Malanina v Snow-Jander HC Auckland CIV-2010-404-008428

[2011] NZHC 1798

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-008428

BETWEEN  SVETLANA MALANINA First Plaintiff

ANDSVETLANA MALANINA AS TRUSTEE OF THE COSMIC HEALING TRUST Second Plaintiff

ANDINGRIDIN SNOW-JANDER Defendant

Hearing:         2 November 2011

Counsel:         E Orlov for the Plaintiffs

No appearance by or on behalf of the Defendant

Judgment:      16 December 2011 at 3:00 PM

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Friday, 16 December 2011 at 3:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Equity Law, PO Box 8333, Auckland 1023

Copy to:

Johnston Prichard Fee, DX CP24022, Auckland 1140

MALANINA & ORS V SNOW-JANDER HC AK CIV-2010-404-008428 16 December 2011

[1]      By  statement  of  claim  originally  filed  on  21  December  2010,  Svetlana Malanina, either in her own name or as trustee of the Cosmic Healing Trust (the plaintiff), seeks damages from the defendant in relation to the purchase of a property situated at 31 Longfellow Parade, Titirangi, Auckland.   Four causes of action are pleaded – commercial deceit, breach of fiduciary relationship, breach of the Contractual Remedies Act, and breach of trustee obligations.

[2]      The plaintiff also filed a without notice application for a freezing order on

21 December 2010.   On the same day, Priestley J made an order restraining the defendant or her agents from removing assets from New Zealand until further order of  the  Court.    He  also  directed  that  the  defendant  was  to  be  served  and  the proceedings called in the Duty Judge List at the High Court at Auckland on Wednesday, 19 January 2011.

[3]      The defendant was unable to be served in person with the proceedings and an order for substituted service on her solicitor was made on 7 January 2011 by Lang J. The documents were subsequently served on the defendant’s solicitor.   By memorandum dated 19 January 2011, the defendant’s solicitor advised the Court that he had no instructions to act for the defendant.  He had no current address for her and did not know where she was.   He stated that he had attempted to contact the defendant through the mobile phone number he was given by her and also by her email address.  No response had, however, been received from the defendant.

[4]      It appears that the defendant left New Zealand on or about 6 January 2011. She also transferred the sum of $294,975 from a New Zealand bank account at the BNZ to an Australian bank account, also in her name, on the same date.  This was breach  of  the  order  made  by  Priestley  J  on  21  December  2010,  although  the defendant may not have been aware of the order, given that she had not been able to be served with it.

[5]      The plaintiff now seeks judgment in accordance with r 15.10 of the High

Court Rules on the basis that the defendant has not filed a statement of defence.

[6]      The plaintiff says she met the defendant at an ―energy healing‖ course in May

2010.  The defendant told the plaintiff that she was looking for a person who could start a healing centre with her and enquired of the plaintiff whether she would be interested in going into business together.  The plaintiff had a number of meetings with the defendant and became very close to her in a short period of time.

[7]      The  defendant  owned  a  property  at  31  Longfellow  Parade,  Titirangi, Auckland, which she represented to the plaintiff as being ideal for a healing centre business.  The plaintiff says that the defendant told her it was necessary for her to purchase the property because she needed the money from the sale of the property to buy the necessary equipment for the business and set up the healing centre.   She promised the plaintiff that the business would bring in $250 per week as soon as they opened up for business and that it would expand quickly.

[8]      The defendant told the plaintiff the house was only eight years old and in really good condition.  It was also suitable for a healing centre because there were rooms at the back of the property which could be used as a retreat where people from overseas could stay.  She said to her that the property was worth $900,000 but that she would be willing to sell it to the plaintiff for $795,000.  The defendant told the plaintiff not to mention the fact that she was going to purchase the defendant’s house and that they were planning to start a healing centre, especially to the plaintiff ’s boyfriend, who the defendant advised was not the right person for the plaintiff.

[9]      The defendant knew that the plaintiff had a property in Russia which she persuaded the plaintiff to sell so that she could purchase the defendant’s house.  The plaintiff initially resisted her attempts to which the defendant responded by telling her that if the plaintiff was to get involved in the business that would solve all of the plaintiff’s problems.

[10]     The  defendant  told  the  plaintiff  that  she  would  find  other  people  from different areas of healing to help run the business and together they visited the Interactive Healing Therapies in Parnell Road, Parnell, on 7 June 2010 and Biotrace

Limited in Morrin Road, Tamaki, on 14 June 2010 to inspect some equipment that the defendant would supposedly buy for the healing centre from the proceeds of the sale of the property to the plaintiff.

[11]     The proceeds of sale of the plaintiff’s Russian property were insufficient to meet the full purchase price of $795,000 and the plaintiff accordingly needed a mortgage to fund the difference.  The plaintiff was however not working and had no ready source of income and so was turned down for a mortgage by both the National Bank and the ASB Bank.

[12]     The defendant subsequently arranged for the plaintiff to see an accountant who created a statement for her which falsely stated that she was earning a regular income from self-employment.  With this false statement she was then able to obtain a mortgage through a mortgage broker.

[13]     The  defendant  also  arranged  a  conveyancing  solicitor  to  represent  the plaintiff.   The defendant took the plaintiff to see the solicitor on 20 July 2010. Before the meeting the defendant told the plaintiff not to use her (the defendant’s) usual surname because she did not want the solicitor to ascertain that she was also the vendor of the property.  The defendant introduced herself to the solicitor as the plaintiff’s friend and in the meeting referred to the vendor in the third person.  The defendant knew that the plaintiff did not understand legal documentation and took charge of the meeting with the solicitor steering the meeting away from issues such as  the value of the property.   The plaintiff says  the meeting  was  not  a proper consultation as she was not able to get truly independent legal advice.

[14]     At the meeting with the solicitor it was agreed that the plaintiff and the defendant would create a trust called the ―Cosmic  Healing Trust‖.   The trust deed was signed on 10 August 2010.  The property was to be purchased by the Trust.  The plaintiff also gave the solicitor a power of attorney to sign documents on her behalf as she would be out of the country when settlement of the property sale was to occur.

[15]     The settlement of the property occurred on 26 August 2010.   It was agreed that the defendant could reside in the property until 1 December 2010, from which

date the healing centre would be operational.   The plaintiff arrived back in New Zealand on 12 November 2010.  The plaintiff says that the defendant then refused to communicate with her and told her she had done nothing to set up the healing centre. By  letter  dated  1  December  2010,  the  defendant’s  solicitor  sent  the  plaintiff’s solicitor a deed of retirement of the defendant as a trustee of the Cosmic Healing Trust.

[16]     The plaintiff concludes that the defendant never had any intention of opening up a healing centre in partnership with her and that the whole reason for befriending her  was  to  sell  her  the  property  at  a  grossly  inflated  price.    The  Government valuation of the property at the time was $590,000, when in fact the plaintiff paid the defendant $795,000.  The property also did not have the consents necessary for the purposes of a retreat where people could stay.

Statement of claim

[17]     The plaintiff pleads several causes of action – commercial deceit, breach of fiduciary relationship, breach of the Contractual Remedies Act, and breach of trustee obligations.  It is sufficient for present purposes to hold that the plaintiff’s evidence establishes a breach of s 6 of the Contractual Remedies Act, which provides:

6        Damages for misrepresentation

(1)      If a party to a contract has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made to him by or on behalf of another party to that contract—

(a)       He shall be entitled to damages from that other party in the same manner and to the same extent as if the representation were a term of the contract that has been broken; and

(b)       He shall not, in the case of a fraudulent misrepresentation, or of  an  innocent  misrepresentation  made  negligently,  be entitled to damages from that other party for deceit or negligence in respect of that misrepresentation.

(2)       Notwithstanding anything in section 56 or section 60(2) of the Sale of Goods Act 1908, but subject to section 5 of this Act, subsection (1) of this section shall apply to contracts for the sale of goods.

[18]     It is a proper inference that the defendant misrepresented the value of the property and its suitability as a healing centre.  The misrepresentation may have been innocent or fraudulent.   The measure of damages is the difference between the market value of the property and the purchase price paid by the plaintiff.  As noted above, the Government valuation at the time was $590,000.  However, the plaintiff has now provided a valuation by a registered valuer employed by Property InDepth of $615,000. This is $180,000 less than the price paid by the plaintiff.

[19]     The plaintiff has also provided evidence that remedial work needs to be undertaken on the house.   In particular, a quote has been received from Aotearoa Roofing for $15,750 to fix identified defects.  Although the defendant may have told the plaintiff that the property was in good condition, the value of the property as assessed  by Property InDepth  is  on  the basis  of the property’s  condition.   The valuation report notes:

We understand from a builder’s report sighted that the roof requires some maintenance work and is leaking in places, especially around skylights.

That being the case, the plaintiff is not entitled to extra damages for the purpose of repairing the identified defects or to the cost of reports on the property’s condition.

[20]     Consequential loss also is recoverable provided the damage is not too remote. The plaintiff is entitled to recover the following expenses reasonably incurred by her in trying to establish the whereabouts of the defendant and what she had done with the proceeds of the sale of the property.

(a)       Private investigators fees - $6,731.94.

(b)      Costs incurred in relation to non-party discovery - $6,801.

[21]     Damages of $25,000 are also sought in relation to stress suffered by the plaintiff as a result of the defendant’s actions.  While the plaintiff has undoubtedly suffered stress, I do not think it is appropriate to award damages for stress on the basis of a brief medical certificate from her general practitioner and in the context of a judgment by way of formal proof.

Result

[22]     For these reasons there will be judgment in favour of the plaintiff against the defendant for the following sums:

Difference between valuation and purchase price           $180,000.00

Private investigators fees  $6,731.94

Costs incurred in relation to non-party discovery               $6,801.00

Total  $193,532.94

[23]     The plaintiff is also entitled to costs on a 2B basis in respect of both this proceeding and the related applications for non-party discovery plus disbursements as fixed by the Registrar.

……………………………….

Woolford J