Knight Investments Limited v Peng

[2025] NZHC 595

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-1397

[2025] NZHC 595

IN THE MATTER

of a claim for damages

BETWEEN

KNIGHT INVESTMENTS LIMITED

Plaintiff

AND

YAOWEI PENG, also known as JAY PENG Defendant

Hearing:

11 March 2025 (by AVL)

Appearances:

R Rao for Plaintiff

Z Chen and S Han for Defendant

Judgment:

21 March 2025

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 21 March 2025 at 3.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

………………………………………

KNIGHT INVESTMENTS LIMITED v PENG [2025] NZHC 595 [21 March 2025]

Introduction

[1]                Knight Investments Limited (Knight)  seeks  summary  judgment  against  Mr Peng for the shortfall suffered on the resale of three vacant lots that Mr Peng failed to settle. Knight also seeks judgment for interest under the contract in respect of the unpaid purchase price together with judgment for consequential costs associated with the resale of the three lots.

[2]                This is the second hearing between the parties. The first resulted in an order for specific performance as sought by Knight.1 Accordingly, I have the advantage of Associate Judge Gardiner’s decision in that matter and I adopt her Honour’s summary of the background.

Factual background

[3]None of the following facts are disputed.

[4]                Knight has for several years been undertaking a property development project known as the Clarks Beach Waterfront Estate. The development has progressed by way of staged releases of lots over time.

The Agreements for Sale and Purchase (the agreements)

[5]                On 15 April 2021, Knight agreed to sell, and Mr Peng agreed to buy, five lots in Stage 5 of the development. Each lot was sold through a separate agreement for sale and purchase:

(a)lot 188 for $425,217.39 plus GST;

(b)lot 194 for $416,521.74 plus GST;

(c)lot 195 for $416,521.74 plus GST;

1      Knight Investments Ltd v Peng [2024] NZHC 285.

(d)lot 196 for $416,521.74 plus GST; and

(e)lot 197 for $416,521.74 plus GST.

[6]                The agreements were each on the standard ADLS Agreement for Sale and Purchase of Real Estate, 10th edition 2019(2).

[7]The agreements also provided, among other things, for:

(a)a deposit of 10 per cent of the purchase price to be paid on execution (cl 21);

(b)the settlement date to be 12 calendar months after Knight notified    Mr Peng that a search copy of the Unique Identifier for the property was available (cl 23.1); and

(c)in the event of a default and non-compliance with a settlement notice, for Knight to be  able  to  sue  Mr  Peng  for  specific  performance  (cl 11.4(1)(a)).

The nominations

[8]                By way of a deed of nomination dated 29 April 2021, Mr Peng nominated Philly Worldwide Ltd to be the ultimate purchaser of lots 188, 194, 195 and 196.

[9]                By way of a deed of nomination dated 29 April 2021, Mr Peng nominated Q&S Housing Construction Ltd to be the ultimate purchaser of lot 197.

[10]Q&S Housing Construction Ltd was placed into liquidation on 22 July 2022.

Variation of settlement date

[11]            By way of a written variation dated 17 November 2021, Knight and Mr Peng changed the settlement date for the agreements to be six months (as opposed to the original 12 months) after Knight notified Mr Peng that a search copy of the Unique Identifier for the property was available.

Issuing of titles and fixing of settlement date

[12]             By separate emails sent on 21 November 2022, Knight’s solicitors notified Mr Peng's solicitors that:

(a)records of title had been issued for each of the lots;

(b)the agreements were unconditional; and

(c)in accordance with cl 23.1 (as varied), the settlement date for the agreements was to be six months from that date, i.e. 19 May 2023 (settlement date).

[13]Mr Peng or his nominees failed to settle the agreements on the settlement date.

[14]            On 22 May 2023, Knight’s solicitors served separate settlement notices under cl 11.1 of the agreements on Mr Peng.

[15]Mr Peng did not settle within the further time allowed by the settlement notices.

[16]            Knight elected not to cancel the agreements and issued proceedings for specific performance of the agreements against Mr Peng.

[17]            Knight has since negotiated agreements to sell lots 188, 194 and 195 to another buyer, and the agreements with Mr Peng concerning those lots have been cancelled. Orders for specific performance are sought solely in respect of lots 196 and 197.

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 relevant principles governing a summary judgment application are well established:2

(a)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. The Court must be left without any real doubt or uncertainty.

(b)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.

(c)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. 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.

[20]            A defendant is under an obligation to lay a proper evidential foundation for the defence in the affidavits filed in support of the notice of opposition.3

[21]            Associate Judge Gardiner made an order for specific performance in respect of two lots which had not been resold: lot 196 and lot 197. Those lots are not the subject of this judgment and I say no more about them.

[22]            This judgment concerns  lots 188, 194 and 195.   Those lots were sold to       a company   called   KCP   Consultants    Ltd    (KCP)    by    a    contract    dated   27 November 2023, being a private sale. Knight had been in contact with KCP since at least early August 2020 about it buying all five lots. KCP settled lot 188 on

2      Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.

3      Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.

21 December 2023 and settled lot 195 on 20 March 2024 but it did not confirm lot 194 (all three lots being subject to a due diligence condition). Lot 194 was subsequently sold via a real estate agent to a third party by a contract dated 13 February 2024 which settled on 12 June 2024.

[23]            The three lots when sold initially to KCP were included in one contract with all three lots intended to settle on the same day. Ms Chen, counsel for Mr Peng, took issue with KCP being given a penalty free extension to settle lot 195 — I will return to that point below as well as the circumstances in which lot 194 was not purchased by KCP.

[24]            One part of the background that Associate Judge Gardiner did not need to address in the specific performance judgment occurred after the settlement notices on 22 May 2023 were issued. On 24 May 2023,  solicitors  acting  for  Philly  Worldwide Ltd, wrote to Knight’s solicitors seeking a price reduction for the lots saying their client would be able to settle at $313,000 plus GST per lot. The offer was in full and final settlement of Mr Peng’s obligations. The request for a price reduction was declined by Knight shortly thereafter.

[25]            The following table sets out the original sale price against Mr Peng’s offer on 24 May 2023 to settle at a reduced price and the price achieved on the resale of the lots by Knight on the contracts that settled to show how those resales achieved a better result than offered by Mr Peng, or at least offered by his nominee.

Lot	Original sale price	Mr Peng’s offer	Knight’s resale price	Increase on Mr Peng’s offer
188	$425,217.39	$313,000.00	$337,391.30	+$24,391.30
194	$416,521.74	$313,000.00	$369,565.22	+$56,565.22
195	$416,521.74	$313,000.00	$337,391.30	+$24,391.30
Total	+$105,347.82

[26]            As mentioned at [6], each of Mr Peng’s purchases were on the ADLS Agreement for Sale and Purchase of Real Estate 10th Edition 2019(2). The following clauses from that agreement are relevant to Knight’s claim.

[27]            Recall that Knight had issued a settlement notice that remained unsatisfied. Clause 11.4 of the agreement provides:

11.4If the purchaser does not comply with the terms of the settlement notice served by the vendor then, subject to subclause 11.1(3):

(1)Without prejudice to any other rights or remedies available to the vendor at law or in equity, the vendor may:

(a)sue the purchaser for specific performance or;

(b)cancel this agreement by notice and pursue either or both of the following remedies, namely:

(i)forfeit and retain for the vendor’s own benefit the deposit paid by the purchaser, but not

exceeding in all 10% of the purchase price; and/or

(ii)sue the purchaser for damages.

(2)Where the vendor is entitled to cancel this agreement, the entry by the vendor into a conditional or unconditional agreement for the resale of the property or any part thereof shall take effect as a cancellation of this agreement by the vendor if this agreement has not previously been cancelled and such resale shall be deemed to have occurred after cancellation.

(3)The damages claimable by the vendor under subclause11.4(1)(b) (ii) shall include all damages claimable at common law or in equity and shall also include (but shall not be limited to) any loss incurred by the vendor on any bona fide resale contracted within one year from the date by which the purchaser should have settled in compliance with the settlement notice. The amount of that loss may include:

(a)interest on the unpaid portion of the purchase price at the interest rate for late settlement from the settlement date to the settlement of such resale; and

(b)all costs and expenses reasonably incurred in any resale or attempted resale; and

(c)all outgoings (other than interest) on or maintenance expenses in respect of the property from the settlement date to the settlement of such resale.

(4)Any surplus money rising from a resale shall be retained by the vendor.

[28]            Mr Rao, counsel for Knight, submits that the three resales which are the subject of this proceeding fall squarely within cl 11.4. Pursuant to cl 11.4, entry of the resales of itself takes effect as a cancellation of the agreements between Knight and Mr Peng

— such is not disputed.

[29]            The date upon which Mr Peng should have settled in response to the settlement notice was 8 June 2023. Pursuant to cl 11.4(3) of the Agreement, Knight may recover the loss it incurred on a bona fide resale contracted within one year from 8 June 2023. While the settlement of lot 194 occurred on 12 June 2024, that was pursuant to

a contract  entered  into  within  one  year  of  8 June 2023.    Accordingly, the three contracts, the subject of this proceeding, are caught by cl 11.4(3).

[30]In respect of cl 11.4, the learned authors of McMorland Sale of Land state:4

That [contractual measure of damages] makes it unnecessary to prove that the resale price represents the market value at the appropriate date, though a it remains open to the purchaser to show that the resale was not bona fide.

(footnotes omitted)

[31]In addition to the loss on the resale, McMorland provides:5

Read in conjunction with cl 3.12(1), [cluse 11.4(3)] entitles the vendor to interest on the whole of the unpaid portion of the purchase price for the given period, and not merely on the shortfall on the resale price.

[32]            The contractual interest rate in respect of all contracts is 12%. There is no argument that rate constitutes a penalty and is not recoverable.

[33]            Ms Chen submits Knight allowing KCP to defer settlement of lot 195 is relevant to penalty interest.

[34]            McMorland Sale of Land provides that under cl 11.4(3)(b), the costs of an attempted resale are recoverable only if a bona fide resale is made within the one year period. The costs of previous unsuccessful attempts to find a new buyer may then be recovered.

[35]            The vendor is obliged to account to the defaulting purchaser for the full amount of the deposit and has done so in its damage calculation.

[36]            The loss on the resale of each of the lots after deduction for the deposit is as follows:

(a)      lot 188:           $45,304.35;

(b)      lot 194:           $5,304.34; and

4      D W McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at 567.

5      At 568.

(c)       lot 195:$37,478.27

[37]            The claim for unpaid interest at the contractual rate from the date each contract should have settled to the date that the settlement on the resale was achieved is as follows:

(a)       lot 188:           $27,176.63;

(b)       lot 194:           $48,065.47; and (c)      lot 195:     $37,711.44.

[38]The claim for costs and expenses on resale is addressed below.

Grounds of opposition

[39]            While liability is not disputed, the only ground of opposition expressly recorded in the notice of opposition is that: “The plaintiff failed to act reasonably to mitigate its losses on resale, taking into consideration of all circumstances of the matter.”

[40]            Mr Peng’s opposition is based on the idea that the properties were sold at an undervalue. In this context, bona fide means the normal principles requiring mitigation of loss.6 This does not mean the vendor must prove that the resale price represents the market value at the appropriate date.7 A vendor’s actions are not assessed with the benefit of hindsight — their conduct is “… not to be weighed in nice scales”.8

[41]            It is common ground that at the time of Knight’s resales the market was depressed.   Mr Peng says the peak of the property cycle had passed and there was    a risk of further correction in prices. Mr Rao submitted that Mr Peng’s present criticism of the resale prices achieved by Knight ring hollow when compared to his

6      D W McMorland, above n 4, at 567, n 769, citing Tucker v Sun (2009) 10 NZCPR 542 at [34]—[48].

7      D W McMorland, above n 4, at 567.

8      Sullivan v Darkin [1986] 1 NZLR 214 CA at 223.

offer to settle each of the lots at $313,000 plus GST with no penalty interest for late settlement, in effect a full and final offer.

[42]            Mr Rao also highlights the evidence as to what Mr Peng believed at the time of the resales. Mr Peng in his affidavit dated 30 August 2023, with reference to his offer to settle each ot at $313,000 said: “32. I believe if the vendor put the lots on the market now it would make a bigger loss than what I have offered above.”

[43]            Mr Peng also produced a valuation from a registered  valuer,  Shaw Valuations Ltd dated 6 May 2023, which he says was for all of the lots. The valuation is in fact only for lot 194 but given Mr Peng was treating all the lots as having the same value, it can be assumed that the valuation is indicative of the value of each of the lots. The market value given was $360,000 including GST. I note that the price Mr Peng offered to pay after he defaulted ($313,000) was plus GST.

[44]            Accordingly, Mr Peng’s position as communicated via his affidavit to Knight not long before the sale of the lots to KCP was that the price of $313,000 per lot represented a means of Knight minimising its loss albeit loss was shifted on to Knight because under Mr Peng’s offer he was immune from further claims. More significant is the registered valuation produced by Mr Peng which put the value at $360,000 including GST. That valuation report rated market volatility as a high risk. It was that state of the market which Mr Peng says frustrated his ability to raise finance to complete the purchases.

[45]            Against that contemporary evidence, the private resale to KCP at $337,391.30 plus GST for lots 188 and 195 compares very favourably to the registered valuation obtained by Mr Peng which, with GST removed, puts the value at $313,044 per lot.

[46]            Mr Peng also obtained what might be called “desktop valuations” from Homes.co.nz for the three lots. Lot 188 was sold for $337,391.30. The desktop valuation gives a range for the property from $320,000 to $425,000, meaning the sale price achieved for lot 188 was within that range. It needs to be noted that lots 188 and 195 were sold by way of private sale so no commission was payable to reduce the net sale price.

[47]            In respect of lot 195, the sale price was also $337,391.30 with the desktop valuation given in an estimated range of $310,000 to $410,000. Accordingly, the price achieved was again within the range.

[48]            In respect of lot 194 (the lot not sold to KCP), it was sold by a real estate agent for $369,565.22 plus GST (lots 188 and 195 were zero rated). The desktop valuation for lot 194 was between $360,000 to $475,000. Again, the sale price was within the range and well above the registered valuation for lot 194 relied on by Mr Peng.

[49]            Ms Chen in careful submissions said it was arguable that Knight did not offer the lots for resale at a proper price having regard to the state of the market. She also says that Knight failed to take adequate steps to advertise and promote the sales because the sales that settled with KCP were private sales.

[50]            Ms Chen placed significance on the fact that KCP purchased with the intent to immediately resell, and such was known to Knight. So much is true. The text exchanges between Knight and KCP show that KCP wanted to firm up on its on-sale before confirming with Knight, hence its purchase of lot 194 not proceeding because the due diligence condition was not satisfied. Ms Chen characterised this as Knight knowingly selling to a buyer whose business model was to “buy low and sell high” which meant Knight was aware that there were buyers in the market who were prepared to pay more than KCP.

[51]            Mr Rao submitted that this submission ignored that KCP’s business model meant it had a pool of potential buyers it could approach without having to formally list the lots. KCP was able to essentially leverage its database of buyers to on-sell the lots.   Knight had no way of accessing those potential buyers save perhaps through   a full marketing programme. Nor are the terms of KCP’s resales known, meaning direct comparisons are not possible.

[52]            I note here that while the contract between Knight and KCP contained a due diligence condition, it was not subject to a finance condition.

[53]            The reality is, the sales achieved by private sale, relatively soon after Mr Peng failed to settle in accordance with the settlement notice, were at a price higher than the market value of lots based on Mr Peng’s valuation.

[54]            As penalty interest runs on the entire unpaid purchase price until settlement of the resale, a vendor could be criticised for holding out for a higher price that may never be achieved while penalty interest is accruing.

[55]            I note that when lot 194 was listed with a real estate agent there was some four months between the date  of  the  contract,  13  February 2024  and  settlement  on  12 June 2024. While there was some delay, which I discuss below in respect of KCP settling lot 195, it was in reality no greater than the delay in settling lot 194 which was a sale through a real estate agent.

[56]            The situation does not call for a “line-by-line” review of events with the benefit of hindsight.   At the time, Knight was facing  difficult  market circumstances and     a buyer who had defaulted on the purchase of five lots. It moved promptly to achieve resales and, at the risk of labouring the point, it achieved sale prices higher than the registered valuation advanced by Mr Peng at the time and significantly higher than his own offer.

[57]            Put another way, it is not open to Mr Peng to say it was unreasonable for Knight to sell at a price higher than the $360,000 including GST based on the registered valuation already referred to. It cannot be said that no reasonable vendor in Knight’s position would have entered these resales.

The contract with KCP in more detail

[58]            The contract between Knight and KCP of 27 November 2023 was for all three lots. While a global purchase price of $1,012,173.90 is listed, below in brackets the contract reads: “(or $337,391.30 per Lot)” plus GST. All lots were expressed to settle on the same day.

[59]            However, the special conditions  are worded as  if there was only one  lot.  Ms Chen, in an argument not foreshadowed in her written submissions or in the notice

of opposition, noted the due diligence condition does not expressly contemplate due diligence not being satisfied in respect of one of the three lots. Accordingly, she submitted the scheme of the due diligence condition was “all or nothing”.

[60]            As I have said, this point was not previously raised. However, irrespective of the contract terms, the reality is that Knight permitted KCP to leave the due diligence conditions unsatisfied on lot 194. That the lots were treated separately is consistent with Knight’s knowledge of KCP’s business model of achieving resales for each of the lots before declaring the contracts unconditional. The short point is that it was not unreasonable for Knight to preserve such resales as it could by allowing KCP to defer settlement, or perhaps more likely, extending the time for satisfaction of the due diligence condition, particularly when, as I have said, the resales were at a higher market value than contended for by the defaulting purchaser.

[61]            Ms Chen was critical of Knight permitting KCP to defer settlement of lot 195 to 20 March 2024 without requiring KCP to pay penalty interest. Mr Rao pointed out that Mr Peng’s proposal to defer settlement was on the basis that there be no penalty interest.

[62]            Again, it cannot be said that it is not open to a reasonable vendor to grant an extension without penalty in order to preserve a sale.

[63]            Ms Chen, relying on the due diligence clause applying to all lots, submitted that had Knight not permitted KCP to exclude lot 194 from the sale and had that lot settled as required by the contract, Mr Peng would have avoided six months of penalty interest. No doubt that is mathematically correct, but it ignores the other possibility that had Knight taken a hard line in respect of either the settlement date or due diligence, KCP could simply have walked away from all three purchases relying on the due diligence clause. Again, there is an element of hindsight in this argument. Knight could not know how long it would take to find a new purchaser for lot 194.

[64]            Mr Peng’s arguments also ignore the fact that Knight had every incentive to achieve the maximum amount possible on the resales. Maximising value at resale was the easiest way for Knight to recoup its losses because of Mr Peng’s default. The

certainty of achieving a higher price is obviously more desirable than accepting       a lower price on the assumption that judgment can be obtained against Mr Peng and that judgment recovered. In short, Knight did not act unreasonably in the sales process.

[65]            I find that Knight has established that Mr Peng does not have a reasonably arguable defence in relation to the bona fides of Knight’s resale of lots 188, 194 and

195. It follows I am satisfied that Knight is entitled to judgment in respect of the undervalues of the lots set out at [36]. The total judgment I enter against Mr Peng is therefore $88,086.96.

Penalty interest

[66]            Ms Chen did not dispute that penalty interest was payable but challenged the calculation in respect of lot 195 because of the penalty free extension of the settlement date and in respect of lot 194 because it was excluded from the KCP sale. I have dealt with those submissions.

[67] I find that Mr Peng is liable to pay penalty interest. Judgment is hereby entered against Mr Peng for $112,953.54 (the total of the amounts at [37] above).

[68]            In respect of the above judgment, interest will run under s 10 of the Interest on Money Claims Act 2016 until payment.

Claim for costs and expenses incurred

[69]            Knight pleads it has incurred legal fees for the conveyancing work associated with the resale of the lots totalling $5,044.00 excluding GST. It also pleads it has incurred real estate agent’s commission for the resale of lot 194 in the sum of

$7,391.30 excluding GST.

[70]            Clause 11.4(3)(b) permits the recovery of all costs and expenses reasonably incurred in any resale or attempted resale. The fact that Knight gives credit for the full value of the deposits paid by Mr Peng is consistent with it not having paid real estate agent’s commission in respect of those aborted sales. A real estate agent is listed on

the front page of the sales contract with Mr Peng, so it is reasonable to assume that if those contracts had settled, Knight would have had to have paid commission. That it had to pay commission on lot 194 on a resale puts it into the position it would have been in had Mr Peng settled.

[71]            Similarly, in respect of conveyancing costs, had Mr Peng settled, Knight would have had one set of conveyancing costs in respect of that settlement in the ordinary way.

[72]I deal with these claims in the following way.

[73]            There is judgment for liability against Mr Peng with leave to Knight to provide further evidence in respect of these issues if they cannot be agreed. I do that as they were issues raised by the Court and not by Mr Peng.

Costs

[74]            There is no reason why costs should not follow the event. Unless Knight files a memorandum in respect of costs within five working days of not more than five pages in length, the order of the Court is that Mr Peng is to pay costs to Knight on a 2B basis plus disbursements as fixed by the Registrar. If Knight does file a costs memorandum then that order will not apply and Mr Peng may reply within a further five working days, again not more than five pages in length.

Associate Judge Lester

Solicitors:

Inder Lynch, Manukau, Auckland (for Plaintiff)

Righteous Law Limited, Auckland (for Defendant)