Ngoi v Wen
[2018] NZHC 3378
•18 December 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2014-404-1999
[2018] NZHC 3378
BETWEEN KOK ANN NGOI
First Plaintiff
SUNLINE ESTATE LIMITED
Second PlaintiffAND
GUIRONG WEN
Defendant
Hearing: 3 August 2018 Appearances:
S A Barker and O C Gascoigne for Plaintiffs
C T Walker QC and A Lenard-Sokorac for Defendant
Judgment:
18 December 2018
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 18 December 2018 at 10 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: ...................................
Solicitors: Buddle Findlay, Auckland
Gilbert Walker, Auckland
NGOI v WEN [2018] NZHC 3378 [18 December 2018]
Introduction
[1] On 14 January 2014, the first plaintiff, Dr Ngoi, agreed to purchase, and the defendant Ms Wen to sell, land at Karaka (“agreement” and “property”). Ms Wen subsequently denied the agreement was binding and, in August 2014, Dr Ngoi and the second plaintiff (“Sunline”), being Dr Ngoi’s nominee, commenced this proceeding seeking an order for specific performance. Nothing turns on the distinction between Dr Ngoi and Sunline, and references below to the former include the latter.
[2] In her judgment of 18 July 2016, Edwards J ruled in favour of Ms Wen.1 Dr Ngoi appealed against that decision, successfully, and on 17 November 2017 the Court of Appeal directed the parties to perform the agreement within 30 days of the date of judgment, or such other date as the parties agreed.2
[3] Shortly before the 30-day period expired, Ms Wen applied for leave to appeal to the Supreme Court. The Court of Appeal stayed execution of its judgment to allow the application to be determined. The Supreme Court declined leave on 5 March 2018.3
[4] The upshot of all of this was that the parties ought to have settled on or about 8 March 2018. They did not and on 14 March 2018, Ms Wen served notice requiring settlement by 19 March 2018. Ultimately settlement took place on 6 April 2018 but there was disagreement as to the sum due, that being resolved in the short term by having a stakeholder hold funds.
[5] This judgment determines interlocutory applications made by the parties to determine the sum due. At the outset of the hearing I expressed reservations as to the procedure the parties had adopted to bring these issues before the Court. However, Mr Barker, counsel for the plaintiffs, assured me that the issues that arose were supplemental or ancillary to the Court of Appeal’s order for specific performance, and that the parties wished to have their applications determined, regardless of any consequences that proceeding in this manner may have for rights of enforcement
1 Ngoi v Wen [2016] NZHC 1621.
2 Ngoi v Wen [2017] NZCA 519, (2017) 19 NZCPR 1.
3 Wen v Ngoi [2018] NZSC 18.
and/or appeal. I record also that counsel advised they would take care of the “arithmetic” once the issues were determined.
[6]The issues, and the answers, are:
(a)Does the agreement “provide for vacant possession” or “provide for the property to be sold tenanted”? This determines whether cl 3.13(2) or 3.13(5) of the agreement applies to ascertain the sum due on settlement.
The agreement provides for the property to be sold tenanted, and so cl 3.13(5) of the agreement applies.
(b)If tenanted, did the agreement become one providing for vacant possession when the tenant in occupation at the date of the agreement vacated in February 2015?
No.
(c)Is Dr Ngoi, as purchaser, liable to reimburse Ms Wen for rates and costs incurred in the course of an application for rezoning, and to pay penalty interest for late settlement?
Dr Ngoi conceded the rates and rezoning costs if cl 3.13(5) applied, as it does. Dr Ngoi is not liable for penalty interest.
[7] Dr Ngoi did not pursue that part of his application seeking an inquiry into damages.
Background
[8] The facts relevant to the issues before me can be stated relatively briefly. A fuller account may be obtained from the earlier judgments.4
4 Ngoi v Wen, above n 1; and Ngoi v Wen, above n 2.
[9] In February 2007, Ms Wen appointed Mr Sammy Ngai of Barfoot and Thompson Limited (“Barfoots”) to act as her agent on the sale the property.5 Ms Wen informed Mr Ngai that the property was tenanted at a rental of $1,120 per month, which it was, to Bloodstock International Limited (“Bloodstock”). Barfoots recorded details of the tenancy in its internal documents.6
[10] In 2013 Dr Ngoi, a property developer based in Singapore, expressed interest in the property and on 1 December 2013 he asked Mr Ngai to prepare an offer to purchase the property.
[11] Mr Ngai prepared the offer on the Ninth Edition 2012 (2) of the ADLS/REINZ form of agreement for sale and purchase (“form”). The front page of the form includes a space headed “TENANCIES (if any)”. Mr Ngai wrote the words “with current tenancy” in that space, as follows:
[12] Dr Ngoi having signed the offer and having initialled each page, Mr Ngai presented it to Ms Wen on 12 January 2014. Ms Wen and Dr Ngoi exchanged counter offers over the next three days, the sole issue between them being the purchase price.
[13] The Court of Appeal determined that the parties reached a binding agreement on 14 January 2014 for the sale of the property at $5,280,000, with settlement to take place on 12 December 2014.7 The offer was conditional for up to 120 working days during which period Dr Ngoi was entitled to satisfy himself that the property was suitable for his intended use, and to investigate such matters as he, in his sole discretion, deemed pertinent.
[14] On 12 June 2014, Dr Ngoi declared the agreement unconditional and paid the deposit of $528,000. Dr Ngoi nominated Sunline as purchaser and commenced this
5 Affidavit of G Wen sworn 8 June 2018 (translated) at [7].
6 Affidavit of G Wen sworn 8 June 2018, above n 5, at [8].
7 Ngoi v Wen, above n 2, at [51].
proceeding in August 2014, it being apparent by then that Ms Wen disputed she was bound by the agreement.
Was the property sold subject to tenancy?
[15] Clause 3 of the agreement makes provision for matters concerning Possession and Settlement, including late settlement, whether as a result of default by the purchaser or vendor, as in this case (see cls 3.12 and 3.13 respectively).
[16] The principal issue between the parties is whether the sum due on settlement is to be determined by reference to cl 3.13(2) as Dr Ngoi contends, or cl 3.13(5) as Ms Wen contends.
[17] Clause 3.13(2) applies if the agreement “provides for vacant possession” and, subject to certain provisos, would allow Dr Ngoi to require Ms Wen to pay interest at the penalty rate, being 13 per cent per annum, on the entire purchase price from 12 December 2014 to the date of settlement being 6 April 2018, so for more than three years. Clause 3.13(5), which applies if the agreement provides for the property to be “sold tenanted”, brings about a less favourable financial outcome to Dr Ngoi. The relevant provisions are:
Vendor Default: Late Settlement or Failure to give Possession
...
(2)If this agreement provides for vacant possession but the vendor is unable or unwilling to give vacant possession on the settlement date, then, provided that the purchaser provides reasonable evidence of the purchaser's ability to perform the purchaser’s obligations under this agreement:
(a)the vendor shall pay the purchaser, at the purchaser’s election, either:
(i)compensation for any reasonable costs incurred for temporary accommodation for persons and storage of chattels during the default period; or
(ii)an amount equivalent to interest at the interest rate for late settlement on the entire purchase price during the default period; and
(b)the purchaser shall pay the vendor an amount equivalent to the interest earned or which would be earned on overnight
deposits lodged in the purchaser’s lawyer’s trust bank account on such portion of the purchase price (including any deposit) as is payable under this agreement on or by the settlement date but remains unpaid during the default period less:
(i)any withholding tax; and
(ii)any bank or legal administration fees and commission charges; and
(iii)any interest payable by the purchaser to the purchaser’s lender during the default period in respect of any mortgage or loan taken out by the purchaser in relation to the purchase of the property.
...
(5) If this agreement provides for the property to be sold tenanted then, provided that the purchaser provides reasonable evidence of the purchaser's ability to perform the purchaser's obligations under this agreement, the vendor shall on settlement account to the purchaser for incomings which are payable and received in respect of the property during the default period less the outgoings paid by the vendor during that period. Apart from accounting for such incomings, the vendor shall not be liable to pay any other moneys to the purchaser but the purchaser shall pay the vendor the same amount as that specified in subclause 3.13(2)(b) during the default period.
[18] Mr Barker submitted that the agreement provided for vacant possession as a result of cl 3.1, which provides:
Unless particulars of a tenancy are included in this agreement, the property is sold with vacant possession and the vendor shall so yield the property on the settlement date.
[19] Mr Barker submitted the part of the agreement reproduced above did not constitute inclusion of “particulars of a tenancy” in the agreement. He submitted that the required particulars were those listed in the space, ie the name of the tenant, the amount of any bond, rent etc.
[20] Mr Walker QC, counsel for Ms Wen, submitted that the agreement provided for the property to be sold tenanted, so that cl 3.13(5) applied. He submitted that it did not matter particularly whether Dr Ngoi knew of the precise terms of the tenancy, which knowledge Dr Ngoi denied. Dr Ngoi made an offer to Ms Wen with the words “with current tenancy” included, admittedly by Mr Ngai, but included all the same.
Moreover, that was sufficient by way of particulars, because the particulars could be ascertained.
[21] In support of his first submission, Mr Walker referred me to Body Corporate 206697 v Chen.8 In that case, Ms Chen argued that she had purchased her apartment with the benefit of a lease which was not to expire until 2011, some six years later, and yielding $24,000 per annum. The lessee vacated early and Ms Chen sued the body corporate, as guarantor, for the rent due for the remaining term. The District Court found in Ms Chen’s favour and the body corporate appealed.
[22] In the High Court, the body corporate argued that the lease was not sufficiently identified in the agreement for sale and purchase and that Ms Chen had purchased the apartment with vacant possession. The form of the agreement used in the Chen case included the same space for recording the details of tenancies and the same cl 3.1 as in this case. The tenant’s name was recorded as “On site Building Manager”, but “bond”, “term” and “right of renewal” were left blank. The “rent” was recorded as “see clause 14.0”. In fact, cl 14 was struck from the agreement but otherwise provided that the agreement was conditional on Ms Chen’s solicitor approving the lease.
[23] Keane J concluded the District Court Judge was correct to find that Ms Chen had purchased with the benefit of the lease saying:
[14] The most natural interpretation of cl 3.1 is that a purchaser is entitled to vacant possession, unless any tenancy is disclosed and incorporated in the agreement. … The Judge was entitled to find that the deed of lease was incorporated plainly enough.
[15] Brief details of any tenancy are allowed for on the first page of the agreement. … Against the first “name of tenant” is the entry “On site Building Manager”. No entries are made against “bond”, or “term” or “right of renewal”. But these are unlikely to be as essential when a purchaser expressly takes with the benefit of a tenancy. …
[16] Clause 14.0 was struck from the agreement. Ms Chen, when questioned about this, could not finally say why. She first said that the vendor had required that. She later accepted that she did not know how it came about. The fact remains that the lease continued to figure explicitly in the agreement and Ms Chen was not offered and did not assume vacant possession. ...
8 Body Corporate 206697 v Chen (2009) 10 NZCPR 22 (HC).
[24]The facts of this case are very similar to the present.
Discussion
[25] I consider that the agreement provides for the property to be sold tenanted, that is cl 3.13(5) applies.
[26] First, and similarly to Chen, I consider the words “with current tenancy” sufficient to constitute inclusion of particulars of the tenancy in the agreement, because they enable those particulars to be ascertained. I do not accept Mr Barker’s submission that the particulars could not be ascertained, as the terms of the tenancy were not recorded in writing as between Ms Wen and tenant. This would not have prevented Dr Ngoi from ascertaining the particulars of the tenancy if he had wished. Mr Ngai had the particulars.
[27] Secondly, as Mr Walker submitted, by making his offer to purchase on those terms, Dr Ngoi must be taken to have been satisfied that he had sufficient particulars of the tenancy, or to have been unconcerned about the matter.
[28] Thirdly, and although it does not matter particularly, the critical words were handwritten on the front page of the agreement, not far below the space provided for the purchase price which was subject to many changes. Dr Ngoi could not have overlooked them. Indeed, he appears to have initialled next to them.
Was the sale and purchase of the property subject only to the tenancy in force at the date of the agreement?
[29] In the alternative, Mr Barker submitted that, if the agreement provided for the property to be sold tenanted, it was sold subject to the tenancy existing or “current” at the date of the agreement and became an agreement providing for vacant possession when the tenant, Bloodstock, vacated in February 2015. Ms Wen engaged a property management company to re-let the property after Bloodstock vacated, which they did so that the property was let from 30 May 2015 until 5 March 2018.
[30] Mr Barker submitted that cl 3.13(5) should be construed so it applied only until Bloodstock vacated, alternatively that a term should be implied into the agreement, to the following effect:
If the agreement provides for tenanted possession, clause 3.13 (5) only applies for the duration of the tenancy in force at the time the agreement is agreed. After that tenancy terminates clause 3.13 (2) applies.
[31] Mr Barker made three points in support of his submission for an implied term.9 First, he submitted the term was reasonable and equitable as it allowed Ms Wen the advantage of cl 3.13(5) whilst the tenancy to Bloodstock subsisted, but avoided what could be described as the “wholly inequitable” position whereby Ms Wen would otherwise be advantaged by having prolonged settlement.
[32] Secondly, he submitted the term was necessary to give business efficacy to the agreement, as a reasonable person would think it absurd that Ms Wen could receive a “windfall gain” by cl 3.13(5) when she had been the cause of late settlement.
[33] Thirdly, Mr Barker submitted the implied term was capable of clear expression and that it did not contradict any express term of the agreement.
[34] Mr Walker’s first submission in response was that the plaintiffs had not pleaded the existence, or breach, of an implied term. Mr Walker is correct in this regard but Dr Ngoi’s application refers to cases commonly cited in support of an implied term, which I expect was sufficient to alert Mr Walker to the submission Mr Barker intended to make on this point.10
[35] Alternatively, Mr Walker submitted that the proposed term was inconsistent with cls 3.13(2) and (5), that it was not so obvious that it “went without saying”, and that implying such a term would be tantamount to a variation of the form and therefore have far-reaching consequences.
9 Mr Barker also submitted that the term was capable of clear expression and was so obvious that it went without saying.
10 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC); Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988; and Ward Equipment Ltd v Preston [2017] NZCA 444, [2018] NZCCLR 15.
[36] Mr Walker also submitted that the operation of cl 3.13(5) produced a reasonable result. Ms Wen would account for the rent received between 12 December 2014 to the date of settlement, and there was no evidence that rent was less than the market rent at the time. Mr Walker also rejected the submission that Ms Wen received a “windfall”. He submitted that Dr Ngoi would receive a windfall if Ms Wen was required to allow him penalty interest at 13 per cent per annum for more than three years.
Discussion
[37] The important point for the application of cls 3.13(2) or (5) is what the agreement provides as to how the property is to be sold, not the state of affairs pertaining at settlement. I am not persuaded that, by the word “current”, the parties agreed that the property was to be sold tenanted if Bloodstock stayed, but not otherwise, and I can think of no reason in principle as to why they would have wished to do so.
[38] Nor is it necessary to imply any term into this agreement. In Belize Telecom, the Privy Council said the Court has no power to improve a contract or to make it fairer or more reasonable.11 That, in my view, is what Mr Barker seeks – a result his client considers fairer or more reasonable than the agreement reached in fact. I also accept Mr Walker’s submission that none of the traditional criteria for implication are met, including in particular that the term proposed would render the agreement reasonable and equitable, or is required for business efficacy, or that it is obvious that the term proposed ought to be implied.12 The agreement is a comprehensive standard form document, used routinely for residential, commercial and rural conveyancing. The General Terms, which include cl 3.13, are the subject of regular revision by practitioners experienced in this field, to ensure they provide for every eventuality. Those terms are sufficient to cover this case and there is no basis for reading anything additional into them.
11 Attorney General of Belize v Belize Telecom Ltd, above n 10, at [16].
12 BP Refinery (Westernport) Pty Ltd v Shire of Hastings, above n 10, at 283 per Lord Simon of Glaisdale.
Outgoings
[39] Clause 3.13(5) requires the vendor to account to the purchaser on settlement for incomings less outgoings between, in this case, 14 December 2014 and 6 April 2018.
[40] In his submissions in reply, Mr Barker accepted that the rates and the sum paid to Hayfield SHA Limited of $59,439.47 (including GST), in respect of the rezoning application to which I referred above, were “outgoings” for the purposes of cl 3.13(5).
[41] However, Mr Barker submitted that the total of these items exceed incomings, being the rent received and that in those circumstances a vendor could not recover the shortfall pursuant to cl 3.13(5). I do not accept that argument. There is nothing in cl 3.13(5) to suggest that the vendor is required to bear any deficit.
Penalty interest
[42] Ms Wen seeks penalty interest of $30,464.88 for the period from 20 March 2018 to 6 April 2018, calculated at the penalty rate.
[43] As I have said, the parties failed to settle on 8 March 2018 being the thirtieth day ordered by the Court of Appeal. Nor did they agree another date, which the Court of Appeal’s order allowed them to do. Buddle Findlay wrote to Ms Wen’s solicitors, Pidgeon Law, on 13 March 2018 and said “we are aiming for settlement around 3 April 2018”. Pidgeon Law replied on 14 March 2018 and said that date had not been calculated in accordance with the agreement and that they expected to give notice under cl 3.15 later that day, which they did. This notice, if effective, deferred settlement to 19 March 2018. Hence Ms Wen’s claim to penalty interest from the following day to the date of settlement (6 April 2018) pursuant to cl 3.12(1).
[44]Clauses 3.15 and 3.12(1) provide:
3.15 In every case, if neither party is ready, willing and able to settle on the settlement date, the settlement date shall be deferred to the third working day following the date upon which one of the parties gives notice it has become ready, willing and able to settle.
Purchaser Default: Late Settlement
3.12If any portion of the purchase price is not paid upon the due date for payment, then, provided that the vendor provides reasonable evidence of the vendor’s ability to perform any obligation the vendor is obliged to perform on that date in consideration for such payment:
(1)The purchaser shall pay to the vendor interest at the interest rate for late settlement on the portion of the purchase price so unpaid for the period from the due date for payment until payment (“the default period”); ...
[45] Mr Barker submitted Ms Wen was not entitled to serve notice as she did, and thereby fix 19 March 2018 as the “due date for payment of the purchase price” for the purposes of cl 3.12. This argument arises from the Court of Appeal’s order for specific performance which was in the following terms:13
[54] A binding contract was formed at about 5.30 pm on 14 January 2014 that is enforceable under s 24 of the Property Law Act. We direct it is to be performed within 30 days of the date of this judgment or on such other date agreed to by the parties.
[46] In effect, Mr Barker submitted that the Court’s order superseded, inter alia, cl 3.15 of the agreement.
[47] Mr Barker also submitted that Ms Wen was not entitled to serve notice on 14 March 2018, as she herself was not ready, willing and able to settle. In fact, Mr Barker submitted that Ms Wen was not ready to settle at any time prior to 6 April 2018.
[48] I accept Mr Barker’s submission that Dr Ngoi is not liable to pay the penalty interest claimed. The parties not having complied with the Court of Appeal’s order to settle within 30 days, the courses open to them were to agree another date, also in accordance with the Court’s order, or to revert to the Court and seek further directions. I do not accept Mr Walker’s submission that it was open to Ms Wen to revert to the terms of the contract as she did.
13 Ngoi v Wen, above n 4.
[49] This appears from Singh v Nazeer, to which Mr Barker referred me.14 In that case, the purchaser had obtained an order for specific performance but proved to be slow in effecting settlement. The vendor then served a “completion notice” under the contract, to which the purchaser objected. For present purposes the important points that emerge from the decision are these:
(a)When an order for the specific performance of a contract for the sale of land is made, the contract continues to exist and is not merged in the order. This, however, does not mean that the exercise of the rights the contract confers remains unaffected by the order.
(b)Once an order for specific performance has been made, either party has adequate remedies if the other is not proceeding with “due despatch”.15 By obtaining an order for specific performance, the applicant “has put it into the hands of the court how the contract is to be carried out. As the court has become seised of the matter, and has made an order, ... subject to anything that the parties may then agree, the working out, variation or cancellation of that order is essentially a matter for the court”.
(c)In ordinary circumstances, the “machinery” provisions of a contract for the sale of land are intended to govern the carrying out of the contract between the parties out of Court. They are not directed to carrying out the contract when an order for specific performance has been made.16
[50] In my view, that case is entirely on point with the present. The parties were required to settle in accordance with the order of the Court of Appeal, whether as issued or varied on a subsequent application for further directions. Ms Wen’s notice was not effective to establish a “due date for payment” under cl 3.12 and she has no entitlement to penalty interest.
14 Singh v Nazeer [1979] Ch 474.
15 At 480.
16 At 481.
Result
[51] The agreement provides for the property to be sold tenanted, hence cl 3.13(5) applies. The rates and the Hayfield SHA Limited invoice are outgoings for the purposes of that clause and Dr Ngoi is liable for any deficit between incomings and outgoings. Ms Wen is not entitled to the penalty interest claimed.
Costs
[52] I expect the parties can agree on costs and disbursements, Ms Wen having succeeded on the critical issue of whether cl 3.13(2) or 3.13(5) applies.
[53]I reserve leave to apply.
Peters J
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