Property Sales Direct Limited v Hawken Lane Development LP
[2022] NZCA 643
•20 December 2022 at 10.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA414/2022 [2022] NZCA 643 |
| BETWEEN | PROPERTY SALES DIRECT LIMITED |
| AND | HAWKEN LANE DEVELOPMENT LP |
| Hearing: | 27 October 2022 |
Court: | Brown, Mallon and Downs JJ |
Counsel: | N F Flanagan for Appellant |
Judgment: | 20 December 2022 at 10.00 am |
JUDGMENT OF THE COURT
AThe application for a stay of execution of the High Court judgment ([2022] NZHC 1735) pending appeal is declined.
BThe appellant must pay the respondent costs for a standard application on a band A basis with usual disbursements.
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REASONS OF THE COURT
(Given by Mallon J)
Background
The respondent (Hawken) is a developer of an 89-lot subdivision in Silverdale. The appellant (PSDL) entered into agreements to purchase 31 of these lots. Subsequently Hawken cancelled the agreements for all but 11 of the lots because PSDL failed to confirm them after the due diligence period. PSDL paid the deposits for the remaining 11 lots, but then could not settle on time when the titles for the lots became available.
PSDL managed to settle five of the 11 lots late but did not accept Hawken’s proposal providing further time for PSDL to settle the remaining six lots. Hawken then issued settlement notices for the six lots. PSDL then purported to cancel the agreements for those lots and demanded the return of the deposits paid for them. Hawken did not accept the purported cancellations and in turn cancelled the agreements.
Initially PSDL sought to bring a liquidation application against Hawken but later withdrew this application. PSDL then issued proceedings seeking the return of its deposits on the six lots ($522,129.98). Hawken responded with a counterclaim for penalty interest payable on five of the six lots before they were cancelled ($461,440.46) and for losses resulting from a caveat PSDL had lodged over the residual land owned by Hawken, which included the area encompassed by the sixth lot (Lot 22) ($122,500.00).
In a judgment given on 20 July 2022, Powell J dismissed PSDL’s claim and found for Hawken (the substantive judgment).[1] Hawken was entitled to retain the deposits and to judgment for the claimed amounts for the penalty interest on the cancelled agreements and the loss caused by the caveat.
[1]Property Sales Direct Ltd v Hawken Lane Development LP [2022] NZHC 1735, (2022) 23 NZCPR 440 [Substantive judgment].
On 3 August 2022 Hawken served a statutory demand on PSDL for the judgment sum of $583,940.46. The last day for satisfaction of the statutory demand was 24 August 2022. On 17 August 2022 PSDL filed a notice of appeal from the substantive judgment to this Court. PSDL corresponded with Hawken advising that it considered Hawken should withdraw the statutory demand and not take steps to liquidate PSDL pending the appeal, or at least pending the determination of PSDL’s proposed stay application. Hawken responded that it intended to continue with liquidation proceedings until the appeal or a stay application had been determined.
PSDL applied to the High Court for a stay of execution of the substantive judgment pending the appeal. In a judgment given on 9 September 2022, Powell J declined the stay application.[2] In doing so, the Judge considered that PSDL’s appeal faced substantial hurdles; its appeal would not be rendered nugatory if PSDL were placed in liquidation; the other relevant factors as to whether a stay should be granted were neutral; and, overall, the balance of convenience did not favour a stay.[3]
Application
[2]Property Sales Direct Ltd v Hawken Lane Development LP [2022] NZHC 2318 [Stay judgment] at [7].
[3]At [10]–[13].
PSDL now applies to this Court for a stay of execution of the substantive judgment.[4]
[4]Court of Appeal (Civil) Rules 2005, r 12(3) and (5).
The relevant factors in determining whether a stay should be granted are: whether the appeal may be rendered nugatory by the lack of a stay; the bona fides of the applicant as to the prosecution of the appeal; whether the successful party will be injuriously affected by the stay; the effect on third parties; the novelty and importance of the questions involved; the public interest in the proceeding; the overall balance of convenience; and the apparent strength of the appeal.[5]
[5]Keung v GBR Investment Ltd [2010] NZCA 396 at [11].
PSDL submits the High Court erred in finding that the appeal would not be rendered nugatory if a stay was refused. PSDL’s business consists of buying sections from developers off the plans and reselling them to homeowners. Affidavit evidence from PSDL’s property manager, Mr Cary, informs the Court that PSDL has no rights or interests in any sections at present, nor any other assets and that the “collapse” of the transactions with Hawken has left PSDL unable to trade.
In the High Court, the Judge accepted Hawken’s argument that whether PSDL was placed into liquidation did not affect whether the appeal was rendered nugatory. That was because, either way, PSDL could only pursue the appeal by obtaining third party funding.[6] PSDL submits that, if it is in placed in liquidation, it is implausible that the liquidator would approve pursuit of an appeal that would seek to overturn the judgment that has led to his or her appointment. However, if there is merit in an appeal and third party funding available to advance it, then a director or shareholder of PSDL could apply to the High Court to reverse a decision by the liquidator not to pursue the appeal.[7] Moreover, the fact that an appeal may be rendered nugatory without a stay is not determinative.[8]
[6]Stay judgment, above n 2, at [11].
[7]Companies Act 1993, s 284(1)(b).
[8]Keung v GBR Investment Ltd, above n 5, at [20].
In this case, and while it will ultimately be a matter for the court hearing the substantive appeal, the strength of the appeal appears to be weak. During the substantive High Court hearing PSDL abandoned many of its claims. Its opposition to Hawken’s counterclaims was also reduced in scope.[9] By the end of the evidence, the only issues left for determination were:[10]
(a)whether PSDL was entitled to restitution or relief from forfeiture of the deposits for five of the lots;
(b)whether PSDL was entitled to the return of the deposit for Lot 22 because title was not issued by 29 June 2018;
(c)whether Mr Cary on behalf of PSDL had a subjective belief on reasonable grounds that PSDL was entitled to lodge a caveat over the residual land owned by Hawken; and
(d)if he did not, whether Hawken suffered loss of $122,500 as a result of the caveat.
[9]Substantive judgment, above n 1, at [5]–[6].
[10]At [7].
On the appeal from the substantive judgment:
(a)PSDL does not seek to challenge the Judge’s decision refusing restitution or relief in relation to the deposits. It raises a new issue, relying on a clause in the contract to the effect that no amount of the deposit above 10 per cent could be forfeited. This begs the question of why PSDL’s counsel in the High Court did not rely on this clause if it applies to the deposits and that is its effect. Hawken submits the reason is that the clause relied on is a general one and is overridden by other specific clauses that applied.
(b)PSDL now contends that there was no contractual basis for penalty interest for PSDL’s failure to settle on certain lots and any penalty interest was a question of fact for the court to determine. Again, this begs the question of why PSDL’s counsel in the High Court did not rely on this argument if it had any merit and instead accepted penalty interest was payable in the amount claimed. Hawken submits that PSDL should not be able to resile from this concession and that there was no evidence adduced to support a lesser award of penalty interest.
(c)PSDL says that the High Court dismissed its claim that it was entitled to cancel the agreement for Lot 22 because it found that PSDL affirmed the contract for that lot with full knowledge of Hawken’s breach.[11] On appeal PSDL seeks to argue that it did not have “full knowledge” of the breach,[12] contending that it did not know quite how long the issue of title for Lot 22 would be delayed. This was not the reason given by PSDL when it purported to cancel the agreement for that lot, nor was this argument made in the High Court. The Judge found that PSDL had explicitly elected to continue with the transaction because, at the relevant time, correspondence recorded PSDL’s position as being “[title for] Lot 22 … is still some time away but I have advised … that we will settle that lot as soon as the title is available”.[13] This election was made with full knowledge that there was a right to cancel because the date for issue of the title had passed.[14]
(d)The High Court found that there “was not any remotely reasonable basis for any subjective belief on the part of Mr Cary that PSDL had any form of caveatable interest in Lot 22” and PSDL had filed the caveat “for an improper purpose, namely to put pressure on Hawken to release the deposit for Lot 22”.[15] On appeal, PSDL intends to argue that the Judge overlooked that the caveat was filed by PSDL’s solicitors, Davies Law, and that that firm must have been satisfied that it was proper to lodge the caveat. PSDL says that Mr Cary cannot be criticised for accepting Davies Law’s view and this point was apparently overlooked by counsel in the High Court. However, the fact of lodging a caveat on instructions does not mean that Davies Law provided advice to Mr Cary on the point. The only evidence of advice from Davies Law was at the outset when it advised that PSDL should not lodge a caveat.[16] In the High Court, it was not argued that Mr Cary relied on advice from Davies Law. Rather, Mr Cary said he relied on subsequent advice from his barrister, Mr Wood, but the High Court found that Mr Cary had withheld crucial information from him.[17]
[11]The agreements were conditional on Hawken giving written notice to PSDL of the issue of title no later than 5 pm on 30 June 2018 or notice extending the date of satisfaction of this condition to 5 pm on 30 December 2018. Hawken failed to give notice extending the date for satisfaction of the condition and failed to issue the title for Lot 22.
[12]Contract and Commercial Law Act 2017, s 38.
[13]Substantive judgment, above n 1, at [56].
[14]At [57].
[15]At [86] and [88].
[16]At [70].
[17]At [84].
The fact that the appeal seeks to raise new arguments and to resile from a concession is consistent with PSDL’s actions to date. It applied to liquidate Hawken and, according to Hawken, refused to withdraw the application unless Hawken repaid the deposits. PSDL then withdrew that application and paid costs to Hawken. PSDL lodged a caveat for the improper purpose of putting pressure on Hawken to repay the deposit for Lot 22.[18] Hawken was successful in obtaining an urgent removal order.[19] Prior to trial, PSDL applied unsuccessfully to strike out Hawken’s amended counterclaim.[20] It was ordered to pay costs.[21] Close to trial it applied for leave to join a third party and for a separate trial in respect of Hawken’s second counterclaim. It was unsuccessful and ordered to pay costs.[22] According to Hawken, PSDL is now on its seventh counsel. PSDL has not met costs orders. All of this is consistent with an approach of delay and pursuing unmeritorious avenues to achieve that.
[18]At [88].
[19]Hawken Lane Development LP v Property Sales Direct Ltd [2021] NZHC 1410, (2021) 22 NZCPR 212.
[20]Property Sales Direct Ltd v Hawken Lane Development LP [2021] NZHC 3119 at [18].
[21]Property Sales Direct Ltd v Hawken Lane Development LP [2022] NZHC 596 at [8].
[22]Property Sales Direct Ltd v Hawken Lane Development LP [2022] NZHC 403 at [35]–[36].
The balance of convenience does not favour a stay. While the refusal of a stay may mean that PSDL is placed in liquidation, it is unclear that any unfair prejudice would flow from that. On the other side of the equation, Hawken succeeded in the High Court and should be entitled to proceed with enforcement action for its judgment sum.
We consider that, together, the apparent weakness of the appeal, the history of taking unmeritorious points and legal action in the dispute, and the balance of convenience strongly point against a stay. We are not satisfied that an appeal would be rendered nugatory if a stay were refused but, even if it were, this does not outweigh the considerations that point against a stay. We agree with the High Court that the other relevant factors are neutral. We are not persuaded there is any public interest in the proceeding or that the questions on appeal are novel or of general importance. There is no effect on third parties. We therefore agree with the High Court that a stay of execution of the substantive judgment, pending the determination of the appeal from that judgment, should not be ordered.
Result
The application for a stay of execution of the High Court judgment ([2022] NZHC 1735) pending appeal is declined.
Hawken sought costs on the application against Murray Price, PSDL’s sole director, personally. It did not advance any submissions in support of that. We order that PSDL, as the unsuccessful applicant, must pay to Hawken costs for a standard application on a band A basis with usual disbursements.
Solicitors:
Meredith Connell, Auckland for Appellant
Heritage Law, Auckland for Respondent
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