Kahawai Point Developments Limited v Khan
[2019] NZHC 3345
•17 December 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-000700
[2019] NZHC 3345
BETWEEN KAHAWAI POINT DEVELOPMENTS LIMITED
Plaintiff
AND
BALLU KHAN, FEROZA ASHRAF and NUR JAN KHAN
Defendants
Hearing: 16 October 2019
Further submissions received 1 and 5 November 2019
Appearances:
G K Holm-Hansen and A A Cho for Plaintiff K F Gould for Defendants
Date:
17 December 2019
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 17 December 2019 at 3.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date……………………….
KAHAWAI POINT DEVELOPMENTS LTD v KHAN [2019] NZHC 3345 [17 December 2019]
Introduction
[1] In these summary judgment proceedings, the plaintiff, as vendor, seeks orders for specific performance of the sale and purchase agreement (SPA) of a block of land at Glenbrook, South Auckland (the property). The purchase has not been completed; a 10 per cent deposit was paid, but the balance of the purchase price was not.
[2] The defendants, Mr Ballu Khan, Ms Feroza Ashraf and Ms Nur Jan Khan, are the trustees of the Kowhai Trust and said, by the plaintiff, to be the purchasers of the property. The SPA was signed by only one of the defendant trustees, namely Mr Khan; the other two trustees, Ms Ashraf and Ms Khan, did not sign. Those two trustees say that they first became aware of the existence of the SPA in May 2019, had no contact or dealing with the solicitors for the Kowhai Trust and do not consent to the purchase.
[3] The plaintiff initially sought summary judgment against all three named- defendants. However, following disclosure of the trust deed by the defendants’ solicitors (subsequent to the hearing), the plaintiff now seeks summary judgment only against Mr Khan. The plaintiff now accepts that its proceedings against the second and third named-defendants, Ms Ashraf and Ms Khan, will have to proceed in the ordinary way.
[4] The critical issue I must determine is whether the plaintiff has established that the defendant, Mr Khan, has no defence to the claim; is the SPA binding on Mr Khan?
Background facts
[5] The plaintiff is the owner and developer of a site at Glenbrook, Auckland, which includes the property at issue (Lot 59 McLarin Road, Glenbrook).
[6] On or about 20 January 2017, the plaintiff entered into a SPA for the sale and purchase of the property.
[7] In the SPA, the Kowhai Trust is the named purchaser. Mr Khan signed the SPA but Ms Ashraf and Ms Khan did not. The purchaser’s lawyers were recorded on the
SPA as “James Donovan lawyers, Howick, Auckland”. The contact details for the purchaser were recorded as “C/o Ballu Khan, K G Accountants, Howick”.
[8]Clause 17 of the SPA reads:
17.1If any person enters into this agreement as trustee of a trust, then:
(1)That person warrants that:
(a)the person has power to enter into this agreement under the terms of the trust;
(b)the person has properly signed this agreement in accordance with the terms of the trust;
(c)the person has the right to be indemnified from the assets of the trust and that right has not been lost or impaired by any action of that person including entry into this agreement; and
(d)all of the persons who are trustees of the trust have approved entry into this agreement.
(2)If that person has no right to or interest in any assets of the trust except in that person’s capacity as a trustee of the trust, that person’s liability under this agreement will not be personal and unlimited but will be limited to the actual amount recoverable from the assets of the trust from time to time (“the limited amount”). If the right of that person to be indemnified from the trust assets has been lost or impaired, that person’s liability will become personal but limited to the extent of that part of the limited amount which cannot be recovered from any other person.
[9] On 26 January 2017, James Donovan solicitors confirmed to the plaintiff’s solicitors that it was acting for the Kowhai Trust on the SPA.
[10] On 2 February 2017, a deposit of 10 per cent ($38,000) was paid to the plaintiff from the bank account of the Kowhai Trust.
[11]On 14 May 2018, a title for Lot 59 was issued.
[12] On 16 May 2018, the plaintiff provided a settlement statement and settlement instructions to the Kowhai Trust.
[13] On 21 May 2018, the Kowhai Trust’s lawyer set up an e-dealing on the Landonline workspace in anticipation of a settlement. The e-dealing showed Mr Khan, Ms Ashraf and Ms Khan as the trustees.
[14] The settlement date was to be 28 May 2018. However, the Kowhai Trust did not settle.
[15] On 10 December 2018, a settlement notice (dated 20 October 2019) was served by the plaintiff on Mr Khan. In accordance with that notice, a settlement was required within 12 working days of service.
[16] On 11 September 2019, the settlement notice was served on Mr Khan, Ms Ashraf and Ms Khan. In accordance with the settlement notice, the plaintiff required settlement within 12 working days of service.
[17]None of the Kowhai trustees settled the purchase by 30 September 2019.
Relevant legal principles
[18]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.
[19]The principles are summarised in Krukziener v Hanover Finance Ltd:1
[26] 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 (CA) at 3. 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 (PC) at
341. In the end the court’s assessment of the evidence is a matter of judgment.
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.
The court may take a robust and realistic approach where the facts warrant it:
Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
[20] In Gardner v Gardner, Associate Judge Osborne summarised the general principles of summary judgment.2 These include:
(a)Common-sense, flexibility and a sense of justice.
(b)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to determine and reject spurious defences or plainly contrived factual conflict. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
(c)In assessing a defence, the Court will look for appropriate particulars and a reasonable level of detailed substantiation. 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.
(d)In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences in certain factual matters if the lack of a tenable defence is plain on the material before the Court.
(e)The need for judicial caution in summary judgment applications has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case.
Procedural history
[21] The plaintiff had not seen a copy of the trust deed before filing and serving its summary judgment proceeding. The trust deed was likewise not in evidence before me at the hearing on 16 October 2019.
2 Gardner v Gardner [2015] NZHC 2018 at [20].
[22] Subsequent to the hearing, I issued a minute, dated 18 October 2019, directing that the defendants were to provide a copy of the trust deed and any relevant powers of attorney of any of the trustees to the plaintiff’s solicitors.
[23] The defendants complied with that direction and made the trust deed available. A letter from counsel for the defendants also confirmed that there are no relevant powers of attorney.
[24] The plaintiff then filed a memorandum dated 1 November 2019, together with an affidavit annexing the trust deed. The plaintiff advised that, on the basis that there are no amendments to the trust deed, it does not pursue an order for summary against the second and third named-defendants.
[25] A further submission was also filed by counsel for the defendants. The defendants maintain the position that, for the Court to make an order for specific performance as against Mr Khan (or any of the defendants), it has to make a finding that there is a binding agreement for sale and purchase as between the plaintiff and the defendants as trustees of the Kowhai Trust.
The Notice of Opposition
[26]Mr Khan opposes summary judgment on the following grounds:
(a)That he is sued in his capacity as a trustee of the Kowhai Trust;
(b)The Kowhai Trust did not enter into the SPA; and
(c)Ms Ashraf and Ms Khan, as the remaining trustees of the Kowhai Trust, did not enter into the SPA.
Analysis and decision
[27] Where a co-owner signs a contract document, the presumption or the presumed intention is that the signature is conditional upon the signature of the co-owner.3
3 Dong v Sun [2014] NZHC 208, (2014) 15 NZCPR 452 at [55].
[28]In D W McMorland’s Sale of Land, the learned author states:4
Where either the vendor or the purchaser is a “trust” the parties to the contract must be the trustees of a trust, the trust itself not being a legal person. The trustees of a trust are subject to their unanimity (all trustees must act in unanimous agreement) and non-delegation (a trustee may not delegate his or her powers or duties to a co-trustee or to a stranger) principles, and each trustee must sign the deed in the absence of a power for fewer to do so conferred by a trust deed or under s 31 of the Trustee Act 1956.
(emphasis added)
[29] In Stokes v Insight Legal Trustee Co Ltd, the Court of Appeal held that in order for a trust to be bound to an agreement to purchase, which was not signed by all of the trustees, it must be shown that there was more than a passive acquiescence to a decision made by another trustee.5 The ratifying act must show the trustee considered the exercise of his or her power as trustee and consented to the action taken.
[30] In Dong v Sun, Faire J observed that the express warranty in the contract of sale that “all of the persons who are trustees of the trust have approved entry into this agreement” (that is, cl 17) can apply only if the parties have entered into an agreement, and such a clause has no application to the question of whether or not the parties have entered into an agreement.6 It is only once an agreement has been established that the parties are bound by the clauses in it, including cl 17.
[31] The plaintiff accepts those statements of general principle but say that Mr Khan has advanced no genuine defence and that he is personally liable to it under the SPA regardless of whether the other two defendant trustees are also liable.
[32] The plaintiff sues Mr Khan in contract; that is the sole cause of action in the statement of claim, and it is, of course, the basis for the summary judgment relief sought, namely specific performance.
4 D W McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [3.02].
5 Stokes v Insight Legal Trustee Co Ltd [2015] NZCA 519, (2015) 17 NZCPR 154 at [49]; and
Hansard v Hansard [2014] NZCA 433, [2015] 2 NZLR 158 at [51]. See also Working With Trusts
– Trustee and Beneficiary Rights and Obligations (online looseleaf ed, Thomson Reuters) at [5.5.14(3)].
6 Dong v Sun, above n 3.
[33] I accept that a trustee is personally liable for all debts incurred in the conduct of a trust.7 However, that principle does not address or provide an answer to the logically prior question of whether Mr Khan has any liability under the SPA, being the contract at issue. In my view, the fundamental problem for the plaintiff is that it is clearly arguable, as a matter of objective interpretation of the SPA,8 that the parties intended the property would be purchased by the trustees of the Kowhai Trust. And there is, arguably, no binding agreement because not all of the trustees agreed to be bound, as required by the trust deed (and s 31 of the Trustee Act 1956 does not apply). The intention that the Kowhai trustees were to be the purchasers is apparent from the description of the purchaser as the Kowhai Trust (albeit legally incorrect) and the factual matrix, including the conduct of the solicitors involved and the payment of the deposit from the Kowhai Trust’s bank account. It is also clearly arguable that, in signing the SPA, Mr Khan, consistent with the objective intention of the parties, was signing as a trustee.
[34] The Court has no jurisdiction to grant specific performance unless there is a binding contract between the parties.9 The onus is on the plaintiff to demonstrate that the defence of a lack of a binding agreement cannot succeed. However, it has not done so. It is not open to the plaintiff to say that this is a clear and unequivocal case of a purchase by Mr Khan personally and that it is irrelevant that not all of the intended purchasers (that is, all the trustees of the Kowhai Trust) are bound. The competing claims will need to be tested at trial, including the role of the solicitors in the transaction.
[35] In these circumstances, I find that the plaintiff has not established that Mr Khan has no defence to the summary judgment application. In my view, it is arguable that Mr Khan is not bound by the SPA in any capacity and, as Faire J reasoned in Dong v Sun,10 cl 17 (pursuant to which Mr Khan represented that he had the approval of the other trustees) has no application to whether the parties have entered into an
7 Foundation Custodians Ltd v Thornton (2009) 10 NZCPR 661 (HC) at [24]. See also McMorland, above n 4, at [3.02].
8 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [19]; and Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 at [60].
9 Peter Blanchard (ed) Civil Remedies in New Zealand (2nd ed, Thomson Reuters, Wellington, 2011) at [8.5.1]; and Kain v Hutton [2007] NZCA 199, [2007] 3 NZLR 349 at [130]–[135].
10 Dong v Sun, above n 3.
agreement. I accept that, in Dong v Sun, the trustees were the vendors (not the purchasers, as is the alleged case here), but I find that that distinction is irrelevant.
[36] It may be that Mr Khan is liable for misrepresentation and/or some other deceit-based cause of action, and that the plaintiff would be entitled to damages from him. It may also be the case that he is liable to the Kowhai Trust for the payment of the deposit, but those are not matters for me to determine at this summary stage and, in any event, do not form part of the pleadings. The plaintiff has not established that Mr Khan has no defence on the basis that he is not bound by the SPA. The application for summary judgment must accordingly fail.
Result
[37]The plaintiff’s application for summary judgment is dismissed.
[38] I note that the defendants wish to be heard separately on the question of costs and contend that the summary judgment application was not appropriate. If costs cannot be agreed, then memoranda are to be filed by 31 January 2020.
Associate Judge P J Andrew
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