Future Sustainable Development Ltd v Liu - [2022] NZCA 249

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA685/2021
[2022] NZCA 249

BETWEEN	FUTURE SUSTAINABLE DEVELOPMENT LIMITED Appellant
AND	WENJING LIU Respondent

Hearing:	9 May 2022
Court:	Miller, Goddard and Duffy JJ
Counsel:	R J Hollyman QC and N G Lawrence for Appellant D K Wilson for Respondent
Judgment:	14 June 2022 at 3.00 pm

JUDGMENT OF THE COURT

AThe appeal is allowed.
BThe order removing the appellant’s caveat is set aside.
CThe respondent must pay the appellant costs for a standard appeal on a band A basis with provision for two counsel.

____________________________________________________________________

REASONS OF THE COURT

(Given by Miller J)

The short question on which this appeal turns is whether the purchaser might unilaterally waive a clause in an agreement for sale and purchase of sensitive land making the agreement conditional on the purchaser or its nominee obtaining regulatory consent to purchase the property under the Overseas Investment Act 2005 (OIA).
The purchaser, Future Sustainable Development Ltd (FSD), waived the condition before 1 October 2020, the final date for its fulfilment. The vendor, Wenjing Liu, took the stance that FSD could not waive the condition without her agreement. On 2 October she avoided the agreement for non-fulfilment of the condition and immediately agreed to sell the property to another buyer for a higher price.
The trial Judge, Jagose J, found that the OIA condition was inserted for the benefit of both parties, so could not be waived by the purchaser alone.[1] He held accordingly that Ms Liu was entitled to cancel the agreement when she did, and he ordered removal of a caveat lodged to protect FSD’s interest.[2] The caveat survives pending this appeal.

Narrative

[1]Liu v Future Sustainable Development Ltd [2021] NZHC 2909, (2021) 22 NZCPR 767 [High Court judgment] at [29].

[2]At [31].

The facts are simple and not relevantly controversial. Ms Liu acquired the property, at 45 Woodford Avenue, Henderson, on 9 April 2020, as nominee for a company named Xinda International Group Ltd. Xinda is controlled by her husband, Wangliang Li, who acted on her behalf in subsequent negotiations with FSD.
Monica (Yue) Hou is the sole director and shareholder of FSD. Her husband Luban (Xiaojiang) Chen, who is the company’s Chief Executive, conducted the parties’ negotiations.
Mr Li and Mr Chen knew one another through a previous employer, and there had been discussions between them about financing the purchase of the Henderson property.
The agreement with which we are concerned was entered after Mr Chen told Mr Li around June 2020 that he was looking for a property to develop. Mr Li offered the Henderson property. During negotiations Mr Chen advised that an overseas person might acquire it and asked that the agreement be conditional on OIA consent. The agreement was also to be conditional on the issue of a resource consent for a development which would replace the existing dwelling with eight townhouses.
There was some dispute in evidence about the terms of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] NZCA 249
Decision Date: 14 June 2022 at 3.00 pm

CaseChat Overview and Summary

Future Sustainable Development Ltd (FSD) appealed against a decision of the High Court that it could not waive a condition in an agreement for sale and purchase of residential land which required FSD or its nominee to obtain consent under the Overseas Investment Act 2005 (OIA) before completing the transaction. FSD argued that it could waive the condition unilaterally. The appeal was heard on 9 May 2022 and the Court gave its judgment on 14 June 2022. The appeal was allowed and the order removing FSD’s caveat was set aside. The Court found that the OIA condition was for the sole benefit of FSD and could be waived unilaterally. Ms Liu must pay FSD’s costs for the appeal.

The facts of the case are straightforward. Ms Liu, the vendor, agreed to sell her property to FSD or its nominee for $1,180,000. The agreement was conditional on FSD, its unnamed investor or nominee obtaining an OIA consent to purchase the land. The condition was not fulfilled by 1 October 2020, so either party could cancel the agreement by giving written notice to the other. On 21 September 2020, Ms Hou, the sole director and shareholder of FSD, declared the OIA condition waived. Ms Liu cancelled the agreement for non-fulfilment of the OIA condition on 2 October 2020 and immediately agreed to sell the property to another buyer for a higher price. FSD sought specific performance of the agreement.

The High Court found that the OIA condition was inserted for the benefit of both parties, so could not be waived by FSD alone. The Court held accordingly that Ms Liu was entitled to cancel the agreement when she did, and ordered removal of a caveat lodged to protect FSD’s interest. FSD appealed against that decision.

The Court of Appeal held that the question whether a condition is for a party’s sole benefit is one of construction of the agreement, turning on whether the stipulation is in terms or by necessary implication for the exclusive benefit of that party. In this case, the OIA condition was inserted at FSD’s request to ensure the transaction could proceed lawfully if it introduced an overseas investor. The agreement accordingly envisaged that a person giving effect to the transaction, whether FSD or another party, might require OIA consent. The right to introduce an overseas investor could be exercised unilaterally and the OIA condition supported that right. The Court concluded that the parties contemplated FSD might unilaterally waive compliance with the OIA condition if it elected not to introduce an overseas investor. Should it give effect to the transaction itself, or should it nominate a transferee who did not need consent, an application for consent would be redundant. The OIA condition in this agreement was for the sole benefit of FSD. FSD was accordingly entitled to, and did, waive the condition before the fulfilment date.

The Court allowed the appeal. It set aside the order removing FSD’s caveat. FSD having succeeded, Ms Liu must pay FSD’s costs for the appeal.

Orders