Peng v Chan

[2024] NZHC 1214

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-2155

[2024] NZHC 1214

BETWEEN

YAO WEI PENG also known as YAOWEI PENG

Applicant

AND

SHU-LIN CHAN, CHI-LAUNG KO and

FENG-YING KUO KO as trustees of the Kofu Family Trust and LISA CHIA-CHUAN KO and JEREMY CHI-HUA TSAI as

trustees of the Chihua Family Trust Respondents

Hearing:	On the papers
Counsel:	Z Chen for Applicant
Judgment:	16 May 2024

JUDGMENT OF O’GORMAN J

[Interlocutory application on notice for leave to appeal]

This judgment was delivered by me on 16 May 2024 at 11 am pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

…………………………………

Solicitors:
Righteous Law Ltd, Auckland

PENG v CHAN [2024] NZHC 1214 [16 May 2024]

[1]    On 16 April 2024 the applicant, Yaowei Peng, filed an interim interlocutory application on notice seeking leave to appeal, along with an affidavit in support dated 22 April 2024. The grounds for the appeal are:

(a)the applicant had a defence of impossibility to the respondent’s summary judgment;

(b)the said defence also renders the specific performance sought by the respondent in the summary judgment application not a suitable remedy open to the respondent; and

(c)the District Court Judge’s refusal to allow the applicant to file his defence amounts to an erroneous decision to exercise discretion under r 12.2 of the District Court Rules 2014 and an injustice to the applicant.

[2]    The application also lists a number of other grounds, including allegations that errors were made:

(a)relying upon “the evidence assessed in Knight Investments Ltd v Peng

[2024] NZHC 285”;

(b)failing to provide further opportunity for the applicant to respond to the summary judgment evidence and proceed with filing further evidence in the substantive appeal; and

(c)finding that further evidence would not affect the respondent’s contractual entitlement for the deposit.

[3]    The applicant also alleges that I made a finding that the evidential threshold for the defence of impossibility is the same as a question of insolvency.

Legal principles

[4]    In Greendrake v District Court of New Zealand,1 the Court of Appeal recognised the following considerations as relevant on an application for leave to appeal:

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

(d)the circumstances must warrant incurring further delay; and

(e)the ultimate question is whether the interests of justice are served by granting leave.

[5]    In the context of an application for leave to appeal  under  s  60  of  the  Senior Courts Act (in respect of a decision on appeal from the District Court), the intention of the legislature is that one appeal is normally sufficient:2

From this it follows that the case must show some features which justify a second appeal. The indicia mentioned by Salmond J are therefore still important. But, as he observed, the section places no fetters on the exercise of the discretion to grant leave. That being so, the guiding principle in the end must be the requirements of justice. In that the extended jurisdiction of the District Court may on occasions be important. While weight will be given to the fact that the High Court Judge has refused leave, an application to this Court is not an appeal and the discretion is to be exercised afresh.

Post-judgment developments

[6]    The affidavit in support of the application for leave to appeal provides some updating evidence about events after my judgment was issued on 15 March 2024.

[7]    On 22 March 2024, Land Information New Zealand (LINZ) provided the applicant with notice under s 143(1) of the Land Transfer Act 2017 to lapse the caveat that lodged over 4 MacMurray Road, Remuera, Auckland (the Property).

1      Greendrake v District Court of New Zealand [2020] NZCA 122 at [6].

2      Cuff v Broadlands Finance Ltd [1987] 2 NZLR 343 (CA) at 346–347 (per Somers J), referencing Salmond J in Rutherfurd v Waite [1923] GLR 34, quoted in Laura O’Gorman (ed) Sim’s Court Practice (online ed, LexisNexis) at [SEN60.6].

[8]    As a result, on 9 April 2024, the applicant applied to the High Court seeking to sustain the caveat. At that point, he must have still intended to specifically perform his obligations as purchaser of the Property, which would of course have required payment of the deposit.

[9]    On 11 April 2024, the vendor then cancelled the agreement, without prejudice to any rights or remedies available to the vendor following cancellation. That cancellation notice was based on the ongoing failure of the purchaser to comply with the expired settlement notice.

[10]   Yaowei Peng also provides further updating information about his financial situation. He again confirmed that the companies do not earn profits or own any relevant property. The only asset in his personal name is the property of 4 Woodford Road, Mount Eden, which is subject to two registered mortgages (these rank ahead of the respondents’ charging order).

[11]   The applicant says he owes debts totalling at least $6.75 million and is liable as a purchaser that has failed to complete on another sale and purchase agreement.3 A financial advisor has said that it would be impossible to obtain finance, given his asset and liability position. The applicant’s position is that he simply cannot pay the deposit.

[12]   Now that the agreement for purchasing the Property has been cancelled, the applicant has instructed his lawyers to withdraw the application to sustain the caveat and instead to let it lapse.

Analysis

[13]   In the above circumstances, it would be pointless to allow any appeal to take place against the District Court judgment, upheld on appeal, requiring payment of the deposit. Any concept of an equitable remedy for specific performance and related relief is now moot. The applicant never disputed that there was a contractual obligation to pay the deposit. Nor did the applicant allege any breach on the part of the vendor. Rather, the grounds for resisting any order for payment of the deposit by

3      Knight Investments Ltd v Peng [2024] NZHC 285.

the purchaser or the assignee was that they could not afford to make such payment (it was financially impossible).

[14]   As set out in my analysis of the legal principles, payment of a deposit is a special type of payment, constituting both part-payment of the purchase price and an earnest for the future performance of the contract by the purchaser. At the time I issued my judgment, there were two possible outcomes in respect of the agreement for the sale and purchase of the Property. The vendor’s position was that it was still possible for settlement to take place (the applicant disputed this). Alternatively, the vendor would exercise rights of cancellation.

[15]   As explained above, the latter pathway has now been taken. I set out the applicable law in para [21] of my judgment:4

Even following cancellation by the vendor, the vendor can seek to recover any unpaid deposit and choose to exercise forfeiture.5 At common law, cancellation ends the obligations of the parties to perform promises that have not yet accrued due, but obligations which had accrued due at the date of cancellation remain enforceable.6 Section 42(1)(a) of the Contract and Commercial Law Act 2017 (CCLA) provides that, so far as the contract remains unperformed at the time of the cancellation, no party is obliged or entitled to perform it further. Despite this, and consistent with the common law position, payment of the deposit may be enforced as a debt accrued due, distinct from an action to specifically enforce the contract.7 Alternatively, the sum can be recovered as damages for breach of the obligation to pay the deposit.8

[16]   Accordingly, all matters concerning damages for the applicant’s non-completion of the sale and purchase agreement will now fall for determination based on the above principles. Any deposit already received by the vendor will be accounted for in that process. The vendor remains entitled to enforce payment of the deposit as a debt accrued due, distinct from any action for specific enforcement. If damages exceed the value of the deposits already paid and subject to forfeiture, then the vendor is entitled to seek judgment for that.

4      Peng v Chan [2024] NZHC 554 at [21].

5      D W McMorland Sale of Land (4th ed, Cathcart Trust, Auckland, 2022) at [7.10].

6      At [7.10], referencing (among others) Samarenko v Dawn Hill House Ltd [2011] EWCA Civ 1445, (2012) 3 WLR 638.

7      At [7.10], referencing Brown v Langwoods Photo Stores Ltd [1991] 1 NZLR 173 (CA) at 176; and

Garratt v Ikeda [2002] 1 NZLR 577 (CA) at [20].

8      At [7.10], referencing Socratous v Koo (1994) ANZ ConvR 209.

[17]   The applicant’s inability to pay does not provide any defence to a judgment in debt for such liabilities.

[18]   In any event, I do not consider that any errors of law have been identified in the judgment, which set out well-established legal principles. There is no legal principle that an inability to pay extinguishes a contractual obligation. To the extent that the question was whether specific performance or damages was the more suitable remedy, both are equivalent on the facts (given the evidence before me that the loss on resale will exceed the agreed deposit amounts). The order for specific performance was to pay the deposit, but at that point it would have been held on the contractual terms, subject to application towards the purchase price or forfeiture in the event of default. Even if those orders for specific performance for payment of the deposit had not been made, the vendor would now be entitled to such payment as a debt.

[19]   For the above reasons, the high threshold for granting leave to appeal is not met. There are no special features that justify a second appeal. There is no alleged error of general or public importance or sufficient importance to the applicant. The circumstances do not warrant the delay and cost involving an issue that is now moot, and the interests of justice are not served by granting leave.

[20]For the above reasons, I decline the application for leave to appeal.

O’Gorman J