SBD LIMITED AND PAUL TARETIA MAK
[2024] NZHC 2728
•1 October 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-258
[2024] NZHC 2728
BETWEEN SBD LIMITED
Plaintiff
AND
PAUL TARETIA MAK
Defendant
Hearing: 25 July 2024 Appearances:
D Chisholm KC and JD Ryan for the Plaintiff WC Pyke for the Defendant
Judgment:
1 October 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 20 September 2024 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Barristers:
Claymore Partners Limited, Auckland W Pyke, Barrister, Auckland
SBD LIMITED v MAK [2024] NZHC 2728 [1 October 2024]
Introduction
[1] The defendant, Paul Taretia Mak, agreed to purchase a property from the plaintiff, SBD Limited, in October 2021 but failed to settle. The default continued despite a settlement notice being issued by SBD. SBD now seeks specific performance by Mr Mak or, in the alternative, the entry of judgment as to liability and an inquiry as to damages.
[2] Mr Mak opposes summary judgment on the grounds that it will be impossible for him to comply with an order for specific performance and that he has defences relating to forfeiture of the deposit and the withdrawal of permission for potential purchasers to view the property.
[3] At the hearing liability for breach of the contract was accepted and that defences relating to forfeiture of the deposit and access to the property relate to any inquiry as to damages rather than to whether specific performance should be ordered or liability entered. The single issue to determine therefore is whether Mr Mak has a reasonably arguable defence of impossibility.
Factual background
[4] The parties entered into an agreement for sale and purchase on 16 October 2021 under which SBD agreed to sell and Mr Mak agreed to purchase a property in St Mary’s Bay, Auckland for $3,095,000 (inclusive of GST (if any)) (Agreement).
[5] The Agreement was on the standard ADLS/REINZ Agreement for Sale and Purchase of Real Estate (Tenth Edition 2019(2)). The terms included:
(a)Mr Mak was to pay a deposit of $309,500 in two equal instalments:
(i)five working days following receipt of the signed Agreement; and
(ii)90 days following the date of the Agreement.
(b)Settlement was to occur on the later of:
(i)five working days after issue to Mr Mak of a separate record of title for the Property; and
(ii)five working days after issue to Mr Mak of a code compliance certificate for the property.
(c)The interest rate for late settlement was 12 per cent per annum on the amount outstanding.
(d)If Mr Mak did not comply with a settlement notice served under the Agreement SBD could, pursuant to cl 11.24, without prejudice to its other rights or remedies available at law or in equity:
(i)sue Mr Mak for specific performance; or
(ii)cancel the Agreement, retain the deposit and sue Mr Mak for damages.
[6] Mr Mak arranged payment of the two tranches of the deposit in accordance with the Agreement, paying $309,500 in total.
[7] Mr Mak’s evidence is that by January 2023 he realised that he may not be able to settle by the settlement date. He explains that this was because the value of his investment portfolio (which was mostly in the form of Bitcoin and Ethereum) had plummeted. Mr Mak says he therefore employed an agent to market and list the property for resale. Mr Mak annexes evidence to his affidavit of his agent’s contact with Mr Schollum, the director of SBD, advising him of this in May 2023. Mr Mak’s evidence is that Mr Schollum initially agreed the agent could access the property for the purposes of resale, but that permission was withdrawn. The correspondence annexed to Mr Mak’s evidence in support does not clearly set out what occurred but it is unnecessary to determine this for the purposes of this decision.
[8] On 10 November 2023, SBD’s solicitor advised Mr Mak’s solicitor that the Agreement was unconditional in all respects and called for settlement under the Agreement. The settlement date was set to be 17 November 2023.
[9] On 14 November 2023, SBD’s solicitor provided Mr Mak’s solicitor with a settlement statement in anticipation of settlement.
[10] Mr Mak failed to settle on the settlement date of 17 November 2023. A deadline sale was attempted by Mr Mak on the day of settlement, 17 November 2023, but no buyer was found.
[11] SBD served a settlement notice on Mr Mak after 5 pm on 17 November 2023 requiring him to settle the Agreement on or before 5 December 2023. Mr Mak failed to comply with the settlement notice.
[12] SBD has elected to sue Mr Mak for specific performance and has not cancelled the Agreement.
Relevant legal principles
[13] The principles applying to a plaintiff’s application for summary judgment are settled and were summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd.1 The ultimate question is whether there is a “real question to be tried” that warrants the time and expense of a trial.2
[14] The plaintiff has the overall onus. Where the plaintiff’s evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.3
[15] 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
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26] to [27].
2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
3 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
with undisputed contemporary documents or other statements by the same deponent or where it is inherently improbable.4
[16] 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.5
Is the defence of impossibility of performance reasonably arguable?
[17] Counsel for Mr Mak submits that he has filed sufficient evidence to raise an arguable defence of impossibility against an order for specific performance at the summary judgment stage.
[18]The defence of impossibility was summarised by Osbourne J in
Ngai Tahu Property Ltd v Dykstra as follows:6
(a)A Court of equity will not require that to be done which cannot be done. Equity does not act in vain. See Equity and Trusts in New Zealand (2nd ed, 2009) at para 24.4.12, p753.
(b)The defendant must establish a very substantial probability that it would not be able to comply with an order for specific performance: see the second formulation in D’Arcy-Smith v Stace (2003) 4 NZ ConvC 193,771 at 193,775, [26]. There is a consistency between this formulation and Dr Spry’s “sufficiently great likelihood” of impossibility.
(c)Anything less than a very substantial probability that performance will be impossible is insufficient – anticipation of possible difficulties or even a demonstrated difficulty in finding purchase money is unlikely to constitute a defence of impossibility. In such cases and subject to any other overriding equitable considerations a Court in equity is likely to order specific performance in the ordinary manner (with or without conditions) – the defendant may then later approach the Court for a modification or variation of the order: see Spry at p128; D’Arcy-Smith v Stace above.
(d)In an ordinary proceeding, pleading of impossibility is in the nature of an affirmative defence and the onus of proof rests upon the defendant as the person taking the point: Humphrey v Fairweather [1993] 3 NZLR 91.
(e)On an application for summary judgment, r. 12.2(1) High Court Rules applies. The plaintiff must prove that the
4 Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC).
5 Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
6 Ngai Tahu Property Ltd v Dykstra (2009) 10 NZCPR 734 (HC) at [12].
defendant has no arguable defence to the claim for an order for specific performance. The onus on the application remains on the plaintiff although, when the plaintiff establishes its contractual entitlement, the evidential onus shifts to the defendants to demonstrate a tenable defence: Auckett v Falvey HC Wellington CP296/86 20 August 1986. Thus, where there is raised an impossibility defence to a summary judgment application for specific performance, the plaintiff must prove that the defendant has no arguable defence that there is a very substantial probability that the defendant will be unable to comply with an order for specific performance.
[19] SBD says that by Mr Mak’s own evidence and statement of defence, he has said that:
(a)He still wishes to settle, he is battling through his financial challenges but wishes to settle by March 2025 (if not earlier).
(b)He was set to complete the sale of a property in Australia at the end of June 2024, which he said would net around AUD 1,200,000 to apply towards the amounts owing under the Agreement. This would mean that finance was required for approximately $1,485,500 or approximately 48 per cent of the purchase price. Mr Mak has failed to make any further progress on this point and has avoided and/or neglected to make contact with SBD regarding the sale.
(c)He will be able to complete the purchase provided “further time is provided to him”.
[20] At the time of filing submissions, counsel for SBD noted that Mr Mak has provided no evidence of steps taken by him to obtain finance or full and candid details of his financial position (including his income and assets).
[21] In written submissions filed for Mr Mak, counsel advised that there remained a prospect that Mr Mak may be able to settle later and that this would be the subject of updating evidence still to be filed.
[22] Updating affidavits were filed on the day and evening before the hearing by Mr Mak himself and by Mark Miller, a financial adviser, who had assisted in attempting to arrange finance.
[23] In his first affidavit Mr Mak deposed he would net approximately AUD 1,200,000 from the sale of a property in Queensland and that he would be willing “to part-pay $1 million AUD after the settlement of the sale”. In his updating affidavit, Mr Mak attaches the settlement statement showing vendors’ funds of AUD 1,137,994.94 but records that he only has “access to about $400,000 AUD from the net proceeds of sale” and that his “de facto partner of 10 years has since [his] first affidavit raised with [him] her entitlement to a half-share in the proceeds”. Mr Mak does not explain why there is a reduction from the original AUD 1,000,000 that he was prepared to part-pay.
[24] In addition, Mr Mak is vague about what other property he owns — saying he has no other “available financial resources” and that he has “some personal property it is not much in value and I have no stream of income at present”.
[25] Mr Mak discusses his investments in cryptocurrency but describes the value and availability of that value as having “dissipated owing to the circumstances described in [his] first affidavit”. These were that the cryptocurrency market had plummeted since he entered into the Agreement. In his first affidavit Mr Mak first says that at the time of the Agreement he had around USD 61 million in liquid capital and then in a later paragraph, liquid capital of about USD 25 million, with snapshots provided of the value of his investments over time. However, none of it is specific enough to understand what his current position is. There is no list of assets and liabilities or valuations as provided in Ngai Tahu Property Ltd v Dykstra or the level of detail provided in Matarangi Beach Estates Ltd v Dawson.7
[26] Furthermore, the evidence from the financial adviser, Mr Miller, filed just prior to the hearing, refers to enquiries made in September 2023 and not any enquiries made prior to the hearing as expected. The adviser says these enquiries were made on the basis that Mr Mak was needing $2,800,000 to settle the purchase and that a contact at
7 Matarangi Beach Estates Ltd v Dawson HC Auckland CIV-2008-404-1817, 15 September 2008.
one of the finance companies outlined Mr Mak’s situation to him. On that basis, Mr Miller’s evidence is that they were unable to finance. But Mr Miller does not explain what he understood Mr Mak’s situation to be. Mr Miller further records that other assets were considered as security but were not acceptable but again does not provide details as to what those assets were. Mr Miller also refers to the sale of the property in Queensland and that he had viewed the settlement statement but does not say what contribution he had been advised would be available from those proceeds.
[27] Mr Pyke, counsel for Mr Mak, submits that Mr Schollum’s evidence for SBD does not engage with or contradict Mr Mak’s evidence on the question of his inability to raise finance and so the Court must accept the evidence filed for the defendant as both admissible and as potentially sufficient proof at the hearing. However, as counsel for SBD submits, it is not an issue of Mr Schollum engaging with or contradicting Mr Mak’s evidence of inability to raise finance or settle. Mr Mak’s financial position is within Mr Mak’s knowledge and to provide a sufficient evidential foundation for an arguable defence of impossibility, Mr Mak needs to provide sufficient disclosure, not only of his own assets, liabilities and income but other assets that he has access to. Mr Mak does not have to prove his defence at the summary judgment stage but he has to put sufficient evidence before the Court to prevent SBD from establishing there is no arguable defence. Mr Mak has failed to do so.
[28] Counsel for Mr Mak submitted that if there was not sufficient evidence before the Court, the application ought to be adjourned to allow that evidence to be filed as happened in Matarangi Beach Estates. However, here SBD’s submissions had been filed and served prior to the filing of Mr Mak’s updating affidavits. SBD’s submissions clearly relied on the fact that there had not been full and candid details of Mr Mak’s financial position, including his income and assets. Despite this, the updating affidavits still do not provide sufficient details as to what Mr Mak’s assets and liabilities are, including other property assets.
[29] Furthermore, in Matarangi Beach Estates even though Associate Judge Hole held that the sale and purchase agreements in that case could only be performed by the defendants if they were given time to put their financial affairs in order, his Honour
still made an order for specific performance but allowed six months to perform, a period the plaintiff was prepared to give the defendants.8
[30] In this case, counsel confirmed at the hearing that SBD is prepared to allow until 31 March 2025 for Mr Mak to perform the Agreement. An open letter had been sent by SBD on 22 July 2024, prior to the hearing, proposing terms for settlement, including vendor finance, with the total amount payable by 31 March 2025. Counsel indicated SBD would consent to the Court imposing similar conditions in the specific performance orders made but acknowledged there might be difficulties with the Court directing a mortgage. Instead, SBD submits specific performance ought to be ordered on a delayed basis by 31 March 2025 with the parties to agree terms. SBD says if Mr Mak has difficulties complying with the order, he can seek a variation from the Court, as the Court acknowledged in Ngai Tahu.9
[31] I agree that this is the appropriate course to take. I am satisfied that SBD has established that Mr Mak has no arguable defence of impossibility. For this defence to be available there is required to be a very substantial probability that Mr Mak will be unable to comply with an order for specific performance. The lack of details provided by Mr Mak, despite SBD relying on this in its submissions prior to the filing of Mr Mak’s updating affidavits, means SBD has established there is no arguable defence.
[32] SBD proposes terms for the specific performance orders to ensure that performance proceeds smoothly. These terms appear appropriate but to avoid issues arising with the specific terms of the orders, I instead simply require the defendant to do all things necessary to perform his obligations and reserve leave to seek further orders as necessary.
Result
[33] The application for summary judgment of SBD’s claim for specific performance of the sale and purchase agreement entered into with Mr Mak on 16 September 2021 is granted, with Mr Mak to specifically perform the Agreement by
8 Matarangi Beach Estates Ltd v Dawson, above n 7, at [20].
9 Ngai Tahu Property Ltd v Dykstra, above n 6, at [12](c).
31 March 2025 and to do all things necessary to perform his obligations under the Agreement with leave reserved to seek further orders if necessary.
Costs
[34] SBD Limited has succeeded and so is entitled to costs. I ask the parties to confer and only if costs cannot be agreed to file submissions of no more than three pages (excluding schedules) on behalf of SBD Limited by 1 November 2024 and Mr Mak by 15 November 2024.
Associate Judge Sussock
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