Easternmanor Development Limited v Yeshe Development Limited
[2023] NZHC 2317
•24 August 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-600
[2023] NZHC 2317
BETWEEN EASTERNMANOR DEVELOPMENT LIMITED
Plaintiff
AND
YESHE DEVELOPMENT LIMITED
Defendant
Hearing: 15 August 2023 Appearances:
R O Parmenter for Plaintiff N C King for Defendant
Judgment:
24 August 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 24 August 2023 at 4.15pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
……
EASTERNMANOR DEVELOPMENT LIMITED v YESHE DEVELOPMENT LIMITED [2023] NZHC 2317
[24 August 2023]
[1] By three separate agreements for sale and purchase dated 21 October 2021 (the contracts), Easternmanor Development Limited (EDL) sold three vacant Lots (the properties) in a subdivision to Yeshe Development Limited (Yeshe). EDL had purchased the properties from a company called Acanthus Limited (Acanthus). All three contracts contain the same terms including price. Settlement was 20 working days after the issue of titles.
[2] The agreements recorded that EDL was purchasing from Acanthus and made the contracts between EDL and Yeshe conditional upon EDL’s purchase from Acanthus becoming unconditional.
[3]The agreement between Acanthus and EDL contained the following clauses:
22.4Subject to clause 22.5 below, the Purchaser shall not nominate, assign, transfer, or otherwise dispose of or alienate the benefit of this Agreement or on-sell the Lot, without the prior written consent of the Vendor, which consent shall not be unreasonably or arbitrarily withheld or delayed.
22.5Neither the Purchaser nor the Purchaser’s agent shall publicly market the section for sale, whether online or in print media, until such time as the Certificate of Title to the Lot has issued. If the Purchaser wishes to publicly market the Lot for sale (whether the transaction is to be by way of a nomination, assignment or an on-sale), then the Purchaser must obtain the Vendor’s prior written consent. Such consent shall be granted at the Vendor’s sole and absolute discretion.
[4] Yeshe was provided with a copy of the contracts between Acanthus and EDL late on 21 October 2021, that is after Yeshe had signed the contacts.
[5] Titles issued on 21 November 2022 making 19 December 2022 the settlement date. Matters were complicated when on 18 November 2022, Yeshe was removed from the Companies Register for not filing its Annual Return. Yeshe was not restored to the Register by its directors until 24 January 2023. EDL says it could not issue a settlement notice until Yeshe had been restored to the Register. A settlement notice was issued on 13 February 2023 and EDL cancelled the contract on 3 March 2023.
[6] EDL seeks summary judgment against Yeshe for losses it says it has suffered from the value of the property having fallen from the price Yeshe agreed to pay.
[7]The above timeline is not disputed by Yeshe.
Summary judgment principles
[8] EDL must prove a negative, that is, it must demonstrate Yeshe has no defence to the claims and therefore no real question to be tried.1
[9] The Court must be left without any real doubt or uncertainty. EDL has the onus but where its evidence is sufficient to show there is no defence, Yeshe will have to respond if the application is to be defeated.2
Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.3
[10] In the end, the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.4
[11] Against that robustness, it is equally important that a defendant should not be shut out of a genuine defence.5
[12] Common-sense, flexibility and justice are required. The defendant should identify any arguable defence with a reasonable level of detail.6
[13]The above summary is taken largely from Sim’s Court Practice.7
1 Pemberton v Chappell [1987] 1 NZLR 1 (CA).
2 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
3 Eng Mee Yong v Letchumanan [1980] AC 331 at 341.
4 Bilbie Dymock Corp Ltd v Patel & Bajaj (1987) 1 PRNZ 84 (CA).
5 Doyles Trading Co Ltd v West End Services Ltd [1989] 1 NZLR 38 (CA).
6 Haines v Carter [2001] 2 NZLR 167 (CA).
7 Laura O’Gorman (ed) Sim’s Court Practice (online ed, LexisNexis) at [HCR12.1].
The defences raised by Yeshe
(1)Breach of the Fair Trading Act 1986 – when were titles to issue?
[14] Mr Miao in his affidavit in support of the opposition says: “the agent for the Plaintiff stated the titles for the properties would be available in March/April 2022 at the latest”. Mr Miao refers to a WeChat message exchange with the agent, who I will refer to as “Gary”. What Gary said in a WeChat message dated 3 February 2022 was:
Mr Miao: Asked whether there is any update on the estimated time for settlement? Is it still sticking to the plan?
Gary:Say May to June. The Developer said to us it will be around May to June. Building consent can be submitted right after the 223 is issued.
Mr Miao: Settlement will be around May to June, right?
Gary:Although this is what they said, I think you should allow 1 or 2 month more, because council is a bit slack these days.
[15] This exchange is not relied on as a precontractual misrepresentation as it came after the contracts. By this stage, Yeshe was committed to purchase the properties.
[16] It is noteworthy that Gary refers to what the developer said. It is clear from a subsequent email, which is referred to at [27] below, that the developer is Acanthus, not EDL. Gary’s role as agent for EDL in relation to the properties subject to the contracts, would normally have ended upon the signing of the contracts by Yeshe three months prior. Gary does not purport to be acting on behalf of EDL in this message. That Mr Miao may have assumed Gary was acting for EDL is not enough. Absent evidence Gary continued to be EDL’s agent in respect of the three properties or generally, or that EDL held him out as such, what Gary said to Mr Miao does not affect EDL. In any event, even if Gary was EDL’s agent, in this message he is only a conduit for what the developer, Acanthus, had advised.
[17] Mr King, counsel for Yeshe, submitted that because of the delay in obtaining titles, the value of the properties had fallen such that Yeshe’s finance could not be obtained. However, Yeshe was committed to the purchases by the timeframe dictated by the contracts, which were not changed by anything Gary said in the above WeChat message. Again, there is no evidence that Yeshe was told by EDL or Gary prior to
21 October 2021 that titles would issue at any particular time. It is not claimed that the WeChat message caused Yeshe to act in a certain way or refrain from acting in a certain way, that is, there is no evidence Yeshe sought finance in February/April 2022 to put itself in a position to settle in June/July 2022. Remedies for breach of s 9 of the Fair Trading Act depend on what the innocent party has done or not done in reliance on the misleading conduct, not on the assumption that the misleading statement was true.8
[18] I am satisfied that the contents of the 3 February 2022 WeChat messages do not provide an arguable defence to EDL’s claim.
(2)The contractual restriction on EDL reselling
[19] Yeshe relies on EDL’s agreement with Acanthus that EDL would not on-sell the properties without Acanthus’ prior written consent, nor would it market the properties without such consent. As mentioned, Yeshe was provided with a copy of the contracts between Acanthus and EDL containing the restriction. No query about this restriction was raised by Yeshe’s solicitors. Mr Miao says he assumed Acanthus had consented to the on-sale to Yeshe.
[20] Yeshe seeks to develop two defences based on the restrictions. Firstly, EDL did not have the power to resell at all and thus Mr King questions the validity of the contracts. Secondly, when Yeshe itself sought to resell prior to the issue of titles, the restrictions prevented it reselling or at least caused Yeshe difficulties in doing so.
(3)Do the restrictions on EDL’s right to resell affect the validity of its contracts with Yeshe?
[21] I am satisfied the restriction in relation to on-selling between Acanthus and EDL does not impact on the validity of the contracts between EDL and Yeshe. Mr King sought to characterise the clauses as a condition which would mean the contracts between Acanthus and EDL remained conditional in some way. In my view, it is incorrect to characterise the clause as a condition. Mr King submitted that EDL’s
8 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at 401-402.
contract with Acanthus was not unconditional of the restrictions. It will be recalled that EDL and Yeshe’s contracts were subject to a condition that the EDL and Acanthus contracts become unconditional.
[22] I am satisfied the relevant clauses do not create a condition in the sense they left the EDL-Acanthus contracts conditional. The clauses are a restriction on EDL’s right to sell and to publicly market the properties. The contracts between EDL and Acanthus did not somehow remain conditional up until settlement and only become unconditional the moment before settlement, because only then would it be certain EDL had not resold. Whether EDL breached its obligation to Acanthus is an issue between them.
[23] As Mr Parmenter, counsel for EDL, submitted, a vendor can enter into a binding contract to sell a property they do not own so long as they are able to settle on settlement date. Again, Yeshe was aware of the clauses set out at [3] above. Sale of Land notes a purchaser who is uncertain as to the vendor’s ability to deliver, can seek an assurance that the vendor will be able to settle.9
[24] Further, Mr Parmenter notes (and as will be explained below), that when Mr Miao of Yeshe was told by Gary that Acanthus was relying on the restriction on on-selling and marketing, no protest was raised by Yeshe with EDL and its solicitors continued to work towards settlement (notwithstanding Yeshe being struck off the Register on 18 November 2022).
[25] I am satisfied that this issue does not provide a defence to Yeshe. Mr King did not dispute that at the time settlement notices were issued and at the time of cancellation, EDL was ready willing and able to settle. EDL’s breach of contract with Acanthus (if that is the case) did not impact on the validity of the contract between EDL and Yeshe.
9 D W McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at 9.11(a).
(4)Did the on-sale restriction impact on Yeshe?
[26] The second defence said to arise from these provisions is that the restrictions prevented Yeshe reselling the properties before it was required to settle. The timeline in respect of resale is as follows.
[27] On 7 June 2022, Yeshe asked Gary to sell the properties on its behalf. Mr Miao’s evidence on this issue is as follows:
39.This had an impact on the Defendant when we were trying to market and sell the sections in September 2022. On 07 June 2022, we requested Gary Qi, the real estate agent, to sell these sections for us.
40.Gary responded and said he would plan for our request. But not until 09 September 2022, I tried to follow up again with Gary, he said he would market it for us.
41.On 19 September 2022, we were told by Gary that Acanthus had found out he were trying to market it on TradeMe and had asked him to take the advertisement off as it is not allowed. (emphasis added)
[28] Mr Miao’s paragraph 41 above is referring to a WeChat message of 19 September 2022 in which Gary recorded that: “We have already put the advertisement on” trademe for the properties. Mr Miao asked “Are the sections all in the same stage?” Gary responded that he “can only ad for a land and home package as the developer do not allow advertising to be delivered before the sections are settled.” (emphasis added)
[29] Gary later said in the exchange: “Before the settlement we can only do so much, as the developer is being very strict, not allowing any advertising.”(emphasis added)
[30]On 23 October 2022, Gary messaged Mr Miao to say:
The vendor said to me, we were worried that the developer does not allow them to resell, and then they went to check with the developer, and now they have got an OK from the developer to resell”.
[31] As aforementioned, it is clear that when Gary, in his 3 February 2022 message (set out at [14] above), referred to the developer, he was referring to Acanthus.
Mr Miao’s evidence at [41], set out above at [27] above, shows he understood Gary’s 19 September 2022 reference to the developer was to Acanthus.
[32] Mr King submitted it was arguable that in the 19 September 2022 message, Gary was acting as an agent for EDL. Other than Gary having acted as agent for EDL on the contracts entered not quite a year earlier, there is no evidence to show that Gary continued to be an agent for EDL. Gary’s 19 September 2022 message to Yeshe was in the context of Gary having been asked to list the properties for sale by Yeshe. Whatever other roles Gary had in the 19 September 2022 email, he is acting for Yeshe on its sales or perhaps passing on a message from Acanthus, but not EDL.
[33] In any event, Yeshe was under no contractual restriction on reselling the properties. While it is not entirely clear, it seems Gary was acting for, or at least had a connection with, Acanthus given his 19 September 2022 WeChat message. While it is understandable that Yeshe approached Gary to resell the properties given he was familiar with them, Yeshe was free to approach another agent to sell on its behalf given it was not subject to any contractual restrictions in that regard.
[34] Further, the timeline shows that Yeshe was not in any hurry to get the properties on the market. On 7 June 2022, Yeshe asked Gary to list the properties. Nothing seems to have happened until 9 September 2022 when Yeshe chased up Gary who said he would then list the properties. The properties then went onto the trademe website resulting in the 19 September 2022 WeChat message, but by 23 October 2022 Yeshe had been given the OK to list the properties but does not appear to have done so. In any event, Yeshe was removed from the Register on 18 November 2022 and was unable to market or sell the properties until it was restored to the Register.
[35] I do not consider Yeshe has an arguable defence arising from the 19 September 2022 WeChat message. It was under no contractual restriction on reselling the properties, if its agent Gary, led Yeshe to believe it could not resell the properties, then that is a matter between Yeshe and Gary.
Misrepresentation as to value
[36] While not referred to in the notice of opposition, the statement of defence asserts: “The initial three valuations for the three properties given by the Plaintiff and their agent over valued [the properties] …”. Mr King did not develop this defence in his submissions. Mr Miao’s affidavit does not produce any valuations said to have been provided prior to the contracts on 21 October 2021. Mr Miao notes the prices on the contracts between Acanthus and EDL, provided to Yeshe on the evening of 21 October 2021, had the prices covered by black marker pen. Such is hardly surprising in an on-sell situation and does not amount to a misrepresentation, in any event, the contracts had been signed by this time.
[37] That EDL sold the properties at a profit to Yeshe is of no moment. Mr Miao asserts that:
Between 21 Oct 2021 to 05 April 2022, Gary confirmed a few times that the section price is stable with no change to what Yeshe has purchased for.
[38] This refers to matters post-contract and cannot found a pre-contractual misrepresentation claim. In any event, such comments were probably no more than Gary’s opinion as a real estate agent and not as a valuer.
Date at which loss is to be calculated
[39] EDL calculates its loss in respect of each property as at the date of cancellation. Its loss calculation is as follows:
a. Capital loss for lot 2022: Sale price (inc. GST) $573,913.00 Less current valuation (inc. GST) $382,608.00 Less current valuation (inc. GST) $191,305.00 Less deposit taken - $ 57,391.30 Net loss ($133,914.00)
[40] The contracts were plus GST if any. EDL initially added GST to the purchase price in its damages calculations. It was common ground that had the contracts settled they would have been zero rated for GST. In discussions with counsel, I said it was my view that the purpose of damages was to put EDL into the position it would have been in had the contracts settled. If settlement had occurred, then the transactions
would have been zero rated for GST. Damages to replicate that outcome should therefore have no GST.
[41] For the moment, I approach the assessment of loss on that basis. Given this was a view put to counsel during the hearing and they had not had a chance to reflect on it, I reserve leave for counsel to file further submissions on this point and in particular, any expert advice that might be obtained on the GST position, should it be incorrect. Any such submissions are to be filed within five working days (that is by Thursday 31 August 2023).
[42] I am satisfied that the appropriate date to calculate loss is the date of cancellation. Yeshe did not produce a valuation as at the cancellation date. Therefore, EDL’s evidence of loss as at that date is not challenged. I adopt the cancellation date largely because between 18 November 2022 and 24 January 2023 Yeshe did not exist, having been removed from the Register. Until Yeshe was restored to the Register, EDL could do nothing in terms of advancing the purchases one way or the other. It was not until 16 December 2022 that Yeshe’s solicitors (apparently unaware their client had been struck off the Register) advised EDL that Yeshe could not obtain finance to settle.
[43] Mr King submitted that if damages were quantified as at settlement date, that the damages would be less, given the market was continuing to fall. I see no basis for EDL as the innocent party bearing the consequences of Yeshe’s breach of contract.
[44] Mr King submitted that EDL’s approach to loss is hypothetical as none of the properties have been resold. However, calculating EDL’s loss does not require it to have re-sold the properties. EDL is entitled to be put into the position it would have been in had the sale of properties settled. As it is, EDL now has properties worth less than the original sale price. Damages will only give EDL a total value that equates to what it would have received on settlement, albeit now made up of the properties at their present value, plus damages.
Orders
[45] There is judgment for Easternmanor Development Limited on its three causes of action against Yeshe. The loss in each case is the same being $133,914.00. Accordingly, the total judgment sum is $401,742.00.
Interest
[46] EDL seeks interest on the damages amount from the settlement date until payment pursuant to the Interest on Money Claims Act 2016. That is appropriate and I so order.
[47] Interest is also sought from settlement date (19 December 2022) to cancellation. Mr Parmenter notes penalty interest under the contracts is not claimable where EDL has cancelled the contracts.10 Mr Parmenter’s point is that EDL would have had its funds on 19 December 2022 and so should have interest through to the date of cancellation. This claim is pleaded as a loss, in substance a claim for interest as damages. Other than submitting damages should be assessed at settlement date, Mr King’s written submissions did not address this claim.
[48] There is judgment for Easternmanor Development Limited in terms of paragraphs 12.b, 22.b and 32.b, being what amounts to interest as damages claim for the period from the settlement date to cancellation.
Costs
[49] Costs are reserved. However, EDL has been successful. If no costs submissions are filed within five working days then the order of the Court shall be that EDL is entitled to costs on a 2B basis in respect of this proceeding. If costs submissions are filed by EDL, of not more than five pages, then Yeshe is to respond
10 Robertson v Agri Trustee Company Ltd [2013] NZHC 3479.
within 10 working days, again its submissions to be not more than five pages and I will deal with costs on the papers.
Associate Judge Lester
Solicitors:
Heritage Law, Auckland (for Plaintiff) Elite Legal, Auckland (for Defendant)
Copy to counsel:
R O Parmenter, Barrister, Auckland (for Plaintiff) N King, Barrister, Auckland (for Defendant)
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