Property Sales Direct Limited v Hawken Lane Development LP

[2020] NZHC 1743

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-1435

[2020] NZHC 1743

UNDER

the Companies Act 1993 and the Limited Partnership Act 2008

BETWEEN

PROPERTY SALES DIRECT LIMITED

Plaintiff

AND

HAWKEN LANE DEVELOPMENT LP

Defendant

Hearing:	15 May 2020
Appearances:	R B Stewart QC for Plaintiff E St John for Defendant
Judgment:	17 July 2020

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 17 July 2020 at 3 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

Solicitors:           Davies Law, Auckland

Heritage Law, Auckland

Counsel:R B Stewart QC, Auckland E St John, Auckland

PROPERTY SALES DIRECT LTD v HAWKEN LANE DEVELOPMENT LP [2020] NZHC 1743 [17 July 2020]

[1]                 This judgment determines an application by the defendant (“Hawken”) that the plaintiff (“PSDL”) give security for costs.1 PSDL’s claim is for the return of

$522,122.98, being the total sum it paid by way of deposits for its intended purchase of particular lots in a subdivision.

[2]                 Hawken’s application for security is made on the ground there is reason to believe PSDL will be unable to pay Hawken’s costs in the proceedings if PSDL fails at trial and, in those circumstances, it is just to make the order sought.

[3]                 The proceedings have been categorised as 2B for costs purposes and, on that basis, Hawken calculates it will be entitled to an award of costs of $38,828 if it succeeds at trial, calculated in the expectation of a three day trial. Hawken seeks security in that sum, and an order staying the proceedings pending provision of the same.

[4]                 PSDL opposes any order that it give security. In its notice of opposition, it contends there is no evidence it will be unable to pay costs if it fails at trial. However, in oral submissions, Mr Stewart QC, counsel for PSDL, made an alternative argument to the effect it would be unjust to order PSDL to provide security as, whatever the merits of the overall dispute, PSDL has a clear case for the refund of the deposit of

$52,043 PSDL paid for its intended purchase of what is referred to as Lot 22.

Background

[5]                 Matters are at an early stage and what follows is the background appearing in affidavit evidence sworn to date.

[6]                 In late-2015, Hawken acquired a large parcel of land in Silverdale, Auckland. Hawken proposed to subdivide, and has subdivided, the land into at least 89 lots for residential development. Hawken was to complete the subdivision in four stages.

[7]                 By individual Agreements for Sale and Purchase of or about 6 July 2016, PSDL agreed to buy, and Hawken agreed to sell, 11 lots in the subdivision, being Lot 15 in

1      High Court Rules 2016, r 5.45.

Stage 1, and Lots 16, 19 to 22 inclusive, 39, 41, 42 43 and 47 in Stage 3 (“agreements”).

[8]                 On or after the date of the agreements, PSDL paid deposits in respect of each lot, these deposits being paid to Hawken’s solicitors as stakeholder (“stakeholder”). The solicitors still hold the deposits in that capacity.

[9]                 Title issued for Lot 15 on or about 22 September 2017. Title for all remaining lots issued on or about 21 November 2017, with the exception of title for Lot 22.

[10]              PSDL subsequently settled its purchase of Lots 15, 39, 41, 42 and 43 and no further issue arises in respect of those lots. PSDL’s proceeding is in respect of the deposits paid on the remaining lots which, as I have said, total $522,122.98.

[11]              On or about 4 October 2018, PSDL advised Hawken the absence of title to Lot 22 had caused PSDL to be unable to settle its purchase of Lots 19, 20 and 21 and that PSDL cancelled the agreements in respect of all four lots. PSDL sought the immediate refund of the deposits paid in respect of those lots.

[12]              On 9 and 23 October 2018, PSDL advised Hawken it also cancelled the agreements in respect of Lots 16 and 47, and it sought the refund of the deposits on those lots.

[13]              Hawken did not accept the cancellations, and did not refund, and has not refunded, any of the deposits.

[14]              On or about 20 March 2019, Hawken, by its solicitors, cancelled or purported to cancel the agreement in respect of Lot 22 on the ground of PSDL’s “un-withdrawn repudiation”. The solicitors also said the stakeholder — being those same solicitors

— would retain the deposit on Lot 22, and Hawken would set off the sum as “damages”.

[15]              By this time, PSDL had served a statutory demand on Hawken for refund of the deposits and, when Hawken did not meet the demand, in February 2019,

commenced proceedings to wind up Hawken. PSDL discontinued those proceedings in June 2019 and then commenced these proceedings shortly afterwards.

Discussion

[16]              It is necessary to say more about Lot 22 and Hawken’s failure to obtain title to the lot.

[17]              First, at the time PSDL agreed to purchase Lot 22, it was plainly part of Stage 3. This appears from the then “master plan” for the subdivision which Mr Yuntao Cai of Hawken annexed to his first affidavit in opposition to the winding up proceeding.

[18]              Secondly, Hawken subsequently amended the master plan to include Lot 22 in Stage 4 and, in the course of that amendment, what was Lot 22 became part of Lot 92 and possibly — this is not clear on the plans put in evidence, but there is a suggestion in the affidavit evidence — made it a much larger lot than its original 1,320 m2. This amendment was made no later than 7 November 2017. Mr Cai did not acknowledge this amendment in a later affidavit, simply referring to Lot 22 as part of Stage 4, but it does seems to be the case on the  subdivision plan of that date put in evidence by   Mr Trent Cary of PSDL.

[19]              Thirdly, as I understand it, Hawken did not inform PSDL of this amendment at the time it was made, or subsequently.

[20]              Fourthly, each agreement for sale and purchase was conditional on Hawken giving written notice to PSDL of the issue of title by 29 June 2018. Hawken could give notice to PSDL extending this date to 30 December 2018 if it was making reasonable progress in obtaining the issue of title. Hawken did not give notice in respect of Lot 22 and, on PSDL’s case, there was never any prospect of Hawken obtaining title to the Lot 22 Hawken had agreed to sell because Hawken had amended its subdivision plan.

[21]              From the documents filed to date, it appears PSDL’s case is that it had on-sold Lot 22 to a third party, but that it could not settle that sale given Hawken’s failure to deliver title to the lot. PSDL contends it required the proceeds of its intended sale of

Lot 22 to secure finance for its purchase of the other lots, and it also contends Hawken’s failure to deliver title to Lot 22 diminished the value of Lots 19 to 21. Hawken denies these allegations.

[22]              Whatever the merits of this dispute, PSDL submits at the very least Hawken was bound to refund the deposit PSDL paid on Lot 22. PSDL’s case is that Hawken’s failure to give notice extending the date for obtaining title to Lot 22 (which PSDL says Hawken was never going to achieve anyway given the change to the master plan) gave PSDL a right to cancel that agreement and to have its deposit refunded.

[23]              On the basis of the evidence before me to date, there is merit in PSDL’s case for at least the refund of the deposit on Lot 22, and therefore in its opposition to this application on the ground it would be unjust in those circumstances to require PSDL to provide security. The deposit on Lot 22 exceeds the sum Hawken seeks as security by more than $13,000.

[24]              Even if I put that issue to one side, I am not satisfied this is a case for ordering security in any event. It may be, as Hawken contends, PSDL has forfeited its deposits of (say) $470,000 on the other lots, but the position is not clear cut and the sum is substantial. In those circumstances, I am not persuaded it would be just to order PSDL to set aside another sum before allowing it to pursue recovery.

[25]              Moreover, had I been persuaded to make an order, it would have been for no more than $20,000. That, in my view, would be sufficient in all the circumstances of this case, and particularly those mentioned in the previous two paragraphs.

[26]              To conclude, I propose to dismiss Hawken’s application for security for costs. Whatever PSDL’s financial position, it would be unjust to order it to provide security.

[27]              Lastly, I record on the morning of the hearing of this application, PSDL filed two affidavits, one by Mr Cary and another by Mr Stuart Smith, a lender to PSDL, apropos of the PSDL allegation in [21] above. As I understand it, these affidavits should have been filed by 13 March 2020 so they were very late indeed.  Mr St John,

counsel for Hawken, objected to them being read. I have read the affidavits but they add little, if anything, to the evidence that was already before the Court.

Result

[28]I dismiss Hawken’s application for security for costs.

[29]              Having failed on this application, Hawken must pay PSDL’s costs on a 2B basis.

Peters J