Qu v Property Partners Limited
[2015] NZHC 1032
•15 May 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-000280 [2015] NZHC 1032
BETWEEN LEIMING QU & WEI ZHANG
Plaintiffs
AND
PROPERTY PARTNERS LIMITED First Defendant
DUN ZHANG Second Defendant
Hearing: 11 May 2015 Appearances:
E St John and D Liu for Plaintiffs
S G Judd for Second DefendantJudgment:
15 May 2015
JUDGMENT OF VENNING J
This judgment was delivered by me on 15 May 2015 at 3.30 pm, pursuant to Rule 11.5 of the High
Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Yu Lawyers, Auckland
Ladbrook Law Limited, Auckland
Copy to: E St John, Auckland
S R G Judd, Auckland
QU & v PROPERTY PARTNERS LIMITED [2015] NZHC 1032 [15 May 2015]
Introduction
[1] Dun Zhang (the owner) owns a property at Browns Bay, Auckland. The owner decided to subdivide the property into three lots. He made an agreement with Property Partners Limited (PPL) authorising PPL to assist him to subdivide the property. PPL was to charge a project management fee for its services. At the same time the owner made a further agreement with PPL, a marketing services agreement pursuant to which the owner granted PPL an option to purchase lots one and two of the proposed subdivision for the prices set out in the marketing services agreement. (The owner was to retain the remaining lot on which the existing house was situated).
[2] PPL later entered agreements to sell lots one and two to Leiming Qu and Wei
Zhang (no relative) (the sub-purchasers).
[3] The subdivision took longer than expected and the costs associated with it exceeded the estimated costs PPL had advised the owner would apply. The owner determined not to proceed with the subdivision. The owner and PPL terminated both the project services agreement and the marketing services agreement. The owner now intends to sell the entire property in an un-subdivided state.
[4] The sub-purchasers sought and obtained an ex parte interim injunction preventing the owner from selling or transferring the property pending further order of the Court.
[5] The application for interim injunction was argued fully before the Court on
11 May.
Principles for an interim injunction
[6] The principles to apply on an application for interim injunction were accepted as settled by counsel. The first issue is whether there is a serious question to be
tried. If there is the Court will consider where the balance of convenience lies between the parties in the circumstances of the case.1
Factual background
[7] The owner and his parents purchased the property at Browns Bay in November 2011. The property is a large piece of land of 1965m2 which contains an existing house. As noted, it was the owner’s and his parents’ intention to subdivide the section into three titles. They were to retain the original house site and sell the other two sections created by the subdivision.
[8] On 14 November 2012 the owner entered the project services and marketing services agreements with PPL. The owner dealt with Mr Ty Jones of PPL. At that time Mr Jones advised the owner the estimated costs (excluding GST) for the subdivision would be $179,066.50 (including $24,300 to obtain the resource consent). The term of the project services agreement was expressed to be:
From the date of this agreement until the issue by Land Information New Zealand of separate certificates of title for the lots shown on the attached plan, unless earlier terminated in accordance with the attached terms and conditions. This project should take no longer than 9 months to complete or contract may be terminate [sic].
The last sentence was a handwritten addition to the agreement. It enabled the owner to terminate the agreement if the project was not completed within nine months.
[9] The property services agreement also referred to the estimate of costs:
Estimate as noted in Schedule 1 attached refers to costs that are expected as part of the Subdivision Process. These estimated figures are based on the scope of work anticipated at the time of issuing this agreement. We will endeavour to meet these estimated costs when engaging with Suppliers however any additional costs will be borne by you.
[10] Importantly the project services agreement provided:
3.3This agreement shall be read together and shall be interdependent with any marketing services agreement entered into between the
1 American Cyanamid Co v Ethicon Ltd [1975] AC 396, [1975] 1 All ER 504 (HL); Eng Mee Yong v Letchumanan [1980] AC 331 (PC); New Zealand Harvest Bakeries v Klissers Farmhouse Bakers Ltd [1985] 2 NZLR 129 (HC).
parties and neither agreement shall be capable of termination unless proper notice of termination is also given under both agreements or the option period under the marketing services agreement expires without exercise of the option.
[11] The marketing services agreement provided for an option at the price of, for lot one $365,000 and, for lot two $295,000, with the option expiry date stated to be
‘upon the issue of a title for the property where a subdivision is being carried out’.
[12] The agreement provided for the exercise of the option as follows:
3.1We may exercise the Option on or before the Option Expiry Date by delivery, to you or your nominated solicitors, of an agreement for sale and purchase of real estate (in duplicate) using the Form and incorporating the terms set out in the Key Terms, signed by us or our nominee (‘Agreement’).
[13] Work commenced on the subdivision. It took much longer and cost a lot more than the estimated figures provided by PPL. In early December 2013 Mr Jones of PPL presented a further front page of the project services agreement to the owner for execution as the nine month initial period under the project services agreement had expired. The following email exchange took between the owner and Mr Jones of PPL about the proposed extension to the agreement. On 5 December the owner emailed:
It’s not very clear on the PDF? Do you want me to initial at where you wrote 3/12/1? What that means?
Can we also alter the minimum price for the two sections please? Or can we discuss later?
[14] Mr Jones responded on 6 December:
Where I wrote the 3/12/13 means that we will continue until completion. I
have spoken to the council guy today he is going to limit the notification to
#1,7a,7b Pinehill Cres and 535 East Coast Rd which is the house on the far side with your bush in between. If none of them reply within 20 working
days the resource consent will be granted. If one of them decide to write in the council will review their concerns and if they are legitimate then it has to
go to a hearing and then the council will be able to put through. There doesn’t appear to be any concerns that the council can see which would be show stoppers.
As far as the prices for the sections we will need to discuss this as I have been working with some parties on builds so I am pretty close to having them sold.
Will call next week to have a chat about the way forward.
[15] The owner then responded to Mr Jones the same day as follows:
Hi Ty,
It seems missed the last digit on the scan you sent me. I put the “3” down
and signed. Please find attached scan.
Still need to wait another another 4 weeks? The council are really slow. We do need to discuss the prices. It will depend on when its going to be done and how much in total I need to spend over the original budget. Appreciate your time and I’m open to discussions. I’m sure we will make the project work.
[16] At the time nothing further was done to resolve the issue of the increased prices sought by the owner for the sections under the marketing services agreement.
[17] The next development was the entry by PPL into agreements for sale and purchase with the plaintiffs on 18 and 20 December respectively. In the case of Mr Qu the purchase price was $440,000 for proposed lot three. In the case of Mr Zhang the price was $410,000 for proposed lot two.
[18] The agreements were on the standard NZREA and NZLS form with a number of further terms. The further terms of the agreement were identical. They recorded
that PPL was assisting the owner to undertake a subdivision and that:
1. b. Vendor’s Option agreement with present owner: The vendor has entered into an agreement with the present owner of the property … for the grant of an option to purchase the property which expires 3 calendar months after the issue of title for the Property (‘the Option’) …
2.Confirmation of the Option: Prior to the payment of the deposit the Vendor shall provide a letter of confirmation and certificate by the Vendor’s lawyer to the Purchase’s lawyer that:-
a.the Option has been so signed and binding on the parties therein; and
b.pursuant to the Option, the Vendor is able to enter into this Agreement on the conditions as stated in this Agreement; and
c.noting in the Option affects or conflicts with the Purchaser’s rights and the conditions as inserted in this Agreement stated as for the sole benefit of the Purchaser.
[19] The agreements then went on to provide:
Vendor’s subdivision
3.Subdivision to be treated as being undertaken by Vendor rather than present owner: Notwithstanding that the Vendor is assisting the present owner of the Property the onus shall rest with the Vendor to ensure the subdivision conditions as stated hereinafter are complied with. …
7.Subdivision work to be done duly: The Vendor undertakes to complete the intended subdivision, for the approval and completion of the required final survey, approved by the Chief Surveyor and for the deposit of the plan for subdivision with Land Information NZ for the new titles to the lots to issue, with due speed and diligence. Vendor to pay subdivision contributions.
[20] On 4 July 2014 the Council issued a resource consent. As required, the plaintiffs paid the balance of the deposits under the agreement to PPL.
[21] In late July 2014 the owner met with Mr Jones again. The owner reminded Mr Jones they needed to discuss increasing the price for the two sections. Mr Jones told the owner at that meeting the sections had been sold at the original prices. The owner’s evidence is:
I disagreed with Ty and said that could not be so because when I had re- signed the page in December 2013 it had been on condition of a price increase. Nothing was resolved at this meeting. Ty did not explain how he could have sold the sections.
[22] By September 2014 the total amount that had been invoiced by PPL to the owner for the subdivision was $96,946.81 all of which related to the resource consent application. This was more than $60,000 over the original estimate for the resource consent. The owner requested a meeting with Mr Jones.
[23] Mr Jones then suggested the revised cost of the subdivision would be around
$300,000 which was $121,500 more than the original estimate. In addition, the estimate of time required for the subdivision was now 27 months which was more than 18 months longer than the original time period agreed.
[24] Following the meeting regarding the increase in costs the owner wrote to Mr
Jones of PPL on 19 September. He asked that the price for the sections be increased
from a total of $660,000 to $810,000. He directed that ‘until we can resolve this
situation, please hold any further activity relevant to this subdivision’.
[25] The owner and Mr Jones met again in October 2014 to try and resolve the issues that had developed in relation to the subdivision.
[26] On 10 October 2014 the owner’s solicitors sought to cancel the project services agreement on the basis the time provided for completion of the subdivision had elapsed. The solicitors also noted that contract had been ‘extended on the basis that the sale price for the proposed lots was to be negotiated to a higher level due to the delays with completion’.
[27] On 14 October PPL’s solicitor wrote to the plaintiffs’ solicitor noting that the owner was no longer intending to complete the subdivision and that, as the agreement from PPL’s options to purchase the property was conditional upon new titles issuing, PPL was unable to complete the sales of the lots to the plaintiffs. The solicitors invited the plaintiffs to exercise their rights early to cancel the agreements and offered to return the deposits.
[28] The plaintiffs took advice. They declined to cancel their agreements with PPL. In a letter of 17 November 2014 their solicitor took the position that, in the absence of confirmation:
(a) the agreements were still on foot;
(b) PPL’s undertaking it would complete the subdivision; and
(c) advice regarding the estimated date of completion, they would seek specific performance of their agreements.
[29] On 21 October 2014 the owner and PPL entered a settlement agreement pursuant to which they recorded their disagreement as to the terms upon which the project services agreement was varied on 3 December 2013, noted that costs had
exceeded the initial quoted budget and that the parties had agreed to settle matters on the basis that:
1.The Agreements are at an end, upon receipt of payment for outstanding invoices owed to [PPL] from [the owner].
2. [The owner] is not liable for any further costs in relation to the
Agreements.
3.[PPL] provide [the owner] with all relevant design drafts and plans associated with the project (including the house designs and all plans mentioned in the resource consent decision report) in electronic copies on a flash drive.
4. [PPL] provide [the owner] with the Herpetofauna Report
(removal/relocation of lizards), on the flash drive.
5.This Settlement Agreement is in full and final settlement of all issues between the parties in relation to the Agreements.
[30] The owner paid the outstanding invoices to PPL and then sought to market the property for sale through real estate agents. These proceedings and the ex parte application for injunction to prevent the sale followed.
Preliminary matter
[31] At the outset of the hearing Mr St John presented an affidavit from Mr Jones from PPL. Mr Judd formally objected to that affidavit from the first defendant being filed at this very late stage. PPL had taken no steps in relation to the injunction and the affidavit was prepared and filed after other affidavits had been exchanged, and indeed after submissions had been exchanged. I took the affidavit in on a provisional basis.
[32] Mr St John wished to rely on the affidavit to prove the state of the owner’s knowledge of the plaintiffs’ interest. Mr Jones confirms that while the owner was well aware of the negotiations to sell the property, he says ‘I’m not sure when [the owner] became aware that sale and purchase agreements had actually been signed’. However, as Mr Judd conceded, on the owner’s own evidence, it is clear the owner was told by Mr Jones the property had been sold by PPL prior to the termination of the agreements. While I have read it, I do not consider that Mr Jones’ affidavit advances the issue of the owner’s knowledge.
Decision
[33] The plaintiffs raise two causes of action. First, breach of contract based on the link between the option agreement between the owner and PPL and the agreements for sale and purchase between them and PPL. Second, assignment. The plaintiffs say that by entering the agreement for sale and purchase with them PPL assigned the benefit of the option between PPL and the owner to them. They seek to enforce PPL’s option with the owner.
[34] Mr St John confirmed the plaintiffs’ case is based on the principle that the plaintiffs as sub-purchasers are able to enforce the head contract between the owner and PPL.
[35] There are two issues to be resolved to determine whether there is a serious question to be tried:
(a) Did the plaintiffs obtain an equitable interest in the land as sub- purchasers?
(b) If so, did they lose it?
Did the plaintiffs obtain an equitable interest in the land?
[36] Mr St John relied on passages from Spry, Principles of Equitable Remedies and McMorland, Sale of Land2 to the effect a sub-purchaser has an equitable interest in the owner’s land and is able to enforce the head contract between their vendor and the owner. Both cite as authority McDonald v Isaac Construction Co Ltd.3
[37] In McDonald v Isaac Mr McDonald had purchased land from the Bartletts. The Bartletts had themselves purchased a large block of land from the Clarkes. The Bartletts intended to subdivide the land into sections. Mr McDonald contracted conditionally to buy one of the sections. The Bartletts ran into severe financial
difficulties and were unable to settle the purchase of either of the blocks they had
2 Spry, The Principles of Equitable Remedies (9th ed, Sweet & Maxwell, London 2014) at 89–90; McMorland, Sale of Land (3rd ed, Lexis Nexis, Wellington 2011) at 10.07.
3 McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612 at 619 (CA).
agreed to purchase from the Clarkes. In the meantime Mr McDonald had declared his contract unconditional and paid a deposit. In due course, following the surrender of the contract by the Bartletts, the Clarkes sold the land to Isaac. Mr McDonald registered a caveat. Isaac required Mr McDonald to justify the caveat.
[38] Tipping J first addressed whether Mr McDonald had obtained an equitable interest in the land. He held:4
In my view there is no reason in principle why a sub-purchaser, whether by sub-sale or assignment, should not be regarded as acquiring an equitable interest in the land. If the sub-sale or assignment is of the whole of the subject matter of the head contract then, as the authorities show, the sub- purchaser is entitled to step into the shoes of his vendor for the purposes of enforcement against the head vendor. If the sub-sale or assignment is of only part of the subject matter of the head contract, the ability of the sub- purchaser to step into the shoes of his vendor is obviously more difficult; but it is at least arguable that in some circumstances the sub-purchaser may have a right to enforce performance from the head vendor to the extent of his part of the subject matter, subject, of course, to its being able to be separately identified.
[39] Mr St John emphasised that the land claimed by the plaintiffs in this case was readily identifiable by reference to the plans of subdivision. Tipping J went on to note:5
It will be relevant to consider the equities between the sub-purchaser and the head vendor because specific performance is an equitable remedy not available as of right. There may be cases where the head vendor will be able to resist a derivative action for specific performance on the grounds that such an order would prejudice him more than the prejudice which would be caused to the sub-purchaser in leaving him to his claim for damages against
.his vendor. Similarly there will be cases, probably the majority, where a sub-purchaser as to part only will be obliged if he wishes to proceed, to settle with the head vendor for all the land and deal with the surplus as per the Naismith approach.
[40] On the facts of the case before him Tipping J concluded that Mr McDonald acquired an equitable interest in the proposed subdivided land by dint of the subsale of that land to him.
[41] Tipping J then went on to consider whether that equitable interest had been lost. In relation to that the Judge considered that:6
4 At 619.
5 At 620.
In the present case it is arguable that if Mr McDonald had moved in time he could have prevented his vendor, the Bartletts, from voluntarily surrendering the head contact. Having entered into the sub-sale with Mr McDonald, the Bartletts had an obligation to him to endeavour to complete the sub-sale. The surrender of the head contract was in direct conflict with such obligation. I am not necessarily suggesting that in this particular case a cancellation by the Clarkes would have been sufficient to break the chain from Mr McDonald's point of view. It would, however, have been a much more promising position for Isaacs to be in.
[42] The Judge considered that it was arguable that the Isaacs, the Bartletts and the Clarkes entered an arrangement for the precise purpose of defeating the subsales. Most of the sub-purchasers had been persuaded to re-negotiate the agreements but Mr McDonald had held out. The Judge confirmed the caveat was not to lapse.
[43] The matter then went on to a substantive hearing between the parties and the Judge (not Tipping J) directed specific performance of the agreement with provision for compensation if appropriate. In allowing the appeal against that decision the Court of Appeal said that:7
Mr McDonald never had any rights in respect of the contract between the Clarkes and Isaac. His only rights arose in respect of the contract between the Bartletts and the Clarkes. As neither the Bartletts nor McDonald were ever in a position to perform the Bartletts’ obligations to obtain title in respect of Lot 5, the Clarkes at no time held the land subject to a trust in relation to Lot 5 binding upon Isaac. …
Neither the Bartletts nor McDonald ever did or could put themselves in the position where the Clarkes were under any duty to provide title to Lot 5 independently of the whole of the land. Nor were the Bartletts or McDonald ever in a position where they could call upon the Clarkes to give title to the whole of the land in favour of the Bartletts and thus enable Mr McDonald to obtain title to Lot 5. …
Whichever way around the facts of the case are looked at, there was never any performance of the Bartletts’ obligations under the head contract which required the Clarkes to hold Lot 5 in trust for McDonald.
[44] Finally, I should note, Mr St John also referred to and relied upon a caveat decision of Associate Judge Doogue in Mira Sahi Company Ltd v Saundercock.8
That case also involved the on-sale by a purchaser of part of the land subject to the
agreement for sale and purchase with the owner. In that case, although the purchaser
6 At 620.
7 Isaac Construction Co Ltd v McDonald CA102/97, 4 December 1997 at 8.
8 Mira Sahib Company Ltd v Saundercock [2012] NZHC 2322.
appears to have been responsible for the development as between it and the owner, the sub-purchaser was responsible for the development as between the sub-purchaser and purchaser. The Judge rejected the submission that, as the purchaser from the owner was in liquidation and the owner was unlikely to want to take steps to complete the subdivision, the contract was not enforceable. The Judge considered that enforcement of the contract envisaged that the owner could be compelled to complete all the subsidiary steps required as a condition for delivering to the other parties to the contract the consideration that was bargained for. To put it another way, it was at least arguable that the sub-purchaser had the right to obtain orders requiring the owner to complete the subdivision and to obtain any consents required for that purpose.
[45] With respect, however, it is not clear from the judgment the extent of the obligation on the owner, particularly when the contract between the owner and the purchaser placed the obligation to undertake the subdivision on the purchaser.
[46] However, I accept the general principle established by McDonald v Isaac that a sub-purchaser, whether by sub-sale or assignment, can acquire an equitable interest in land. Further, although in this case PPL’s interest at all relevant times was as an option to purchase the land, such an option is itself an equitable interest.9
[47] For present purposes I accept there is a seriously arguable question as to whether, in the circumstances of the case, the plaintiffs as sub-purchasers obtained an equitable interest in the option that PPL had with the owner.
Has the equitable interest been lost?
[48] The real issue is whether in the circumstances of this case the plaintiffs’
equitable interest in the land has been lost by the termination of the option.
[49] In Isaac v McDonald Tipping J considered that the interest had not been lost because the evidence was not sufficiently clear to be able to say there was a break in
the contractual chain as between Mr McDonald and the Bartletts. The various
9 Bevin v Smith [1994] 3 NZLR 648 (CA), at 665; and Morland v Hales (1910) 30 NZLR 201 (SC).
conditions appeared to have been fulfilled or at the very least the Bartletts so conducted themselves that they could not be heard to say the conditions were not fulfilled. What appeared to have happened in relation to the Bartletts and Clarkes was that as part of their deal with Isaac, the Bartletts surrendered their rights under their contract with the Clarkes, the Judge noting that it did not appear the Clarkes had cancelled their contract with the Bartletts.
[50] The present case is, in my judgment, distinguishable. PPL did not have an agreement for sale and purchase with the owner. Rather PPL had an option to purchase which it never exercised. The plaintiffs can be in no better position at law than PPL, from whom they derived their interest in the owner’s land. At best, on their case, they would have been entitled to exercise that option.
[51] The situation in the present case is similar to a conditional contract with a condition in favour of the owner entitling the owner to determine the contract. Whatever equitable interest a sub-purchaser may have through the chain of contracts, they could not require the owner to waive the condition. At most they would be able to require the owner to act bona fide in attempting to satisfy the condition. In the present case the option was practically dependent on completion of the subdivision. It was only when it was completed that the two sections would have been available and the option exercisable. On the evidence before the Court, however, the delay and cost escalation in the subdivision supports the owner’s actions in terminating the project services agreement and his decision not to complete the subdivision.
[52] As Tipping J observed in McDonald v Isaac:10
The equitable interest is, of course, subject to defeasance if the contract is lawfully cancelled or if it otherwise goes off for failure of a condition. … if a necessary link in his equitable chain were to break his initial equitable interest would cease. A sub-purchaser is obviously in a more vulnerable position than the head purchaser. A sub-purchaser will lose such equitable interest as he acquires at the outset if a link in his contract fails or if a link in the head contract fails.
[53] As noted, exercise of the option was always practically dependent on the completion of the subdivision. PPL had assumed responsibility to manage that
subdivision at the owner’s cost. While in terms of its contractual arrangements with the plaintiffs PPL undertook responsibility for the subdivision, as between PPL and the owner, the owner was responsible to pay all the costs of subdivision.
[54] PPL itself never exercised the option. Before PPL was able to exercise it, it became obvious there were major issues with the subdivision. On the evidence before the Court the subdivision, which was initially estimated to cost $179,066.50 and be completed within nine months was by September 2014, some 21 months later, was then estimated to cost $300,576, in excess of $121,500 over the original budget. In the circumstances the owner had a very strong case for termination of the project services agreement. While the clause providing for the estimate of costs provided for “any additional costs will be borne by you” a reasonable reading of the clause does not support that wording as requiring the owner to complete a subdivision estimated to cost 55 per cent more than originally estimated, particularly when associated with the additional finance costs caused by the delay. Importantly, the option granted to PPL was interdependent on the performance of the project management agreement in relation to the subdivision.
[55] The proposition advanced for the plaintiffs must be that despite the substantial increase in the estimated costs and the delays in the subdivision which would justify the owner terminating the project services agreement, PPL would nevertheless have been entitled to exercise its option and to require the owner to specifically perform the resultant agreement for sale and purchase by completing the subdivision. The difficulty with that proposition is apparent.
[56] The plaintiffs suggest they will provide funds (at market rates) to the owner to complete the subdivision, on condition the subdivided properties are transferred to them but they will then require the owner to give a credit on the purchase price for the moneys advanced to him. There is no equitable basis to support such an onerous obligation on the owner given the existing contractual provisions.
[57] I note that in Naismith v Smith,11 (a case referred to in McDonald v Isaac) the sub-purchaser was able to enforce the purchaser’s rights against the owner, but was
required to pay the balance due for the whole of the owner’s land, holding part on trust for the purchaser. An important difference in the present case is that PPL only ever had an option over part of the owner’s land, once subdivided.
[58] In McDonald v Isaac, the purchaser who was in the shoes of PPL in this case, was unable to complete because of its financial inability. Again, that is not the position here. In this case it is the owner who has determined not to pursue the subdivision on which the option was conditional. Clear grounds exist to enable the owner to terminate the project services agreement.
[59] It is also relevant that in McDonald v Isaac it seems clear from the Judge’s reasoning that he considered the owners and original purchasers (and the Isaacs) had acted together for the precise purpose of defeating the various subsales including Mr McDonald’s. In the present case the owner, not unreasonably, does not wish to proceed with what is now an uneconomic subdivision.
[60] There is a separate point which is relevant to the bona fides of the termination of the agreements. While the owner’s right to terminate after the expiry of nine months may have been waived by him signing the amended project services agreement, at the time the owner agreed to extend that time, it is arguable he did so on the basis that the parties would reach further agreement on the prices under the marketing services agreement. No such agreement was ever reached.
[61] The owner and PPL have, after taking advice, terminated the marketing services and project services agreements. They were entitled to do so and the evidence does not suggest the owner acted other than bona fide in doing so. While the owner may have known that PPL had agreed to sell the sections (once subdivided) that cannot affect the owner’s right to make decisions as to the use of his land and whether the subdivision should be completed.
[62] Finally, I note that in McDonald v Isaac Tipping J was considering whether there was an equitable interest sufficient to sustain a caveat. As the Judge noted:12
What the sub-purchaser is entitled or obliged to do later by way of settlement is not the present point.
However, when considering whether there is a serious question to be tried it is relevant to have regard to the relief sought which is an order requiring the second defendant to subdivide the land.
[63] For the above reasons I find there is a break in the chain of contractual arrangements in this case so that whatever equity the plaintiffs held in the land as sub-purchasers has been lost by the termination of the marketing services agreement before the option was exercised.
[64] The second cause of action relies on an assignment. As an assignee of PPL’s situation, the plaintiffs can be in no stronger position than its assignor, PPL. Similar reasoning applies to defeat that cause of action.
[65] For those reasons I find the plaintiffs are not able to establish a serious question to be tried as to their equitable interest in the land.
Balance of convenience
[66] It is strictly unnecessary to consider the balance of convenience in the circumstances. I briefly refer to it in deference to counsels’ submissions. Mr Judd emphasised the position of the owner and his parents and their financial commitments. He submitted that this case was really all about damages because the plaintiffs could simply buy the land in its entirety from the owner (if they are willing to carry out the subdivision) could then sue PPL for any damages. However, I do not consider the position to be quite that straight forward. Obviously the land that the plaintiffs agreed to buy was the subdivided sections. They never agreed to and apparently never wanted to buy the entire land.
[67] If I had found a serious question to be tried, I would have found the balance of convenience to be rather more evenly balanced than Mr Judd submitted. However, as noted, that issue does not arise.
Result
[68] The existing interim injunction is discharged. Costs are awarded to the second defendant on a scale 2B basis together with disbursements as fixed by the Registrar.
[69] There will be issues of damages to be determined between all parties. The case is to be allocated a case management conference by the Registrar.
Venning J
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