Knight Investments Ltd v Peng

[2024] NZHC 285

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-001397

[2024] NZHC 285

BETWEEN

KNIGHT INVESTMENTS LIMITED

Plaintiff

AND

YAOWEI PENG

Defendant

Hearing:	20 February 2024
Appearances:	R Rao / C Richardson for the Plaintiff C Holland for the Defendant
Judgment:	23 February 2024

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 23 February 2024 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date.......................................

Solicitors:

Inder Lynch, Auckland Righteous Law, Auckland

KNIGHT INVESTMENTS LTD v PENG [2024] NZHC 285 [23 February 2024]

Introduction

[1]    Knight Investments Limited (Knight) applies for summary judgment of its claim against Yaowei Peng for specific performance of two agreements for the sale and purchase of sections in Knight’s residential subdivision at Clarks Beach.

[2]    Knight originally sought orders for specific performance of five sale and purchase agreements, but after filing the proceedings it entered into an agreement to sell three of the five lots in issue (lots 188, 194, and 195). Therefore, Knight no longer seeks specific performance of the agreements for those lots (which it has cancelled), and instead intends to pursue recovery of its losses on the resale from Mr Peng. Knight applied for, and was granted, leave to amend the application for summary judgment to only claim specific performance of the remaining agreements concerning lots 196 and 197 (the fourth and fifth causes of action).

[3]    Mr Peng opposes the making of orders on the basis that it will be impossible for him to comply with an order for specific performance. The single issue to determine is whether this defence is reasonably arguable.

Factual background

[4]None of the following facts are disputed.

[5]    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 over time.

The agreements

[6]    On 15 April 2021, Knight agreed to  sell,  and  Mr  Peng  agreed  to  buy,  five sections in Stage 5 of the development. Each section 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;

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

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

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

[8]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);

(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

[9]    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.

[10]   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.

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

Variation of settlement date

[12]   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

[13]   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;

(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).

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

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

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

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

[18]   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

[19]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.

[20]   The relevant principles governing a summary judgment application are well established:1

(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.

[21]   A defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.2

Does Mr Peng have an arguable defence of impossibility?

[22]   In Ngai Tahu Property Ltd v Dykstra,3 Associate Judge Osborne summarised the principles relating to the defence of impossibility:

(a)A Court of equity will not require that to be done which cannot be done. Equity does not act in vain. See Equity and Trusts in New Zealand (2nd ed, 2009) at para 24.4.12, p 753.

1      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].

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

3      Ngai Tahu Property Ltd v Dykstra (2009) 10 NZCPR 734 (HC) at [12].

(b)The defendant must establish a very substantial probability that it would not be able to comply with an order for specific performance: see the second formulation in D'Arcy-Smith v Stace (2003) 4 NZ ConvC 193,771 at 193,775, [26].

(c)Anything less than a very substantial probability that performance will be impossible is insufficient - anticipation of possible difficulties or even a demonstrated difficulty in finding purchase money is unlikely to constitute a defence of impossibility. In such cases and subject to any other overriding equitable considerations a Court in equity is likely to order specific performance in the ordinary manner (with or without conditions) – the defendant may then later approach the Court for a modification or variation of the order: see Spry at p 128; D'Arcy- Smith v Stace above.

(d)In an ordinary proceeding, pleading of impossibility is in the nature of an affirmative defence and the onus of proof rests upon the defendant as the person taking the point: Humphrey v Fairweather [1993] 3 NZLR 91.

(e)On an application for summary judgment, r 12.2(1) High Court Rules applies. The plaintiff must prove that the defendant has no arguable defence to the claim for an order for specific performance. The onus on the application remains on the plaintiff although, when the plaintiff establishes its contractual entitlement, the evidential onus shifts to the defendants to demonstrate a tenable defence: Auckett v Falvey HC Wellington CP296/86, 20 August 1986, Eichelbaum J. Thus, where there is raised an impossibility defence to a summary judgment application for specific performance, the plaintiff must prove that the defendant has no arguable defence that there is a very substantial probability that the defendant will be unable to comply with an order for specific performance.

[23]   In this case, Mr Peng has not laid a sufficient evidential foundation for a defence of impossibility. The sum of Mr Peng’s affidavit evidence on this topic is:

36.     I will face tremendous difficulty if I am forced to try to settle all the properties. Philly Worldwide Limited does not have the funds to proceed with settlement, nor is it able to secure funds to settle. Annexed marked "YP-004" are the most recent financial statements of Philly Worldwide Limited.

37.       I currently reside at […] Woodford Road, Mount Eden, Auckland comprised in record of title NA355/283 and legally described as Lot 5, Deposited Plan 3984. This property is currently mortgaged to ANZ Bank and Snell Properties Limited is registered as the second mortgagee. Annexed marked "YP-005" is a copy of the record of title NA355/283 and mortgage instruments 12122218.3 and 12794326.1.

38.    Settlement by Q&S Housing Construction Limited (In Liquidation) is now out of my control. It is now up to the liquidators as to how they wish to proceed with the sale and purchase agreement.

39.    I am not able to settle the other four lots because I simply cannot secure the finance.

[24]   The financial position of the nominee companies, Philly Worldwide Limited and Q&S Housing Construction Limited, is irrelevant. The agreements for sale and purchase were not novated to these companies. Mr Peng nominated the companies to complete the purchases of the properties through Deeds of Nomination which are in evidence. As a matter of law, a nominating party remains liable for the obligations of the contract they entered into. This is confirmed by cl 1.5 of the agreements for sale and purchase, which states:

Where the purchaser executes this agreement with provision for a nominee, or as agent for an undisclosed or disclosed but unidentified principal, or on behalf of a company to be formed, the purchaser shall at all times remain liable for all obligations on the part of the purchaser.

[25]   The only evidence Mr Peng gives of his personal financial situation is paragraph 37 of his affidavit, set out above, where he describes his residential property and the mortgages over that property. He has not provided details of the value of that property, or the sum secured. He has not provided a statement of his assets and liabilities, his income and expenses, or evidence of attempts to secure personal finance.

[26]   Mr Peng’s affidavit evidence falls well short of establishing an arguable defence that there is a very substantial probability that performance of the agreements will be impossible.

[27]   The scant evidence from Mr Peng to substantiate his defence of impossibility is in stark contrast to the position in Ngai Tahu. In that case the defendant provided extensive affidavit evidence of their financial position, including a list of assets and liabilities, valuation reports, details of their income and expenses, and correspondence from their bank declining to increase their borrowing.

[28]   I do not forget that special care is required where specific performance is sought on summary judgment. The exercise of the Court’s discretion to order specific performance may give rise to issues that are different, or additional, to those that arise when considering whether an arguable defence exists in respect of liability.4

[29]    However, where the parties have expressly provided for and included remedies (such as specific performance). the Court generally will uphold their remedial choice.5 Here, the parties have specifically agreed that if Mr Peng does not comply with the terms of a settlement notice served by Knight, then Knight may sue for specific performance.6

[30]   Furthermore, Mr Peng does not point to any considerations that may weigh against an order for specific performance in the Court’s discretion, aside from the claim that performance is impossible.

Result

[31]   I enter summary judgment for Knight of its claim for an order for specific performance by Mr Peng of:

(a)the agreement for sale and purchase dated 15 April 2021 for the sale and purchase of lot 196; and

4      Hart v Bankfield Farm Ltd (2008) 9 NZCPR 685 (HC) at [39].

5      Butler v Countrywide Finance Ltd [1993] 3 NZLR 623 at 631 – 632.

6      Clause 11.4(1)(a), ADLS Agreement for Sale and Purchase of Real Estate, 10th edition 2019(2).

(b)the agreement for sale and purchase dated 15 April 2021 for the sale and purchase of lot 197.

[32]   Mr Peng will pay Knight their costs on a 2B basis and reasonable disbursements to be fixed by the Registrar.

Associate Judge Gardiner