Kinleith Land and Infrastructure Limited v Bremworth Limited
[2021] NZHC 2145
•19 August 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000241
[2021] NZHC 2145
UNDER Section 290 of the Companies Act 1993 BETWEEN
KINLEITH LAND AND INFRASTRUCTURE LIMITED
Applicant
AND
BREMWORTH LIMITED
Respondent
Hearing: 31 May 2021 Appearances:
B Henry for the Applicant
K M Massey and S Dymond for the Respondent
Judgment:
19 August 2021
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 19 August 2021 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Shanahans Law Ltd, Auckland Russell McVeagh, Auckland
B Henry, Auckland
KINLEITH LAND AND INFRASTRUCTURE LTD v BREMWORTH LTD [2021] NZHC 2145
[19 August 2021]
[1] Kinleith Land and Infrastructure Ltd (KL&I) agreed to buy from Bremworth Ltd (Bremworth)1 a commercial property in Papatoetoe, Tāmaki Makaurau. The price was $24 million. KL&I did not pay the deposit when it was due according to the written agreement. Then it did not settle on the settlement date. Bremworth cancelled the agreement for non-payment of the deposit. It then issued a statutory demand for the unpaid deposit.
[2] KL&I applies to set aside the statutory demand, because there is a genuine and substantial dispute about whether the deposit is due and owing. It claims that the parties varied the written agreement about when the deposit was to be paid. It says that the deposit was not due when Bremworth cancelled the agreement, so Bremworth wrongly cancelled, revoking its right to receive the deposit.
[3] KL&I also claims that Bremworth misled KL&I on the asbestos risk present at the property and on its intention to settle with KL&I. Further, that the statutory demand should be set aside because Bremworth made a profit of $900,000 on the eventual sale of the property and therefore did not suffer any loss.
[4] Finally, KL&I maintains that material factual disputes make this application unsuitable for a summary procedure.
[5] Bremworth contends that there is no genuine or substantial dispute over the central issue of whether the deposit is due and owing.
[6]The issues I need to decide are:
(a)Did Bremworth and KL&I vary the agreement about when the deposit was to be paid?
(b)Did Bremworth mislead KL&I?
(c)Should the statutory demand be set aside because Bremworth did not suffer any loss?
1 “Cavalier Bremworth Ltd” at the time of signing the agreement.
(d)Are there material disputes of fact that make this matter unsuitable for a summary procedure?
[7] On 30 July 2021 this Court ordered that KL&I be put into liquidation. The statutory demand is therefore redundant as a means of establishing that KL&I is insolvent. Despite that, I am issuing this judgment. I do so because I have not received a request from the parties not to; the judgment was substantially complete when the company went into liquidation; there is some public interest in the issue between the parties; and a decision on the demand may serve a useful purpose if Bremworth makes a claim in the liquidation.2
Legal principles concerning applications to set aside statutory demands
[8] A Court may grant an application to set aside a statutory demand if it is satisfied there is a substantial dispute whether or not the debt is owing or is due (or the debtor company appears to have a counterclaim, set-off or cross-demand which generally is near to, or exceeds, the amount of the claimed debt).3
[9] As the Court of Appeal stated most recently in Confident Trustee Ltd v Garden and Trees Ltd, the general principles are well settled:4
(a)The onus is on the applicant seeking to set aside the statutory demand to show that there is arguably a genuine and substantial dispute as to the existence of the debt. The Court’s task is not to resolve the dispute but to determine whether there is a substantial dispute that the debt is due.
(b)The mere assertion that a dispute exists is not enough. Material short of proof is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved first in ordinary civil proceedings before any statutory demand is issued.
(d)If a counterclaim, cross-demand or set-off is suggested an applicant must establish that this is reasonably arguable in all the circumstances.
(e)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise,
2 Barclays Bank v Nylon Capital [2011] EWCA Civ 826, [2012] 1 All ER (Comm) 912.
3 Companies Act 1993, s 290(4).
4 Confident Trustee Ltd v Garden and Trees Ltd [2017] NZCA 578 at [16]. Affirmed in Mega Project Holding Ltd v Orewa Developments Ltd [2020] NZCA 111 at [4].
unless such evidence is contrary to the available documents or earlier statements made by the parties.
[10] In another case the Court of Appeal suggested that the threshold for a substantial dispute will be met where the applicant can show a “fairly arguable basis” on which it is not liable for the amount claimed.5 The Court also said, drawing an analogy with other summary procedures such as applications to remove caveats and oppose summary judgments, that the Court is not required meekly to accept without question whatever unvarnished statements may happen to be made on affidavit. The Court is entitled to act in a more robust and common-sense manner.
Did Bremworth and KL&I vary the agreement about when the deposit was to be paid?
[11] I will first set out the sequence of events. On or about 20 August 2020, KL&I and Bremworth entered into an agreement for the sale and purchase of property located at 7–9 Grayson Avenue, and 2 and 9 Brett Avenue, Papatoetoe (SPA). The purchase price for the property was $24 million (plus GST, if any).
[12] Under the SPA, KL&I agreed to pay the deposit, being 10 per cent of the purchase price.6 The deposit was to be paid on the “Unconditional Date”.7
[13] The “Settlement Date” was 6 November 2020. Under the SPA, KL&I was required to pay the balance of the purchase price on the Settlement Date.8
[14] On 31 August 2020, Bremworth confirmed that the cl 25 condition (Overseas Investment Notification Regime) was satisfied.
[15] On 3 September 2020, KL&I waived the cl 23 condition (Technical Assessment).9 When doing so, KL&I noted that it had only received the technical due
5 United Homes (1988) Ltd v Workman [2001] 3 NZLR 447 (CA) at [27], citing Forge Holding (NZ) Ltd v Kearney Finance (NZ) Ltd HC Christchurch M149/95, 20 June 1995.
6 SPA, sch 1, cls 2 and 22.
7 Clause 22.1 of the SPA’s Unconditional Date is defined in the SPA as meaning the date all of the conditions in cls 23, 24, and 25 are either satisfied or waived.
8 SPA, sch 1.
9 Email of David Henry to Paul Alston and others, dated 1 September 2020; and email from Joe Biddles to Caleb Hensman and another, dated 3 September 2020.
diligence report the day before, and that it needed to complete additional environmental due diligence, but it did not want to delay Bremworth’s shareholder approval process.
[16] On 17 September 2020, Bremworth, by its solicitors Russell McVeagh, confirmed that the cl 24 vendor approval condition was satisfied, and that the agreement was therefore unconditional.10 Russell McVeagh attached a trust account deposit slip to enable payment of the deposit, which it said was due that day.
[17]KL&I did not pay the deposit.
[18] On 18 September 2020, Bremworth, by its solicitors, issued a notice requiring payment of the deposit pursuant to cl 2.2 of the SPA (Deposit Notice) within three working days (by 23 September 2020).11 By issuing the Deposit Notice, Bremworth acquired the right to cancel the SPA for non-payment of the deposit at the expiry of the notice period.
[19]KL&I did not pay the deposit by 23 September 2020.
[20] Rather than terminate the SPA, Bremworth continued engaging with KL&I to settle the transaction.
[21] On 21 October 2020, the parties agreed a Deed of Variation (the Deed of Variation). The variations were required by KL&I’s proposed funder (based in the United States) and concerned compliance with overseas legislation, and provisions concerning tenancies.
[22]Settlement date (6 November 2020) arrived. KL&I did not settle.
[23] At 5.10 pm on 6 November 2020, Bremworth, by its solicitors, issued a settlement notice pursuant to cl 11.1 of the SPA (the Settlement Notice). The Settlement Notice provided KL&I with 12 working days, to 25 November 2020, to
10 Email from KL&I to Joe Biddles, dated 17 September 2020.
11 Affidavit of Paul Alston affirmed 25 February 2021 at [14]–[15]; Affidavit of David Henry, sworn 11 February 2021, exhibit E.
pay the balance of the purchase price. The notice stated that time was of the essence, but without prejudice to any intermediate rights of cancellation of Bremworth.
[24] On 13 November 2020 Bremworth, by its solicitors, cancelled the SPA for non-payment of the deposit.12
[25] KL&I claims that, by the Settlement Notice served on 6 November 2020, Bremworth represented to KL&I that it had until 25 November 2020 to pay both the deposit and the balance of the purchase price, in one single payment, and that it would not cancel the agreement for non-payment of the deposit before then. KL&I says that as such, the parties formed a new agreement that varied the SPA.
[26] KL&I also points to an email from Bremworth’s Chief Executive, Paul Alston, to David Henry, Director of KL&I, that day in which he said:
Hi David,
Just had a meeting with our lawyers and Chair.
We did not receive any documentation about the plan B so difficult to get any real degree of comfort that funding will materialise.
TBB did call RMV while we were at the meeting and indicated that there is work being done in the background with a new funder, but they were not able to give us any detail. It did not seem like a solution is days away.
This being the case we … have decided [to] issue a notice of termination – as per the contract that gives 12 working days to come up with the funds otherwise we will have no option but to terminate.
As discussed hopefully you can deliver within this time frame. (emphasis added).
[27] KL&I also relies on Mr Alston’s statements to the New Zealand Herald on 9 November 2020:
There wasn’t a deposit paid. It was all based on them getting all of the funding and paying all at once on Friday … [A deposit had been part of the initial agreement, but] I guess a commercial decision was made to wait for the funds to all come at once. That was the commitment from the other side, so you either cancel at that point in time or wait a couple of weeks until the funds come. We’ve been given every assurance they will settle and they have
12 Affidavit of Caleb Hensman affirmed 25 February 2021 at [15] and exhibit CH-010.
12 days to do so. If they don’t then we are getting advice to see what our options are.
[28]And, Mr Alston’s statement to the New Zealand Stock Exchange (NZX):
Kinleith is in default under the sale and purchase agreement and now has 12 working days to remedy the default … In the meantime, [Bremworth] will be exploring all options, including the legal remedies that are available to it should Kinleith fail to remedy the default within the stipulated timeframe.
[29] Moreover, KL&I claims that Bremworth later represented to it that it might have until 11 December 2020 to pay the deposit and settle the transaction. In an email to KL&I’s solicitors dated 10 November 2020, Bremworth’s solicitors said:
… If an agreement can be reached this week on the terms set out above, and as otherwise set out in my email yesterday (and subject to Paul obtaining the green light from the Board), [Bremworth]’s intention would be to waive its right to terminate the agreement until after 11 December (if the purchaser defaults on its obligation to settle).
[30] KL&I submits that this email was misleading and deceptive. It says that, while the parties had reached a settled understanding on 6 November 2020 (that the deposit was not payable until 25 November 2020 and that Bremworth would not cancel before then), it can be inferred from Bremworth’s cancellation on 13 November 2020 that by 10 November 2020 Bremworth was already negotiating with an alternative buyer. KL&I says that by this email, Bremworth was setting the stage for cancellation of the agreement with KL&I.
[31] KL&I submits that Bremworth was not entitled to cancel the contract on 13 November 2020, as the deposit was not payable until 25 November 2020 and the 12-day notice period had not expired. Thus, KL&I says Bremworth revoked its right to receive the deposit. KL&I refers to its response to the cancellation notice, sent only the minutes after receiving it, in which it said:
[KL&I] considers it unconscionable for [Bremworth] to exercise a cancellation right pursuant to the deposit notice … In any event, [KL&I] does not consider that [Bremworth] retains a right to cancel the agreement pursuant to the deposit notice and therefore disputes the validity of the purported cancellation by [Bremworth].
[32] Before I set out my findings on KL&I’s submissions, I will discuss the distinction between a vendor’s right to recover an unpaid deposit under an agreement
for sale and purchase of land, and their right to cancel the agreement. The law is settled that the vendor acquires an unconditional right to recover the deposit on the date the deposit is due.13 The vendor’s right to require payment of the deposit is unaffected by cancellation of the contract, because the right is unconditionally acquired under the contract prior to cancellation.14
[33] In contrast, the right to cancel the agreement for non-payment of the deposit is acquired by the vendor when a Deposit Notice served on the purchaser expires without payment (cl 2.2 of the SPA). Similarly, the right to cancel the agreement because the purchaser has failed to settle, and retain any deposit paid by the purchaser or sue for damages, arises when a Settlement Notice is unmet.15 The vendor may also elect to sue for specific performance.
[34] Therefore, it is undoubtedly correct that Bremworth acquired an unconditional right to recover the deposit from KL&I on the date it became due under the SPA, unless the parties agreed to vary the SPA. That right is not dependent on expiry of a Deposit Notice or a Settlement Notice. The essential question is therefore: was the original agreement in the SPA that the deposit was payable on 17 September 2020 varied by the parties so that the deposit was not payable until expiry of the Settlement Notice on 25 November 2020?
[35] There is no evidence in the correspondence prior to the Settlement Notice to support the claim that the parties agreed a variation to the obligation in the SPA to pay the deposit on 17 September 2020, or that Bremworth waived its right to recover the deposit. All Bremworth’s communications are consistent with the position that the deposit was overdue and that its right to recover the deposit was unaffected by the ongoing dialogue or non-cancellation.
[36] First, on 17 September 2020 when Bremworth, by its solicitors Russell McVeagh, confirmed that the cl 24 vendor approval condition was satisfied
13 Garratt v Ikeda [2002] 1 NZLR 577 (CA) at [13], [20] and [44].
14 Garratt v Ikeda [2002] 1 NZLR 577 (CA) at [13] and [20]; Brown v Langwoods Photo Stores Ltd [1991] 1 NZLR 173 (CA) at 175–176; and Pendergrast v Chapman [1988] 2 NZLR 177 (HC) at 190.
15 Clause 11.2
and the agreement was therefore unconditional, they attached a trust account deposit slip to enable payment of the deposit which they said was payable that day.16
[37] Then, on 18 September 2020, Bremworth, by its solicitors, issued the Deposit Notice pursuant to cl 2.2 of the SPA, requiring payment of the deposit within three working days.
[38] Then followed the negotiations to vary the SPA to meet the requirements of KL&I’s proposed funder, culminating in the Deed of Variation. The obligation to pay the deposit and the settlement date were unaffected. Notably, Bremworth’s solicitors on 1 October 2020 wrote:
Hi Joe
Have you had a chance to review / take instructions on the changes proposed in the version attached to Ed’s email below?
Should also note (although it goes without saying) that these negotiations
/ subsequent arrangements are without prejudice to our client’s rights under the agreement.
(emphasis added).
[39]KL&I’s solicitors acknowledged Bremworth’s reservation of rights.17
[40]Then, on 21 October 2020:
Hi Joe
Further to the below, can you please update us regarding execution of the Deed of Variation by your client?
In addition, please advise when we can expect payment of the deposit. (emphasis added).
[41]KL&I’s solicitor said they would revert with an update.18
[42] On 23 October 2020 Bremworth’s solicitors returned the signed Deed of Variation to KL&I’s solicitors and wrote:
16 Email from KL&I to Joe Biddles dated 17 September 2020.
17 Email, Thompson Blackie Biddles to Russell McVeagh, 1 October 2020.
18 Email, Thompson Blackie Biddles to Russell McVeagh, 21 October 2020.
Hi Joe
…
(a)Our client preserves its right to terminate the sale and purchase agreement pursuant to clause 2.2, for so long as the deposit remains unpaid; and
(b)Our client will be entitled to terminate the sale and purchase agreement in the event that your client is not ready, willing and able to settle the transaction by next Friday, 30 October (with evidence of the same to include an undertaking from Thompson Blackie Biddles that funds required to settle have been deposited in their trust account, and that Thompson Blackie Biddles will only release those funds by either (a) transferring them to our trust account to complete settlement; or (b) transferring them to their client in circumstances where the agreement is cancelled due to a vendor default.
For the avoidance of doubt, our client does not accept the terms of the variation agreement without an acceptance of the above conditions.
(emphasis added).
[43]Then, on 27 October 2020:
Hi Joe
As per Ed’s email from last Friday, our client’s agreement to, and exchange of, the deed of variation was conditional upon your client agreeing that our client will be entitled to terminate the agreement if your client is not in a position to settle by this Friday (as more particularly outlined in Ed’s email). Can you please confirm whether the conditions outlined in Ed’s email are accepted by your client?
Our client is becoming increasingly less confident of your client’s capacity to settle, particularly given that the deposit remains unpaid. If your client is not willing to accept the condition set out in Ed’s email, then our client is willing to consider a settlement date of next Friday but only if we receive correspondence or other documentation that evidences (to our client’s satisfaction) that your client has agreed funding in place, and that settlement funds are either currently held by your client or actually in the process of being transferred from offshore. Could you please liaise with your client and confirm?
In the meantime, our client reserves its rights set out in the agreement. We also note that the provisions of the deed of variation will not be binding on the parties until agreement on the conditions set out in Ed’s email is reached.
(emphasis added).
[44]On 30 October 2020 at 8.23 am:
Hi Joe
Thanks for the email. We’ll liaise with our client and revert. On the lease, the ADLS front end that we attached to the SPA was prepared by TBB, if you could please complete by including the landlord entity (once known) and the various dates (assuming settlement next Friday) and send through, we can compile with the relevant annexures.
In the meantime, are you able to advise the status of your client’s funding arrangements? As mentioned earlier this week, we are due to discuss with our client later this morning whether they continue to proceed with the agreement on foot without the deposit having been paid, so it would be helpful if we could please have an update over the next couple of hours.
(emphasis added).
[45]And at 5.12 pm:
Hi Joe
Further to our discussion this morning, I’ve just spoken with our client who has conveyed its disappointment that no information has been forthcoming in relation to progress from your client in arranging funding for the transaction. Silence is being read as confirmation that funding remains elusive. That said, our client has confirmed that it still intends to progress with making arrangements for settlement next Friday, but on the basis that, if your client defaults in its obligation to settle next Friday, our client intends to cancel the agreement.
Any information that can be shared in the meantime as to the identity of the funders and details on what remains outstanding to finalise those arrangements would be helpful to provide some assurance that your client has a reasonable chance of being in a position to satisfy its obligations under the agreement, come next Friday.
The above all being sent without prejudice to our client’s rights under the agreement.
(emphasis added).
[46] All Bremworth’s communications up to this point were consistent with the position that the deposit was overdue and that its right to recover the deposit was unaffected by the ongoing dialogue or non-cancellation.
[47] Then, on 6 November 2020, Bremworth’s solicitors served the Settlement Notice. Did this notice amount to a variation of that position as KL&I claims? I conclude that it did not. The notice set up Bremworth’s right to sue for specific
performance or to cancel the agreement if the Settlement Notice was not met. It did not, in and of itself, affect Bremworth’s unconditional right, already accrued, to recover the deposit as a debt. There is nothing in the Settlement Notice that suggests a variation to the original agreement to pay the deposit on 17 September 2020 or that Bremworth was waiving its right to recover the deposit. There is no mention of the deposit at all.
[48] What KL&I effectively submits is that, by issuing the Settlement Notice, Bremworth represented that it would not cancel for non-payment of the deposit (or failure to settle on the agreed settlement date) before the expiry of the 12 days prescribed in the Settlement Notice. And that this representation amounted to an agreement that the deposit was no longer due and was not due until the expiry of the notice. This submission is misconceived. It fails to recognise the distinction between KL&I’s obligation to pay, and Bremworth’s right to recover, the deposit; and Bremworth’s right to cancel the agreement. Even if, by this Settlement Notice, Bremworth represented that it would not cancel the agreement for non-payment of the deposit, that did not affect its unconditional right, already accrued, to recover the deposit. It is that right that underpins Bremworth’s present claim to the deposit and the statutory demand.
[49] In any case, the Settlement Notice recorded that the 12-day period for settlement was without prejudice to any intermediate rights of cancellation.19 So any claim that the notice amounted to a representation that Bremworth would not cancel for non-payment of the deposit based on the expired Deposit Notice is also misconceived.
[50] As for Mr Alston’s statements to the media and the NZX on 9 November 2020, these occurred after the event which KL&I claims gave rise to the new agreement: the 6 November 2020 Settlement Notice. In any case, these statements do not provide support for the proposition that the original agreement to pay the deposit on 17 September 2020 was varied or that Bremworth was waiving its right to recover the deposit. Mr Alston has deposed:
19 At [2.1]. Consistent with cl 11.2 of the general conditions of the SPA.
I was not commenting on Bremworth’s legal rights in respect of the deposit or our ability to terminate, and certainly nothing had been agreed with [KL&I] to alter its obligation or our rights in those regards.
[51] Viewed objectively, Mr Alston’s statements concern Bremworth’s decision to refrain from cancelling the agreement and to give KL&I more time to try to settle the transaction. This decision not to cancel, and the statements Mr Alston made, do not amount to an alteration of the legal rights arising out of the SPA, including Bremworth’s accrued right to the deposit.
[52] Further, I do not accept that KL&I, a sophisticated commercial operator, was mistaken or misunderstood the position and thought that the deposit was no longer due. It had no basis for thinking that based on the communications set out above. Through this chain of correspondence, Bremworth repeatedly asked about payment of the deposit and was careful to expressly reserve its right to cancel for its non-payment. KL&I has not pointed to any other oral or written communications aside from those described.
[53] The fact that the deposit remained due and owing was reinforced in the email on 10 November 2020 from Bremworth’s solicitors:
Hi Joe
I’ve spoken with Paul this evening. He remains open to agreeing an alternate arrangement, subject to the deposit being paid this week (with the appropriate undertakings in place). In response to your comments below, we advise as follows:
...
If an agreement can be reached this week on the terms set out above and as otherwise set out in my email yesterday (and subject to Paul obtaining the green light from the board), [Bremworth]’s intention would be to waive its right to terminate the agreement until after 11 December (if the purchaser defaults on its obligation to settle).
...
Kind regards Caleb
(emphasis added).
[54] Further, I accept Bremworth’s submission that it is clear from the execution of the Deed of Variation and the formality of the written correspondence that Bremworth would have been careful to formally document a variation to the terms of the SPA had that been what it intended.
[55] I have found that there is no credible argument that the SPA was varied so that the deposit was not payable on 17 September 2020. Or that Bremworth waived its unconditional right to recover the deposit, by not cancelling the agreement or otherwise. That disposes of KL&I’s main objection to the statutory demand. However, I will briefly address the remaining arguments.
Did Bremworth mislead KL&I?
[56] KL&I submits that in breach of the Contractual Remedies Act 197920 and the Fair Trading Act 1986 Bremworth misled it:
(a)by not properly disclosing asbestos contamination issues in its Board-approved asbestos register for the site; and
(b)regarding its intentions to complete the agreement, when it was working behind the scenes to sell the property to another buyer and cancel the agreement with KL&I.
[57] The background to the first point is that on 11 September 2020 (after waiving the Technical Assessment condition) KL&I received an Environmental Due Diligence Report. This report concluded that there was: a medium risk of contaminated land associated with the presence of fill onsite and asbestos-containing materials; and a high risk of contaminated land associated with the storage of liquid waste in a concrete-lined sump.21 Then on 14 September 2020, KL&I received a Hazardous Materials Management Survey that identified high risk asbestos-containing material in the buildings on site that was not recorded in the asbestos register.22
20 Repealed.
21 At [5.3].
22 At [3.1].
[58] On 24 and 25 September 2020, KL&I undertook further onsite test work to better understand the contamination risk present on the property in relation to the storage of liquid waste in the concrete-lined sump. KL&I received a revised Environmental Due Diligence Assessment on 21 October 2020. The revised assessment downgraded the risk of contaminated land from the sump from high to moderate-low. The revised assessment also recorded that contamination arising out of asbestos-containing materials onsite was only a medium risk if earthworks were undertaken on site. During ordinary site operations, the risk arising out of asbestos was considered low.
[59] In any case, whether Bremworth’s risk register accurately recorded asbestos- containing materials onsite is irrelevant to the issue of whether the deposit is due and owing. Bremworth did not revisit its waiver of the Technical Assessment Condition when it received the Hazardous Materials Management Survey. There is no question that the agreement was unconditional, and the deposit was payable as a result.
[60] Nor does the claim that Bremworth committed an actionable wrong in the way described at (b) pass muster. Bremworth was entitled to negotiate with an alternative buyer. It had become apparent to Bremworth that KL&I had entered into the SPA without funding to pay the deposit or complete the transaction. By the first week of November 2020, KL&I still did not appear to have secured funding. The deposit remained unpaid. KL&I had failed to settle on the agreed Settlement Date. To suggest that KL&I did not apprehend that Bremworth would be considering alternatives and that it was misled by Mr Alston’s statements lacks credibility. In fact, in his statement to the NZX Mr Alston states that Bremworth was “exploring all options”.
Should the statutory demand be set aside because Bremworth did not suffer any loss?
[61] KL&I also submits that Bremworth has not suffered any loss because of the SPA not settling, as it went on to sell the property for a profit of $900,000. KL&I says that therefore, Bremworth is not entitled to enforce payment of the deposit against KL&I.
[62] The law is clear that the fact that a vendor makes a profit on the resale of a property does not provide the purchaser with a basis for disputing payment of the deposit. In Garratt v Ikeda, the purchaser argued that the vendor was precluded from recovering a 10 per cent deposit due under a sale and purchase agreement because the vendor made a substantial profit on the resale of the property to a third party. The Court held:23
We would not have regarded the so-called profit made by Mr Ikeda on the re- sale as justifying any relief against the forfeiture of Mr Garratt’s deposit, or more precisely here, relief against Mr Ikeda’s ability to recover the balance outstanding.
[63] The Court also observed that the vendor faced risk and expended time and energy on achieving the subsequent resale, and said that:24
In any event it is inherent in cancellation following a purchaser’s default, that the vendor may achieve more for the property on a re-sale. The market may be a rising one, or the vendor may simply be fortunate, or indeed may have sold at too low a price the first time around.
[64] Therefore, I reject KL&I’s submission that Bremworth is not entitled to enforce payment of the deposit against KL&I because it made a profit following cancellation.
Are there material disputes of fact that make this matter unsuitable for a summary procedure?
[65] KL&I highlights several factual disputes between the evidence of Mr Alston and Mr Henry. It submits that these factual disputes cannot be resolved in a summary hearing and there accordingly needs to be a trial.
[66] None of the factual disputes identified have any bearing on the issue for determination in this proceeding: whether the deposit is a debt that is due. I will briefly address each point raised by KL&I.
[67] First, KL&I highlights Mr Alston’s statement, at [9] of his affidavit, disputing Mr Henry’s evidence about KL&I’s waiver of the Technical Assessment condition on
23 Garratt v Ikeda [2002] 1 NZLR 577 (CA) at [49].
24 At [49].
3 September 2020. Mr Alston states that at no point during negotiations did KL&I raise issues about the waiver or timing of the waiver. Mr Henry, in his reply affidavit, states that he did raise the issue of timing in an email to Mr Alston on 1 September 2020. This difference between their affidavits is minor and irrelevant to the issue in question.
[68] The second alleged dispute concerns the outcome of the environmental due diligence. Mr Henry refers to high contaminant risks attached to the property and says that Mr Alston deliberately ignored the Hazardous Materials Management Survey in his deposition that there was no failure on Bremworth’s part to allow sufficient due diligence. In fact, Mr Alston refers to the Hazardous Materials Management Survey.25 Mr Alston’s also refers to the downgrading of the risk of liquid-waste-related contamination in the revised Environmental Due Diligence Report. That report also clarified that there was a low risk of asbestos-related contamination during normal operations. The deponents differ in the way they describe the outcome of the environmental due diligence, but that does not amount to a material dispute of fact. The reports speak for themselves. In any case, the environmental due diligence is irrelevant to the issue of whether the deposit is due as a debt, for the reason stated earlier.
[69] The third alleged factual dispute concerns Mr Alston’s evidence that he found it increasingly difficult to engage with Mr Henry during October 2020. Mr Henry disagrees, saying that there was significant and proper communication between the parties and their legal counsel. This is a minor difference in perspective between them and has no bearing on the issue of whether the deposit is payable.
[70] Fourth, Mr Henry disputes Mr Alston’s evidence that he became aware that KL&I had appointed a broker to find a new buyer for the property. Mr Henry says that no broker was appointed and further KL&I’s legal counsel informed Bremworth’s legal counsel about the proposed new deal involving another buyer. Again, these are minor differences in the parties’ recollections and make no difference to the issue at hand.
25 At [11].
[71] Finally, Mr Henry takes issue with Mr Alston’s statement that he became evasive about the source and timing of funding to complete the transaction. Mr Henry says that he provided as much information as he could within the confines of his non-disclosure obligations to the potential overseas funder. Again, this minor difference in perspective has no bearing on the relevant issues.
[72] None of these points present any barrier to the determination of whether the deposit is due and owing in a summary hearing.
Result
[73] KL&I has not reached the threshold of establishing a reasonably arguable case that there is a genuine and substantial dispute that the deposit is due and owing.
[74]The application to set aside the statutory demand is dismissed.
[75] As KL&I is now in liquidation, I invite submissions from the liquidators and Bremworth on costs.
Associate Judge Gardiner
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