Hu v Liu
[2023] NZHC 972
•28 April 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-001635
[2023] NZHC 972
BETWEEN ZHENGXI HU
Applicant
AND
KUN LIU
Respondent
Hearing: 10 March 2023 Appearances:
M Chen for the Applicant
M Taylor for the Respondent
Judgment:
28 April 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by Associate Judge Gardiner
on 28 April 2023 at 4.00 pm, pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar – Date: ………………………………..
Solicitors:
K3 Legal, Auckland
Ku & Partners Ltd, Auckland M Taylor, Auckland
HU v LIU [2023] NZHC 972 [28 April 2023]
Introduction
[1] The plaintiff, Zhengxi Hu, and defendant, Kun (Lillian) Liu entered into an agreement for the sale and purchase of a property in Papakura, Auckland.
[2] Mr Hu claims that in breach of the agreement, Ms Liu failed to pay the second tranche of the deposit when due, and to settle the purchase of the property after a settlement notice was issued.
[3] Mr Hu applies for summary judgment for breach of contract for non-payment of the second tranche of the deposit. He has discontinued his application for summary judgment in respect of his second cause of action for breach of contract for failure to settle the purchase of the property.
[4] Ms Liu’s defence is that she was not (and is not) obliged to pay the second tranche of the deposit because:
(a)she was entitled to avoid the agreement because a condition had not been satisfied; or
(b)she was entitled to and did cancel the agreement because:
(i)Mr Hu breached a warranty in the agreement and the breach could not be remedied; and/or
(ii)Mr Hu and/or his agent made misrepresentations that induced her to enter into the agreement and to declare the due diligence condition satisfied;1 or
(c)the agreement was void for uncertainty; or
(d)Mr Hu waived the deposit requirement.
[5]The issue is whether any of these defences are reasonably arguable.
1 Contract and Commercial Law Act 2017, ss 36 and 37.
[6] Alternatively, Ms Liu argues that summary judgment should be declined because Mr Hu breached r 12.4 of the High Court Rules 2016 as he did not bring to the attention of the Court facts he was aware gave rise to a defence for Ms Liu.
Background facts
[7] Ms Liu and her husband Xiwen (Jack) Gu were looking for a property to develop. They were contacted by a real estate agent, Lei Lu (known as Rocky), who was marketing a property on Valentine Street in Papakura. Ms Liu and Mr Gu say that Rocky told them that prior to settlement the vendor would obtain a resource consent to develop the site to construct six units.
[8] On 1 October 2021, Mr Gu (a lawyer) sent a form of agreement for sale and purchase to Rocky. The agreement was unsigned and contained further terms of sale prepared by Mr Gu at cls 20 to 25. The purchase price was recorded as $1,260,000.
[9]The relevant further terms of sale were:
20.0 Due Diligence
This agreement is conditional upon the purchaser being satisfied with the results of a due diligence investigation of the property within 5 working days after the date of this Agreement. If the purchaser is dissatisfied with any aspect of this investigation the purchaser may at the purchaser's absolute discretion by notice in writing terminate this agreement. This clause is inserted for the sole benefit of the purchaser and the purchaser is under no obligation whatsoever to supply any reasons for the purchaser's dissatisfaction with any aspect of the investigation.
21.0 Prior Agreement
The Purchaser acknowledges that the Vendor has entered into an unconditional sale and purchase agreement with Chia-Yu Chang and Andy Tzu-An Liu dated
21 August 2021 ("Prior Agreement'). Prior Agreement and letter of Nomination dated 3 August 2021 are attached.
The Agreement is conditional on the Vendor has successfully purchased the property as per Prior Agreement.
22.0 Resource Consent
The Agreement is conditional upon a Resource Consent granted in accordance with the site plan (attached) to the satisfaction of the Purchaser. The Purchaser shall use his best endeavour to satisfy this condition within 5 work days upon receipt of such Resource Consent. This clause is inserted for the sole benefit of the Purchaser.
23.0 Purchase Price
The Purchase Price recorded in this agreement includes all costs in association with the Vendor's application of a Resource Consent referred in clause 22.0.
24.0 Deposit
The Purchaser shall pay a deposit of $50,000.00 upon satisfaction of Due Diligence Condition as per clause 20.0 above.
A further deposit of $76,000.00 shall be payable immediately upon the Vendor's successful settlement of the Property in accordance with the Prior Agreement.
The deposit will be paid to the Vendor's Solicitor's Trust Account who will hold such deposit as stakeholder. The stakeholder will hold deposit received on interest bearing on-call bank deposit ("stakeholder account'') established in the name of the Vendor until all conditions are satisfied (at which time the stakeholder will release the deposit to the Vendor) or this agreement is cancelled.
Any interest earned on the deposit (less any withholding tax, bank or stakeholder deduction or any other proper deduction) will follow the deposit.
[10] Later that day, Rocky returned a copy of the agreement signed by Mr Hu. The purchase price had been amended to $1,280,000. No other changes had been made, including to the further terms of sale inserted by Mr Gu.
[11] Mr Gu signed the agreement on behalf of Ms Liu and initialled Mr Hu’s change to the purchase price. Mr Gu provided a copy of the signed agreement to Rocky via WeChat at 2.51 pm on 1 October 2021.
[12] Mr Gu says he then discussed changing the deposit with Rocky. Mr Gu says he asked Rocky to inquire with Mr Hu whether cl 24.0 could be amended so that $1 was payable on satisfaction of the due diligence clause and 10% of the purchase price was payable on Mr Hu settling the prior agreement as per cl 21.0.
[13] WeChat messages from Rocky to Mr Gu on 1 October 2021 at 3:59pm show that Rocky attached a further version of the agreement saying “Mr Gu…all signed … You will need to look at the conditions at the back … A minor amendment … And the deposit has been amended to what have said in the morning … To start, pays $1.”
[14] In the attached version of the agreement cls 22 and 24 had been changed and initialled by Mr Hu, to:
22.0 Resource consent
The vendor warrants that Resource Consent granted in accordance with the site plan (attached) to the satisfaction of the Purchaser.
…
24.0 Deposit
The Purchaser shall pay a deposit of $1.00 upon satisfaction of Due Diligence Condition as per clause 20.0 above.
A further deposit of 10% shall be payable immediately upon the Vendor’s successful settlement of the Property in accordance with the Prior Agreement.
The deposit will be paid to the Vendor’s Solicitor’s Trust Account who will hold such deposit as stakeholder. The stakeholder will hold deposit received on interest bearing on-call bank deposit (“stakeholder account”) established in the name of the Vendor until all conditions are satisfied (at which time the stakeholder will release the deposit to the Vendor) or this agreement is cancelled.
Any interest earned on the deposit (less any withholding tax, bank or shareholder deduction or any other proper deduction) will follow the deposit.
[15] Mr Gu says he attempted to negotiate amendments to the agreement with Mr Hu’s conveyancing lawyers, Wong & Bong. On 6 October 2021, Mr Gu sent an email to Jerome Wu of Wong & Bong stating:
We refer to the attached SPA, we confirm we act for the Purchaser and note you act for the Vendor.
We understand the [sic] both parties have been communicating via an acquaintance and principally agreed the following variations to the Agreement:
1. The Purchase Price is amended to $1,275,000.00 inclusive of GST;
2. Amend the clause 22.0 to as follows:
22. Resource consent
The Agreement is conditional upon a Resource Consent granted in accordance with the site plan to the satisfaction of the Purchaser. The Vendor shall provide a copy of its planner’s draft Resource Consent and seek the Purchaser’s consent to this draft before Lodging it to Auckland Council. The Purchaser shall within 2 working days after the receipt of the draft to advise whether the condition is satisfied or not.
3. The Vendor shall appoint Shield Group as their subdivision consultant and shall reach agreement with Shield Group in accordance with Shield Group quotation dated 04 October 2021 as attached (“Consultant’s quotation”);
4. The Vendor shall be liable for the following items as outline in consultation quotation
a. 1.1 CCTV
b. 1.2 TOPO
c. 2.0 Resource consent and its application fees to Auckland Council The Purchaser is willing to satisfy Due Diligence Condition as per
20.0 and pays $1.00 to Vendor’s bank account immediately upon the
confirmation by your client to the variations as mentioned above.
[16] Mr Gu says Rocky informed him during a telephone conversation that Mr Hu agreed to the amendments at 1 and 2 (with the inclusion of the words “full set of documents”) but did not agree to points 3 and 4. Rocky sent Mr Gu a screen shot of Mr Hu’s instructions to Wong & Bong, which said:
Hi Jerome,
Please find our answers below.
1. The Purchase Price is amended to $1,275,000.00 inclusive of GST AGREED
2. Amend the clause 22.0 to as follows Please change to:
22.0 Resource consent
The Agreement is conditional upon a Resource Consent granted in accordance with the site plan to the satisfaction of the Purchaser. The Vendor shall provide a copy of its planner’s draft Resource Consent full set of documents and seek the Purchaser’s consent to this draft before Lodging it to Auckland Council.
The Purchaser shall within 2 working days after the receipt of the draft to advise whether this condition is satisfied or not.
3
The Vendor shall be liable for all project costs until RC approved by Auckland Council except costs from Shield Group.
Shield Group will provide design service only for 68 valentine street RC period.
Thanks a lot!
[17] Ms Liu says the parties subsequently agreed that, because Mr Hu did not agree to Shield Group being appointed, the purchase price would revert to $1,280,000. On 7 October 2021, Mr Gu sent an email to Wong & Bong which said:
Hi Jerome,
We understand both parties had discussion regarding the variations to Agreement again yesterday, they have principally agreed:
1.The Purchase Price shall remain at $1,280,000.00 inclusive of GST;
2.Amend the clause 22.0 to as follows:
22.0 Resource Consent
The Agreement is conditional upon a Resource Consent granted in accordance with the site plan to the satisfaction of the Purchaser. The Vendor shall provide a copy of its planner's draft Resource Consent including full set of documents being submitted and seek the Purchaser's consent to this draft before lodging it to Auckland Council. The Purchaser shall within 5 working days after the receipt of the draft advise whether this condition is satisfied or not.
3.To delete point 3 and 4 outlined in my email dated 06 October 2021;
4. Your client shall consult with the Purchaser in relation to the design plan for the new dwellings.
Please take your instructions and revert.
[18] Confirmed by the email chain in evidence, Mr Gu did not receive a response from Wong & Bong. On 7 October 2021, Mr Gu attempted to extend the due diligence period to seven weeks. He did not receive a response. On 8 October 2021, he asked that the due diligence period be extended to 15 November 2021. He did not receive a response and at 1:25 pm that day he wrote an email that said:
Hi Jerome,
We refer to the attached SPA, we confirm we act for the Purchaser and note you act for the Vendor. Despite my previous correspondence to you regarding this matter.
Our client has instructed that Due Diligence is satisfied as per clause 20.0, please provide your client’s bank account details so that our client can pay
$1.00 as the deposit accordingly.
Please acknowledge the receipt of this email.
Kind regards Mr Gu
[19] At 1:39 pm Wong & Bong responded with a trust account deposit slip. Ms Liu paid the first tranche of the deposit of $1 on 8 October 2021.
[20] Mr Gu and Ms Liu say that on 25 October 2021 they were provided with eight pages of concept plans. They do not say from whom. Mr Hu says that Mr Gu approved these concept plans before they were submitted to Council for the resource consent. These plans show the internal layout and elevations for units for the site.
[21] On 29 March 2022, Mr Gu and Ms Liu were provided with a copy of a same- date letter from Auckland Council requesting further information in relation to the resource consent application submitted to the Council on 28 January 2022. The letter highlighted issues with the application and asked for further information including:
Flooding
15. Note that the flooding hazard is significant. Please provide a copy of correspondence with HW. Also, please confirm if wave effect has been considered as the flood water may enter the property and lift the vehicles in the parking area. Please submit a copy of the HEC-RAS model to allow for further assessment.
[22] Ms Liu and Mr Gu consulted with their architect. On 8 April 2022, the architect advised via email with reference to the concept plans that the site would require more expensive subfloor or concrete piles; that the small size of two lots meant only two‑bedroom units could be built; and that in one unit the bathroom was too small to be used. Ms Liu says they also consulted a building contractor who confirmed that the cost of the foundations required to deal with the flood risk would be significantly more than the cost involved in ordinary foundations.
[23] In the meantime, on 7 April 2022, the prior agreement settled. That same day, Mr Hu’s solicitors notified Mr Gu that the prior agreement had settled and the second tranche of the deposit was payable (10% of the purchase price). On 11 April 2022, Mr Hu’s solicitors informed Ms Liu’s new solicitors of this fact and requested payment of the 10% deposit according to cl 24.0 of the agreement. Ms Liu did not pay the deposit.
[24] On 19 April 2022, pursuant to cl 2.2 of the agreement, Mr Hu issued a notice to pay the deposit within three working days from the date of the notice.
[25] That same day, Ms Liu through her lawyer, purported to cancel the agreement, citing misrepresentations relating to the size and layout of the units to be developed at the property and the cost of the foundations required for the development. Ms Liu pointed to the fact that the site plan originally provided by Rocky was for a different property and that it had become apparent that the layout set out in that plan was not suitable for the property she had agreed to buy.
[26] In a response dated 10 May 2022, Wong & Bong said that the resource consent had not yet issued and that the purported cancellation was premature.
[27]On 17 June 2022, resource consent was granted.
[28] In accordance with the terms of the agreement, settlement was to take place on 24 June 2022. As 24 June 2022 was Matariki, Mr Hu’s solicitor suggested that settlement take place on 27 June 2022.
[29]Ms Liu did not settle the property purchase on 27 June 2022.
[30] On 12 August 2022, Mr Hu, through his solicitor, issued a settlement statement for the property with a settlement date of 19 August 2022. On 18 August 2022, Mr Hu’s solicitor reiterated that settlement was to be completed by 19 August 2022 and that failure to settle on the settlement date would amount to repudiation.
[31] On 19 August 2022, pursuant to cl 11.0 of the agreement, a settlement notice was served on Ms Liu.
[32] On 6 September 2022, Ms Liu did not settle the property in accordance with the settlement notice.
[33] On 6 September 2022, Mr Hu purported to cancel the agreement in reliance on the unremedied settlement notice.
Legal principles
[34]Rule 12.2(1) of the High Court Rules 2016 provides:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[35] The relevant principles governing a summary judgment application are well established:2
The principles are well settled. 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: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. 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: MacLean v Stewart (1997) 11 PRNZ 66 (CA). 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: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[36] I will now consider each of the defences raised by Ms Liu. To obtain summary judgment, Mr Hu must satisfy the Court that none of these defences are arguable.
Entitled to avoid the agreement because a condition had not been satisfied
[37] Ms Liu argues that she was not obliged to pay the deposit because the agreement was not unconditional. She advances two propositions. First, that the agreement was concluded on 1 October 2021, containing the following condition:
22.0 Resource Consent
The Agreement is conditional upon a Resource Consent granted in accordance with the site plan (attached) to the satisfaction of the Purchaser. The Purchaser shall use his best endeavour to satisfy this condition within 5 work days upon receipt of such Resource Consent. This clause is inserted for the sole benefit of the Purchaser.
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
[38] Alternatively, Ms Liu says that cl 22.0 was amended by agreement on 6 October 2021 to:
22.0 Resource consent
The Agreement is conditional upon a Resource Consent granted in accordance with the site plan to the satisfaction of the Purchaser. The Vendor shall provide a copy of its planner’s draft Resource Consent full set of documents and seek the Purchaser’s consent to this draft before Lodging it to Auckland Council.
The Purchaser shall within 2 working days after the receipt of the draft to advise whether this condition is satisfied or not.
[39] Ms Liu submits she was entitled to avoid the agreement in either scenario as the condition in cl 22.0 was not satisfied and therefore, she was not obliged to pay the deposit.
[40] This defence is not tenable. Payment of the deposit was not conditional on the conditions in cl 22.0 concerning the resource consent. Rather, payment of the second tranche of the deposit was conditional on Mr Hu settling the prior agreement.3 Mr Hu notified Ms Liu, through Mr Gu on 7 April 2022 that the prior agreement had settled. This notification was repeated to Ms Liu’s new solicitors on 11 April 2022. On 7 April 2022 or, at the latest 11 April 2022, the second tranche of the deposit was due and payable. Ms Liu breached the contract by not paying the deposit when it was due.4
[41] By issuing a notice to pay under cl 2.2 of the agreement, Mr Hu made time of the essence, entitling him to cancel the agreement if the deposit was not paid. This notice did not change the fact that the obligation to pay the second tranche of the deposit accrued on 7 April 2022 (or at the latest 11 April 2022).
[42] Ms Liu had not avoided the agreement by this date. If an agreement is subject to a condition, a party may avoid the agreement for failure to meet the condition on the fulfilment date by notice to the other before the condition is fulfilled or waived.5 But Ms Liu did not give notice to Mr Hu that she was avoiding the agreement for failure to meet cl 22.0. The fact that a party is entitled to avoid the contract does not
3 Sale and purchase agreement, cl 24.0.
4 DW McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at 7.06.
5 Sale and purchase agreement, cl 9.10.
relieve them of their obligations under the agreement, until they do in fact avoid the agreement.
[43] It is doubtful that Ms Liu was entitled to avoid the contract for failure to meet the cl 22.0 condition at this stage. Under the original wording of cl 22.0 agreed on 1 October 2021, the ‘condition’ is Mr Hu obtaining a resource consent to the satisfaction of Ms Liu. The contract does not specify a date by which Mr Hu was required to obtain a resource consent. Rather, the fulfilment date for the condition was five working days after Ms Liu received the resource consent for her approval. That had not happened on 7 April 2022 when the deposit was payable or even when Ms Liu terminated the agreement.
[44] Under the revised cl 22.0 arguably agreed on 6 October 2021, the condition is still Mr Hu obtaining a resource consent to the satisfaction of Ms Liu. Additionally Mr Hu was obliged to obtain Ms Liu’s approval of the resource consent plans before they were submitted to Council. Despite the following reference to this obligation as a ‘condition’ it is not a condition. It is by its nature an obligation on Mr Hu to do something, at best entitling Ms Liu to cancel the agreement if Mr Hu failed to obtain her approval before submitting the resource consent to Council.
[45] Either way, even if Ms Liu was entitled to avoid the contract, she did not do so. The contract remained on foot and on 7 April 2022 the second tranche of the deposit became due.
Entitled to cancel the agreement for breach of warranty
[46] Ms Liu submits that if cl 22.0 was amended so that the obligation on Mr Hu to obtain a resource consent to her satisfaction changed to a warranty, she was entitled to cancel the agreement under cl 9.10(2) because Mr Hu failed to obtain a resource consent to her satisfaction. She also says that it had become clear to her that any resource consent granted would not be to her satisfaction and therefore Mr Hu had repudiated the contract entitling her to cancel under s 37(1)(c) of the CCLA.
[47] There is no evidence that Ms Liu, or Mr Gu on her behalf, agreed to Mr Hu’s amendment to cl 22.0 to change the obtaining of a resource consent from a condition
to a warranty. Later exchanges between the parties were based on the version of cl
22.0 agreed at 2:52 pm on 1 October 2021, stating that the agreement was conditional on Mr Hu obtaining a satisfactory resource consent. However, arguably cl 22.0 was amended by agreement on 6 October 2021 to add an obligation on Mr Hu to obtain Ms Liu’s approval of the resource consent plans before they were submitted.
[48] On that basis, Ms Liu’s best argument is that she was not obliged to pay the deposit because she was entitled to cancel the agreement because of Mr Hu’s failure to perform that obligation.
[49] There is a factual dispute about whether Ms Liu, through Mr Gu, was in fact provided with the draft resource consent. Mr Gu and Ms Liu admit that on 25 October 2021 they were provided with eight pages of concept plans. The resource consent application was not submitted until January 2022 and used plans developed from the concept plans provided to Mr Gu and Ms Liu. Mr Hu says that Mr Gu was in contact with the architect about the resource consent before it was submitted.
[50] I am unable to make a finding on this factual issue in this summary hearing, but I observe that on Ms Liu’s own evidence she was provided with considerable information about the development plans before the application was submitted to Council. She obtained her own expert advice on these plans, including from an architect and a building contractor. Mr Gu sought and received advice on the flooding issue from the civil and structural engineer who had prepared the infrastructure report.
[51] Assuming for the sake of this application that Mr Hu was in breach of the obligation to provide Ms Liu with a draft of the resource consent application and obtain her approval before submitting it to the Council, does this mean that Ms Liu was not obliged to pay the deposit on 7 April 2022 and therefore, is not liable to pay the sum now?
[52] The answer is no. First, Ms Liu had not cancelled the agreement by 7 April 2022. Cancellation takes effect when the cancelling party makes it known to the other party. They must show a clear intention to cancel the contract.6 Ms Liu’s
6 Contract and Commercial Law Act 2017, s 41.
purported right to cancel was not exercised nor was any intention to cancel shown until 19 April 2022, by which time the obligation to pay the deposit had accrued.
[53] Second, the fact that she may have been entitled to cancel because (allegedly) Mr Hu had not provided her with the draft resource consent application, is irrelevant. Her obligation to pay the 10% deposit was not conditional on Mr Hu performing clause 22.0.
[54] Third, even after Ms Liu purported to cancel the agreement on 19 April 2022, her obligation to pay the deposit survived. When a contract is cancelled no party is obliged or entitled to perform an unperformed contract further.7 But it is settled law that rights and liabilities, or any cause of action, accrued unconditionally prior to cancellation are not discharged by cancellation.8
[55] It is not accepted that this principle does not apply because the entire contract was not unconditional. The only condition on payment of the 10% deposit, that the prior agreement was settled, was met. Ms Liu was unconditionally obliged to pay the second tranche of the deposit before the agreement was cancelled. Accordingly, the obligation to pay the deposit survives cancellation.
Entitled to cancel the agreement for misrepresentation
[56] Ms Liu claims that Mr Hu, through Rocky, misrepresented the development plans for the property. She says that these misrepresentations induced her to enter into the agreement and to declare that the due diligence condition was satisfied.
[57] The alleged misrepresentations are twofold. First, prior to signing the agreement on 1 October 2021 Rocky sent Ms Liu and Mr Gu a street photograph, aerial photograph and a site plan showing a layout for six units on the site, by WeChat. Later, Rocky sent a plan showing the internal design for the units. As I understand it, Ms Liu alleges that these were misrepresentations because the site plan was for another
7 Contract and Commercial Law Act 2017, s 42(1)(a).
8 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, Lexis Nexis, online ed, 2022) at [18.4.1]; Pendergrast v Chapman [1998] 2 NZLR 177(HC) at 186; Brown v Langwoods Photo Stores [1991] 1 NZLR 173 (CA) at 176; Garratt v Ikeda [2002] 1 NZLR 577; and Hollister v Robertson HC Auckland HC70/98, 22 July 1998.
property being developed by Mr Hu; and the internal design showed units with two bedrooms, when in fact that site was not large enough to accommodate six two-bedroom units.
[58] Second, after Ms Liu became aware during the due diligence period that the property was in a flood zone, Rocky said by WeChat message on 4 October 2021:
Civil engineers have seen that the foundation will use subfloor foundations to lift around 550mm to solve flooding problems.
…
The cost is about the same as a normal foam foundation.
[59] Ms Liu says this was a misrepresentation, as she became aware after later consulting an architect, that the foundations required to deal with the flooding issue would be more expensive.
[60] In my view the misrepresentation claim seems doubtful. On her own evidence, Ms Liu became aware during the due diligence period that the plans provided by Rocky prior to her signing the agreement were for a different property. She was provided with correct concept plans for the property in October 2021. Furthermore, her evidence is that she became aware during the due diligence period that the property was in a flood zone. The WeChat exchange with Rocky set out above corroborates that fact. Mr Gu declared the due diligence condition satisfied after this exchange, on 8 October 2021. Later, he sought and received advice on the flooding issue from the civil and structural engineer who had prepared the infrastructure report, who explained the report in plain terms. Ms Liu further consulted an architect and a building contractor on the flooding issue.
[61] In any event, even if Ms Liu was entitled to cancel the agreement because of these alleged misrepresentations, she did not do so until after her unconditional obligation to pay the deposit had accrued on 7 April 2022. For the reasons already explained, that obligation survives cancellation.
[62] At best, Ms Liu has a counterclaim against Mr Hu for damages under s 35(1)(a) of the CCLA. However, it is settled that such a counterclaim would not amount to a defence to an application for summary judgment although it may be relevant to an application for stay of execution of such judgment.9 The question is moot in any case as Ms Liu has not raised a counterclaim for misrepresentation.
Is the agreement void for uncertainty?
[63] Despite being raised in the notice of opposition this issue did not receive any attention in the hearing.
[64] I am not persuaded that Ms Liu has a reasonable argument that the agreement is void for uncertainty. Both parties have clearly acted as if there was an agreement on foot. This proposition contradicts Ms Liu’s misrepresentation and breach of cl 22.0 defences.
Did Mr Hu waive the requirement to pay the deposit?
[65] Failing to cancel the agreement for non-payment of the deposit did not waive the requirement for the deposit to be paid. Waiver would require unequivocal or unambiguous representations that Mr Hu would no longer exercise his right under the agreement for payment of the deposit.10 There is no evidence of Mr Hu representing that he did not require the deposit.
Mr Hu’s breach of r 12.4
[66] Rule 12.4(5) requires a plaintiff applying for summary judgment to file and serve an affidavit verifying the allegations in the statement of claim to which it is alleged the defendant has no defence and depose to their belief that the defendant has no defence to the allegations and set out the grounds of that belief. The plaintiff has a duty to disclose in its affidavit any facts of which it is aware that could amount to a defence.11
9 Hollister v Robertson HC Auckland HC70/98, 22 July 1998 at 10.
10 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, Lexis Nexis, online ed, 2022) at [18.3.2]; and Cycle Manufacturing Co Ltd v Williamson [1993] 1 NZLR 454..
11 Heartland Bank Limited v Hillend Station [2018] NZHC 2919 at [26].
[67] Ms Liu argues that Mr Hu failed to disclose correspondence regarding the following events:
(a)On 19 April 2022 Ms Liu purported to cancel the agreement for misrepresentations made by Mr Hu.
(b)On 17 August 2022 Ms Liu raised further concerns about the validity of a condition that had been unilaterally amended by Mr Hu to read as a warranty.
[68] Ms Liu is correct that Mr Hu did not disclose this correspondence in his supporting affidavit or subsequent affidavits. I consider that Mr Hu should at a minimum have informed the Court of Ms Liu’s purported cancellation on 19 April 2022. The question is whether to exercise my discretion to deny Mr Hu summary judgment because he did not do so. In the face of Mr Hu’s clear and persuasive case I am not prepared to refuse him judgment for this reason. That should not be taken as excusing Mr Hu’s actions.
Result
[69]I enter judgment against Ms Liu in favour of Mr Hu for the first cause of action:
(a)in the sum of $128,000 being the second tranche deposit; and
(b)interest on the judgment sum under s 10 of the Interest on Money Claims Act 2016 at the late settlement rate under the agreement of 10% from 9 April 2022 until the date of payment;12 and
(c)costs on a scale 2B basis and reasonable disbursements to be fixed by the Registrar.
Associate Judge Gardiner
12 Sale and purchase agreement, cl 3.12(1); DW McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at 7.08.
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