Marble Arch Trustee Limited v Li

[2023] NZHC 3196

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-838

[2023] NZHC 3196

BETWEEN

MARBLE ARCH TRUSTEE LIMITED

Plaintiff

AND

ANG LI

Defendant

Hearing:	7 November 2023
Counsel:	P Spring / M Flood for the Plaintiff No appearance for the Defendant
Date of Judgment	13 November 2023

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 13 November 2023 at 4 pm.

Pursuant to Rule 11.5 of the High Court Rules.

…………………..

Registrar/Deputy Registrar

Solicitors/Counsel

Keegan Alexander Solicitors, Auckland

MARBLE ARCH TRUSTEE LTD v LI [2023] NZHC 3196 [13 November 2023]

Introduction

[1]    The plaintiff, Marble Arch Trustee Ltd (Marble Arch), and the defendant, Ang Li, are parties to  an  agreement  for  sale  and  purchase  of  real  estate  dated 23 September 2020 (the agreement). The agreement is in relation to two units in a  Mt Wellington property, developed and owned by Marble Arch.

[2]    Marble Arch commenced this proceeding upon Mr Li’s failure to settle the agreement on 1 March 2023. It sought, by way of summary judgment, orders that  Mr Li specifically perform the agreement.

[3]    On 1 August 2023, I granted the plaintiff’s application for summary judgment for specific performance of the agreement. My order required Mr Li to settle his obligations under the agreement by paying to Marble Arch, by no later than 11 August 2023, the sum of $1,005,207.32 (being the purchase price less the deposits already paid, inclusive of GST) and interest at the contractual rate of 22 per cent per annum from 1 March 2023 to the date of settlement. I reserved leave to Marble Arch to apply for an order releasing it from its obligations under the agreement in the event Mr Li failed to comply.

[4]    Mr Li did not comply. Marble Arch has since identified that Mr Li is the registered owner of land at 8A Ayr Street, Parnell, Auckland (the Ayr Street property). It now applies for an order appointing a receiver to the Ayr Street property. The order sought would empower the receiver to take possession of the property and to sell it to realise funds to meet Mr Li’s obligations under the agreement.

[5]    The application for appointment of a receiver was called in the summary judgment list on 7 November 2023. There was no appearance by or on behalf of Mr Li.

Legal principles

[6]    This application requires a consideration of the avenues for recourse available to a vendor in the event a purchaser refuses to settle their obligations under an agreement for sale and purchase of real estate.

The first election

[7]    If a purchaser makes plain their refusal to complete the contract, the vendor must make an election as to remedy: it can accept the repudiation, cancel the contract, and seek damages for breach; or it can seek from the Court an order for specific performance with damages for any loss arising from delay in settlement.1

[8]    An order for specific performance is affirmatory in nature. When the order is made, the contract falls under the supervision and control of the Court, operating in its equitable jurisdiction.2 Importantly, the contract itself remains on foot (along with the obligations of all parties to the contract); the contract does not merge in the judgment for specific performance and the original breach of contract continues to subsist.3

The second election

[9]    It is well established that when an order for specific performance is not complied with, the vendor must make a second election: it can seek enforcement of the order; or it can apply to vacate the order for specific performance and then seek leave to cancel the contract.4

[10]   The latter course is typically followed with an inquiry into damages; it being open to the vendor to recover the difference between the purchase price under the contract and the land remaining in its hands,5 or in some circumstances, the difference between the purchase price and the eventual resale price.6 Where a party is in default, an order vacating an order for specific performance does not follow as of right. Instead, it is a matter for the exercise of the Court’s discretion whether, in all the circumstances, discharge of the order would be unjust to the other party.7

1      Johnson v Agnew [1980] AC 367 (HL) at 392.

2      Johnson v Agnew, above n 1, at 398.

3      Austins of East Ham Ltd v Macey [1941] Ch 388 (CA) at 341.

4      Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 260; Mayoral Drive Trustee Co Ltd v Lal (2007) 9 NZCPR 801 (HC) at [2]; Investment Specialist Ltd v Kumaran (2009) 10 NZCPR 658 (HC) at [5]; and Pegasus Town Ltd v Wong (2010) 11 NZCPR 524 (HC) at [15]–[18].

5      Laird v Pim (1841) 7 M & W 474 (Exch); and Noble v Edwardes (1877) 5 Ch D 378 (Ch).

6      Hooper v Oates [2013] EWCA Civ 91, [2014] Ch 287 at [38].

7      Johnson v Agnew, above n 1, at 399.

[11]   If the vendor elects to seek enforcement of the order for specific performance, then it can immediately proceed to enforcement if the order for specific performance specified the steps required of the purchaser and the time within which the purchaser had to complete those steps.8

Enforcement measures

[12]   In a vendor’s claim, it is possible to enforce the order by one or more of the various modes of enforcement available in relation to enforcement of a money judgment.9

[13]   For example, the vendor might seek a charging order over land owned by the recalcitrant purchaser, followed by a sale order under r 17.58 of the High Court Rules 2016 (HCR). That was what occurred in Chandler Properties Ltd v Yu.10

[14]    Alternatively, it is open to the vendor to seek a broader sale order under r 17.63 of the HCR, however r 17.77 may require the vendor to first sell qualifying chattels belonging to the purchaser before allowing sale of the purchaser’s land.

Discussion

[15]   Marble Arch seeks to rely on the Court’s inherent jurisdiction to appoint a receiver to the Ayr Street property to enforce my summary judgment order for specific performance.

[16]   In Evans v Orr, Reed J explained the circumstances in which a receiver may be appointed to execute a judgment:11

8      If the order for specific performance is general in its terms, the vendor will need to apply for a further order directing the purchaser to complete: see Palmer v Lark [1945] Ch 182 (Ch) at 184.

9      High Court Rules 2016, pt 17. While an order for specific performance does not give rise to a judgment creditor/judgment debtor relationship between vendor and purchaser (see Marcolongo v Mazoudier [2008] NSWSC 1403, (2008) 14 BPR 26,863), a vendor is nonetheless permitted to apply for enforcement of the order under pt 17 as a party “entitled to relief against another party under a judgment” or alternatively as a party entitled to “payment of a sum of money” (see r 17.1).

10 Chandler Properties Ltd v Yu [2020] NZHC 753, (2020) 20 NZCPR 799. See also Tawanui Developments Ltd v Harnett HC Palmerston North CIV-2008-454-949, 20 August 2010.

11 Evans v Orr [1923] NZLR 769 (SC) at 771 (footnote omitted).

… The appointment of a receiver of a debtor's property was a mode of relief granted to a judgment creditor on the ground that either no remedy by execution at law was open to him or was likely to be effective owing to the peculiar nature of the property of the judgment debtor which it was sought to make available to answer the judgment. “The process is based upon the old practice of the Court of Chancery to assist in enforcing a judgment for the recovery of money of a Court of ordinary jurisdiction by entertaining an application for the appointment of a receiver of such of the interests in property of the judgment debtor as could not, owing to the nature thereof, be taken under a common-law writ of execution”.

[17]   In summary, appointment of a receiver will be available where there is a judgment debt; the debtor has property available to satisfy the judgment debt; and no other effective execution process is open to the judgment creditor.

[18]   That is not the situation here. First, as conceded by counsel for Marble Arch, Marble Arch is not a judgment creditor.12 Secondly, the orthodox measures to enforce an order for specific performance, discussed above, are reasonable options open to Marble Arch. This is not a case where there is no effective remedy, other than appointment of a receiver.

[19]   For the foregoing reasons, it is not appropriate for the Court to exercise its inherent jurisdiction to appoint a receiver to the Ayr Street property. The equitable principle stated in Evans v Orr does not apply.

[20]   I note that the Ayr Street property is subject to a registered mortgage. There is presently no evidence regarding the funds that might be produced from a sale of the property after discharge of all obligations secured by the mortgage. Such evidence will obviously inform Marble Arch’s next steps. Of course, Marble Arch continues to have the option of seeking an order vacating the order for specific performance and seeking leave to cancel the contract, followed by a claim for loss of bargain damages.

Result

[21]The application for appointment of a receiver is refused.

12     See above n 9.

[22]   I reserve leave to Marble Arch to seek other orders from the Court in respect of the agreement, given that Mr Li has failed to comply with my order for specific performance.

[23]There is no order as to costs.

Associate Judge Brittain