Northwest Developments Limited v Xue
[2019] NZHC 1042
•13 May 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-2402
[2019] NZHC 1042
BETWEEN NORTHWEST DEVELOPMENTS LIMITED
PlaintiffAND
LIN XUE
Defendant
Hearing: 13 May 2019 Appearances:
K J Ng for the Plaintiff
Lin Xue in person, accompanied by his wife Huajing Zhang
(Interpreter)
Judgment:
13 May 2019
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Castle Brown (Colin Girven), Newmarket, Auckland, for the Plaintiff
Copy for:
M J Fisher/K J Ng, Auckland, for the Plaintiff Huajing Zhang (translator) wife of Defendant,
NORTHWEST DEVELOPMENTS LIMITED v LIN XUE [2019] NZHC 1042 [13 May 2019]
[1] Northwest Developments Ltd as vendor sues Lin Xue as purchaser for specific performance of an agreement of 16 June 2016 for the sale of lot 60 of its subdivision at 81 Nobilo Road, Huapai, Auckland. It has applied for summary judgment.
[2] The agreement initially had a sunset date of 31 March 2018 by which title was to issue. Northwest says that the parties agreed to extend the sunset date to 31 October 2018. Title issued in September 2018. Northwest wishes to settle but Mr Xue refuses to do so. He has raised these matters in opposition to the application for summary judgment:
(a)He was induced to enter into the agreement by a misrepresentation that title would issue in or around September 2017.
(b)He was induced to agree to the variation extending the sunset date by a misrepresentation.
(c)The agreement to change the sunset date is not enforceable because it is not supported by consideration.
(d)There was a breach of warranty under cl 6.1(1) of the agreement because there were outstanding requirements at the time of the agreement.
(e)The vendor did not use its best endeavours to obtain title as soon as was reasonably practicable.
(f)In September 2017 the vendor misrepresented the likely settlement date.
(g)The vendor has reduced the value of the property by building houses on unsold lots in the subdivision.
[3] In Krukziener v Hanover Finance Ltd, the Court of Appeal re-stated the principles on which a plaintiff’s summary judgment application is decided:1
[26] The principles are well settled. 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. 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. … 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. …
[27] Under r 141A, the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.
(Citations omitted)
[4] When he entered into the agreement with Northwest, Mr Xue had a lawyer. In 2018 he instructed a new lawyer. That lawyer was acting for other purchasers of lots in Northwest’s subdivision. On 5 October 2018, that lawyer wrote to the lawyers for Northwest, setting out various matters of complaint. For his case, Mr Xue has largely adopted the arguments which his second lawyer set out in her letter dated 5 October 2018. At the time that she wrote that letter, Mr Xue was not one of her clients but he retained her shortly afterwards.
[5] In this proceeding, Mr Xue does not have a lawyer. He is also at a disadvantage as he does not speak English. His wife, Huajing Zhang, has appeared with him today. At the start of the hearing I discussed matters with Ms Zhang. I established that she speaks English fluently. During the hearing she has translated the plaintiff’s submissions for her husband and she has translated what her husband has said to me. Ms Zhang, while acting as interpreter, has acted as a form of McKenzie friend. I am grateful to her for her assistance.
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26]-[27].
[6] For his case, Mr Xue has largely adopted the arguments which his lawyer set out in her letter of 5 October 2018. In the way of many letters by lawyers, it makes a case for her clients. It makes assertions of fact based on instructions from her clients. Insofar as that letter makes factual assertions, it is hearsay under the Evidence Act 2006. Under s 4 of the Evidence Act, a hearsay statement is a statement that is made by a person other than a witness and is offered in evidence at a proceeding to prove the truth of its contents. In this case, the lawyer has passed on instructions given by her clients and neither the lawyer nor her clients have given evidence. The factual assertions in her letter are not admissible hearsay. The conditions for hearsay evidence to be accepted have not been satisfied. I have no reason to believe that the statements made by the lawyer are reliable as she is simply passing on instructions from her clients. It has not been shown that those who gave instructions to the lawyer are not available to give evidence. The statements ought not to be allowed in simply on the ground of avoiding undue expense and delay. In short, if Mr Xue wanted to prove the truth of the matters asserted by his lawyer, he should have done more than produce his lawyer’s letter. He should have provided evidence from those with direct knowledge of the matters asserted by the lawyer in her letter. In his submissions today, Mr Xue made certain factual assertions but those were not in his affidavit. To the extent that he attempted to adduce evidence today I am unable to take it into account.
[7] I will refer to the lawyer’s letter of 5 October 2018. I will treat it as a kind of pleading or submission, setting out a case for Mr Xue. But I cannot use the letter as evidence for any of the factual aspects of his case.
The subdivision process
[8] This case concerns the steps by which land is subdivided for residential development. The legislation on subdivision provides a context for the facts of this case and the parties’ agreement. There are other contextual matters as well. Subdivision is controlled under the Resource Management Act 1991. I use the version of the Resource Management Act in force at 30 April 2016, the time of the agreement. I deal only with those parts of the Resource Management Act that are relevant to the subdivision in this case.
[9] Subdivision is controlled under the Resource Management Act. Section 11(1)(a) of the Act imposes a prima facie restriction on subdivision, and states the circumstances in which a subdivision may take place:
(1) No person may subdivide land, within the meaning of section 218, unless the subdivision is—
(a)both, first, expressly allowed by a … a resource consent and, second, shown on one of the following:
(i)a survey plan, as defined in paragraph (a)(i) of the definition of survey plan in section 2(1), deposited under Part 10 by the Registrar-General of Land; or
The relevant parts of the definition of ‘subdivision of land’ in s 218 are:
218 Meaning of subdivision of land
(1)In this Act, the term subdivision of land means—
(a)the division of an allotment—
(i)by an application to the Registrar-General of Land for the issue of a separate record of title for any part of the allotment;
…
And the relevant parts of the definition of “Allotment” in s 218(2)(a) are:
(2)In this Act, the term allotment means—
(a)any parcel of land under the Land Transfer Act 1952 that is a continuous area and whose boundaries are shown separately on a survey plan, whether or not—
(i)the subdivision shown on the survey plan has been allowed, or subdivision approval has been granted, under another Act; or
(ii)a subdivision consent for the subdivision shown on the survey plan has been granted under this Act; …
“Survey plan” is defined in s 2(a):
survey plan has the meaning set out in the following paragraphs, in which cadastral survey dataset has the same meaning as in section 4 of the Cadastral Survey Act 2002:
(a)survey plan means—
(i)a cadastral survey dataset of subdivision of land, or a building or part of a building, prepared in a form suitable for deposit under the Land Transfer Act 1952; …
[10] A subdivision consent is invariably subject to conditions. Some conditions must be satisfied before title can issue. Others are to apply after title has issued. The latter are subject to consent notices under s 221 of the Resource Management Act and bonds. An applicant seeking a subdivision consent may typically have its surveyors prepare an indicative subdivision plan, sometimes called a “scheme plan”. While that plan may be used for the application and the subdivision consent, it is not the survey plan used to create new titles. For new titles to issue, a survey plan must be deposited. Section 224 of the Resource Management Act states the requirements for the deposit of a survey plan. One of them is that the territorial authority must have approved the survey plan under s 223. For that, the territorial authority is required to approve a survey plan if a subdivision consent has been granted, and the survey plan conforms with the subdivision consent. Under s 224(c) of the Resource Management Act, a territorial authority may grant a certificate, showing that the territorial authority has approved the survey plan, that the authority is satisfied that the conditions of the subdivision consent have been complied with, and that appropriate measures have been put in place to ensure ongoing compliance with conditions. The survey plan must also be submitted to LINZ for approval as to survey. That is to ensure that the survey plan is a fit within the New Zealand survey cadastre held in LandOnline. Once the requirements of s 224 are met and a survey plan is deposited, a certificate of title can issue for land shown as a separate allotment on a survey plan.2
The subdivision at 81 Nobilo Road, Huapai
[11] Nobilo Road at Huapai to the northwest of Auckland was originally in countryside, but in more recent years has been re-zoned for residential development. The area is called the “Huapai Triangle”. Owners of land in the Huapai Triangle agreed to work together to maximise the value of their land by having it re-zoned by a private plan change. That was intended to come within the Housing Accords and Special Housing Areas Act 2013.
2 Resource Management Act 1991, s 226(1)(a).
[12] In June 2015, five owners of land in the eastern part of the Huapai Triangle entered into an agreement called the “Huapai Triangle Five Landowners Infrastructural Agreement”. One of the parties to that agreement, the Mortons, owned 81 Nobilo Road, a 6.3 hectare block. Another party were the Jung interests, who owned 77 Nobilo Road. The Huapai Triangle Agreement included these provisions:
Recital C:
… This agreement sets out the basis upon which the Landowners will cooperate with each other in respect of, and will contribute to the cost of, infrastructure to be installed to service the Landowners’ Land if the plan change request is successful.
Clause 14 - each party agreed to allow others access across the use of one another’s land to enable infrastructure to service the other party’s land.
Clause 15 - they agreed to grant easements to recognise access rights.
Clause16 - if the Council required any land or other infrastructure to be vested in or dedicated to the Council as a condition of consent, the party whose land was required would do all things reasonably necessary to allow that vesting or dedication to occur.
Clause 65 - each party would with due diligence sign all necessary deeds and documents and do everything that is reasonably required to carry out the terms of the agreement.
Clause 58 says that the agreement is to bind successors in title:
Subject to clause 59 the rights and obligations of each party shall run with their respective land as detailed in Schedule A. Each party must assign or transfer its rights and obligations under this Agreement when transferring any part of its interest in any part of the Landowners’ Land to a successor in title (from time to time). It will also cause such successor/s to enter a new agreement/s to enter into a new agreement with the other parties on the same terms as this Agreement or a deed of novation, so that the successor in title is bound on the same terms as the transferring/assigning party is bound by this Agreement.
There were provisions for the parties to contribute to the costs of infrastructure incurred by others.
[13] In May 2015, Northwest entered into an agreement with the Mortons to buy 81 Nobilo Road. That purchase settled in October 2016.
[14] In November 2015, the Auckland Council approved the private plan change for the Huapai Triangle. Northwest obtained a subdivision consent from the Auckland Council.
[15] In May 2016, the Jung interests – that is, the owners of 77 Nobilo Road - agreed to sell their property to Sanli Homes Ltd. That was due to settle in May 2017. In breach of the Five Owners’ Agreement, the Jung interests did not assign or transfer their rights and obligations under the Five Owners’ Agreement to Sanli Homes Ltd, and they did not arrange for Sanli Homes Ltd to enter into a new agreement with the other parties on the same terms as provided in clause 58 of the Five Owners’ Agreement.
[16] On taking title to 81 Nobilo Road on 6 October 2016, Northwest became the assignee of the Mortons’ rights, title and interests under the Five Owners’ Agreement. The parties also agreed to assume the Mortons’ obligations under the agreement. After settlement, Northwest began the subdivision and associated infrastructure works, which had been consented by the neighbouring landowners and the Auckland Council.
[17] In May 2017, Northwest lodged a caveat against the title to 77 Nobilo Road to protect the easement granted by the Jung interests under the Five Owners’ Agreement. This was to protect Northwest’s right of access to the property at 77 Nobilo Road to carry out necessary infrastructure works. It lodged the caveat because the Jungs had failed to obtain the agreement of Sanli Homes Ltd to be bound by the Five Owners’ Agreement. Northwest also applied for an interim injunction to restrain the sale of 77 Nobilo Road by the Jung interests, except on terms directed at protecting Northwest’s right of access and use of part of the property to build and to vest the road in Auckland Council. It also sought to secure a sum to cover the liability of the Jung interests to contribute towards the infrastructure costs.
[18] In August 2017, Jagose J granted an interim injunction restraining settlement of the sale of 77 Nobilo Road on terms and upheld the caveat.3 At the same time, Northwest had been trying to get the Jung interests to sign a deed of novation which would tie Northwest to the Five Owners’ Agreement. The Jung interests refused to do so.
[19] By about September/October 2017, Northwest’s infrastructure works for the subdivision of 81 Nobilo Road were close to completion. However, Northwest still had more work to do before titles could issue. It needed the approval of the Auckland Council under s 223 of the Resource Management Act for the survey plan; it needed a certificate under s 224(c) as to compliance with the conditions of the subdivision consent; it needed LINZ approval of its survey plan; and it needed the consents of the neighbouring landowners – that is, the parties to the Five Owners’ Agreement or their successors in title – to the deposit of Northwest’s survey plan. These consents were required because the deposit of Northwest’s plan would vest part of the neighbouring land in the Auckland Council as road.
[20] By September 2017, Northwest asked the Jung interests to consent to the deposit of its survey plan LT 509469. The Jung interests refused to do so.
[21] Northwest obtained its s 223 survey plan approval on 29 September 2017. It submitted the survey plan to LINZ on 30 October 2017. LINZ approved it on 1 November 2017. The next day, on 2 November 2017, Northwest began a proceeding against the Jung interests seeking an order for specific performance under the Five Owners’ Agreement requiring their consent to the deposit of the survey plan LT 509469. Its application for summary judgment was heard on 23 February 2018.
[22] In December 2017, Northwest obtained its s 224(c) certificate from the Auckland Council.
[23] In January 2018, Northwest became aware that another neighbour, GSC Holdings Ltd, the owner of 69 Nobilo Road, had decided to obtain approval as to survey of its own subdivision on the basis that it would not obtain the consent of
3 Northwest Developments Ltd v Zhang [2017] NZHC 1891.
the Jung interests as owners of 77 Nobilo Road or the consent of Northwest as owner of 81 Nobilo Road. GSC Holdings Ltd did that by excluding from its subdivision plan that part of 69 Nobilo Road that had been set aside for road reserve. Northwest says that if the GSC Holdings plan were to vest before its own plan (LT 509469), Northwest would have to submit a new plan to take account of the new titles created by GSC Holdings Ltd’s plan. About March 2018, Northwest became aware that GSC Holdings’ plan had deposited.
[24] At this stage, the decision had not been given in the summary judgment proceeding against the Jung interests. Northwest’s surveyor prepared a new survey plan, LT 522391. Northwest obtained a s 223 approval of the new plan on 27 March 2018. It submitted the new plan to LINZ for approval as to survey. LINZ approved it on 20 June 2018.
[25] On 13 July 2018, judgment was given in the summary judgment application against the Jung interests. 4 The Jung interests were not satisfied with that decision and appealed to the Court of Appeal which gave its decision dismissing their appeal on 6 May 2019.5 Notwithstanding the appeal, the Jung interests had a partial change of heart. They consented to the deposit of LT 522391 on 23 August 2018. With that, Northwest lodged the documents with LINZ for LT 522391 to deposit. Titles issued in September 2018.
The agreement between Northwest and Mr Xue
[26] On 16 June 2016, Northwest entered into the agreement with Mr Xue to sell lot 60 in the subdivision. At the time of the agreement, Northwest was the purchaser of 81 Nobilo Road but had not yet taken title nor obtained a subdivision consent.
[27] The agreement for sale and purchase was in the Real Estate Institute of New Zealand/Auckland District Law Society form.6 It had special terms that showed that Mr Xue was buying a lot in a proposed subdivision. I refer to some of these terms:
4 Northwest Developments Ltd v Zhang [2018] NZHC 1736.
5 Zhang v Northwest Developments Ltd [2019] NZCA 137.
6 Real Estate Institute of New Zealand/Auckland District Law Society form (9th ed, 2012).
19.1 The Vendor has not yet obtained resource consent for the subdivision. The proposed plan for the subdivision is attached in Schedule A (“the Plan of Subdivision”).
19.2 The Agreement is conditional upon the Vendor obtaining resource consent by 30 September 2017. If the Vendor has not received resource consent by that date the Vendor may in its sole discretion extend this date for a further 6 months.
…
20.1 The purchaser acknowledges that a separate certificate of title for the property has not yet issued.
20.2 The vendor shall as soon as practicable after the issue of all consents required to obtain a separate certificate of title for the property and at the vendor’s cost carry out all works (including development works) necessary to subdivide the land comprised in computer freehold register NA 66A/206 (“the Head Title”). The Vendor will also use its best endeavours to have the Plan of Subdivision deposited at LINZ as soon as reasonably practicable to create a separate computer freehold register for the property.
…
23.1 The vendor gives no warranty to the purchaser as to when the plan will be deposited with LINZ, nor as to when the purchaser will be able to register a transfer instrument of the property to the purchaser. The purchaser acknowledges that time shall not be of the essence in regards to the issue of separate computer freehold registers.
…
24.2 Should title have not issued by 31 March 2018 then either party may cancel the agreement by giving written notice to the other party notifying them that the agreement is now terminated. Provided however that in the event that the vendor has submitted the survey plan for approval to LINZ the vendor may at its sole discretion, prior to 31 March 2018, notify the purchaser that the time for satisfaction of this condition has been extended by a further 6 months.
Other special conditions are not relevant for this decision.
[28] Under the agreement the interest rate for late settlement was 15 per cent per annum. There is a due diligence clause. On 22 June 2016 Mr Xue’s lawyers wrote advising that the due diligence clause had been satisfied. Mr Xue paid the deposit.
[29]On 27 July 2016, Northwest’s lawyers sent a fax to Mr Xue’s lawyers:
As you will be aware, sunset clause 24.2 of the agreement provides that either party can cancel the agreement if title has not issued by 31 March 2018. In fact our client is hopeful that title will have issued by late 2017.
However, our client’s prospective lenders (the major trading banks) currently have recently adopted a policy that any sunset dates in subdivision development agreements for sale and purchase must be 12 months beyond the date of expected issue of title.
Accordingly, our client requests a variation to clause 24.2 of the Agreement for Sale and Purchase, amending both dates from 31 March 2018 to 31 October 2018.
In response, on 1 August 2016 the lawyers for Mr Xue sent a fax advising:
… our client is agreeable to the variation to clause 24.2 of the agreement.
[30] In November 2017, Northwest’s lawyers advised Mr Xue’s lawyers that Northwest was expecting its s 224(c) certificate to issue in that week, and it hoped to lodge the documents with LINZ with titles to issue shortly afterwards. As I have noted, the Auckland Council gave its s 224(c) certificate on 8 December 2017.
[31] On 16 February 2018, Northwest’s lawyers wrote to Mr Xue’s lawyers, extending the sunset date under the proviso to cl 24.2 of the agreement. That extension was for six months - that is, until 30 September 2018 – but on 19 February 2018, Northwest’s lawyers wrote again, realising that they had been mistaken because the sunset date had already been extended by agreement to 31 October 2018.
[32] The title for lot 60 issued on 11 September 2018. That is said to be a backdated date. Northwest’s lawyers advised Mr Xue’s lawyers that settlement was set for 11 October 2018. A settlement statement was sent on 2 October 2018. Mr Xue failed to settle on 11 October 2018. Northwest gave a notice requiring settlement within five working days after the date of service. On 15 October 2018 Mr Xue’s new lawyer advised that she now acted for him. Northwest began this proceeding on 26 October 2018.
[33] Northwest says that on those facts it is entitled to require Mr Xue to complete the agreement.
Mr Xue’s objections
Misrepresentation as to timing of issue of title
[34] The lawyer’s letter of 5 October 2018 asserts that at the time of entering into their agreements, her clients were told by the agent that titles were to issue around September 2017, and there was allegedly marketing material which indicated settlement would be about that time. The lawyer said that notwithstanding cl 23.1 of the agreement, the Fair Trading Act applies to these representations. There is, however, no admissible evidence of any such representations.
[35] Mr Ng submitted on the basis that arguably such representations had been made. His submission was that the representations were not actionable by Mr Xue regardless. He submitted that any assertions as to when title would issue were representations as to a future event. A misrepresentation is actionable only if it is about a present or past event or state of affairs. He submitted that there were reasonable grounds for any opinion as to when title was to issue. He also submitted that the terms of the agreement make it clear that Northwest made no promises as to when title would issue. He referred to cl 23.1 which provides that Northwest gives no warranty on when the plan will deposit. He cited the Court of Appeal’s decision in Narayan v Arranmore Developments Ltd, another case where summary judgment was sought for specific performance against a defaulting purchaser who alleged a misrepresentation as to when title would issue. The Court of Appeal said:7
Accepting as we must that such a representation was made, we consider it was overtaken by the specific terms of the agreement. Further, the course of dealing between the parties confirms that Mr Narayan did not regard it as essential so as to give rise to a right to cancel. A similar analysis applies to the terms of the Fair Trading Act. Given the terms of the agreement, a reasonable person in Mr Narayan’s position would not have been misled by the misrepresentation.
[36] I note that Mr Xue had legal representation when he entered into the agreement and that he had an opportunity to do due diligence. The lawyers gave notice of satisfaction with the due diligence condition. They would have had the opportunity to explain to him that the vendor had not made any promises as to when title would issue.
7 Narayan v Arranmore Developments Ltd [2011] NZCA 681 at [36].
Accordingly, on the assumption that there may have been a representation as to when title would issue, it is not an actionable as a misrepresentation and does not give grounds to cancel the agreement.
Misrepresentation to obtain variation
[37] Mr Xue says that Northwest made a misrepresentation to obtain the variation to extend the time for title to issue. Mr Xue referred to that in his oral submissions today. He queried whether major trading banks did in fact have a policy that any sunset dates in agreements to sell lots to be created by subdivision should be 12 months beyond the date of the expected issue of title.
[38] On its side, Northwest has given evidence as to a conversation with a manager of the ANZ bank, where the bank manager indicated that Northwest should provide an extended sunset date. Mr Xue has not tendered any evidence to suggest that there was a factual misrepresentation in the letter of 27 July 2016. His lawyers advised that he accepted the extension.
[39] Mr Ng submitted that even if Mr Xue had not consented to the variation, Northwest was still able to obtain an extension of time to the sunset date in the agreement by invoking the proviso in cl 24.2 to extend time. That submission has some resonance because Northwest did that, even though it was unnecessary. That means that the time for delivery of title would be extended to 30 September 2018, even if Mr Xue had refused to give consent to the variation extending time. Mr Xue cannot legitimately say that he has been detrimentally affected by the alleged misrepresentation. Again, I note the point that there is no evidence that there was in fact any misrepresentation.
Was consideration required for the variation?
[40] Mr Xue’s next point is that the variation was not enforceable because there was no consideration. The traditional view is that any variation to an agreement must be supported by legal consideration. The law has, however, changed somewhat. It is now recognised that if a variation to a contract is shown to have a practical benefit –
even if it is not legal consideration – that will suffice. The authority for that is the English Court of Appeal’s decision in Williams v Roffey Bros & Nicholls (Contractors) Ltd,8 which has been followed in New Zealand in United Food and Chemical Workers Union of New Zealand v Talley,9 and Attorney-General for England and Wales v R.10
[41] The practical benefit in this case is the greater assurance that the subdivision could be carried out and that title would be delivered. Meeting the bank’s requirements for the sunset date gave greater assurance of obtaining finance for the development and thereby enhanced the prospects of the subdivision being carried out. That was in the interests of both parties.
[42] Mr Ng also cited Anton’s Trawling Co Ltd v Smith, where the Court of Appeal was prepared to dispense with the requirement for consideration altogether. The Court said:11
The importance of consideration is as a valuable signal that the parties intend to be bound by their agreement, rather than an end in itself. Where the parties who have already made such intentions clear by entering into legal relations have acted upon an agreement to a variation, in the absence of policy reasons to the contrary they should be bound by their agreement.
That has been followed in Teat v Willcox.12 That is perhaps a more radical view of the requirement for consideration and certainly helps the plaintiff here. Perhaps more cautiously, I find that the requirement of practical benefit under Williams v Roffey13 is satisfied here. The objection that there was no consideration does not apply here.
Was there a breach of the ‘no outstanding requirement’ warranty?
[43] Mr Xue relies on this warranty in cl 6.1 of the general conditions of the agreement for sale and purchase:
6.1 The vendor warrants and undertakes that at the date of this agreement the vendor has not:
8 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (CA).
9 United Food and Chemical Workers Union of New Zealand v Talley [1993] 2 ERNZ 360 (CA).
10 Attorney-General for England and Wales v R [2002] 2 NZLR 91 (CA) at [51].
11 Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23 (CA) at [93].
12 Teat v Willcox [2013] NZCA 162, [2014] 3 NZLR 129 at [54].
13 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (CA).
(1)received any notice or demand and has no knowledge of any requisition or outstanding requirement:
(a)from any local or government authority or other statutory body; or
(b)under the Resource Management Act 1991; or
(c)from any tenant of the property; or
(d)from any other party.
[44]The lawyer’s letter of 5 October 2018 says:
As at the date of the sale and purchase agreements your client had not entered into a Deed of Novation or a Deed of Assignment of the Huapai Triangle 5 Landowners’ Infrastructure Agreement dated 23 June 2015 as purchaser from an original party. We also note that the neighbouring property owner sold their land to Sanli Homes Ltd on 5 May 2016, and this purchaser needed to be novated into the agreement to be able to enforce it for the land to be developed. This meant that there were outstanding requirements that your client was aware of in relation to the property …The existence of those requirements should have been disclosed to the purchasers.
Further on, the lawyer’s letter states:
The purchasers that I act for are successors in title, but there is no provision for novation of the Huapai Triangle 5 Landowners’ agreement in the lot sale and purchase agreements, which puts your client again in breach of that agreement.
[45] Any question of breach of the warranty in cl 6.1 is to be assessed at the date of agreement, 16 June 2016. At that time Northwest was a purchaser of 81 Nobilo Road, but the purchase did not settle until 6 October 2016. Northwest could not novate to the 5 Owners Agreement until it became the owner of 81 Nobilo Road. Northwest was not in breach of any duty to novate as at 16 June 2016. Indeed, as the decisions of this court14 and the Court of Appeal in the proceeding against the Jung interests show, Northwest was able to enforce its rights under the Five Owners’ Agreement. The Court of Appeal expressly held that cl 58 operated even in the absence of an actual agreement signed by Northwest with the other parties to the Five Owners’ Agreement. Similarly, Brewer J at first instance noted that the Jung interests remained liable as an
14 Northwest Developments Ltd v Zhang [2018] NZHC 1736 at [25]-[28].
owner under the Five Owners’ Agreement. In his decision Brewer J referred to cl 58 of the 5 Owners Agreement and said: 15
The agreement for sale and purchase by which Northwest bought its land complies with cl 58. A novation agreement has been executed by all parties, save the Jung interests. The Jung interests cannot rely on their contractual obligations to Sanli to justify not signing the novation agreement.
[46] Mr Xue also says that the purchasers were not novated, but that shows a misunderstanding of the Five Owners’ Agreement. The purpose of the Five Owners’ Agreement was to allow a private plan change to take place so that subdivided lots could be created and sold to purchasers. The purchasers themselves were not to be tied into the Five Owners’ Agreement. The objects of the Five Owners’ Agreement would have been met once the titles were available to the purchasers.
[47] That leads to another point. I am not satisfied that the objections raised really go to what are called “outstanding requirements” under cl 6.1. At the time of the agreement for sale and purchase, Northwest had to take a number of steps before it could deliver title. But once it had carried out all those steps, it was in a position to deliver title to Mr Xue. The fact that there were steps that had to be undertaken may be thought to be outstanding requirements, but they are not material requirements under cl 6.1(1) of the agreement for sale and purchase. The purpose of cl 6.1(1) is to protect purchasers against disadvantages they might suffer after taking title – for example, outstanding local authority requisitions. Where the vendor has knowledge of those, he must inform the purchaser. But the fact that there were steps to be undertaken to create the subdivision does not mean that the purchaser was not informed of an outstanding requirement under cl 6.1.
Breach of warranty to use best endeavours to issue title as soon as possible
[48] Mr Xue says that there was a breach of the warranty under cl 20.2 to use best endeavours to have the plan of subdivision deposited as soon as reasonably practicable.
15 See also Zhang v Northwest Developments Ltd [2019] NZCA 137 at [32]-[34].
[49] The lawyer’s letter of 5 October 2018 contends that Brewer J found that Northwest had failed to complete the formalities to become a party to the Five Owners’ Agreement. Brewer J made no such finding. The part of the judgment which the lawyer is referring to appears to be Brewer J’s outline of the arguments for the Jung interests. They are not ratio. Indeed, the Court of Appeal found that Northwest was able to invoke cl 58 of the Five Owners Agreement without needing to have the Jung interests and Sanli Homes Ltd sign a deed of novation.
[50] The lawyer’s letter also claims that there were delays in dealing with the Jung interests. It alleges that Northwest prioritised recovery of costs over dealing with the consent issue. The evidence in this proceeding does not bear that out. Northwest began its first proceeding against the Jung interests in May 2017 before it had completed its infrastructure work. In the proceeding against the Jung interests started in May 2017, Northwest wanted to ensure that it had access to the land to complete its infrastructure work. It needed to do that before it could seek approval of its survey plan under s 223 and obtain the certificate under s 224(c). Dealing with survey plans was a matter that would come later.
[51] Mr Xue has not raised any arguable point in alleging unreasonable delay. I accept, of course, that the delivery of title took much longer than expected. That was because of the obduracy of the Jung interests and their failure to comply with the Five Owners’ Agreement. If anything, Northwest made strenuous efforts to get the Jung interests to comply with their obligations under the Five Owners’ Agreement.
[52] Mr Xue has raised this matter of delay as giving him a right to cancel the agreement. He has not, in so many words, said that he has cancelled the agreement but by refusing to perform it he has shown that he does not regard himself as bound by the agreement any longer. Any question of cancellation for breach needs to be founded on the provisions of the Contract and Commercial Law Act 2017. Any breach would have to be substantial in terms of the burden in complying with the agreement. He has not laid any evidential foundation for a submission that the breach was substantial under s 37(2)(b) of the Contract and Commercial Law Act 2017.
Misrepresentation as to likely settlement date
[53] Mr Xue says that there was a misrepresentation as to the likely settlement date. For this, Mr Xue relies on a letter from Northwest’s lawyers of 27 November 2017 where they said that they “hoped to lodge title documents shortly”. The lawyer’s letter of 5 October 2018 makes the point that the plan leading to titles issuing was not lodged in November 2017. The survey plan from which titles issued was not completed until March 2018 and was not lodged with LINZ until June 2018.
[54] I accept that, with hindsight, the statement made in the letter of 27 November 2017 was optimistic, and that later events showed that it was not correct. But it was a statement as to future events, and there is nothing in the case to suggest that it was not honestly intended at the time. It is in any event not actionable on the part of Mr Xue. The parties were already in a contract, so it is not a case of a misrepresentation inducing a contract. There is no evidence that it had any prejudicial effect on Mr Xue. I see no basis on which it could be actionable under the Contract and Commercial Law Act 2017, the Fair Trading Act or otherwise. It is not a basis for refusing relief in this case.
Reducing value by building houses on other lots
[55] Mr Xue says that Northwest had been erecting houses on other lots in the subdivision and that has undercut the value of the section he purchased. There is no contractual provision preventing Northwest from doing so. Nor is there any evidence that it has in fact been building houses. In fact, the only evidence on the issue is directly to the contrary. The director of Northwest Developments Ltd says that no such houses have been built.
Outcome
[56] I have considered all the grounds objection raised by Mr Xue and recorded in the lawyer’s letter of 5 October 2018. Northwest Developments Ltd has satisfied me that none of those objections has any merit and that there are no arguable grounds of defence.
[57] Specific performance is a discretionary remedy. Even if a plaintiff can make out its rights at common law to enforce an agreement, equity may decline to order specific performance on discretionary factors such as hardship and mistake. Mr Xue has not advanced any such factors here. I see no reasons why equity should refuse the remedy of specific performance. It is accordingly appropriate to require Mr Xue to perform the agreement. There will be an order for specific performance accordingly.
[58] The date for performance is 7 June 2019. That gives Mr Xue time to raise finance if he has not done so already. The order for specific performance will include a term of the sort I applied in Arranmore Developments Ltd v Zeeland Developments Ltd.16 I also reserve leave to the parties to apply for further directions. I also record that the purchase price payable on settlement will include interest under the contract.
Costs
[59] Mr Xue is to pay Northwest Developments Ltd the costs of the proceeding. The plaintiff is to send a schedule of its costs to Mr Xue. If he does not agree with those costs or does not reply within 10 working days of receiving them, memoranda may be filed and I will decide costs on the papers.
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Associate Judge R M Bell
16 Arranmore Developments Ltd v Zeeland Developments Ltd HC Auckland CIV-2009-404-4342, 15 June 2010 at [27].
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