Hou v Zhang - [2023] NZHC 3102

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2290

[2023] NZHC 3102

BETWEEN
ZHENCHANG HOU

Plaintiff

AND

KAI ZHANG

First Defendant

TAMAKI CA LIMITED

Second Defendant

Hearing:
26 June 2023

Further memorandum filed 10 July 2023

Appearances:

M R Taylor and O Sutton for the Plaintiff/Applicant

J G Ussher for the First and Second Defendants/Respondents

Judgment:

6 November 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 6 November 2023 at 4.00 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
PCW Law Limited

HOU v ZHANG [2023] NZHC 3102 [6 November 2023]

Introduction

[1] The plaintiff, Mr Hou, seeks summary judgment of his claim for specific performance of the exit clause in a property sharing agreement (PSA) entered into with the first defendant, Mr Zhang. The PSA relates to a property in Pakuranga, Auckland (Property) held by the second defendant, Tamaki CA Limited (Tamaki). Mr Zhang and his wife are directors and shareholders of Tamaki.

[2] The exit clause (cl 8) include subclauses for determining value and division of proceeds. The plaintiff submits therefore that any issue between the parties as to the appropriate share of the proceeds if the property is sold does not need to be determined in the context of this summary judgment proceeding; an order that the parties are to specifically perform cl 8 includes a mechanism for resolving those issues.

[3] The defendants oppose summary judgment on both technical and substantive grounds.

[4] The technical grounds arise including because the plaintiff does not speak English and yet filed an affidavit in English. Directions were made by Venning J addressing this issue which the defendants say have been ignored as while the plaintiff filed a translation of the affidavit in accordance with those directions the wording remained the same. The defendants say it is not therefore the evidence of the plaintiff and ought to be struck out.

[5]In addition, the defendants rely on the following substantive grounds:

(a)the PSA was not adequately explained to the parties and was poorly drafted;

(b)the PSA was varied by consent;

(c)the plaintiff is estopped from relying on the PSA;

(d)the first and second defendants contributed more to the development than the sums alleged by the plaintiff;

(e)the plaintiff knew about and consented to the property being held by the second defendant, and about the tenants and GST refund; and

(f)they have arguable counterclaims.

[6] The application for summary judgment sets out the specific orders sought including:

(a)requiring the first and second defendants to take reasonable steps to facilitate the sale of the Property;

(b)agreeing to a minimum price at which the Property will be sold, or complying with the valuation clause in the PSA (cl 9) if necessary; and

(c)after accounting for income and expenses, applying the proceeds:

(i)95.65 per cent to Mr Hou, and 4.35 per cent to Mr Zhang; or

(ii)in the alternative,…

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: [2023] NZHC 3102
Decision Date: 6 November 2023

CaseChat Overview and Summary

The case of Hou v Zhang involved a claim by the plaintiff, Mr Hou, for summary judgment to enforce specific performance of an exit clause in a property sharing agreement (PSA) with the first defendant, Mr Zhang. The PSA related to a property in Pakuranga, Auckland, held by the second defendant, Tamaki CA Limited, of which Mr Zhang is a director and shareholder. The defendants opposed the application on both technical and substantive grounds. The plaintiff sought specific performance of clause 8 of the PSA, which outlines the process for selling the property if certain conditions are met, including the division of proceeds. The court considered the principles of summary judgment and whether there were any real questions to be tried. It found that the PSA was binding, there was no variation to the PSA, and the plaintiff could rely on the failure to comply with the buy-out clause to seek specific performance of clause 8. The court also concluded that none of the potential counterclaims raised by the defendants were sufficient to prevent summary judgment. The court granted the plaintiff's application for summary judgment in part, requiring the parties to comply with the exit clause and directing that the proceeds of sale be held in a trust account pending further order of the court. The part of the application for division of the proceeds was adjourned pending agreement between the parties or proposed directions for the determination of the application.

Orders