53 minute and 40 second phone call. Ms Li says in her affidavit that in this call she “explained to Mrs Le the contents of the agreement and what she and Mr Le needed to do next, including paying the deposit and sending through her solicitor’s details” so the Backup Agreement could be sent to Mr and Mrs Le’s solicitor.
13 Stokesay Holdings Ltd v Walker HC Blenheim CIV-2004-406-147, 30 November 2004 at [17].
[53] Mr Le says that Mrs Le’s message asking Ms Li to confirm the exact content and details of the Backup Agreement offer confirms that Ms Li did not explain the Backup Agreement in full on 24 September 2020 when he signed it.
[54] Following the call, Mrs Le sent through her solicitors’ details and Ms Li sent through a copy of the Backup Agreement. There were then several further phone calls between Ms Li and Mrs Le.
[55] The next day on 26 September 2020 at 12.22 pm, Ms Li sent a message to Mrs Le saying:
Please transfer some deposit to the following account today, because the first buyer is very regretful and has now declared unconditional, but because the vendor’s lawyer has agreed to cancel their offer and proceed with your back up offer, if they decide to come back with an offer it makes theirs a backup offer. So we have to be careful, they can cancel your contract once the deposit is overdue. You need to be quick and get ready, please don’t delay.
[56] A similar message was sent to Mr Le at 12.26 pm on the same day ending with “Just transfer some sum to confirm and you can transfer more in future”. This message was followed by a message providing the Barfoot and Thompson account details. Other than a New Year’s greeting, there are no further WeChat messages to Mr Le in evidence.
[57] Ms Li then provided details of the further back up offer to Mrs Le “waiting on the result of your one”. It appears Ms Li refers to a further back up offer but this is not addressed in the evidence. Ms Li then says at 1.33 pm: “So it is critically important that you pay the deposit. We should not miss it.”
[58]Ms Li then sent a further message on 26 September 2020 at 1.39 pm saying:
Please ask your husband to transfer a portion of the deposit today to show your sincerity and genuine interest. You could pay in full next week.
…
This is because the vendor’s solicitor needs to reply to the next buyer’s solicitor on the current status of the transaction they wish to respond quickly, so they request an update on the deposit.
[59] There was a further telephone call with Mrs Le and following that, at 8.40 pm, another message from Ms Li to Mrs Le:
The first buyer has officially written the back up offer on paper, so once it is accepted, you have to pay the deposit in full before Wednesday, or they will take it back. This transaction is really amazing. Many twists and turns, and the sense of competition is strong. I have been in real estate for so many years and only encountered it once but it was not as funny as the first buyer wrote a Backup and tried to buy back again.
…
That other sales person is in the worst position, I can always get the listing fee, but if you buy it, she can’t get anything. You have to pay 10% in full by Wednesday if you really want to buy. I hope you can make it. Also, it is not easy to obtain mortgages from banks now, and it may take a long time.
[60]There was then a further message from Ms Li to Mrs Le at 8.55 pm saying:
Initially, if you pay a little portion of the deposit first, you don’t need to be concerned, but now the first buyer has written their back up offer on paper, and the lawyer will not wait for you, not possible to extend even for a day, and it will be a foregone conclusion after three days.
[61] More telephone conversations followed and short messages asking for progress on the deposit.
[62] On 1 October 2020, Ms Li then sent a WeChat message to Mrs Le saying “Could you please notify your solicitor to cancel the contract?” Mrs Le replied confirming that she had messaged their solicitor “Hello, I agree to cancel the contract on 12 Upland RD”.
[63] During this time emails were also exchanged. On 25 September 2020, Mr Snedden sent an email to Ms Li asking Ms Li to advise the “back up purchaser” that the Backup Agreement was unconditional and to advise him of the purchaser’s solicitors’ details. One of his colleagues, Ms Jones, then emailed the solicitor for Mr Le and his wife, Mr Li at MBL, advising the Prior Agreement had been cancelled so the Backup Agreement is now “unconditional” and asking MBL to please arrange for their client to pay the deposit as per the terms of the Backup Agreement.
[64] On 26 September 2020, another agent at Barfoot & Thompson, Ms Liu, emailed Mr Snedden a copy of the Second Backup Agreement with Mr Yu. Mr Snedden replied on 28 September 2020 to Ms Liu and Ms Li saying:
Thanks for the email. Please note that you attached the wrong agreement to your email. The back up offer was from [Mr Thach Son Le] and that offer is now unconditional.
Can you confirm you have received the deposit?
[65]Ms Li replied to Mr Snedden on the same day saying:
The attached agreement is not from Thach Son Le. It is a backup offer from our colleague Amy Liu. Herman Yu (he is the first buyer to put the offer in and miss out), they would like to buy the property back now just in case the unconditional offer under the name Thach Son Le cannot complete by paying the deposit on time. Now we are waiting for Thach Son Le to arrange the deposit to be paid, hopefully, we can receive it soon and will keep you posted.
[66] On 1 October 2020, Mr and Mrs Le’s solicitors, MBL, emailed Cartref’s solicitors saying:
We note that unfortunately, our client is unable to arrange an International Money Transfer from China at present, mainly due to a long Mid-Autumn Festival and Holiday.
In case your client has decided to cancel this agreement, our client would have no choice but to accept it.
[67]The following day, Cartref’s solicitors emailed MBL saying:
We note that your client has not complied with the deposit notice previously sent.
Without prejudice to our clients rights and in respect of your clients failure to comply with the deposit notice including but not limited to recovering such loss that our client suffers as a result, we hereby give notice that the agreement is cancelled.
[68] The Backup Agreement records in cl 2.1 of the standard terms that that the deposit is payable on its execution. From the contemporaneous documents annexed to the affidavits, as discussed above, it appears that there was no demand to pay the deposit on 24 September 2020 when the Backup Agreement was executed but only when the Backup Agreement became unconditional.
[69] Mr Snedden, in an affidavit filed in support of the summary judgment application, deposed that the deposit was payable when the Backup Agreement became unconditional. But the backup clause at cl 21.0 making the agreement conditional on cancellation or termination of the Prior Agreement did not refer to the timing of payment of the deposit or the deposit at all.
[70] At this hearing, Cartref’s position in submissions was that the deposit was payable on execution of the Backup Agreement.
[71] I accept that there is only one day’s difference between execution of the Backup Agreement and when it became unconditional but the fact that there is this difference in the evidence suggests a lack of clarity as to when the deposit was payable.
[72] Furthermore, in none of this correspondence does it say that if the deposit is not paid it would still be recoverable by the vendor even if the contract is cancelled.
[73] Mr Le’s understanding that if he wished to proceed he needed to pay the deposit or otherwise lose the right to purchase the property is not therefore clearly inconsistent with the contemporaneous correspondence at the time.
[74] Counsel for Cartref says that essentially Mr Le’s position amounts to an allegation of deliberate dishonesty against Ms Li, submitting that a claim based on fraud must be properly particularised and proven to a high standard commensurate with the severity of the allegation.
[75] I do not accept that Mr Le’s evidence necessarily amounts to an allegation of deliberate dishonesty and in fact may instead show a misunderstanding between the parties. As stated above, the law is clear that to succeed in a plea of non est factum, the mistake relied on may arise from an erroneous but not necessarily fraudulent explanation of the document’s content and meaning.14
[76] The contemporaneous documents do not allow me to discount Mr Le’s evidence as to what Ms Li told him the Backup Agreement contained. I am therefore
14 Burrows, Finn and Todd on the Law of Contract in New Zealand, above n 8.
unable to resolve the dispute in the evidence of Ms Li and Mr Le about Ms Li’s explanation of the terms of the Backup Agreement. On this basis I consider that Mr Le does have a substantial ground of defence.
Is the delay in applying to set aside reasonably explained?
[77] The application for summary judgment was not served on Mr Le for two years following the cancellation of the contract. This is unusual but it is also unusual that Mr Le did not take any steps after having been served with court documents. However, Mr Le’s explanation that New Zealand was still at orange in the COVID-19 protection framework and that he did not anticipate the Courts would be operating cannot be discounted. This is particularly the case given his age and vulnerability regarding COVID-19.
[78] Mr Le says his failure to respond to the original proceedings, including the summary judgment application, can also be reasonably explained by his limited English together with his understanding of the agreement signed.
[79] As noted above, no further documents were served on him until the sale order was served on 30 June 2023. Mr Le then filed this application to set aside on 13 July 2023.
[80] In the circumstances I consider that the delay in applying to set aside the judgment can be reasonably explained.
Would Cartref suffer irreparable injury if the judgment were set aside?
[81] Cartref submits that it will suffer irreparable harm as a result of the irrecoverable cost, inconvenience, time, effort and delay of a trial if the summary judgment is set aside, none of which they say will ever be recovered.
[82] This issue could be addressed by an award of costs and interest if Cartref is ultimately successful against Mr Le. I accept that Cartref may not recover all of the costs incurred but I do not consider this to be a determinative factor if in fact Mr Le has an available defence. This is particularly the case where there was some delay by
Cartref in bringing the summary judgment proceedings in the first place and there was no immediate demand for payment of the deposit at the time the Backup Agreement was cancelled.
[83] Counsel for Mr Le submits that rather than irreparable injury, in fact in the present case if the judgment against Mr Le is allowed to stand and be enforced it would result in a windfall to Cartref at Mr Le’s expense. Counsel submits that this windfall would only increase further if Cartref also recovers against Mr Yu. Mr Le submits that this is a further reason to set aside the default judgment so the Court can properly consider this issue with the benefit of full argument and in the context of the wider claims.
[84] Cartref submits in response that a deposit is a pledge for the performance of a contract, relying on Coumat Ltd v Whitford Properties Ltd, where Asher J held that in the case of purchaser default, “there is nothing unjust in it having to meet this contractual pledge, to which it has expressly agreed”.15 Cartref therefore submits that it is irrelevant that Cartref may also recover from the second defendant, Mr Yu.
[85] These arguments depend on the terms of the contract with Mr Le and whether in fact there is a right of forfeiture of the deposit in the Backup Agreement, either express or implied.16
Conclusion
[86] Having considered all of the factors above, I am satisfied that there may have been a miscarriage of justice in this case as Mr Le has a substantial ground of defence, the delay can be reasonably explained and I do not consider that there will be irreparable injury to Cartref if the summary judgment orders are set aside.
[87] Consequently, the execution of the sale order must also be stayed as it relies on the summary judgment orders for its validity.
15 Coumat Ltd v Whitford Properties Ltd [2018] NZCA 15 at [56].
16 See discussion in DW McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at [12.60].
Result
[88] Mr Le’s application to set aside the summary judgment orders obtained against him by default on 11 October 2022 is granted and the execution of the sale order dated 28 June 2023 is stayed until further order of the Court.
Costs
[89] Mr Le has been successful in his application but I do not consider that costs ought to follow until determination of either the renewed summary judgment application or substantive proceedings. The extent to which the application to set aside is an indulgence cannot be determined prior to determination of the factual disputes between the parties.
[90]Costs are therefore reserved.
Associate Judge Sussock
0
3
1