Wang v Future Urban Limited

[2023] NZHC 2609

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-000399

[2023] NZHC 2609

BETWEEN

YUE WANG

Plaintiff

AND

FUTURE URBAN LIMITED

First Defendant

S J LAWYERS
Second Defendant

LAI WEI

Third Defendant

Hearing:	13 July 2023
Counsel:	DB Hickson for Plaintiff
Judgment:	20 September 2023

JUDGMENT OF DOWNS J

This judgment was delivered by me on Wednesday, 20 September 2023 at 3 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

PCW Law Ltd, Auckland.

WANG v FUTURE URBAN LTD [2023] NZHC 2609 [20 September 2023]

Introduction

[1]    The plaintiff, Yue Wang, brings claims against three defendants in relation to a deed of nomination. This judgment addresses Mr Wang’s claims against the first and third defendants, each by way of formal proof.1 Mr Wang’s  claim  against  the second defendant will be tried in the usual way.

[2]    The first defendant is Future Urban Ltd, or Future Urban. Future Urban was the purchaser in a sale and purchase agreement in relation to a property at Lot 98,   10 Scott Road, Hobsonville. The third defendant, Lai Wei, is the sole director and shareholder of Future Urban.

Background

[3]    Mr Wang and Mr Wei were once friends. Both worked in the building industry together and undertook development projects together.

[4]    In 2018, a large piece of land at 10 Scott Road, Hobsonville, was being subdivided into at least 200 properties. Mr Wang, Mr Wei and another friend decided to purchase three lots—Lots 98, 100 and 102—build a home on each, and then sell all three. They agreed to contribute one third of the cost each and to share profits in the same proportion. Future Urban agreed to purchase the three lots on their behalf.

[5]    On 8 October 2018, Future Urban entered a sale and purchase agreement in relation to Lot 98, which I call the agreement. Under the agreement, the purchase price was $400,000, and the deposit, $20,000. Settlement was to occur 10 working days after the vendor’s lawyer notified Future Urban’s lawyer a search copy of the certificate of title was available. The agreement contained these conditions about nominations:

4.8 The Purchaser shall not transfer, assign, dispose of or alienate its rights under this Agreement or enter into any agreement to on sell the Property first without procuring the new purchaser to enter into a covenant on the same terms as the covenant in this clauses 4.6 to 4.8 (inclusive) with the Vendor, such covenant to be made at the cost of the Purchaser using the form prepared and approved by the Vendor (at its sole discretion).

1      Minute of Associate Judge Taylor dated 6 March 2023.

…

6.6 Subject to clause 4.8, the Purchaser may assign, transfer (whether by nomination or otherwise), or dispose of or alienate the benefit of this Agreement, or enter into any further agreement to on-sell the Property before the Settlement Date with the Vendor’s prior written consent (such consent not to be unreasonably withheld).

[6]    Mr Wang later decided he wanted to develop Lot 98 for himself and his family, rather than sell it for profit. So, on 29 April 2021, Mr Wang and Future Urban entered a deed of nomination, which I call the deed. The deed was prepared by S J Lawyers, the second defendant. S J Lawyers acted for Future Urban, the purchaser in the agreement.

[7]The deed provided:

1.The Nominator hereby irrevocably nominates the Nominee as the Purchaser under the Agreement.

2.The Nominee accepts the nomination referred to in clause 1 above and from the Settlement Date, this Deed shall take effect.

3.The Nominator and the Nominee accept that the Nominee shall have the full benefit and burden of the covenants in the Agreement as if they were parties to the Agreement and will at all times hereafter well and sufficiently indemnify and keep indemnified the Nominator against all proceedings, actions and claim which may now or at any time in the future be brought or made against the Nominator in connection with the Agreement including all costs, charges or expenses which the Nominator may incur or be liable.

4.In consideration of the Nominator entering into this Deed, the Nominee shall pay the balance of the Purchase Price upon the settlement of the Agreement with the Vendor and assume and continue to assume all the liabilities in relation to the Property and the lease of the premises of the Property.

5.The Nominee will pay the costs incurred or to be incurred in related to this Deed.

[8]    On 4 May 2021, S J Lawyers sent the deed to the vendor’s lawyers with this note:

We refer to attached sale and purchase agreement of the above property.

Please see attached Deed of Nomination. Our client has nominated a new purchaser to purchase the property.

For accounting purposes can you please urgently forward us the receipt of the 5% deposit?

Thanks

[9]On 24 May 2021, Mr Wang’s lawyers received this email from S J lawyers:

Hi Lei,

Please see attached trust account receipt from the vendor’s lawyer for Lot 98.

Now please arrange your client to pay the deposit to our trust account as attached.

Regards,

[10]   Mr Wang’s lawyers replied the same day, saying Mr Wang and Mr Wei had made arrangements between them concerning payment of the $20,000 deposit. However, a dispute then arose between Mr Wang, Future Urban and Mr Wei about payment of the deposit. That dispute became an impasse, and the impasse was never resolved.

[11]   On 19 October 2021, S J Lawyers emailed Mr Wang’s lawyers to record that Future Urban was terminating the deed. On 29 October 2021, S J Lawyers emailed the vendor’s lawyers to record Future Urban’s termination of the agreement.

[12]Lot 98 was sold to another purchaser.

A preliminary procedural matter

[13]   Mr Wang seeks a determination that he has served Future Urban with his amended statement of claim. The issue arises because Future Urban did not retain a lawyer, and Mr Wang did not serve the amended claim by effecting personal service on Future Urban, unlike the original statement of claim.2

[14]   Mr Wang amended his statement of claim on 29 September 2022, by adding to the relief sought. He emailed a copy of the amended claim to Mr Wei the same day

2      Mr Wang filed his original statement of claim on 9 March 2022. He served Future Urban with that claim on 13 April 2022, by delivering it to Future Urban’s registered office.

but did not deliver it to Future Urban’s registered office. The email was expressed as effecting “service on the defendants”—plural.

[15]   Mr Wei is the sole director and shareholder of Future Urban and had identified the email address used by Mr Wang as his preferred address for service, albeit as the third defendant. The statements of claim are identical other than in relation to relief. If Future Urban had retained a lawyer, it is all but certain the amended claim would have been sent to that lawyer by email, and there is nothing to suggest Mr Wei did not receive the email attaching the amended claim. I, therefore, find Future Urban has been served with the amended claim.

The claims in brief

[16]   Mr Wang’s amended claim contained several causes of action, but Mr Wang abandoned all but two. His remaining causes of action are twofold: first, an allegation that Future Urban breached s 9 of the Fair Trading Act 1986, for which Mr Wang seeks various forms of damages; and second, an allegation in debt against Mr Wei in relation to the deposit, for which Mr Wang seeks $20,000.

A breach of s 9 of the Fair Trading Act?

[17]The amended claim says:

The conduct of Future Urban in nominating Mr Wang as purchaser of the Scott Road property pursuant to the Deed of Nomination comprised an unambiguous representation to Mr Wang that the Deed of Nomination, once executed, would be valid and enforceable (the representation).

The representation was false because Future Urban had failed and/or neglected to:

(a)     Obtain the prior written consent of Scott Road to the nomination in accordance with clause 6.6 of the first agreement; and

(b)     Arrange for Mr Wang to enter into a covenant with Scott Road in terms of clauses 4.6 to 4.8 of the first agreement.

(the misrepresentation).

Mr Wang was induced to execute and/or enter into the Deed of Nomination by the misrepresentation.

…

The conduct of Future Urban referred to paragraph 36 above comprised misleading and deceptive conduct in trade within the meaning of section 9 of the Fair Trading Act 1986, (the “Misleading and Deceptive Conduct of Future Urban”).

As a consequence of the Misleading and Deceptive Conduct of Future Urban, Mr Wang has suffered loss and damage in the sum of $274,686.30 as pleaded in paragraphs 34(a) and 34(b) above.

Because of the matters referred to in paragraphs 20, 30, 31, 42 and 43 above, Mr Wang has also suffered emotional distress and harm.

The plaintiff claims against the first defendant:

(a)Damages   in    the    sum   of   $274,686.30   pursuant   to section 43(3)(f) of the Fair Trading Act 1986.

(b)Further damages for emotional distress and harm in the sum of $15,000.

(c)Interest pursuant to sections 9 and 10 of the Interest on Money Claims Act 2016.

(d)Costs.

[18]Section 9 of the Fair Trading Act states:

9      Misleading and deceptive conduct generally

No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

[19]   It is beyond argument that Future Urban is a person in terms of the statute, and that it was “in trade” when it nominated Mr Wang as purchaser: Future Urban was a property developing company, and the nomination occurred in  the  course  of  Future Urban’s business. It is also beyond argument that Future Urban’s nomination of Mr Wang as purchaser under the deed amounted to “conduct”. The question then becomes: was that conduct misleading or deceptive?

[20]The required approach is identified by the Supreme Court:3

The question to be answered in relation to s 9 in a case of this kind is accordingly whether a reasonable person in the claimant’s situation — that is, with the characteristics known to the defendant or of which the defendant ought to have been aware — would likely have been misled or deceived. If so, a breach of s 9 has been established. It is not necessary under s 9 to prove

3      Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].

that the defendant’s conduct actually misled or deceived the particular plaintiff or anyone else.

[21]   I accept Mr Wang’s contention that the conduct of Future Urban in nominating Mr Wang as purchaser under the deed conveyed an unequivocal, albeit tacit representation, that the deed, once executed, would be valid and enforceable. I also accept Mr Wang’s contention that this conduct was false or misleading as the admissible evidence helpfully summarised by Mr Hickson on behalf of Mr Wang reveals that:

In an email to [Mr Wang’s lawyers] dated 8 December 2021, S J Lawyers admitted that Future Urban’s nomination of Mr Wang had never received the prior written consent of the vendor of Lot 98. [The vendor’s lawyer] confirmed the position by email to [Mr Wang’s lawyers] of 8 December 2021. They also advised that Future Urban had no ability to nominate Mr Wang because no covenant had been entered into between the vendor and Mr Wang requiring Mr Wang to do all the things listed in clause 4.6 to 4.8 of the agreement for sale and purchase. They further indicated that S J Lawyers had advised them as long ago as 15 October 2021, ie 4 days before Future Urban purported to cancel the nomination, that the deed of nomination was “not to take effect” because of a dispute between Future Urban and Mr Wang.

[22]   Relief is provided for by s 43 of the Fair Trading Act. Causation must be shown:4

Then, with breach proved and moving to s 43, the court must look to see whether it is proved that the claimant has suffered loss or damage “by” the conduct of the defendant. The language of s 43 has been said to require a “common law practical or common-sense concept of causation”.

[23]   Mr Wang spent money preparing to build on the property after ostensibly being nominated as purchaser. He applied for a building consent; commissioned architectural and structural plans; and placed an order for materials. These expenses total $29,686.30 and have been wasted. I, therefore, award damages in this sum.

[24]   Mr Wang claims the $245,000 increase in the market value of the property as opportunity loss.

4      Red Eagle Corporation Ltd v Ellis, above n 3, at [29] (footnote omitted).

[25]   Damages for opportunity loss appear to be recoverable under s 43 of the   Fair Trading Act.5 However, the difficulty for Mr Wang lies in causation or more particularly, proof of causation. It is not sufficiently clear that Future Urban’s misleading or deceptive conduct caused the sale of Lot 98 not to proceed with       Mr Wang as purchaser. Related evidence is scant, a difficulty that may reflect the manner in which the case was heard.

[26]   Damages for emotional distress also appear to  be  recoverable  under  the Fair Trading Act.6 However, damages of this nature are not typically awarded in commercial cases unless the purpose of the arrangement is to secure relief from an existing state of anxiety.7

[27]   I accept Mr Wang was intending to build a family home on the property, and that he and his wife have suffered disappointment. However, I am not persuaded the threshold is crossed for damages of this nature, especially as the arrangement grew out of a commercial venture to develop property.

Debt

[28]This cause of action requires a little more background.

[29]   Mr Wang says in 2019, he and Mr Wei  completed  a  development  at  Myland Drive, which resulted in a net profit of approximately $480,000. Mr Wang says he and Mr Wei agreed that Mr Wei would receive $250,000 of that profit, and Mr Wang $230,000, because Future Urban had paid the $20,000 deposit in relation to the  agreement  concerning  Lot  98. Mr Wang  claims  against  Mr Wei,  in  debt,  the

$20,000 that he says he essentially paid through this uneven profit share arrangement, as it is now clear Future Urban was repaid the deposit by the vendor. Otherwise, says Mr Hickson, Mr Wei “and his company have, in effect, made a double recovery”.

5      Harvey Corp Ltd v Barker [2002] 2 NZLR 213 (CA) at [14] and [17]. See also Shabor Ltd v Graham [2021] NZCA 448, [2021] NZCCLR 26 at [64]–[67].

6      Sinclair v Webb & McCormack Ltd (1989) 2 NZBLC 103,605 (HC) at 103,612.

7      Crump v Wala [1994] 2 NZLR 331 at 345–346.

[30]   I am not satisfied the evidence reveals an action in debt against Mr Wei for four interrelated reasons (even though payment of the deposit was a source of contention).

[31]   First, Mr Wang’s evidence about these arrangements is not supported by any contemporaneous documentation beyond banking records showing withdrawals in the amounts of $250,000 and $230,000. Second, the relevant evidence is framed at a level of generality incommensurate with a determination of a specific, legally binding arrangement between Mr Wang and Mr Wei. Third, equal division of the net profits would have resulted in each party receiving $240,000, and a $20,000 adjustment of that figure suggests Mr Wei should have received $260,000, not $250,000; likewise, that Mr Wang should have received, $220,000, not $230,000. Mr Hickford’s supplementary submission on this aspect does not explain this arithmetical curiosity, a point that dovetails with the first and second points. Fourth, there is no other evidence beyond Mr Wang’s that he and Mr Wei agreed that the $20,000 difference created a legally binding arrangement between them. This aspect of claim, therefore, fails.

Result

[32]   Mr Wang’s claim against Future Urban is upheld in the sum of $29,686.30, plus interest under the Interest on Money Claims Act 2016.

[33]Mr Wang’s claim against Mr Wei is dismissed.

Costs

[34]Mr Wang is awarded 2B scale costs against Future Urban.

Postscript

[35]Mr Wang gave this evidence in his affirmation of 22 May 2023:

The funding for 60 Myland Drive was, however, complicated by the fact that Mr Wei was being investigated by the Inland Revenue Department at the time. For that reason, he wanted to hide his involvement in the project from the IRD and, to this end, paid his contributions toward the cost of the development to my mother who then transferred the payments to me.

[36]   The Registrar is to send a copy of this judgment is to the Commissioner of Inland Revenue.8

……………………………..

Downs J

8      I asked Mr Hickson at the hearing whether he wished to be heard on this passage of the evidence, or it being referred to the Commissioner of Inland Revenue. Mr Hickson said he did not wish to be heard in relation to either. However, Mr Wang filed a supplementary affirmation in which he said that he agreed to help Mr Wei only because he assumed the investigation was meritless.