FINSBURY TRUSTEE LIMITED AND LI ZHANG
[2024] NZHC 2935
•10 October 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-883
[2024] NZHC 2935
BETWEEN FINSBURY TRUSTEE LIMITED
Plaintiff
AND
STEPHEN COWELL and LI ZHANG
Defendant
CIV-2024-404-897 BETWEEN
FINSBURY TRUSTEE LIMITED
PlaintiffAND
LI ZHANG
Defendant
Hearing: 2 October 2024 Counsel:
P J K Spring/ M Flood for the Plaintiff P Napier / R Wang for the Defendants
Judgment:
10 October 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 10 October 2024 at 10 am.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel:
Keegan Alexander Solicitors, Auckland K3 Legal, Auckland
FINSBURY TRUSTEE LTD v ZHANG [2024] NZHC 2935 [10 October 2024]
Table of contents:
Paragraph
Introduction [1]
Summary judgment principles [8]
What pre-contractual statements are attributed to Mr Ma? [11]
If the statements were made, what did those statements mean and was
there a misrepresentation? [20]
Could the statements found an estoppel? [37] Did Ms Zhang and Mr Cowell reasonably rely on the statements? [41] Conclusion on liability [91]
Is specific performance of the contracts an appropriate remedy? [94] Orders [110]
Introduction
[1] The plaintiff, Finsbury Trustee Limited (Finsbury), is the developer of apartments on Great South Road, Auckland, known as “Park Ave”. Initially, Finsbury marketed its development off the plans before construction.
[2] The defendants, Li Zhang (Ms Zhang) and Stephen Cowell (Mr Cowell), are married. On 23 May 2021, Ms Zhang signed a contract to purchase residence 27 in Park Ave, and Ms Zhang and Mr Cowell signed a contract to purchase residence 26 (the contracts). They paid deposits of $189,750 for each unit.
[3] Finsbury completed construction of the units, and the contracts became unconditional. Settlement was due on 25 March 2024. Ms Zhang and Mr Cowell failed to settle. Finsbury has applied for summary judgment for an order requiring Mr Cowell and Ms Zhang to specifically perform the contracts.
[4] Mr Cowell and Ms Zhang oppose the application. They say that they are entitled to cancel the contracts based on misrepresentations made to them before they signed the contracts by a salesperson acting for Finsbury, Martin Ma (Mr Ma). Ms Zhang and Mr Cowell advance three defences:
(a)Finsbury engaged in misleading or deceptive conduct in breach of s 9 of the Fair Trading Act 1986 (FTA);
(b)they were induced to enter into the contracts by the misrepresentations, entitling them to cancel under s 37 of the Contract and Commercial Law Act 2017 (CCLA); and
(c)they relied on the misrepresentations when they entered into the contracts and Finsbury is estopped from enforcing the contracts.
[5] Finsbury says that no misrepresentations were made, and even if misrepresentations were made, the contracts included a clause which prevents Ms Zhang and Mr Cowell from relying on any pre-contractual statements.
[6] If the contracts are held to be enforceable, Ms Zhang and Mr Cowell argue that specific performance should be declined because they do not have the financial means to complete settlement of either contract.
[7] The application for summary judgment can be resolved by considering the following issues:
(a)What pre-contractual statements are attributed to Mr Ma?
(b)If the statements were made, what did those statements mean and was there a misrepresentation?
(c)Could the statements found an estoppel?
(d)Did Ms Zhang and Mr Cowell reasonably rely on the statements?
(e)Is specific performance of the contracts an appropriate remedy?
Summary judgment principles
[8] The Court may give judgment against a defendant if satisfied that the defendant has no defence to a cause of action in the statement of claim.
[9] The leading authority on applications for summary judgment is Krukziener v Hanover Finance Ltd.1 The Court of Appeal set out the following principles:2
(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, there is no real question to be tried. The Court must be left without any real doubt or uncertainty.
(b)The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.
(c)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is not consistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. 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.
[10] The defendant is under an obligation to lay a proper evidential foundation for the defence in the affidavits filed in support of the notice of opposition.3
What pre-contractual statements are attributed to Mr Ma?
[11] Mr Ma was engaged by Conrad Properties Group (Conrad), which marketed Park Ave for Finsbury.
[12] Finsbury accepts that Mr Ma was acting on its behalf and as its agent, although not as a real estate agent.
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.
2 At [26].
3 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.
[13] The statements attributed to Mr Ma by Ms Zhang and Mr Cowell are alleged to have been made at an in-person meeting on 23 May 2021.
[14] Ms Zhang and Mr Cowell say that Mr Ma said that they would never have to settle the contracts, because Mr Ma would on-sell the units for them before settlement was due, at a profit. Ms Zhang and Mr Cowell expected that their deposits would be held by Finsbury for nine to 12 months, and then released to them after Mr Ma had found another buyer for the units. They expected to make a profit on the on-sales of
$30,000 to $50,000 for each unit.
[15] Ms Zhang says that Mr Ma was aware that they did not have the ability to settle the contracts, and that Mr Ma told them that the properties would definitely be on-sold before settlement. Mr Ma said that they could leave it to him, there would be no need to sell the units until construction of the development started, and there was “no way we wouldn’t be able to on-sell the property by 2024.” Mr Ma described it as a rare opportunity for Ms Zhang and Mr Cowell to purchase and resell for a profit instead of settling.
[16] Mr Cowell and Ms Zhang seek to corroborate their own evidence with affidavit evidence from Solomon Tseng (Mr Tseng), regarding his purchase of a unit in the development. Mr Tseng’s evidence is that, before he signed his contract, Mr Ma assured him that Mr Ma would on-sell his unit within 18 months and before Mr Tseng was required to settle the purchase, so that Mr Tseng would not be required to settle.
[17] Mr Tseng also failed to settle his contract. Finsbury sued him for specific performance and that proceeding has been settled on a confidential basis.
[18] Mr Ma’s affidavit evidence is that he is an experienced real estate salesperson. He does not profess to be a licensed real estate salesperson. He says that Mr Tseng is associated with Ms Zhang and Mr Cowell, and that Ms Zhang was the primary contact for all three.
[19] Mr Ma accepts that he made statements regarding his previous experience with on-sales at a profit in other developments managed by Conrad. However, he says that
he never said that Ms Zhang, Mr Cowell or Mr Tseng would not be required to settle their contracts. Mr Ma says that he was aware that Ms Zhang owned two properties in China, and he believed she had the means to settle. Mr Ma denies giving any assurances regarding the likelihood of an on-sale of the units or expected profits.
If the statements were made, what did those statements mean and was there a misrepresentation?
[20] Misrepresentations can be expressed or implied by the words and conduct of a party.4 An important question in all misrepresentation cases is: what was the meaning of the misrepresentation? Was the statement made fairly capable of the meaning alleged?5 The meaning relied upon must be reasonable in all the circumstances.6
[21] A misrepresentation is a representation of past or present fact that is false or misleading and excludes statements of intention, opinion and law.7 However, a statement of intention impliedly asserts that the intention is genuinely held at the time the statement is made. If the intention is not genuinely held when the statement is made, then it is a misrepresentation of an existing fact.8
[22] A statement of opinion cannot support a claim for misrepresentation. However, a statement of opinion impliedly asserts that the opinion is genuinely held at the time the statement is made and may impliedly assert the existence of present facts providing the representor with a reasonable basis for their opinion.9
[23] When the representee knows that the representor cannot be certain of the statement’s truth, it is likely to be considered as a mere opinion.10
4 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [11.2.1(a)].
5 Magee v Mason [2017] NZCA 502, (2017) 18 NZCPR 902 at [26].
6 West v Quayside Trustee Ltd [2012] NZCA 232 at [30].
7 Weine v Tadd Management Ltd [2024] NZCA 323, (2024) 16 TCLR 855 at [29].
8 Buxton v The Birches Time Share Resort Ltd [1991] 2 NZLR 641 (CA) at 646–647.
9 Weine v Tadd Management Ltd, above n 7, at [29], citing Smith v Land and House Property Corp
(1884) 28 Ch D 7 (CA) at [15].
10 Ridgway Empire Ltd v Grant [2019] NZCA 134, (2019) 20 NZCPR 236 at [23]; and AE McDonald Ltd v Adams HC Wellington A318/82, 22 March 1985.
[24] Similarly, with respect to s 9 of the FTA, statements of opinion will generally not be actionable if they are reasonably held, reasonably based opinions.11
[25] For Ms Zhang and Mr Cowell, Mr Napier submitted that the statements attributed to Mr Ma were statements of intention and opinion that implied that the there was no risk of the properties not being on-sold before settlement.
[26] The nub of the alleged representation is that there was absolutely no risk to Ms Zhang and Mr Cowell in entering into the contracts. They would receive the profit on any on-sale, but any risk of the units on-selling at less than the price they contracted to pay, or alternatively not on-selling at all, was to be borne by others. Their deposits would be refundable no matter what.
[27] If Ms Zhang and Mr Cowell did not carry the incidence of the risk of a falling market, then that risk must have been borne by either:
(a)Finsbury, if Mr Ma’s representation was made with the actual or implied authority of Finsbury; or
(b)Mr Ma, if the representation was made outside of his actual or implied authority.
[28] This raises the issue of whether Mr Ma was expressly or impliedly authorised by Finsbury to make the alleged representation on Finsbury’s behalf. This issue has not been raised by Finsbury or argued by the parties. Finsbury’s application for summary judgment can be determined without resolving this issue.
[29] This case involves a speculative investment — the purchaser speculates that they will be able to on-sell the property at a profit before they are called upon to settle their purchase. This is not novel. Cases involving this type of investment, and allegations of misrepresentations by or on behalf of the vendor regarding the future state of the market, have come before the courts before.
11 Weine v Tadd Management Ltd, above n 7, at [26], citing Premium Real Estate Ltd v Stevens
[2008] NZCA 82, [2009] 1 NZLR 148 at [54].
[30] In Beech Cove Properties Ltd v Blair,12 Associate Judge Osborne (as he then was) dealt with a case involving a long-term agreement for the sale and purchase of an apartment in a development in Queenstown. The market had turned and the purchaser was called on to settle. The purchaser alleged that the vendor’s agent misrepresented that the purchaser would never have to settle the purchase because the purchaser would be able to on-sell the apartment prior to settlement for a profit.
[31] The Judge rejected those allegations and entered summary judgment for specific performance in favour of the vendor. Associate Judge Osborne held that the statements were an opinion as to what would happen in the future, honestly held. There was no expert evidence that the opinion could not have been rationally held given the state of the market at the time the opinion was given.13
[32] Associate Judge Osborne accepted that there is public awareness that the property market is cyclical. The agent’s opinion could not preclude substantial changes in world or New Zealand markets. The opinion could not be treated as being akin to a guarantee.14 The Judge rejected the FTA argument for the same reasons.15
[33] Lang J reached a similar result, after trial, in GNLC Ltd v Daji (No 2).16 Mr Daji and his interests had signed contracts to purchase five residential sections in a new development, under long-term agreements. Mr Daji alleged that he had signed the contracts relying on a misrepresentation from the vendor’s agent that the prevailing real estate market conditions and the surrounding infrastructure development were such that the land would increase in value by settlement, and there would be no difficulty in being able to on-sell the land before settlement was required.17
[34] Lang J held that any person making such a representation would be predicting a future state of affairs over which they have absolutely no control. The Judge considered that it was inherently unlikely that the agent would have suggested that
12 Beech Cove Properties Ltd v Blair HC Christchurch CIV-2009-425-161, 9 September 2009.
13 At [19]–[20].
14 At [21].
15 At [26].
16 GNLC Ltd v Daji (No 2) HC Auckland CIV-2009-404-8510, 16 August 2011.
17 At [12].
there would be no problem on-selling the sections before settlement.18 Lang J held that it was inconceivable that Mr and Mrs Daji would have remained silent once they knew that they would be required to complete the purchases of the sections within a couple of months. By then they would have known that they had no prospect of on-selling the sections prior to settlement. If their claims were genuine, they would have immediately told the vendor that they were not prepared to continue with the purchases. They did not do that.19
[35] The reasoning in Beech Cove and Daji applies with equal force in the present case. If Mr Ma made statements regarding expected movements in the property market in general, the value of the subject units, and the likelihood of on-sales at a profit, then these were statements of opinion. There is no evidence that those opinions were not genuinely held or could not have been rationally held.
[36] I find that the statements attributed to Mr Ma are not misrepresentations actionable under the CCLA nor misleading or deceptive conduct under the FTA.
Could the statements found an estoppel?
[37] Mr Napier submitted that, in the alternative, the requirements to establish a misrepresentation based on a statement of intention or opinion do not apply to the defence of estoppel.
[38] During oral submissions, Mr Napier clarified that the estoppel defence is based on an alleged promise by Finsbury, made by Mr Ma, that Finsbury would not call on Ms Zhang and Mr Cowell to perform their obligations under the contracts.
[39] There are four elements that must be established by a party asserting an estoppel, including that:20
(a)the party to be estopped has acted in a clear, unequivocable manner which has caused the claimant to have a certain belief or expectation;
18 At [22].
19 At [105]–[106].
20 BDM Grange Ltd v Trimex Pty Ltd [2017] NZCA 12, [2017] NZCCLR 11 at [71].
(b)the claimant has reasonably relied upon the belief or expectation;
(c)the claimant has suffered detriment by relying on the belief or expectation; and
(d)it would be unconscionable for the party to be estopped to depart from the belief or expectation.
[40] The statements attributed to Mr Ma cannot be characterised as a promise by Finsbury that it would never enforce the contracts. The statements attributed to Mr Ma relate to the likelihood of an on-sale before the purchasers were compelled to perform their legal obligation to settle. There was no representation that would estop Finsbury from enforcing the contracts.
Did Ms Zhang and Mr Cowell reasonably rely on the statements?
[41] In case I am wrong in finding no actionable statements under the CCLA or in estoppel, and no misleading or deceptive conduct under the FTA, I will consider the issue of reliance.
[42] To cancel a contract under s 37 of the CCLA, the party seeking to cancel must have been induced to enter the contract by the misrepresentation.21 It is open to a representor to argue that a representation was immaterial, on the basis that it would not induce a reasonable person to enter into the contract.22
[43] The concepts of inducement and reasonableness are intertwined. In the Court of Appeal’s decision in Savill v NZI Finance Ltd, Hardie Boys J said:23
… I consider that it remains the law that it is not enough for a party to say that a representation caused him to act in a particular way. He must also show either that the representor intended him to do so, or that he “wilfully used language calculated, or of a nature to induce a normal person in the circumstances of the case to act as the representee did” …
21 Contract and Commercial Law Act, s 37(1).
22 At 145.
23 Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 145.
[44] In Western Park Village Ltd v Baho, Heath J said that inducement is a specie of reliance.24 The reasonableness requirement was endorsed by the Court of Appeal in Vining Realty Group Ltd v Moorhouse.25
[45] While it is not a requirement under s 9 of the FTA to prove that the party’s conduct actually misled or deceived, to obtain relief under s 43, it must be shown that the conduct was an effective cause of the party’s loss or damage.26
[46] There is a similar requirement for reasonable reliance where a party relies on a claim of estoppel.27
[47] Therefore, whether the defence is based on the CCLA, FTA or estoppel, the issue is whether it is arguable that:
(a)Ms Zhang and Mr Cowell actually relied on Mr Ma’s representation; and
(b)if so, that reliance was reasonable.
[48] Ms Zhang and Mr Cowell say that they relied on Mr Ma’s statements when they entered into the contracts. The parties agree that it is open to the Court to reject the affidavit evidence of Ms Zhang and Mr Cowell if it is inconsistent with contemporaneous documents, and the extent of that inconsistency renders the affidavit evidence incredible and unreliable.
[49]The critical documents are:
(a)WeChat messages between Ms Zhang and Mr Ma from May 2021 to February 2024; and
24 Western Park Village Ltd v Baho [2014] NZHC 198, (2014) 15 NZCPR 180 at [67].
25 Vining Realty Group Limited v Moorhouse [2010] NZCA 104, (2010) 11 NZCPR 879 at [46].
26 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28]–[29].
27 BDM Grange Ltd v Trimex Pty Ltd, above n 20, at [71].
(b)correspondence between the solicitors when settlement was due in 2024.
[50] The WeChat messages have been translated from Mandarin, and I acknowledge the potential for nuances to become lost in the translation. I will refer to those messages that I consider relevant.
WeChat messages on 21 May 2021
[51]Ms Zhang’s first query was:
By saying there are no risks in the project, you mean this is off-plan and it is also ok to sell it before completion if I want?
[52] The referenced statement of “no risks in the project” is not in evidence. Ms Zhang’s query related to the potential for an on-sale by her. Mr Ma responded confirming that the units could be on-sold before completion, and that the contract would include the reference “and/or the nominee”.
[53] Ms Zhang’s next queries were directed towards the price, whether there was money to be made by an on-sale, and seeking confirmation that the price would need to be paid after construction was completed. Mr Ma responded by recounting the successful capital gains made by purchasers who on-sold before settlement on a previous project.
[54] Ms Zhang confirmed that her purchase would be an investment, which led Mr Ma to discuss the possibilities for Airbnb use. Mr Ma also discussed potential use of the unit as a long-term tenancy. These comments by Mr Ma assumed that Ms Zhang would settle the purchase and retain ownership.
[55] In the last message, Mr Ma advised that he would “ask the lawyer to explain the contract to you guys by WeChat”.
WeChat messages on 23 May 2021
[56] The message exchange began at approximately 11 pm, so it must have been after Ms Zhang and Mr Cowell met with Mr Ma in person. Ms Zhang queried who their lawyer would be.
[57] The remainder of the exchange was about the timing of the units being put on the market and legal fees. Ms Zhang referred to three units as a package. Mr Ma agreed to contribute half of their legal fees on the purchases.
[58] There was no mention of any assurances about on-sales given by Mr Ma during the in-person meeting earlier in the day.
WeChat messages on 24 May 2021
[59] Ms Zhang discussed the “brightline policy of New Zealand real estate”, and its consequences for “making a profit on a sale before completion”.
[60] Ms Zhang questioned the price. Mr Ma responded by discussing the price discount that had been given by the vendor. Mr Ma said:
I regard you as Elder Sister and will not let you suffer a loss.
[61] That comment was in the context of a discussion about price and not linked to any assurance that Mr Ma would procure an on-sale of the properties before settlement was due. Ms Zhang commented that she was considering the risks and “protective measures”. Ms Zhang’s contemplation of her risk based on the price that she was to pay is inconsistent with her assertion that she carried no risk on the on-sales.
WeChat messages on 26 May 2021
[62] Ms Zhang confirmed that she had spoken to her lawyer, receiving an explanation of the contract and a narrative about the project in Chinese.
[63] Ms Zhang confirmed that she had received advice that the preferred investment period was 10 to 12 years. Ms Zhang queried whether the investment was suitable for her “intention of short-term (let go before settlement)”.
[64] Ms Zhang queried whether there was a fixed management fee for the Body Corporate after settlement. Mr Ma confirmed the Body Corporate fees. There was further discussion about the short-term nature of Ms Zhang’s proposed investment. Mr Ma commented that short-term investment has “less earning” than long-term investment. Mr Ma discussed a possible profit scenario after a five-year investment.
[65] Ms Zhang confirmed that she was planning to sell a property that she owned in China, confirming that the sale of this property had been discussed at the meeting on 23 May 2021. In her affidavit evidence, Ms Zhang asserts that, during the meeting on 23 May 2021, Mr Ma became aware that Ms Zhang and Mr Cowell did not have the means to settle the contracts. That assertion is inconsistent with the WeChat record of Mr Ma and Ms Zhang discussing the sale of her investment property in Beijing when they met.
[66] Later in the exchange, Mr Ma commented that “real estate in any place is an upward spiral.” Ms Zhang responded:
Hahaha. Investment, speculation without capital, there is no opportunity. if there is an opportunity, just never miss it!
WeChat messages on 27 and 28 May 2021
[67] There was discussion regarding Ms Zhang receiving advice from her lawyer, and payment of the first deposit of $1,000. Both contracts were subject to the purchasers’ solicitor approving the contracts within five business days from the date of the contracts. Ms Zhang and Mr Cowell had been introduced to an independent solicitor, Mr Li of Carson Fox Legal.
[68]Mr Li’s advice to Ms Zhang and Mr Cowell
[69] Mr Li sent emails to Ms Zhang on 28 May 2021, confirming that he had spoken to Ms Zhang and Mr Cowell, and that he “went through both agreements with you”. Ms Zhang and Mr Cowell did not instruct Mr Li that they had received assurances that Mr Ma would procure on-sales of the units before settlement was due under the contracts.
WeChat messages on 9 and 10 November 2021
[70] Ms Zhang and Mr Ma discussed the treatment of the deposits if the units were on-sold. The messages suggest that there may have been some buyer interest at the time. Mr Ma said that he considered there was an opportunity to on-sell at that time, recommending:
Lock in the proceeds. Now the market has heated up, but as for one year later it is unknown.
[71] Ms Zhang and Mr Ma discussed the merits of an on-sale, with Ms Zhang referencing the level of profit that would be made, accounting for agent’s fees and legal fees. The tenor of this exchange was an assessment of the options open to Ms Zhang, and whether she should on-sell at the time. The exchange is consistent with Ms Zhang carrying the risk of an on-sale, and inconsistent with Ms Zhang’s proposition that she carried no risk.
WeChat messages on 18 November 2022
[72] Ms Zhang sent Mr Ma details of two investment opportunities in Paraparaumu. Mr Ma made negative comments about those potential investments and proposed that Ms Zhang should consider purchasing more units in Park Ave, as on-sales. He confirmed that prices on on-sales were discounted 30 per cent and that the original purchasers’ deposits would be transferred to the new buyer, and the vendor would offer a further discount of five to 15 per cent.
[73] Ms Zhang responded that she had no interest, noting the decline in the prices as “drastic”. There was no comment by either party regarding Ms Zhang’s obligations on settlement of the contracts for residences 26 and 27.
WeChat messages on 24 November 2022
[74]Mr Ma sent a message to Ms Zhang:
Don’t buy too many things. Focus on cash. Still need to reserve the funds for settlement at the end of next year or early the year after next.
[75] There was no response from Ms Zhang. The context is important. By this time, the market had turned. Other original purchasers seeking to on-sell were offering discounts of 30 per cent and other favourable terms of purchase. If Ms Zhang had relied on an assurance from Mr Ma that she would not be required to settle her contracts, it is surprising that this assurance was not mentioned.
WeChat messages on 4 December 2022
[76] Ms Zhang sent a message to Mr Ma discussing the benefits of purchasing a new property over time periods of a few years to 20 years. Ms Zhang was contemplating the benefits of owning property in the medium to long-term.
WeChat messages on 9 January 2023
[77] Ms Zhang sent Mr Ma a message recording what she had recently discussed with a friend, saying:
I communicated with her about matters of my Auckland investment. Her narrative was that this was indeed not a good investment and it was even more inexplicable the deposit was non-refundable in case of a sell-out now. My answer was that as it was our own speculative trading, I had no intention in my heart to carry out the final settlement either, and just look forward to earning some money, but if there were various kinds of unpredictable changes, it was also caused by not having done a good homework about the details of the project, and it was all the final outcome from listening to your narrative. No matter what, at the time the property was ordered, in terms of the objective effects, it was helpful to you. No matter what, currently the final decision is: from now on, “the one who ties the bell to the tiger should untie it”. Through your lobbying, complete the action of releasing from hands at any time. Thanks a lot.
[78] This message contains significant admissions by Ms Zhang: her purchase of the units was speculation; she had no intention in her heart of settling the contracts but she did not attribute that intention to anything said by Mr Ma; there had been unpredictable changes and she had not done her homework.
[79] Although she refers to Mr Ma’s “narrative”, she does not say that this narrative included an assurance that it was certain that she would have secured on-sales before settlement. It is reasonable to expect that this would have been recorded in such a
detailed message. The thrust of the message is a request to Mr Ma to extricate Ms Zhang from her commitments.
[80] The exchange continued. After Mr Ma offered an explanation as to how the deposits paid by Ms Zhang and any deposit paid by a purchaser on an on-sale would be treated, Ms Zhang responded:
Thanks for your understanding. Thanks for your narrative. It is the first time to be subjected to this kind of thing in New Zealand. There have been many times in China …
... Since the price is as high as this, how can a move be made? At the time the intention was that making a small amount of money was enough. Will look at the trend now. The most gratifying thing would be not getting stuck in hands. Hurry up in releasing from hands. Release from hands even if no money is made. Get rid of this sore point! Therefore, the only one on whom high hopes can be placed is you, the “one who ties the bell”. Thanks!
[81] Again, this message is inconsistent with Ms Zhang holding a genuine belief that Mr Ma had assured her that she would be able to on-sell and not be required to settle.
WeChat messages on 7 November 2023
[82] Mr Ma enquired whether Mr Tseng could take over Ms Zhang’s contracts. Ms Zhang responded advising that Mr Tseng also wanted to be “let go”. Ms Zhang urged Mr Ma to work hard to sell the properties, and Mr Ma advised Ms Zhang that she needed to prepare to fund the settlement. This led to the following exchange:
MrMa I have been telling you to prepare for multiple eventualities. When you were in Beijing, you must sell out the property in Beijing. As early as when we were in Beijing, I drank coffee with you. At the time the properties in Beijing were still easy to sell.
Ms Zhang I told you in a very definitive manner that there was no possibility at all, because there was no money for making this move.
[83] Mr Ma confirmed that all apartments in Park Ave had been sold by the developer and that he was not aware of any on-sales. Discussion followed regarding what had led to that situation. Ms Zhang blamed the high prices paid at the time of purchase. Mr Ma blamed the fall in the market.
The correspondence between solicitors when settlement was due
[84] On 8 February 2024, Mr Li emailed Finsbury’s solicitors, advising that Ms Zhang and Mr Cowell were not in a financial position to settle both units, proposing that the contract for residence 27 be cancelled by mutual agreement, with the deposit and accrued interest credited towards settlement of the contract for residence 26. Finsbury did not agree.
[85] Mr Li’s email made no mention of any assurance by Mr Ma that Ms Zhang and Mr Cowell would not be required to settle, or that they had been assured that they would have on-sold the units at a profit before settlement was due.
WeChat messages on 21 February 2024
[86] Ms Zhang asked Mr Ma to present an offer to “your team”. The substance of the offer was that Ms Zhang and Mr Cowell would “sacrifice” a deposit, equivalent to 10 per cent of the price, and exit. Mr Ma advised Ms Zhang that she should deal through the lawyers.
WeChat messages 26 February 2024
[87] Mr Ma and Ms Zhang were communicating regarding a potential on-sale, with Mr Ma trying to ascertain Ms Zhang’s sale price. Ms Zhang said:
All the figures are displayed here. In one sentence, reduce the loss to the minimum. Since the moment when the signing was completed, I have told you to start the sell.
Analysis
[88] Ms Zhang seeks to downplay her experience in the real estate market. Ms Zhang and Mr Cowell seek to portray themselves as naïve retirees. On that basis, they say that it was reasonable for them to rely on an assurance from Mr Ma that there was no risk that they would be called on to settle the contracts.
[89] This portrayal is not supported by the evidence. Ms Zhang was an experienced investor in real estate. She had previously purchased properties in China. Ms Zhang and Mr Cowell received independent legal advice in respect of the contracts before
they became bound by them. Ms Zhang continued to look at other opportunities in New Zealand after purchasing the units in Park Ave. She understood the bright-line rule for investors.
[90] I reject Ms Zhang and Mr Cowell’s evidence that they signed the contracts in reliance on the statements that they attribute to Mr Ma. That evidence is inherently improbable. If they had relied on statements by Mr Ma, then there would have been reference to the statements:
(a)in the WeChat messages which span two years, including messages sent after it had become apparent that Ms Zhang and Mr Cowell would be required to settle their contracts; and
(b)in the correspondence from their lawyers sent on 8 February 2024 when settlement was imminent.
[91] No reasonable person, with even a rudimentary understanding of the legal obligations that flow from a contract for the sale of land, would have relied on the statements attributed to Mr Ma as amounting to a guarantee of on-sales negating the obligation to settle the contracts.
Conclusion on liability
[92] Finsbury has discharged the onus upon it to show that Ms Zhang and Mr Cowell have no defence.
[93] It is unnecessary to consider Finsbury’s argument that Ms Zhang and Mr Cowell are prevented from relying on pre-contractual statements by the express terms of the contracts.
[94] In their notice of opposition, Ms Zhang and Mr Cowell raised an issue regarding the default interest charged by Finsbury, and whether that amounts to a penalty. That ground of opposition has been abandoned.
Is specific performance of the contracts an appropriate remedy?
[95] An award of specific performance of a contract for the sale of land is discretionary. Specific performance will not be ordered where there is a very substantial probability that a defendant would not be able to comply,28 or where it would occasion great hardship to the defendant, to the extent that an order would be “unreasonable or harsh”.29
[96] The parties agree that the critical factor in this case is whether Ms Zhang and Mr Cowell are unable to pay the purchase prices. Inability is not to be confused with difficulty.30 Mere difficulty in paying the purchase price is unlikely to amount to a defence of impossibility or hardship.31
[97] Mr Cowell’s evidence is that he was previously a director of a company that was put into liquidation, forcing him to sell his home in Glen Eden. He does not expressly state that he does not own any real estate.
[98] Mr Cowell asserts that he has “minimal disposable income” and that he does not have $500,000 to $600,000 to purchase his half of residence 26. He does not provide a statement of his financial position.
[99] Ms Zhang says that she does not own any real estate in China. She acknowledges that she has use of a property in Beijing, averring that she has never held title and that she cannot sell it. No documentary evidence is provided.
[100] Ms Zhang says that she sold her Beijing investment property in 2022, realising NZD 1.36 million after paying expenses and meeting commitments. Ms Zhang says that she invested the proceeds in the stock market and the investment has declined by nearly 90 per cent. No documentary evidence is provided.
28 Ngai Tahu Property Ltd v Dykstra (2009) 10 NZCPR 734 (HC) at [12].
29 Revell v Hussey (1813) 2 Ball & B 280; Norton v Angus (1926) 38 CLR 523; and Patel v Ali
[1984] 2 WLR 960.
30 D’Arcy Smith v Stace (2003) 4 NZ Conv 193, 771 at [19].
31 Gilbert v Manninem (2009) 10 NZCPR 209 at [49].
[101] Mr Ma says that on around 28 October 2022, he was in attendance when Ms Zhang arranged a transfer of the funds from the sale of the Beijing property into New Zealand dollars. The purported loss on the stock market is not credible.
[102]Ms Zhang acquired a property on Kingfisher Way, Te Kowhai, in 2020 for
$429,000. There is no mortgage registered against the title. Mr Napier confirmed that the property is the residence of Ms Zhang and Mr Cowell.
[103] Ms Zhang asserts that, even if the Kingfisher Way property is sold and all of the proceeds from the Beijing investment property sold in 2022 were available to settle the purchase of the units, they would still be short by roughly $200,000.
[104] Ms Zhang does not expressly state that she has no other assets or savings available to complete settlement if she is obliged to settle. However, that is the inference I am invited to draw from the evidence of Ms Zhang and Mr Cowell.
[105] Mr Napier submitted that the evidence adduced by Ms Zhang and Mr Cowell is sufficient to discharge the evidential onus upon them, and it is arguable that they do not have the financial means to complete settlement of the contracts.
[106] I do not accept that submission. Faced with these applications for summary judgment, it was incumbent upon Ms Zhang and Mr Cowell to give full disclosure of their financial positions. Ms Zhang and Mr Cowell have not adequately explained how they intended to fund their compromise proposal made by Mr Li on 8 February 2024. In a late reply affidavit, Mr Cowell has averred that they intended to approach relatives to borrow between $300,000 and $400,000.
[107] Ms Zhang and Mr Cowell have provided no evidence regarding their cash reserves, or their ability to raise finance. Mr Napier submitted that as retirees they have no ability to service finance. However, that overlooks that the units would produce revenue.
[108] It was open to Ms Zhang and Mr Cowell to approach a finance company or a mortgage broker to ascertain whether finance was available, and if not, to adduce
evidence to establish that position. Similarly, there is no evidence regarding their ability to borrow funds from relatives.
[109] Ms Zhang and Mr Cowell have failed to place sufficient financial information before the Court. I find that Ms Zhang and Mr Cowell have not discharged the evidential onus upon them to adduce evidence to support their defence that they are financially unable to settle the contracts. Although some evidence has been provided, it does not provide a complete picture of their financial positions.
[110] For Finsbury, Mr Spring submitted that the appropriate relief is an order for specific performance. In the first instance, it is appropriate that Ms Zhang and Mr Cowell be ordered to perform the contracts. The contracts will remain under the supervision of the Court.
Orders
[111] In CIV-2024-404-883:
(a)The defendants shall complete their obligations pursuant to the sale and purchase agreement dated 23 May 2021 (the Agreement) by no later than 15 working days from the making of this order by paying to the plaintiff:
[112](i) $1,020,230.33 being calculated as follows:
(1)purchase price of $1,205,000 (Purchase Price); less;
(2)deposit already paid of $180,750 (Deposit); less
(3)credit for net interest earned on deposit of $7,330.83 (Credit); plus
(4)Body Corporate levy of $3,067.20; plus
[113](5) Purchaser’s share of Auckland Council rates for the unit from 25 March 2024 to 30 June 2024 of $243.96.
(i)Interest at the contractual rate of 22 per cent per annum from 25 March 2024 to the date of settlement on the sum of
$1,016,919.17 (being the Purchase Price less the Deposit and Credit).
(ii)The costs of this proceeding on an indemnity basis pursuant to clause 12.8 of the Agreement, fixed pursuant to these orders.
(b)On receipt of the payment specified in (a) above, the plaintiff is to do all things necessary to perform its obligations pursuant to the Agreement.
(c)In the event that the defendants do not comply with the order at (a) above, leave is reserved to the plaintiff to apply for an order releasing it from its obligations under the orders at (b) above by filing a memorandum of counsel requesting the making of such an order on the papers.
[114] In CIV-2024-404-897:
(a)The defendant shall complete her obligations pursuant to the sale and purchase agreement dated 23 May 2021 (the Agreement) by no later than 15 working days from the making of this order paying to the plaintiff:
(i)$1,020,229.98 being calculated as follows:
(1)purchase price of $1,205,000 (Purchase Price); less
(2)deposit already paid of $180,750 (Deposit); less
(3)credit for net interest earned on deposit of $7,331.18 (Credit); plus
(4)Body Corporate levy of $3,067.20; plus
(5)purchaser’s share of Auckland Council rates for the unit from 25 March 2024 to 30 June 2024 of $243.96.
(ii)Interest at the contractual rate of 22 per cent per annum from 25 March 2024 to the date of settlement on the sum of
$1,016,918.82 (being the Purchase Price less the Deposit and Credit).
(iii)The costs of this proceeding on an indemnity basis pursuant to clause 12.8 of the Agreement, fixed pursuant to these orders.
[115] Counsel shall confer regarding costs. If the parties are unable to agree on costs then:
(a)the plaintiff shall file and serve written submissions on costs, of no more than three pages, by 25 October 2024;
(b)the defendants shall file and serve written submissions on costs, of no more than three pages, by 8 November 2024;
(c)I will then fix costs, which shall be payable on settlement in terms of the above orders for specific performance.
Associate Judge Brittain
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