Harsono v Fang

[2023] NZHC 3717

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-000658

[2023] NZHC 3717

BETWEEN

WILLIAM HARSONO and YUN YUEH CHENG
Plaintiffs

AND

LIN FANG

Defendant

Hearing:

9 November 2023

Appearances:

M Keall for the Plaintiffs

L Huang / B Hayes for the Defendant

Judgment:

15 December 2023

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 15 December 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Jenny Wang & Associates, Auckland Tompkins Wake, Auckland

M Keall, Auckland

HARSONO v FANG [2023] NZHC 3717 [15 December 2023]

Introduction

[1]    The plaintiffs, William Harsono and Yun Yueh Cheng (the Harsonos) claim against the defendant, Lin Fang (Ms Fang) for an order of specific performance of an agreement for sale and purchase of a property at Dunkirk Road, Panmure, by paying the outstanding purchase price of $3,562,500.00 and default interest from the settlement date of 23 January 2023.1 The Harsonos apply for orders by summary judgment.

[2]    Ms Fang’s  defence  is  that  the  Harsonos  agreed  to  defer  settlement  to  23 January 2024 and waive default interest. Alternatively, that Mr Harsono made representations to this effect which she detrimentally relied on, that the Harsonos are estopped from denying. Or, if these defences are not available, that specific performance is not an appropriate remedy.

[3]The issues are:

(a)Does Ms Fang have an arguable defence that she and the Harsonos agreed to vary the settlement date?

(b)If not, does Ms Fang have an arguable defence that Mr Harsono made representations to that effect, that the Harsonos are estopped from denying?

(c)If not, is specific performance the appropriate remedy?

Factual background

[4]With one exception, the chronology of facts is agreed up until 26 January 2023.

[5]    On 6 October 2021, the Harsonos’ property at  Dunkirk Road was sold  to  Ms Fang at a competitive auction. The agreement was recorded on a standard ADLS Particulars and Conditions for Sale of Real Estate by Auction (the Agreement).2

1      At the rate of 15 per cent per annum, a daily rate of $1,464.04.

2      ADLS Particulars and Conditions for Sale of Real Estate by Auction (5th ed, 2020).

[6]    The purchase price was $3,750,000. The settlement date was 30 June 2022. A deposit of 10 per cent of the purchase price, $375,000, was agreed, payable as follows:

(a)$50,000 payable on auction day;

(b)the balance of five per cent payable by 30 November 2021; and

(c)the balance of 10 per cent payable by 31 March 2022.

[7]    Interest payable on late settlement was 15 per cent.3 Clause 12.4(1)(a) of the Agreement provided that in the event the purchaser fails to comply with a settlement notice, the vendor is entitled to enforce the contract by way of specific performance.

[8]    Ms Fang paid $187,500 in deduction of the deposit but did not pay the remaining $187,500 by the agreed date of 31 March 2022.

[9]    Between 5 April 2022 and 30 June 2022, the Harsonos and Ms Fang agreed a variation to the agreement as follows:

(a)the settlement date was extended to 23 January 2023;

(b)Ms Fang would pay the sum of $50,000 in lieu of penalty interest that would  otherwise   have   accrued   between   30   June   2022   and   23 January 2023 (the Additional Sum);

(c)Ms Fang was required to pay the outstanding balance of the deposit in the sum of $187,500 by 31 July 2022.

[10]   Ms Fang, in her affidavit, disputes that the Additional Sum was agreed. That dispute is immaterial to this application.

[11]   Ms Fang  made  additional  deposit  payments  totalling  $50,000  between  12 August 2022 and 6 January 2023. She did not pay the Additional Sum of $50,000.

3      Clause 1.5.

[12]   On 19 January 2023, the Harsonos’ solicitors issued a settlement statement to Ms Fang’s solicitors, including the usual undertakings about the apportionment of rates and water charges, and a statement that the Harsonos were anticipating settlement on 23 January 2023.

[13]Ms Fang did not settle the purchase on 23 January 2023.

[14]   The Harsonos’ solicitors issued a settlement  notice  on  24  January  2023. Ms Fang did not comply  with  that  notice  before  the  last  day  for  compliance,  13 February 2023 (or at any subsequent time).

[15]   Mr  Harsono  and  Ms  Fang   had   an   extended   WeChat  discussion   on 26 January 2023 about options for resolving the situation. As noted, Ms Fang claims that the outcome was that Mr Harsono agreed  to defer settlement to on or after      23 January 2024. The Harsonos dispute that any such agreement was reached. I return to this issue later.

[16]   It is not disputed that since the date of the Agreement, the market value of the property has declined.   The Harsonos have obtained a registered valuation dated    22 February 2023 which assesses the market value of the property at that date at

$2,130,000 (including fixed chattels).

Legal principles

[17]   The relevant principles governing a summary judgment application are well established:4

(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty.

4      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].

(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 inconsistent 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 judgement. The Court may take a robust and realistic approach where the facts warrant it.

[18]   The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.5

[19]   Special care is required where specific performance is sought on summary judgment. The exercise of the Court’s discretion to order specific performance may give rise to issues that are different to those that arise when considering whether an arguable defence exists in respect of liability.6

Does Ms Fang have a defence that she and the Harsonos agreed to vary the settlement date?

The competing positions

[20]   Ms  Fang’s  defence  is  that  after  the  settlement   notice  was  issued  on   24 January 2023, she and Mr Harsono agreed a written variation to the Agreement. She says that this variation occurred during the WeChat discussion between them on 26 January 2023.

[21]   Specifically, Ms Fang pleads in her statement of defence that Mr Harsono agreed:7

5      Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.

6      Hart v Bankfield Farm Ltd (2008) 9 NZCPR 685 (HC) at [39].

7 Statement of Defence, dated 21 July 2023, at [17].

(a)that the Harsonos waived any default interest under the Agreement;

(b)that settlement date was deferred for another year, to 23 January 2024;

(c)the balance of the deposit would not be payable until 23 January 2024; and

(d)the parties would review the situation in a year’s time, i.e. on 23 January 2024.

[22]   Mr Huang, on behalf of Ms Fang, submits that both Ms Fang and the Harsonos benefitted from this variation. In Ms Fang’s case, her evidence is that she was unable to settle the purchase in January 2023 due to cashflow difficulties caused by the economic and housing market downturn throughout 2022 and 2023. By agreeing to defer settlement, the Harsonos retained the benefit of a higher purchase price (as the housing market had since declined) and they avoided having to resell the property in a lower market. Mr Huang submits, therefore, that there was a mutual exchange of value for the variation.

[23]   Relatedly, Mr Huang submits that because the Harsonos have not filed a reply to the affirmative defence and positive allegations contained in Ms Fang’s statement of defence, the Harsonos are deemed to have admitted the affirmative defence and other positive allegations under r 5.63 of the High Court Rules 2016. Mr Huang submits that the Court should therefore treat as admitted the events of 26 January 2023, Ms Fang’s positive allegation that the Agreement was varied on the 26 January 2023, and her affirmative defence of estoppel by representation.

[24]   The Harsonos do not take issue with the translation of the WeChat exchange. But they say that the discussions ended inconclusively because Ms Fang was unable to provide a firm commitment to settle the Agreement, or any credible reason to believe her circumstances would improve significantly over the following year or two. Mr Keall, for the Harsonos, submits  that  Mr Harsono’s  comments  relied  on  by Ms Fang must be seen in the context of the entire discussion, and that Mr Harsono made it clear from the outset that if settlement was to be deferred, he would require

clear assurances from Ms Fang. Mr Keall submits that Ms Fang expressed her appreciation in response to a range of general proposals towards the end of the discussion that offered to defer or reduce her undisputed liabilities but did not commit herself to any of them.

[25]   Mr Keall submits that the entirely one-side nature of the benefits provided by the alleged variation makes it inherently improbable. Mr Keall submits that there was no benefit to Mr Harsono agreeing to this variation, as the Harsonos could simply do nothing but wait and see what happened. The one-sided nature of the benefits provided by the alleged variation also makes it unenforceable as a matter of law.

[26]   Further, Mr Keall submits, the alleged variation is internally inconsistent, as it involved three different things: first a deferral for six months; then a deferral to a settlement date of 23 January 2024; and also a review on 23 January 2024.

[27]   The Harsonos also say that the outcome of the WeChat discussion was contingent on further input and approval from their solicitors, and Ms Cheng, who was the other vendor but not part of the WeChat discussion.

[28]   As to Mr Huang’s submission that the Harsonos are deemed to have admitted the allegation of a variation and/or estoppel by not filing a reply, Mr Keall submits that Ms Fang’s statement of defence and notice of opposition to the application for summary judgment go well beyond Ms Fang’s affidavit evidence. He says that the Harsonos have thoroughly rebutted every positive allegation in her statement of defence and the notice of opposition in Mr Harsono’s affidavit in reply.

My assessment

[29]   Dealing with this final point, first, I do not accept that for the purposes of this summary judgment hearing the affirmative defence and positive allegations contained in Ms Fang’s statement of defence and notice of opposition must be treated as admitted by  the  Harsonos  because  they  have  not  filed  a  reply  under  r  5.62  of  the  High Court Rules. I accept the Harsonos’ position that it is enough, for this summary

judgment application, that Mr Harsono replied to the allegations in his affidavit in reply.8

[30]   Turning to the main issue, in my view, Ms Fang has an arguable defence that Mr Harsono agreed on behalf of himself and his wife, Ms Cheng, to postpone settlement for at least one year and to waive default interest in the meantime. I consider that this agreement is arguable from the final three statements he made in the two‑hour WeChat exchange he had with Ms Fang on 26 January 2023 and Ms Fang’s responses.

[31]   Before setting out those key statements, it is relevant to note that when the conversation commenced Mr Harsono stated:

Thanks, big sister, I understand your situation, my lawyer hopes we could discuss this privately, set out our respective requirements, and reach a mutual outcome we could both accept.

[32]   There followed a long conversation in which Mr Harsono probed Ms Fang for information about her financial situation, and Ms Fang explained her cashflow difficulties due to the downturn in the property market.   During the conversation   Mr Harsono sought a commitment from Ms Fang that she would settle the purchase, saying:

I also know you intend to commit to carrying out this contract. But I need some clear assurances. If defer for another year or two years, my original reason for selling the property in 2021 will no longer exist.

[33]   They discussed different options, including Mr Harsono and Ms Fang jointly developing the property and Mr Harsono tenanting the property in the meantime.

[34]   Mr Harsono ended the conversation by offering to “cancel/waive penalty, and firstly postpone/defer [the Agreement] for 1 year”, to which Ms Fang said, “Okay. Thank you”. Then Mr Harsono said, “we will review after 1 year”, to which Ms Fang responded, “Understand. I am grateful”. Finally, Mr Harsono said, “[i]n this period  if there are any progress and you will have money to help me, I will be very welcome

8      See Affidavit of William Harsono in Reply to Affidavit of Lin Fang, sworn 17 August 2023, at

[22] and [44].

and grateful”. Ms Fang responded, “Thank you”. Mr Harsono responded with three happy face emojis. The conversation ended there.

[35]On 14 March 2023, Ms Fang wrote a message simply saying:

My dear, greetings to you. Letting you know everything is okay at my end.

[36]Mr Harsono did not respond.

[37]On 16 May 2023, Ms Fang wrote:

My dear. I have returned to Auckland.

[38]Again, Mr Harsono did not respond.

[39] I do not accept the Harsonos’ submission that the 26 January 2023 WeChat discussion ended inconclusively. In my view, Ms Fang has a tenable defence that in the final stages of the conversation set out at [34] above, she and Mr Harsono reached an agreement. Mr Harsono offered to defer settlement for one year and waive default interest over that period and Ms Fang indicated her acceptance of this offer by saying “Thank you”.

[40]   I accept that the variation pleaded by Ms Fang in her statement of defence contains an internal inconsistency, in that it involves settlement being deferred for one year to 23 January 2024 and settlement being reviewed in one year. But objectively viewing Mr Harsono’s words, it is arguable that he agreed to defer settlement from 23 January 2023 for one year, with the possibility of a further extension, to be reviewed in advance of then.

[41]   There is merit in the Harsonos’ submission that previous variations were confirmed in writing by the lawyers, and Mr Harsono referred to his lawyers at various points in the conversation. But at no stage did he state that any agreement reached between himself and Ms Fang was subject to input from and approval by their solicitors. Further, he held himself out as having authority to negotiate matters relating to the Agreement on behalf of his wife Ms Cheng.

[42]   Further, I find that the alleged variation was arguably beneficial to the Harsonos and is therefore enforceable at law. The fact that Mr Harsono engaged in a two-hour conversation with Ms Fang to try to “reach a mutual outcome” indicates that he saw benefit in agreeing a position on the Agreement with Ms Fang rather than just waiting to see what happened. Furthermore, I am not persuaded that it would have been tenable to simply let the Agreement run on with no agreed settlement date. That seems wholly impractical not least because Mr Harsono indicated that he would tenant the property pending settlement of the sale to Ms Fang.

[43]   The Court of Appeal has said that although the position is not settled, consideration in the form of a benefit “in practice” is sufficient to support a binding variation.9 Further, the Court was attracted to the view expressed in Antons Trawling Co Ltd v Smith that no consideration at all may be required provided the variation is agreed voluntarily and without illegitimate pressure.10

[44]   I conclude that Ms Fang has a defence that the alleged variation was beneficial in practice to the Harsonos as it meant that they maintained the Agreement for sale at a higher than market price, with an agreed settlement date in one year’s time albeit with the possibility of further extension, giving them some certainty and enabling them to tenant the property in the meantime.

[45]   This finding disposes of the Harsonos’ application for summary judgment. However, in case it is helpful to the parties I will briefly comment on Ms Fang’s alternative defence of estoppel.

Does Ms Fang have an arguable defence of estoppel by representation?

[46]The requirements for estoppel by representation are:11

(a)A clear and unequivocal representation which has created or encouraged a belief or expectation.

9      Teat v Willcocks [2013] NZCA 162 at [54].

10     At [54] referring to Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23 (CA) at [93].

11     Wilson Parking NZ Ltd v Fanshawe 136 Ltd [2014] NZCA 407 at [44].

(b)The person has reasonably relied on to the representation to their detriment.

(c)It would be unconscionable for the representor to depart from the belief or expectation.

[47]   Had it been necessary I would have found against Ms Fang because she has not laid a proper foundation for the defence that she relied on the representations to her detriment.

[48]   Mr Huang submits that Ms Fang relied on this representation by not taking any further actions to perform the Agreement and the settlement notice, and by making commercial decisions in respect of her property portfolio and other interests believing she did not need to perform the Agreement for another year.

[49]   The first part of that submission is not persuasive — she was unable to perform the Agreement and comply with the settlement notice in any event because she did not have the money to settle. That is what she told Mr Harsono during the WeChat conversation and that is her evidence now. As to the second part, she has provided a “Confidential Schedule” summarising her assets and liabilities, but she has not given any evidence of the supposed commercial decisions she made in reliance on the Agreement being deferred for one year.

Result

[50]The application for summary judgment is dismissed.

[51]In accordance with the NZI Bank v Philpott,12  costs are reserved.

Associate Judge Gardiner

12     NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).