Heng Yang Investment Limited v Wave Investments Limited
[2021] NZHC 853
•20 April 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-416
[2021] NZHC 853
UNDER the Land Transfer Act 2017 section 143 IN THE MATTER OF
an application that a caveat not lapse
BETWEEN
HENG YANG INVESTMENT LIMITED
Applicant
AND
WAVE INVESTMENTS LIMITED
Respondent
Hearing: 20 April 2021 Appearances:
T J Herbert for the Applicant
C T Patterson and C F Le Grice for the Respondent
Judgment:
20 April 2021
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
William Gong Lawyers Limited, Auckland, for the Applicant Mana Law (Kevin Lo), East Tamaki, Auckland, for the Respondent
Copy for:
T J Herbert, Barrister, Auckland, for the Applicant
Chris Patterson Barrister Limited (C F Le Grice), Auckland, for the Respondent
HENG YANG INVESTMENT LIMITED v WAVE INVESTMENTS LIMITED [2021] NZHC 853 [20 April 2021]
[1] This is a caveat case. Caveat 11943181.1 has been lodged against record of title NA125B/419 for the property at 4 Glenmore Road, Pakuranga, Auckland. The interest claimed in the caveat is:
Agreement for sale and purchase dated 15 February 2021 between the registered owner Wave Investments Limited as vendor and the caveator Heng Yang Investments Limited as purchaser.
[2] Heng Yang Investment Ltd is the caveator. The man behind the company is Mr Yan Gao, also known as Anson Gao. Wave Investments Ltd is the registered proprietor. The shareholders and directors of the company are Mr Shashikumar and his wife. There is no dispute that there was an agreement for the sale and purchase of the property made between the parties on 15 February 2021. The issue is whether Wave Investments Ltd has validly cancelled the contract for non-payment of the deposit.
[3] This case has moved fairly quickly. The agreement was made on 15 February 2021. Wave Investments Ltd purported to cancel it on 17 February 2021. The caveat was lodged on 24 February 2021. On 1 March 2021, Wave Investments Ltd requested the Registrar-General to give a notice for the caveat to lapse. This application was lodged within time – on 16 March 2021. Gault J made an interim order that the caveat not lapse on 22 March 2021.
[4] I uphold the caveat, for the primary reason that the cancellation of the agreement was arguably invalid because Heng Yang Investment Ltd has an arguable case that it did pay the deposit within time. Heng Yang Investment Ltd advances other grounds, but that is my main ground for upholding the caveat.
[5] On 15 February 2021 the property at Glenmore Road was sold by auction. Auckland was under Alert Level 3 lockdown. It had gone into Alert Level 3 at
11.59 pm on 14 February 2021,1 and moved to Alert Level 2 at 11.59 pm on
1 COVID-19 Public Health Response (Alert Level Requirements) Order 2021, cl 2.
17 February 2021.2 Those lockdown restrictions are relevant as they affected how real estate could be sold and also how parties to agreements for sale and purchase of land could pay deposits.
[6] Land agents carried out the auction for the vendor. Two agents are referred to in the evidence, Angela Cai (also known as Baoxia Cai) assisted by Zhuofeng Xie (also known as Joethy). Because of the Level 3 lockdown, there was not a public auction where interested purchasers could attend in person. Instead, the auction was conducted online. Interested purchasers could bid by telephone or by online streaming. Ahead of the auction, Heng Yang Investment Ltd sent an auction bidding registration form to the land agents. Mr Gao signed the form, but gave as his email address the email address of his friend, Jenny Yan (also known as Min Yan). On the form, he acknowledged that the purchase price was cash unconditional, and that the deposit would be payable to the land agents “on the fall of the hammer by cheque or by electronic transfer”. The indicative deposit was five per cent of the purchase price.
[7] Mr Gao and his friend, Ms Yan, went to the land agents’ offices by car. Ms Cai and Mr Xie said that Mr Gao could take part in the auction by bidding online and by telephone. Mr Gao was the successful bidder. The agents told him to wait in his car but notwithstanding that he went into the auction rooms and while there he signed the agreement for sale and purchase.
[8] The agreement is the Auckland District Law Society/Real Estate Institute of New Zealand - Particulars and Conditions of Sale of Real Estate by Auction (5th ed, 2020). It is not the standard ADLS/REINZ agreement for sale and purchase of real estate. The form contains a memorandum of contract which both parties have signed. It is not clear on the evidence when the vendor signed the agreement. On the rear of the contract, contact information is given for the parties. Mr Gao put his name ‘Anson Gao’ and one of his email addresses as the purchaser’s contact details. He also provided his lawyer’s contact details, including an email address for the lawyer. The settlement date under the agreement is 30 September 2021.
2 COVID-19 Public Health Response (Alert Level Requirements) Order (No 2) 2021, cl 35.
[9] Mr Gao says that when he signed the agreement he discussed payment of the deposit with the land agents. On his account, they told him that the deposit had to be paid but it could be paid within 10 working days. That was because of issues with the COVID-19 pandemic. They also said that if Heng Yang Investment Ltd did not pay within the 10 working days, Wave Investments Ltd would have the right to cancel. His friend, Ms Yan, has confirmed that. On the other hand, the agents deny that they said anything of the sort.
[10] At 5.15 pm that evening, Mr Xie sent an email to the address given on the auction bidding registration form. That email asked Mr Gao to pay the deposit, take a screenshot and send that screenshot to the land agents. A trust account deposit slip was attached. Mr Gao denies receiving that email. Later that evening, Mr Xie also sent Mr Gao a purchaser acknowledgment form for signing and return. Mr Gao says he sent that back on the following day.
[11] On 16 February 2021, Mr Shashikumar contacted the land agents about the payment of the deposit. Ms Cai emailed him saying that the purchaser had said that he would “pay tomorrow.” She also advised him that once the deposit was received it would be held for 10 working days. Mr Gao, in response, denies that Ms Cai was in contact with him on 16 February 2021. Neither side refers to anything else relevant on 16 February.
[12] On 17 February 2021, Mr Gao says that Ms Cai sent him a text message that the agreement would be cancelled if the deposit was not paid by 2 pm. He phoned her and, on his account, she told him that Wave Investments Ltd needed the deposit to fund the purchase of another property. Wave Investments Ltd required the deposit to be promptly released to it. Mr Gao says he would never authorise the early release of the deposit. He also says that Heng Yang Investment Ltd could not pay the deposit because the land agents had not sent details of the trust account for him to pay. He considered how to make a payment but he believed the banks would not be open because of the pandemic. He decided to pay by online banking. At 2.11 pm Mr Xie, the other land agent, emailed Mr Gao with the bank account for the land agents’ trust account. Mr Gao replied that he would “sort it out shortly”. At 2.47 pm, the land agent emailed the vendor’s lawyer:
The purchaser due to COVID-19 they all work from home. Better give them bit more time today to sort out. Will keep you posted.
The lawyers acknowledged in a return email that they would put the matter on hold pending further instructions.
[13] At 4.32 pm that day, Mr Shashikumar instructed the lawyer and the land agent to give them until 5 pm that day to pay the deposit.
[14]At 5.01 pm the vendor’s lawyer sent an email to the purchaser’s lawyer:
Refer to our email today.
Our client advises that the deposit has not yet been paid.
Our client hereby cancels this agreement pursuant to clause 4.2 of the agreement. This agreement is ended.
Please acknowledge receipt of this email.
[15]Mr Gao paid $60,000 on 17 February 2021. His explanation for paying
$60,000 is that that was the maximum amount that the bank would allow to be paid by an online payment, and he paid the remaining $40,000 on 18 February 2021. That payment was received at 12.56 pm on 18 February 2021. While the vendor’s lawyer had sent notice of cancellation at 5.01 pm on 17 February, at 6.45 pm or thereabouts, the land agents sent a fresh email to Mr Gao pressing him for payment of the deposit.
[16] As I have explained, the agreement uses the standard terms of the ADLS/REINZ particulars and conditions of sale of real estate by auction. Further terms of sale are added at the end. Those further terms of sale address the question of COVID-19 Alert levels in relation to settlement dates and viewing restrictions. I do not regard those further terms of sale as relevant to this case. Counsel did not refer them to me. The agreement is unconditional. A page headed “Memorandum of Contract” has been signed by both parties. The purchase price is $1,813,000. The deposit is $100,000 and is “payable to Mountfort Estate Agents Ltd Trust Account”. Part 2 of the Conditions deals with conduct of the auction. Clause 2.8 says:
2.8The Purchaser shall immediately on the completion of the auction:
(a)sign the memorandum of contract, failing which the auctioneer may sign on behalf of the purchaser;
(b)pay to the vendor’s licensed real estate agent the deposit being 10 per cent of the purchase price unless otherwise agreed; and
(c)complete the GST information.
Clause 3.3 deals with time for performance:
3.3(2) Any act done pursuant to this agreement by a party including service of notices after 5:00pm on a working day or on a day that is not a working day shall be deemed to have been done at 9:00am on the next succeeding working day;
(3) Where two or more acts are done pursuant to this agreement, including service of notices, and deemed to have been done at the same time, they shall take effect in the order in which they would have taken effect but for subclause 3.3(2);
Clause 3.4 deals with notices:
Notices
The following reply to all notices between the parties relevant to this agreement, whether authorised by this agreement or by the general law:
All notices must be served in writing.
…
(3)All other notices, unless otherwise required by the Property Law Act 2007, must be served by one of the following means:
(a)On the party as authorised by sections 354 to 361 of the Property Law Act 2007; or
(b)On the party or on the party’s lawyer;
(i)by personal delivery; or
(ii)by posting by ordinary mail; or
(iii)by email; or
…
(4)In respect of means of service specified in sub-clause 3.4(3)(b), a notice is deemed to have been served:
(a)in the case of personal delivery, when received by the party or at the lawyer’s office;
(b)…
(c)in the case of email;
(i)when sent to the email address provided for the party or the party’s lawyer on the back page; or
(ii)any other email address notified subsequently in writing by the party or the party’s lawyer (which shall supersede the email address on the back page); or
(iii)if no such email address is provided on the back page or notified subsequently in writing, the office email address of the party’s lawyer’s firm appearing on the firm’s letterhead or website … ; or
Clause 4 deals with the deposit:
4.1The purchaser shall pay the deposit to the vendor’s licensed real estate agent immediately on the completion of the auction or, where the property has been sold prior to, or subsequent to, the auction on the execution of this agreement by both parties, time being of the essence.
(Emphasis added)
4.2If the deposit is not paid as set out in sub-clause 4.1, the vendor may cancel this agreement by serving notice of cancellation on the purchaser;
4.3The deposit shall be in part-payment of the purchase price.
[17] The deposit provision is to be contrasted with the standard ADLS/REINZ agreement for sale and purchase of real estate. Under the standard agreement, the deposit is payable immediately upon execution of the agreement by both parties, but the purchaser has a period of grace if the vendor wishes to cancel for non-payment of the deposit. The vendor must give the purchaser written notice requiring payment of the deposit on or before the third working day after service of the notice, time being of the essence. The vendor can cancel only if there is non-compliance with that notice. There is no comparable notice provision under the agreement for the sale of real estate by auction.
[18] The question whether Heng Yang Investment Ltd complied with the time to pay the deposit needs to be considered in the light of the circumstances at the time. Auckland was under Alert Level 3 lockdown. There were restrictions on personal liberties under the COVID-19 Public Health Response (Alert Level Requirements)
Order 2021. The main requirement was that people were required to stay at home.3 As an exception, people could access businesses or services as essential personal movement, if that was necessary for their own needs or on behalf of a fellow resident or a vulnerable or high-risk person.4 The background of the Level 3 restrictions gives a context for the steps taken by the parties.
[19] The parties accept that payment of a deposit is not effective until cleared funds are received by the agent. There are options for paying. Obviously, the purchaser could not pay in bank notes – that would raise anti-money laundering concerns. A purchaser might attend an auction with her or his chequebook and write out a personal cheque. That would show their good faith in intending to purchase the property, but simply handing over the cheque would not count as payment. The payment would not be effective until her or his bank honoured the cheque and the funds were deposited into the land agents’ trust account by its bank. While paying by personal cheque may be falling out of favour now, in the past the tender of a cheque by the successful bidder at auction would be an acceptable way of making payment of a deposit. But it would entail some lapse of time between the handing over of the cheque and the funds being received in the trust account of the land agents. Another option was to pay by bank cheque. It was suggested in argument that Mr Gao could have prepared himself to pay by bank cheque by obtaining a bank cheque ahead of the auction and come armed with a bank cheque for most of the deposit, leaving the balance to be paid later. That was of course one option, but it needs to be remembered that a purchaser is not required to pay the deposit until they are the successful bidder at the auction. Given that the auction took place late in the day, time would be required for the purchaser to go and obtain a bank cheque.
[20] Again, it may be queried whether obtaining a bank cheque was a realistic option during Alert Level 3 lockdown. Personal movement was discouraged. Wave Investments Ltd has shown that there were branches of the applicant’s bank open during the lockdown where a bank cheque might have been obtained. I do not regard that as conclusive against the purchaser. In COVID-19 conditions, under lockdowns with restrictions on personal movement, a person should not be taken to task because
3 COVID-19 Public Health Response (Alert Level Requirements) Order 2021, cl 19.
4 COVID-19 Public Health Response (Alert Level Requirements) Order 2021, cl 20(a).
they have chosen a course which minimises contact with others. That leaves electronic payments. Mr Gao could safely make electronic payments from his home. He would not have to leave his home to go to a bank and to the office of the land agents. But before he could make an electronic payment, he needed to know the bank account into which his company’s deposit should be paid.
[21] Shortly after the auction, after 5 pm on 15 February 2021, the land agents had sent the bank account details to Ms Yan’s email address, but it is arguable for Mr Gao that he did not receive those details then. He raised the matter when the land agents contacted him on the morning of 17 February. He was given that information shortly after 2 pm that day. Until he received those bank account details, I do not regard him as in breach of the agreement to pay the deposit. He did not come under a duty to pay until he received the bank account details.
[22] Under the contract, he was required to pay “immediately”, with time being of the essence. There was necessarily some lapse of time between receiving the bank account details and actually making the payment. Mr Patterson submitted that “immediate” meant that there must not be any lapse of time, but he accepted that there is some guidance in the case law as to what “immediate” might mean. He cited Gilbert J’s decision in Groupe Couleur v Emerald Inn On Takapuna Beach Ltd.5 The facts in that case are quite removed from this one, but Gilbert J found that there was a duty on the plaintiff to make an immediate payment where time was of the essence. He said:6
Groupe Couleur was required to take immediate steps following the meeting on 13 October 2010 to arrange the necessary bank transfer. It breached an essential term of the agreement when it failed to take this step on 14 October 2010. Emerald Inn became immediately entitled to cancel the agreement at that point.
[23] What is common between that case and this one is a requirement for immediate payment where time was of the essence. That case offers some useful guidance. Once Mr Gao received the information about the land agents’ trust account, paying immediately required that the payment be completed no later than the close of business
5 Groupe Couleur v Emerald Inn On Takapuna Beach Ltd [2012] NZHC 1323.
6 At [74].
the following day, 18 February 2021. It is arguable for Heng Yang Investment Ltd that the immediacy requirement is satisfied by paying before the close of business on the following day. It means that by the end of the next day the vendor could make an informed choice whether to cancel or not. It also means that successful purchasers must make sure that they have the funds in place to make the payment. Failure to pay the deposit within that time can be taken by the vendor as giving a proper reason no longer to proceed with the agreement. Allowing for a shorter time would, in my view, risk making the agreement unworkable for purchasers. That position is at least arguable for the purchaser in this case.
[24] Accordingly, the payment of the deposit in two instalments – $60,000 on 17 February and $40,000 on 18 February 2021 – was completed before the close of business on 18 February 2021. That was within the time allowed by the contract. The result is that the notice of cancellation sent on the evening of 17 February 2021 was premature. The vendor and its lawyer ought to have allowed the purchaser time to make the payment after the purchaser was notified of the trust account details on 17 February 2021. Because the cancellation was arguably premature and because the purchaser did make the payment within the time allowed by the contract, the purchaser can say that the cancellation was ineffective and insist on performance of the contract.
[25] The purchaser has raised other arguments, but I put less weight on them. Mr Herbert submitted that there had been a waiver or estoppel by the statements by the land agents when the agreement was signed indicating that the deposit could be paid within 10 working days. Mr Patterson submitted that that was inherently improbable. Mr Herbert submitted that Mr Gao’s account was backed-up by his friend, Ms Yan. These factors lead me to doubt that evidence. The agents would have been acting without the authority of the vendor who had authorised them to arrange a sale of the property under the particulars and conditions of sale of real estate by auction in the ADLS/REINZ form. There is nothing to suggest they had any authority from the vendor to alter the terms by extending the time for payment of the deposit. The evidence indicates Mr Shashikumar was concerned that the deposit was paid promptly. When the agents pressed Mr Gao for payment, he did not raise this 10 working days question as a reason for not making payment, but instead responded by taking steps to pay. The matter was not raised until 16 March 2021 when Heng Yang Investment Ltd
filed the present application. The chances of Heng Yang Investment Ltd making out that aspect of the case are slim.
[26] Mr Herbert also submitted that notice of cancellation was not properly given. His argument was based on how the contact details were given on the back page of the agreement for sale and purchase of real estate. The form has a space for the email address for service of notices. For both the vendor and the purchaser that space has been left blank. Nevertheless in the space above, email contacts are given. In the case of the purchaser, Mr Gao’s name, his email address, the name of his lawyers and their email address have been written. While the space for the email address for service is left blank, the agreement properly sets out contact details for email. The vendor’s lawyers’ email cancelling the agreement was properly sent to an email address specified in the agreement.
[27] Finally, Mr Herbert submitted that when the agents contacted Mr Gao for payment on the evening of 17 February 2021, after the vendor had cancelled the agreement, that revived the agreement. That argument has to be considered in the light of cl 3.3(3) of the agreement. While the cancellation and the request for payment are treated as having occurred at 9 am the next day, the notice of cancellation comes first. I accept Mr Patterson’s submission that once a notice cancelling the agreement is given, the agreement is at an end and cannot be revived unilaterally. Mr Herbert said in response that it might be taken as an offer to revive the contract but I cannot see that argument going very far.
[28] Overall, on the primary ground I have stated in this decision I regard the caveat as sound.
[29] Mr Patterson also submitted that even if I were to find that there was a caveatable interest, I should nevertheless order the removal of the caveat upon the vendor providing adequate substitute security for any damages award to Heng Yang Investment Ltd if it succeeded at trial. I decline to do that. If I were to do that, I would be holding that even if Heng Yang Investment Ltd proved its case, it could not obtain an order for specific performance. Mr Patterson submitted that this was an investment property, not a home for Mr Gao and his family. Notwithstanding that, I do not regard
that as an adequate ground for declining specific performance. It is certainly not a judgment I can make at this preliminary stage.
[30] The agreement is to settle on 30 September 2021. The purchaser should, however, begin a proceeding promptly. The vendor has already indicated its unwillingness to complete the agreement. In the meantime it has on-sold the property to another purchaser who has also caveated the title. There is, therefore, a live issue to be decided and the sooner a proceeding is started the better. Accordingly, it is a condition of the order that the applicant is to begin a proceeding for specific performance by 18 May 2021.
[31] The applicant is entitled to costs. If counsel cannot agree costs, memoranda may be filed.
…………………………………….
Associate Judge R M Bell
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