Deng v Lu
[2015] NZHC 2585
•21 October 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-931 [2015] NZHC 2585
BETWEEN QINGQI DENG
Applicant
AND
YULIANG LU AND HONGYU YANG Respondents
CIV-2015-404-1760
BETWEEN WEIJIE DENG Applicant
ANDYULIANG LU AND HONGYU YANG Respondents
Hearing: 8 October 2015
(with additional submissions: 13 October 2015 (respondents)
and 16 October 2015 (applicants)Appearances:
D K Wilson for Applicants
P J Wright and A Sinclair for RespondentsJudgment:
21 October 2015
JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to Caveats]
This judgment was delivered by me on pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
DENG v LU [2015] NZHC 2585 [21 October 2015]
Two applications
[1] Two applications are being dealt with at one hearing. One is an application for leave to lodge a second caveat. The other is an application for an order that a caveat not lapse.
An agreement for sale and purchase
[2] The applicants are respectively a father (in the 931 proceeding) and a son (in the 1760 proceeding). In early 2015 the son at auction signed an agreement to purchase an Auckland property (the agreement). The father subsequently lodged a caveat against the title claiming an interest arising from his nomination as purchaser under the agreement. The respondents, being the registered proprietors of the property, initiated the caveat lapsing procedures under the Land Transfer Act 1952.
The father unsuccessfully applied for an order that his caveat not lapse.1 The father
had relied on a deed of nomination whereby the son had nominated the father (and his wife) to take title to the property. Associate Judge Doogue found that there were irreconcilable factual disputes between the parties as to the specific details of the agreement for sale and purchase which were not capable of resolution (against the applicant) in a caveat proceeding.2 But his Honour found that, by reason of a subsequent document by which the son (as nominator) and his parents (as nominees) cancelled the earlier nomination, the father did not have an equitable right to enforce the agreement.3 Accordingly, Associate Judge Doogue dismissed the father ’s application (the first judgment).
[3] Counsel for the respondents immediately had the order of Associate Judge
Doogue sealed and the caveat removed from the title.
[4] Too late, the father sought recall of the first judgment. The father filed a notice of appeal in the Court of Appeal on 29 July 2015 and sought a stay of the first
judgment pending the outcome of the appeal.
1 Deng v Lu [2015] NZHC 1531.
2 At [26].
3 At [29] to [36].
[5] For the father, Mr Wilson recognises that by reason of the immediate sealing of the order and the removal of the caveat, this Court is unable to recall the judgment.4 He submits that a further caveat would provide appropriate protection of the applicants’ rights under the agreement.
[6] On 21 July 2015, the son lodged a caveat against the title to the Auckland property claiming an estate or interest pursuant to the agreement. The respondents promptly commenced caveat lapsing procedures through the Registrar.
[7] The applications now before the Court are:
(a) the son’s application for an order that his caveat not lapse (the Court having made an interim order that the caveat not lapse until further order); and
(b) the father’s application for leave to lodge a second caveat.
The history of dealings between the parties
[8] In his judgment delivered on 3 July 2015, Associate Judge Doogue recited the history of dealings between the parties up to June 2015.
[9] References in his Honour’s judgment to the “caveat” are to the first caveat, which has already lapsed pursuant to the first judgment. References to “the applicant” are to Qingqi Deng, whom I otherwise describe in my judgment as “the father”.
[10] Associate Judge Doogue described the history thus:5
Background
[2] The caveat was lodged against the title to a residential property at 52B Peary Road, Mt Eden, Auckland (“the property”). The caveat was in the following terms:
Estate or Interest claimed
4 High Court Rules, r 11.9.
5 Deng v Lu, above n 1, at [2] – [25]
Pursuant to an agreement for sale and purchase dated 3 February
2015 between Weijie Deng as purchaser and the registered proprietors as vendor and a deed of nomination in respect of the
aforesaid agreement dated 19 March 2015 between Weijie Deng as
nominator and the caveator as nominee.
[3] The person known as Weijie Deng is the son of the applicant. I will describe him as the son throughout this judgment. It is also necessary to make reference to a further member of the family, Miaohe Mo, who is the wife of the applicant and the mother of the son. I shall refer to her as “the wife” below.
[4] The applicant, at the outset, accepts that he has an onus to establish that he has a reasonably arguable case for the interest claimed.6 That requirement means that the applicant needs to demonstrate that factual contentions which he puts forward are reasonably arguable. He does not need to prove on the balance of probabilities that his account of the matters is true. It is further the case that it is not the function of the court hearing a caveat application to resolve disputed matters of fact.
[5] With that introduction, I will now outline the background facts which the applicant bases the application on.
[6] The applicant and his wife are citizens of China. The son was at material times living in New Zealand. The parents came to New Zealand on
25 January 2015 and stayed at the property which is owned by the respondents. They found out that the respondents were intending to sell the property and that they had an auction scheduled for the sale of the property.
The original auction date was 18 February 2015.
[7] The applicant and his wife said they were interested in buying the property in the name of their son. They entered into an agreement with the vendors which was written in Chinese and drafted on 30 January 2015 (I will refer to as the “Chinese Agreement”). I will set the Chinese Agreement out in full because it is of importance to the outcome of the application. The Chinese Agreement, translated into English, was to the following effect:
Sale and Purchase Agreement
Property owner YANG Hongyu and LU Yuliang agree with the buyer (in handwritten form, read as: DENG Weijie) to transact a property: 52B Peary Road, Mt Eden, Auckland at a price of NZ
$1,260,000.00.
The buyer offers a starting price of NZ $1,100,000.00 in pre-auction sale and will transfer the difference of NZ $160,000.00 to the buyer’s account in advance.
(In handwritten form, read as: 12 3029 0353903 01 ASB Bank)
If the final auction price exceeds the starting price of NZ
$1,100,000.00 but lower than the agreed price of NZ $1,260,000.00, then the seller will refund the overpaid amount to the buyer.
6 Sims v Lowe [1988] 1 NZLR 656 (CA) at 660.
Owner:
(Signatures of Hongyu Yang & Yuliang Lu) Hongyu Yang & Yuliang Lu
Buyer:
(Signature of MO Miaohe) DENG Weijie and MO Miaohe Date: 30/01/2015
DENG Qingqi 0221905457
DENG Weijie 02108289918
[8] I interpolate, that this document, on its face, discloses that the applicant and his family considered that the property was worth $1,260,000 and they were offering to pay $160,000 towards that expected price on the basis that, if in fact the property achieved less than that, the amount of the pre-payment of $160,000 would be scaled back by the seller refunding the overpaid amount to the buyer.
[9] It was explained to me that the Chinese Agreement was reached without the benefit of legal advice on either side. It is not wholly satisfactory to achieve the apparent objectives of the parties. It does not spell out in detail the mechanism that is intended, which may be that the applicant and his family will pay 1/10th of the price in advance; and that they assume the price will be $1,260,000 but that if it is a lesser amount then the difference between the $160,000 which they pay and 10 per cent of the actual will be refunded to them.
[10] Another feature of the Chinese Agreement to be noted is that it was signed by the mother even though its terms contemplated that the property was being acquired by the son.
[11] The funds payable under the Chinese Agreement were transferred into the respondents’ bank account on 3 February 2015. It seems likely that by the date that the funds were sent from China (which was the point of origin), the applicant and his family were already in New Zealand.
[12] The auction of the property went ahead on 3 February 2015. It was brought forward from 18 February 2015. No comment is required on the reasons for that. At the auction, the property was knocked down to the son at
$1,180,000.
[13] The Memorandum of Contract executed following the auction identified the son as being the purchaser. However, the part of the agreement where that was stated was followed by the words:
and/or nominee (“the purchaser”).
[14] The settlement date provided for in the particulars and conditions of sale was Friday 6 March 2015.
[15] Pursuant to the Memorandum of Contract, dated 3 February 2015, the applicant paid the deposit of $118,000 to the real estate agents.
[16] Also, the sum of $160,000 was received into the account of the respondents on 30 January 2015. The evidence of the applicant is that employees of his from China paid the money in.
[17] On 12 February 2015, the applicant, his wife and the son entered into a deed of nomination (original Deed). Both the applicant and his wife were nominees in terms of the Deed. The background to the original Deed stated that the nominator, the son, wished to nominate the “nominee” (that is his parents) as the persons who are to take title to the property. It also recorded the agreement of the proposed nominees to that course. The effect of the actual nomination was expressed in fairly wide terms as follows:
2.1Nomination: The Nominator nominates the Nominee as the person who is to take title to the property described in the agreement and acknowledges that with effect from the Operative Date all the rights and interests of the Nominator as purchaser under the Agreement shall pass to the Nominee.
[18] The original Deed was served on the solicitors for the vendors. On or about 22 February 2015, the solicitors served a settlement statement on the solicitors for the son, addressed to the account of the son as the purchaser. The settlement statement showed the receipt of the deposit of
$118,000. There was no reference to the sum of $160,000 which the applicant had caused to be paid into the bank account of the
respondents/vendors. The applicant’s solicitors communicated with the
vendors’ solicitors on 4 March 2015 advising that:
our clients also advised that they had paid an extra $160,000 being further deposit to your client direct. That is to say, the total deposit paid is $278,000. Please include these sums in your settlement statement.
[19] The solicitors acting for the respondents/vendors did not accept that there had been any additional payment. They served a settlement notice dated 6 March 2015 on the husband and the wife who were described parenthetically in that document as “purchasers”. This, of course, represented a shift from the settlement notice which was addressed to the son. The applicant’s solicitors forwarded to the solicitors acting for the vendors evidence of the payment of the $160,000 under cover of the letter 20
March 2015 but the instructions of Hong Hu, acting for the vendors, were firm that there had been no additional payment.
[20] On 19 March 2015, the son and the parents entered into a further deed (second Deed) in terms of which the son purported to cancel the original Deed dated 12 February 2015. The operative part of the document recorded:
2.1 The nominator and the nominee hereby cancel this nomination.
[21] It is not disputed that a copy of the cancellation of the deed of nomination was served on the Hong Hu Lawyers on behalf of the respondents/vendors.
[22] The explanation which the applicant provides for the fact that the family executed the second Deed was that “the family decided it would be better if title were taken in my name alone”. It is to be observed that the applicant was not the purchaser under the Agreement and the likely effect of cancellation of nomination of any other person meant that the right to require a transfer on settlement reverted to the son and not to the father, as he seems to have assumed.
[23] The Memorandum of Contract has never been cancelled.
[24] The case which the respondents put forward is that the applicant has told only part of the story about the dealings between himself and the respondents. The respondents say that the applicant was desirous of obtaining a residency visa in New Zealand which required him to satisfy certain investment criteria in a business or businesses in New Zealand. As the respondent Yuliang Lu stated in his affidavit:
11. As he is a businessman in China, he agreed that he will input
5% of total investment value, equivalent to approximately $800 –
900 million, which is the standard industrial service rate we charge for my other clients.
[25] I also understand that Yuliang Lu, in his affidavit, says that the applicant additionally wished to have the respondents provide one year’s worth of training in matters such as property investment or design of manufacturing plant, marketing and other matters. These services were to be provided variously by one or the other of the respondents. Yuliang Lu said that the cost of providing those services, but not, I understand, the investment component, was to be $160,000. That, according to the respondents, explains why the applicant sent the sum of $160,000 to the respondents. Their account of matters is that the sum of $160,000 was not therefore paid as a part payment of the price to be paid for 2/52 Peary Road, Mt Eden.
Outcome of application in relation to first caveat
[11] Except in relation to the issue of nomination (which was dispositive), it appears that Associate Judge Doogue would otherwise have found that the father’s basis of claim was arguable. In particular –
(a) it was arguable that the $160,000 received into the respondents’ account on 30 January 2015 was paid in relation to the potential property purchase as a “pre-deposit”; and
(b)from the point of execution of the deed of cancellation (of nomination), it was the son alone who arguably would have had an equitable interest in the property arising out of the agreement.
The nomination issue
[12] As I have recorded, the Associate Judge dismissed the father’s application in relation to the first caveat on the ground that such right as the father had as nominee to enforce the agreement for sale and purchase had come to an end (on 19 March
2015) through the deed of cancellation. His Honour concluded that the father thereupon had no equitable interest to sustain his caveat. Associate Judge Doogue dealt with “the nomination issue” in the following way:
[29] A central issue that arose in the proceedings was the effect of the asserted nomination which the son executed. Such a nomination is nothing more than a statement by the purchaser identifying the person whose name is to be inserted into the memorandum of transfer as the person who is to take legal title, that is a conveyance by direction. A nomination does not assign the rights of the nominator in the agreement to the nominee. That being so, the nominee is not on account that he or she has such status, a party to the agreement who is entitled to enforce it.
[30] If it did nothing else, the original Deed directed the vendor to transfer the property on settlement to the parents. The original Deed dated
12 February 2015 was overtaken by the second Deed dated 19 March 2015.
[31] The second Deed stated that the intention of the parties was to
“cancel this nomination”, the reference being to the original Deed.
[32] From that point, the situation reverted to what it was at the beginning, that is, as if no nomination had occurred at all. Therefore, even if there had been an implied assignment contained in the original Deed, in addition to a simple requirement of settlement being with the nominee, it would appear that, to the extent that the original Deed had the effect of a nomination, that was reversed on the execution of the second Deed. From that point, the only person who could exercise the rights under the contract as purchaser was, and is, the son. This result must follow because if the nomination was cancelled, the position would revert to the usual one where the purchaser would be the party entitled under the Memorandum of Contract to call for transfer of the property to him on tender of the purchase price being made.
A further nomination of the father – a deed overlooked?
[13] For the father, Mr Wilson submits that the judgment overlooks the existence of a second deed dated 19 March 2015.
[14] Associate Judge Doogue referred to one deed dated 19 March 2015, by which the nomination of the father and mother was cancelled.
[15] There was in evidence, however, a second deed of nomination of the same date (19 March 2015) by which the son the nominated the father alone.
[16] The relationship between the two deeds was explained in the son’s affidavit
for the first caveat hearing when he deposed:
On 19 March 2015, the family decided it would be better if title were taken in my father’s name alone. To that end we cancelled the deed of nomination made on 12 February 2015, and did a further deed of nomination from me to my father and attached marked “K” and “L” are copies of those deeds.
[17] The father’s caveat was registered the following day and expressly refers to
the 19 March 2015 deed of nomination.
[18] Mr Wilson submits correctly that the Associate Judge does not deal with the
19 March 2015 deed of nomination, referring only to the deed of cancellation of that date. (There is in the judgment a reference to the second deed in that his Honour sets out the terms of the father’s caveat (paragraph [2] of the judgment, at [10] above) which contain reference to the 19 March 2015 nomination. But he does not refer to the evidence which establishes that nomination. To the contrary, he finds the father was no longer a nominee.
The father’s application for leave to lodge a second caveat
The statutory jurisdiction
[19] The father invokes the Court’s jurisdiction under s 148(1) Land Transfer Act
1952 which provides:
148 No second caveat may be entered
(1) If a caveat has been removed under section 143 or has lapsed, no second caveat may be lodged by or on behalf of the same person in respect of the same interest except by order of the High Court.
[20] The Court of Appeal has, of this jurisdiction stated in Cotton v Keogh:7
A Court does not lightly consent to the lodgement of a second caveat. It is in the nature of an indulgence and the applicant’s claim is scrutinised carefully.
[21] For the respondents, Mr Wright also referred me to the observation of Thorp J in Muellner v Montagnat in which his Honour identified three factors relevant to the exercise of the Court’s discretion:8
(a) the strength of the case made by the applicant to support the estate or interest claimed, although this is only one facet;
(b)where the caveat lapsed because the caveator failed to exercise his or her rights under s 145 or 145A of the Land Transfer Act 1952, some explanation for that failure will normally be required before the Court will exercise its discretion under s 148; and
(c) leave is unlikely to be granted save on terms in an endeavour to avoid prejudice to those who have acted in reliance on the register and in the belief that the caveator is not pursuing the claim.
Discussion
[22] The second and third considerations identified by Thorp J in Muellner v Montagnat have little or no relevance in this case. The father took the appropriate steps to sustain his caveat, through application to this Court. Full argument was addressed on the merits. The father’s application was dismissed upon the basis that he was no longer a nominee (and therefore had no right or interest) although the evidence adduced establishes a valid nomination.
[23] I observe that the lodging of a caveat is in the nature of an interim protection for the caveator pending the determination of his or her rights at a substantive hearing. There is something of a parallel in the protection which a litigant may
secure through obtaining a stay of a judgment pending the outcome of an appeal
7 Cotton v Keogh [1996] 3 NZLR 1 (CA) at 8–9 per Blanchard J delivering the judgment of the
Court.
8 Muellner v Montagnat (1986) 2 NZCPR 520 (HC) at 523.
from that judgment. In this case, the father’s appeal is complicated by the fact that the order made in the first judgment has already taken effect and the lapsing of the caveat cannot be stayed.
[24] This situation is recognised by the authors of Hinde McMorland & Sim Land
Law in New Zealand when they comment:9
… once the caveat has lapsed (following expiration of a 28-day period under ss 145 or 145A) or has been removed by the Registrar (following an order under s 143), an application … for leave to lodge a second caveat is too late and likely to be futile, since the Court appears to have no jurisdiction to reinstate a caveat.
[25] The authors cite the judgment of Robertson J in Somervilla Orchards Ltd v Auckland Investments (2003) Ltd as an applicable example of the Court’s permitting the lodging of a second caveat.10 Importantly, Robertson J recognised:
[11] The real issue in the case has always been an application for specific performance. It is always the case that the Court may order damages in lieu, but that is a discretion to be exercised in the totality of the circumstances. Pending the hearing of an appeal it is important that the right to obtain that relief is not rendered nugatory.
[26] His Honour also noted that should any detriment flow against the registered proprietor through the lodging of a second caveat or a stay, the detriment was substantially cushioned by the substantial deposit which the registered proprietor had received.11
[27] Mr Wright, for the respondents in this case, submitted that the approach in Somervilla Orchards may be distinguished because the Court of Appeal (Civil) Rules have since been amended in a way which may make the imposition of a stay pending appeal a meaningful alternative to a second caveat. I do not find it necessary to examine that submission further because the jurisdiction to grant permission to lodge
a second caveat clearly exists. Provided it is exercised in a principled manner, it is a
9 Hinde McMorland & Sim Land Law in New Zealand (online looseleaf ed, LexisNexis) [10.020(i)] (citations omitted).
10 Somervilla Orchards Ltd v Auckland Investments (2003) Ltd HC Auckland CIV-2004-404-1819,
3 September 2004.
11 At [24].
legitimate and alternative means of protecting in the interim a person who claims an interest in land.
The father’s case
[28] I consider the circumstances of these proceedings by analogy to the factors which the Court takes into account on a stay application, as those will inform a decision as to the just outcome. Mr Wright invoked the list of factors identified by the Court of Appeal in Yan v Mainzeal Property and Construction Ltd (in rec and in liq).12
[29] As much of the focus of the submissions which I heard was on the question of whether the applicants have a good case at all, I begin with a discussion of the son’s case, in the context of the final consideration under the Yan guidelines, being the apparent strength of an appeal (or in this case, more appositely, the strength of the proposed proceeding for specific performance).
[30] Both counsel accepted that the pre-auction agreement and the (auction) agreement itself must be read together. Mr Wilson went so far as to submit that they truly constitute a single contract. On any approach, one cannot be read without the other.
[31] The most unfortunate feature of this case lies in the drafting of the pre- auction agreement. Unlike the (auction) agreement which is a commercially prepared, comprehensive form of contract,13 the pre-auction agreement occupies six lines of Chinese text and is clearly intended to introduce into what may become a binding contract at auction a mechanism for an additional, initial payment and the possibility of later refund. When the respondents and the son subsequently signed the (auction) agreement following the auction, that document recorded the agreed
purchase price as $1,180,000.
12 Yan v Mainzeal Property and Construction Ltd (in rec and in liq) [2014] NZCA 86, (2014) 22
PRNZ 296 at [25].
13 Adopting the REINZ/ADLS standard form (4th ed, 2012(3)).
[32] Mr Wright submits that the pre-auction agreement has a clear meaning and that a resort to principles or interpretation such as those identified in Vector Gas Ltd v Bay of Plenty Energy Ltd will not alter the meaning that is plain on the face of the document.14 Mr Wright submits that that meaning is:
(a) the respondents agreed to sell the property to the son; (b) the purchase price is $1,260,000;
(c) the scheduled auction was to proceed with the son making an opening bid of $1,100,000;
(d)the son was in advance to transfer “the difference” of $160,000 to the respondents’ account (the reference in the pre-auction agreement itself to “the buyer’s bank account” being plainly an error); and
(e) if the auction price was between $1,100,000 and $1,260,000, the seller would refund the overpayment to the son.
[33] For the applicants, Mr Wilson submits there is a different and more logical interpretation of the pre-auction agreement (as also influenced by the subsequent (auction) agreement), being:
(a) the respondents agreed to sell the property to the son, but with final details of the sale to become fixed depending on the outcome of the auction;
(b)the purchase price was tentatively $1,260,000, but subject to variation according to the final auction price;
(c) the son is making an offer of a starting price of $1,100,000;
(d) the son is to now transfer $160,000 to the respondents’ account;
14 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] 2 NZSC 5, [2010] 2 NZLR 444.
(e) if the final auction price was between $1,100,000 and $1,260,000 with the son as buyer, then the respondents were to refund from the
$160,000 the difference between the final auction price and
$1,260,000; and
(f) the respondents were free at the auction to sell the property to someone else at a price above $1,260,000 and the son was also permitted to buy above that figure.
[34] Counsel engaged in detailed submissions as to the logic or otherwise of the competing interpretations. The need to resort to arguments as to whose is the more logical interpretation of a contract reinforces the measure of ambiguity that is evident in the short pre-auction agreement. I do not find it clear beyond argument that the son, if successful, as bidder at auction, has to pay the full $1,260,000 as against the
$1,180,000 that the (auction) agreement records as the purchase price.
[35] As Mr Wilson submits, an implication of the last paragraph of the pre-auction agreement is that the difference between the starting price of $1,100,000 and the final price is to come from the $160,000 which the son was pre-paying.
[36] To the extent that the price agreed at auction was $1,180,000, I find it at the very least arguable that the son had made an excess payment of $80,000, which he was entitled to have “refunded” to use the express word of the pre-auction agreement or brought into account as a matter of efficacy.
[37] Notwithstanding the apparent existence of a relationship between the pre- auction agreement and the (auction) agreement, the respondents’ solicitors issued their settlement statement on 6 March 2015 as if the applicants had made no payment on account of a purchase price (of $1,260,000) other than the deposit of
$118,000 paid on the day of the auction.
[38] It is at least arguable that the respondents were by their contractual arrangements required to take into account in the settlement statement the $80,000 which exceeded the agreed opening bid of $1,100,000. I also find it arguable that the
contractual arrangements required the respondents (if the son requested that the
$80,000 “refund” be appropriated to the purchase price) to take the full $160,000 pre-payment into account.
[39] Mr Wright submitted in relation to the entitlement to a refund of $80,000 that the son would not have been entitled to an equitable set-off of the $80,000 so as to bring it into account on settlement. The implication of Mr Wright’s argument is that the respondents were contractually entitled to retain the sum of $80,000 representing the “refund” and to pay that, at some point of their choosing or some later reasonable time, to the applicant. In my judgment, there is at least an arguable case upon principles of contractual interpretation (without resort to equitable set-off principles) that the buyer was entitled to insist on having the full pre-payment of $160,000 taken into account at settlement.
[40] In these circumstances I do not examine further the detailed, additional submissions filed by Mr Wright, with leave, following the hearing. Mr Wright referred to the provisions in the (auction) agreement – the REINZ/ADLS standard form (4th ed, 2012(3)) – which expressly provide a regime for purchasers’ set-off claims.15 Those provisions were brought into the standard form to deal, in a detailed way, with the situation which arose, through use of an older, less detailed form, in Propery Ventures Investments Ltd v Regalwood Holdings Ltd.16 There is strength in Mr Wright’s submission that the applicants in this case lost any right to claim a set- off when they failed to give the stipulated form of set-off notice and to thereafter
follow the set-off settlement regime. I refrain from expressing a concluded view on the issue as the applicants have a reasonable argument as to accounting for pre- payment as a matter of contractual interpretation, independently of set-off principles.
[41] The failure of the respondents’ solicitors to account for the $160,000 in the settlement statement was the subject of an immediate email exchange. The applicants’ solicitors referred to the extra payment of $160,000 made as “further deposit” and asked for that sum to be included in the settlement statement. The
response from the respondents’ solicitors was:
15 Clause 9.
16 Propery Ventures Investments Ltd v Regalwood Holdings Ltd [2010] NZSC 47, [2010] 3 NZLR
231.
Our clients advise that they have not received any extra $160,000 from your clients.
[42] On the next day, the respondents’ solicitors issued the settlement notice referred to at [19] of Associate Judge Doogue’s judgment. They again did not take into account the $160,000 pre-paid. As the Associate Judge records, this led to a further exchange of letters in which the respondents’ solicitors maintained that there had been no additional payment.
[43] Mr Wright addressed detailed submissions as to a vendor’s right of cancellation when a purchaser does not correctly tender the settlement sum. He referred particularly to the judgment of Tipping J in Stewart v Davis as illustrating the principles involved.17 It may be, in this case, that the applicants did not correctly tender the correct settlement sum when confronted with a settlement statement and a settlement notice which they considered to stipulate an excessive settlement sum. But, as Mr Wright conceded upon the basis of the authorities, including observations of Tipping J in the same case, a subsequent purported cancellation of the sale
agreement is invalid where the settlement notice upon which it is based states a greater sum than the amount payable under the contract.
[44] Accordingly, as matters stand in relation to the agreement, it arguably remains in existence. If the applicants are in a position to complete the purchase either by now tendering the correct settlement sum or by responding in due course to a correct settlement notice, on that basis they are arguably entitled to completion of the contract. It matters not that they have earlier failed to tender settlement correctly. Mr Wright submitted that there remains an impediment to the applicants’ specific performance claim, namely that the applicants have not established even arguably that they are ready, willing and able to settle. He points to two matters. First, he notes that the initial advice by the applicants’ solicitors on the settlement date (6
March 2015) was that “our clients are not in a position to settle today”. That statement cannot be conclusive of the applicants’ current financial situation or of what their position will be at a later trial. The statement related to a particular point of time and was made when the respondents’ position was that the settlement
calculation excessively stated the contractual requirements by $160,000. Secondly, Mr Wright observes that the applicants’ evidence as to being “ready, willing and able to settle” is a bare assertion. That is correct, but the present context is not a trial in which such assertions can be reliably tested. The passage in Somervilla to which I have referred contains Robertson J’s recognition that the relevant time for considering whether equitable relief will be granted will generally be at trial.
Applicants’ bona fides in pursuing their claim
[45] Neither the father nor the son has yet commenced a substantive proceeding for specific performance although some six months has passed since the settlement date. Normally, this would cast serious doubt on the bona fides of the applicants in pursuing substantive relief. But I accept as relevant, as Mr Wilson submits, the number of litigation events which have since occurred. There was the first caveat proceeding and then the response to the first judgment by the filing of the present applications and a notice of appeal. Those will have inevitably required a focus which will have detracted from the resolution of the substantive issues. The steps they have taken to date indicate a serious intent. That intent cannot be dismissed as mere delaying tactics when the applicants clearly wish to recover value for the money they have already paid. In the circumstances, I do not find lack of bona fides on the part of the applicants. Mr Wilson accepted that any order made by this Court would properly be conditional upon the expeditious pursuit of a substantive outcome (and/or an appeal outcome).
Injurious effect of a caveat or stay
[46] The respondents have effective security in the form of the applicants’ 10 per cent deposit ($118,000) and the pre-payment of $160,000. For the reasons identified by Robertson J in Somervilla (at [26] above), the risk of detriment to the respondents does not assume the importance it may in other cases.18
Other specific factors
[47] Neither Mr Wilson nor Mr Wright submitted that there are circumstances in this case which call for consideration of:
· Effect on third parties.
· Novelty or important questions.
· Public interest.
I agree. Those considerations may be put to one side.
Overall balance of convenience
[48] I stand back. Central to this case is an unsatisfactorily and ambiguously drafted “pre-auction agreement” which has to be read with the later (auction) agreement. The parties understandably differ as to the combined effect of the two agreements. The applicants have paid substantial sums towards the purchase price. They have a good argument that they have an entitlement to be taken into account on settlement but the respondents insist on receiving at settlement a sum which ignores that entitlement. Exactly what contractual entitlements each party has are matters appropriately resolved not by a judgment of interim effect but through a trial of the substantive issues. The applicants are prepared to take the lead in pursuing substantive relief. It would equally have been open to the respondents to do so. The just interim outcome is that there is a preservation of the claimed interest. In the case of the applicants, that is most appropriately achieved by the lodging of a second caveat. In the case of the respondents, they have the comfort of knowing that
$278,000 of the applicants’ money is held. The respondents will have their right of
recovery of any additional damages if their position is ultimately vindicated.
[49] There are also available to the parties, if they agreed, alternative interim solutions which would allow settlement or cancellation to take place with the parties reserving rights to damages in the event that a subsequent declaration or other judgment is in their favour.
[50] It is appropriate that the father have leave to lodge a second caveat.
The son’s application for an order his caveat not lapse
The son’s caveat
[51] The son’s caveat is in the following terms:
Estate or Interest claimed
Pursuant to an agreement for sale and purchase dated 3 February
2015 between Weijie Deng as purchaser and the registered proprietors as vendor.
[52] In support of his application, the son (Weijie Deng) has provided affidavit evidence. He refers to the history of dealings as identified in the first caveat judgment. He identifies the fact that the settlement amount ($1,062,224.91) stated in the respondents’ settlement notice of 6 March 2015 took into account the deposit ($118,000) paid on the day of auction but gave no credit for the $160,000 paid beforehand.
[53] The applicant’s lawyers by letter dated 20 March 2015 notified the respondents’ lawyers that the settlement statement was defective through failure to allow for the sum of $160,000. The respondents’ lawyers emailed a response on 23
March 2015. They asserted that nothing other than the $118,000 constituted a deposit and that the settlement notice was accordingly still effective. In the meantime the father had lodged the first caveat.
[54] The son deposes:
I with my father’s financial assistance wish to purchase the property and have at all times been ready willing and able to purchase the property but the Respondents need to properly account for the two deposits paid to them.
The respondents’ grounds of opposition
[55] The respondents identify, in opposition, the following grounds of fact or mixed fact in law:
(a) The pre-auction agreement did not expressly or implicitly require the respondents to treat the $160,000 payment as a deposit to be taken into account on settlement of any purchase of the property (with the consequence that the pre-auction agreement and the agreement are to be performed and operate separately).
(b)Consequently, the applicants are not entitled to have the $160,000 deducted from the purchase price of the property.
(c) Consequently, the respondents’ settlement notice identified the correct sum as the balance required for settlement.
(d)The applicants were never ready willing and able to settle on any basis.
(e) The applicants failed to comply with a valid settlement notice.
(f) Consequently, the respondents were entitled to cancel which they did by letter dated 13 April 2015.
(g)In relation to the son’s application, the son has no estate or interest as the Deed of Nomination acted as an assignment of all the son’s rights and interests.
(h)In relation to the father’s application, the intended caveat is a second caveat (i.e of s 148 Land Transfer Act 1952) and the father ought not to be granted leave to register a second caveat under s 148(1) of the Act.
(i) In relation to the son’s application, the caveat is “effectively” a second
caveat lodged without leave under s 148(1) of the Act.
(j) The son’s caveat ought to lapse as a matter of the Court’s discretion
on the basis it serves no useful purpose.
Overview – relationship of son’s and father’s application
[56] Mr Wilson accepted in the course of his submissions that the father’s and son’s applications were effectively pursued in the alternative. Mr Wilson indicated that were I to grant the father’s application, an order in the son’s favour was no longer required.
[57] Given the conclusion I have reached on the father’s application, and having regard to the interlocutory nature of the evidence and argument before me, I will refrain from detailed discussion of the submissions which counsel focused on the son’s position.
[58] The findings which I have made as to the two agreements and as to an arguable case to pursue specific performance have general application to both father and son.
[59] There is however a strong argument (for the respondents) that the son, by assignment to the father on 19 March 2015, gave up all right and interest in the (auction) agreement, and thereby in the property. Arguably the only person with an interest is the father (as the nominated purchaser who has also taken the son’s right and interest by assignment). The description of the deed as “Deed of Nomination” cannot alter the substantive effect of the words of the deed. The nomenclature adopted by the parties is not decisive, and so-called “nominations” may be found to
have been assignments.19 The present Deed of Nomination may be an example, but I
do not make a finding to that effect.
[60] A further consideration in relation to the son’s application for a stay is that, as between father and son, it was clearly intended from at least 19 March 2015 that it would be the father who would settle the purchase. As a form of interim protection, a second caveat to protect the father’s interest in the land is a more immediate and appropriate form of relief than a stay pending an appeal from the first caveat
judgment.
19 Field v Felton [1988] 1 NZLR 482 (CA) at 491 – 492.
[61] This is a case in which the residual discretion under s 148(1) Land Transfer Act ought to be exercised to allow the son’s caveat to lapse. The son chose to nominate his father as purchaser. His father will by this judgment resume his caveator status. A second caveat (from the one family) over the title serves no useful purpose.
Costs
[62] The appropriate costs outcome in relation to the two proceedings is complicated by the fact that they were sensibly heard together with single sets of submissions and a single hearing.
[63] In substance, the father has succeeded on his application. The son could be said to have failed, but that is predominantly because his application was correctly to be viewed as in the alternative.
[64] The disbursements in each case ought to be payable by the losing party. That is to say, the respondents on the father’s application and on the son’s application. But costs more appropriately might be dealt with by a combined approach if the parties agree, which would take into account the substantial overlap of fact and submission in the two proceedings. The Court needs to recognise the success in preserving the interim position but also the almost inevitable outcome whereby at least one of the applications has been dismissed. I tentatively view as a just outcome an award in the father’s favour of costs on a 2B basis but discounted by 50 per cent. There would be no costs on the son’s application.
[65] Counsel are to confer with the view to reaching an agreement on costs. Otherwise the directions with a costs judgment are then delivered on the papers.
Orders
[66] I order:
(a) The application of Qingqi Deng for an order recalling the judgment of
3 July 2015 is dismissed.
(b)There is an order granting leave to the applicant Qingqi Deng to lodge a second caveat over 52B Peary Road, Mt Eden, Auckland being a Joint Tenancy of Fee Simple and half share of Lot 63 Deposited Plan
169602, more particularly referred to in Certificate of Title NA
103B/841 (“the property”).
(c) As a condition of the Court’s order at [64](a) above, the applicant
Qingqi Deng shall:
(i)within 10 working days file in this Court and serve any proceeding (the proceeding) which he intends to pursue in relation to the specific performance of the agreements dated 30
January 2015 and/or 3 February 2015;
(ii)promptly thereafter pursue in this Court the progress of the proceeding to ensure it is expeditiously brought to a substantive hearing. Without limiting that requirement, he shall meet all timetable requirements and directions applying to the proceeding; and
(iii)within 10 working days through counsel either notify the respondents that his appeal to the Court of Appeal is not to be pursued (and then take steps to abandon it) or, if the appeal is to be pursued, through counsel, confer with the respondents as to a timetable for the expeditious pursuit of such appeal and thereafter expeditiously pursue the appeal to its hearing.
(d)Pending the decision of the applicant, Qingqi Deng, pursuant to the order at [64](c)(iii) above, there is an order (until further order) staying further execution of the judgment of 3 July 2015 but with the stay application otherwise adjourned.
(e) In the event of Qingqi Deng’s breaching the conditions at [64](c)
above, the respondents have leave on three days’ notice to have
Qingqi Deng’s application brought on for consideration, having regard to the seriousness of the breach, whether the second caveat shall lapse.
(f) There is an order that caveat no. 10007310.1 North Auckland Registry lodged by the applicant, Weijie Deng, against the title to the property shall lapse immediately upon the registration of the second caveat of Qingqi Deng against the second title.
(g)Costs are reserved. In the event of disagreement, memoranda (no more than five pages) are to be filed and served (applicants’ first and respondents’ within five working days thereafter).
Associate Judge Osborne
Solicitors:
Loo & Koo, AucklandCounsel: D K Wilson, Barrister, Auckland Fencible Law, Auckland (Kelly McCullough) Counsel: Peter J Wright, Barrister, Auckland
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