Xu v Meng
[2023] NZHC 1899
•18 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-508
[2023] NZHC 1899
UNDER High Court Rules 2016 BETWEEN
WEI XU and JUNHUI ZHANG
Plaintiffs/Counterclaim Defendants
AND
XING MENG and HUIMIN GUAN
Defendants/Counterclaim Plaintiffs
Hearing: 20 and 21 November 2023 Appearances:
C L Holland for the Plaintiffs
E St John and D Liu for the Defendants
Judgment:
18 December 2023
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Monday, 18 December 2023 at 2:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Righteous Law (C L Holland), Auckland
Heritage Law (D Liu), Auckland
Counsel: E St John, Auckland
XU v MENG [2023] NZHC 1899 [18 December 2023]
[1] This proceeding arises out of a failed property deal between two old friends, the first named plaintiff, Wei Xu, and the second named defendant, Huimin Guan, who first met when they attended high school in China together.
[2] Ms Guan and her husband, the first named defendant, Xing Meng, orally agreed to purchase a property at 105 Bayside Drive, Browns Bay, Auckland (the property) from Mr Xu and his wife, the second named plaintiff, Junhui Zhang. The defendants moved into the property on 7 May 2018 as purchasers in possession. They paid a deposit of $200,000 on 15 October 2018. However, the purchase never settled, and the defendants remained in occupation.
[3] On 18 March 2021, the plaintiffs applied to the High Court for an order to recover the property. In a judgment dated 29 July 2021, Associate Judge Andrew found the plaintiffs were entitled to vacant possession and ordered the defendants to vacate the property within 28 days.1 The defendants vacated the property on 21 September 2021.
[4] Associate Judge Andrew did not, however, deal with the defendants’ counterclaim for the return of the $200,000 deposit. That remains to be determined. Since then, the defendants have added another counterclaim to their original counterclaim for the return of the deposit. The defendants now also seek the return of funds paid by them towards the principal component of the plaintiffs’ mortgage while in occupation.
[5] The plaintiffs have subsequently also made counterclaims against the defendants for:
(a)Rental of $162,916.19 for the period from 24 February 2020 to 21 September 2021;
(b)Income from boarders while in occupation; and
1 Xu v Meng [2021] NZHC 1936.
(c)Income from using the property for commercial purposes while in occupation.
[6] This proceeding deals with the five outstanding counterclaims, two from the defendants and three from the plaintiffs.
Application for leave to file amended pleadings
[7] On 15 November 2023, five days before trial, the defendants filed a memorandum seeking leave to file amended pleadings after the close of pleadings date. The first pleading was an amended statement of defence and counterclaim that:
(a)Clarified the basis on which the defendants sought repayment of amounts paid towards the plaintiffs’ mortgage; and
(b)Amended the prayer for relief to identify the correct section of the Interest of Money Claims Act 2016 on which the defendants relied for their claim to interest.
[8] The second pleading was a statement of defence to the plaintiffs’ amended counterclaim. This was to replace the reply dated 17 October 2023, which did not refer to the affirmative defence of issue estoppel pleaded in response to the plaintiffs’ original counter-counterclaim.
[9] The plaintiffs did not oppose the defendants’ application for leave to file amended pleadings after the close of pleading date. Leave was accordingly granted.
Factual background
[10]It is accepted by the parties that the terms of the oral agreement were:
(a)The plaintiffs would sell the property to the defendants.
(b)The price was to be $1.78 million.
(c)A deposit of 20 per cent (or $356,000) would be paid on the sale of a property owned by the defendants at 1A Alexander Avenue, Torbay, Auckland (Torbay property). This was later varied to the sum of
$200,000.
(d)Until settlement, the defendants were liable for all costs associated with the property.
(e)The agreement was conditional upon the defendants obtaining finance.
[11] On 7 May 2018, the defendants moved into the property as purchasers in possession. There was no agreed settlement date.
[12] On 13 September 2018 the defendants sold the Torbay property with settlement on 10 October 2018. The defendants told the plaintiffs that, with the price they received from the sale of the Torbay property, they were not able to pay a deposit of 20 per cent ($356,000) on the property. The plaintiffs agreed to reduce the deposit to the sum of $200,000, which was the amount paid by the defendants to the plaintiffs on 15 October 2018.
[13] The plaintiffs had previously received income from renting out a portion of the property through Airbnb yielding a sum of $1,160 per week. The defendants had told the plaintiffs that they did not have enough income to purchase the property and so the plaintiffs agreed that the defendants could use any rental income from the property to assist them with making their weekly payments to the plaintiffs for occupying the property.
[14] The plaintiffs prepared a spreadsheet setting out an amount that was to be paid by the defendants each week and ultimately offset against the purchase price as well as payments for mortgage interest and rates, which would not be deducted from the purchase price. The plaintiffs initially set the amount to be paid by the plaintiffs to be
$1,168 per week. The plaintiffs later varied the amount payable to $1,750 per week and then $1,697 per week.
[15] Although the plaintiffs were late in making some payments, it is accepted that they were up to date with the payments as calculated by the plaintiffs as at 24 February 2020.
[16] On 14 February 2020, Ms Guan told Mr Xu in a WeChat message that she would see whether she could get a loan that year. She asked Mr Xu about the payments she had been making, which incorporated both principal and interest. Mr Xu replied saying he would “deduct the part of the loan principal for you from the settlement date”.
[17] In the days after this conversation, Ms Guan went to the BNZ Bank to apply for finance to settle the purchase. She was told by the bank that they needed a written agreement for sale and purchase.
[18] In a WeChat phone call on 3 March 2020, Ms Guan asked Mr Xu to sign a sale and purchase agreement. Ms Guan says that Mr Xu told her that even if he signed an agreement, he was not able to settle the purchase because he was not then in a position to repay his loan on the property which, he said, was $1.8 million.2
[19] Ms Guan was concerned that the plaintiffs would not honour their agreement and after consultation with lawyers, on 6 March 2020 the defendants lodged a caveat on the record of title for the property to protect their interest in the property as purchasers in possession.
[20] On the same day, there was an exchange of WeChat messages and a group WeChat between the parties. In one of the WeChat messages, Ms Guan said she wanted the $200,000 deposit returned to her. Mr Xu replied, “Okay, I will calculate” the “remaining balance”. In a later group WeChat the same day, Mr Xu confirmed he had agreed to sell the property to the defendants and he would do whatever was needed to sign a sale and purchase agreement. He said that they could get lawyers involved.
2 The balance to settle would have been no more than $1.58 million, being the purchase price of
$1.78 million less deposit of $200,000 and (unspecified) weekly principal payments.
[21] It was, however, not until more than four-and-a half months later, on 16 July 2020, that the plaintiffs’ solicitors wrote to the defendants solicitors saying, “Our client is willing to instruct us to prepare a sale and purchase agreement” and proposing that the price be increased by $57,318.03 (being principal and interest on the plaintiffs’ loan since February 2020), such that the amount required on settlement would be
$1,637,318.03 ($1,780,000 less deposit of $200,000 plus $57,318.03). The defendants did not agree to pay more for the property.
[22] On 2 September 2020 (six months after the crucial WeChat messages on 6 March 2020), the plaintiffs’ solicitors provided a draft sale and purchase agreement to the defendants’ solicitors. It included proposed conditions that:
(a)The purchase price included all amounts claimed by the plaintiffs as unpaid monies that arose from the defendants having possession of the property since May 2018.
(b)In the event that the agreement was declared unconditional, it was agreed that the deposit would be released to the vendor and would be in part payment of the purchase price.
(c)In the event that the agreement was voided for non-ratification of any condition, it was agreed that the deposit would remain held in the plaintiffs’ solicitors’ trust account until a deed of settlement was entered into by both parties, or by order of the Court.
[23] The draft agreement for sale and purchase was provided by the plaintiffs to the defendants on the same day as a hearing in the High Court on the defendants’ application for an order sustaining the caveat lodged on 6 March 2020. Lang J noted the difficulty arose from the fact that the oral agreement for sale and purchase did not contain any date by which the defendants were required to obtain finance to enable them to complete the purchase of the property. Lang J sustained the caveat until 2 December 2020 to allow the defendants another three months within which to obtain finance. In a subsequent minute dated 24 November 2020, Lang J stated:
The applicants have not sought to sustain the caveat beyond 2 December 2020, and it will accordingly lapse on that date. I note that the respondent has agreed to return the applicants’ deposit and that any outstanding disputes will need to be resolved in another forum.
[24] The parties accept that the oral agreement for sale and purchase came to an end on 2 December 2020 when the caveat lapsed.3
Return of deposit
[25] The defendants first counterclaimed for the return of the deposit by a statement of defence and counterclaim dated 13 May 2021. The counterclaim alleges that on or about November 2020 the plaintiffs and defendants agreed to end the conditional agreement on the condition that the defendants would return the deposit.
[26] In a reply to the statement of defence and counterclaim dated 17 May 2021, the plaintiffs acknowledge that they agreed to return the deposit (if any remained) after calculations were done in regard to rent et cetera due from the defendants. The plaintiffs also assert they had an equitable set-off in regard to a commercial matter where they are owed money by the defendants.
[27] Mr Xu confirms that the plaintiffs had agreed to the return of the deposit. In an affidavit sworn on 27 May 2021, Mr Xu stated:
Paragraph 27 is accepted in that I did agree to return the deposit after deductions if there was any left, but in all other aspects denied. The defendants owe money for rent, and expenses for the property while they have been in occupation. The defendants also owe money to the plaintiffs due to commercial transactions between the plaintiffs and the defendants. We had agreed with the plaintiffs that they could use premises of ours, and also use stock from one of our companies for use by a company owned by the defendants, and that they would pay at a later date. The defendants used the premises, damaged the premises, took what stock they wanted and have made no payments to cover the rent or damage of the premises or for the stock they took. Once these amounts are taken into account the defendants in fact owe the plaintiffs money, over and above the deposit.
[28] The plaintiffs’ position was reiterated over a year later in the plaintiffs’ amended statement of defence to defendants’ counterclaim dated 31 July 2022:
3 In a judgment on costs dated 10 February 2021, Lang J noted that the defendants were unable to arrange finance to enable them to complete the purchase and “The agreement accordingly came to an end and the caveat lapsed on 2 December 2020”.
3.Paragraph 48 is denied. The plaintiffs agreed to return the deposit (if any remained) after calculations were done in regards to rent etc due from the defendants. The plaintiffs also assert that they have an equitable set off in regard to a commercial matter where they are owed money by the defendants.
[29] As to the “commercial matter”, in a judgment dated 16 December 2022,4 I dismissed the plaintiffs’ application for joinder of three companies as plaintiffs and one company as a defendant on the basis that the jurisdictional threshold for joinder of other parties was not met. I determined that the proposed parties’ claims can, and should, be brought as separate proceedings against Ms Guan.5 I am unaware whether the plaintiffs have pursued these claims as separate proceedings. However, as a result of my ruling, they have been unable to advance them in this proceeding.
[30] Furthermore, the plaintiffs have not pleaded repudiation of the agreement by the defendants, which would enable them to cancel the agreement for sale and purchase and retain the deposit.
[31] Although not pleaded, there was some suggestion at trial that the defendants had not made reasonable efforts to secure finance. I am, however, satisfied that nothing more could have been done by the defendants to secure finance. The first named defendant, Xing Meng, was an airline pilot with a Chinese airline. As a result of COVID-19, air travel was severely restricted in China. Not only was Mr Meng’s salary slashed, but he was stuck in China for a number of months and unable to return to New Zealand. Banks were obviously reluctant to lend money to someone employed in a sector with an uncertain future.
[32] The defendants’ counterclaim for return of the deposit is granted. The plaintiffs have never disputed that the deposit is to be returned to the defendants.
Return of principal repayments
[33] In the second amended statement of defence and counterclaim dated 15 November 2023, the defendants plead that pursuant to the oral agreement between
4 Xu v Meng [2022] NZHC 3496.
5 The claims related to a company shareholding, use of a Mercedes Benz motor vehicle and the takeover of two retail stores.
the parties, any amounts paid towards the principal component of the plaintiffs’ mortgage were in part payment of the purchase price and were to be deducted from the purchase price at settlement. The defendants say they relied on the plaintiffs to detail the amounts paid towards the principal component. They paid the total amounts said to be payable by the plaintiffs, but the plaintiffs are unable, or unwilling, to verify how much the defendants have paid towards the principal component of the plaintiffs’ mortgage.
[34] The defendants plead that they are entitled to the return of those amounts the plaintiffs are unable or unwilling to verify. They also seek relief under s 43 of the Contract and Commercial Law Act 2017 in the form of an order for repayment of the deposit and all amounts paid to the plaintiffs in part-payment of the purchase price.
[35]These allegations are denied by the plaintiffs.
[36]However, there are a number of WeChat messages that bear on this issue:
1 May 2018 Mr Xu to Ms Guan “The bank did the loan at 100%” 14 February 2020 Ms Guan to Mr Xu “…the amount of my weekly repayments isn’t the same as your normal bank deductions, correct? I saw that deductions by the bank isn’t 1,679.” Mr Xu to Ms Guan “Because the amount I paid to the bank is more than yours”
“My loan is 1.8 million”
“The amounts are different”
Ms Guan to Mr Xu “Oh, oh, ok, the loan principal and interest will be paid together, will the deposit or the loan be a bit less after that?” Mr Xu to Ms Guan “It means I will deduct the part of the loan principal for you from the settlement date”
[37] Mr Xu confirmed the arrangements in his first affidavit sworn on 10 February 2021. Mr Xu states:
On the same day [19 November 2018] I sent a new spreadsheet to [Ms Guan] setting out the amount that would now be payable (which was to be $1,750
per week). I further agreed with [Ms Guan] that any payments which were made toward the principal component of the mortgage would be deducted from the ultimate sale price.
[38] In her affidavit sworn on 13 May 2021, Ms Guan stated that Mr Xu confirmed that principal payments made by her would be deducted from the settlement amount. This was admitted by Mr Xu in his affidavit in response dated 27 May 2021. In his brief of evidence, Mr Xu also states that he reminded Ms Guan that the payments she had made towards the principal would be offset from the final purchase price.
[39] The difficulty for the plaintiffs is that they have not demonstrated just what proportion of the payments made by the defendants constituted repayment of principal and what proportion constituted payments of interest. The former are not costs associated with the property in terms of the oral agreement between the parties. Principal repayments are therefore refundable as payments made towards the property when a contract is avoided. Interest payments are not refundable as they are costs associated with the property.
[40] At the time the defendants took possession of the property, the plaintiffs had two mortgage loans with the ANZ Bank (loan #1001 and #1002) totalling $1,608,706 ($858,000.00 plus $750,706.00) with interest charged at 5.79 per cent per annum.
[41] On 30 November 2018, the plaintiffs refinanced their loans with Westpac Bank. The new loans (loan #93 and #94) totalled $1,780,000.00 ($980,000.00 plus
$800,000.00) and interest was being charged at 3.95 per cent per annum (on loan #93) and 3.99 per cent per annum (on loan #94).
[42] Both the ANZ and the Westpac loans were being repaid on an interest only basis. The ANZ and Westpac loans were advanced not only in relation to the property which the plaintiffs bought in 2015 for $1.388 million, but also in relation to the plaintiffs’ home at 21 McGivern Place. There is no explanation of how those loans are apportioned between the two properties.
[43] Even if the entire ANZ and Westpac loans (which were secured over both the property and the defendants’ home address) were attributed to the property, the costs
charged by the plaintiffs to the defendants and paid by them do not meet the actual repayments. In respect of the ANZ loans (totalling $1,608,706.00), the monthly repayments totalled $7,910.87 ($4,219.25 plus $3,691.62) or $1,791.23 per week. In respect of the Westpac loans (totalling $1,780,000.00), the fortnightly repayments totalled $2,709.08 per fortnight ($1,484.76 plus $1,224.32) or $1,354.54 per week.
[44] Mr Xu gave evidence for the plaintiffs but was unable to give a satisfactory account of the breakdown of the amounts charged to the defendants. Under cross- examination Mr Xu claimed that the weekly payment of $1,750.00 was calculated using an interest rate of 3.43 per cent. This cannot possibly be correct as it would mean that the property had a mortgage loan in excess of $2.65 million. Mr Xu then conceded that he had added other amounts that he thought the defendants owed him. He said all of this was conveyed to the defendants. Mr Xu’s allegation that his calculations as to the component parts of the payments were conveyed to the defendants had, however, not been put to Ms Guan when she gave evidence.
[45] Counsel for the defendants submits that the plaintiffs have failed to discharge their obligation to prove that they had charged the defendants interest in accordance with the parties’ agreement and the Court should simply disallow the plaintiffs’ claims for mortgage interest and order them to repay the “interest” that they had received from the defendants in its entirety by entering judgment in the sum of $137,132.23 against the plaintiffs.
[46] This would, however, not be just or in accordance with the parties’ agreement that the defendants would be liable for all costs associated with the property. In order to do justice, I will adopt Mr Xu’s evidence that banks would not generally lend above 60 per cent loan to value ratio (LVR) on investment properties. Although the plaintiffs bought the property in 2015 for $1.388 million, the sale price to the defendants in May 2018 was to be $1.78 million.6 Sixty per cent of $1.78 million is $1,068,000. We know the interest rates charged by ANZ (5.79 per cent) and Westpac (3.95 per cent). Adopting these figures then the mortgage interest incurred by the plaintiffs in
6 This price seems reasonable as the property’s rating valuation on 1 June 2021 was $1,825,000 and the property sold for $2,088,888 on 11 December 2021.
relation to the property for the relevant period (7 May 2018 to 21 September 2021) is as follows:
Start date
End date
Days
Interest rate
Principal
Interest
07/05/2018
30/11/2018
207
5.79%
$1,068,000
$35,069.32
30/11/2018
21/09/2021
1026
3.95%
$1,068,000
$118,583.11
Total
$153,652.43
[47] The defendants stopped making mortgage payments on 24 February 2020 because the plaintiffs had been unable to provide them with proper calculations of what was owing, and they thought that the plaintiffs may have been overcharging them. They did not make any further payments until they moved out on 21 September 2021. Before they stopped making mortgage payments, the defendants had paid a total sum of $137,132.23 to the plaintiffs. If the sum paid of $137,132.23 is taken away from the sum of $153,652.43, calculated to be interest payments over 40 months in which the defendants were in occupation, the sum due and owing by the defendants to the plaintiffs in respect of interest payments is $16,520.20.
[48] The plaintiffs admit that the defendants were to pay the plaintiffs’ mortgage and outgoings, but say that the payments represented rental payments. I later reject the submission that these payments could be classified as rent. However, the plaintiffs have not pleaded in the alternative that they were payments of their mortgage and outgoings, but it seems to me that I can grant relief to the plaintiffs under s 43 of the Contract and Commercial Law Act 2017. The contract is cancelled and s 43 allows me to direct the defendants to pay to the plaintiffs a sum that the Court thinks just.
[49] The defendants’ counterclaim for judgment in a sum representing unverified mortgage payments and outgoings is dismissed. There will, however, be an order under s 43 of the Contract and Commercial Law Act 2017 that the defendants pay the plaintiffs the sum of $16,520.19, calculated to be the shortfall in the mortgage interest payments over 40 months the defendants were in possession of the property.
Rental of property
[50] In the plaintiffs’ amended counterclaim to the defendants’ amended counterclaim dated 8 September 2023, the plaintiffs’ counterclaim for “rental” of the property from the date on which the defendants made their last payment in respect of all costs associated with the property, 24 February 2020, until the date they vacated the property on 21 September 2021. The plaintiffs seek payment of the sum of
$162,916.19, being approximately 96 weeks at $1,697 per week. The sum of $1,697 was the weekly sum payable at the time the defendants stopped making payments towards costs associated with the property.
[51]The plaintiffs plead:
5.The plaintiff and the defendant agreed that the defendants’ early possession of the Bayside property was conditional on the defendant’s paying rental until settlement date.
6.The defendants failed to meet their obligation of the rental during the period they and their family occupied the Bayside property, being from [24 February 2020] to [21] September 2021. Such rental equates to $162,916.19.
…
10.The defendants have refused and/or neglected to pay the sum of
$162,916.19 to the plaintiffs.
These allegations are denied by the defendants.
[52] The difficulty for the plaintiffs is that the plaintiffs and the defendants did not agree that the defendants’ early possession of the property was conditional on the defendants paying rent until settlement date.
[53] The facts as pleaded in the statement of claim dated 18 March 2021 and admitted in the second amended statement of defence and counterclaim dated 15 November 2023 are that until settlement, the defendants were liable for all costs associated with the property, meaning mortgage payments, rates, insurance, and other outgoings.
[54] This is confirmed by Mr Xu in his first affidavit dated 10 February 2021. He says he prepared a spreadsheet that took into account the mortgage repayments and rates he was making and therefore the amount Ms Guan would need to pay. His mortgage was on interest only at that point, so he charged Ms Guan $1,168 per week which represented his mortgage payments.
[55]In her affidavit dated 13 May 2021, Ms Guan states:
11.The terms of the agreement were:
a.Wayne and his wife to sell the Property to me and my husband;
b.Price: $1.78 million.
c.Deposit: RMB20,000
d.Further deposit: To be agreed pending sale of our property at 1a Alexander Drive
e.My husband and I to pay all loan and house owner costs associated with owning the Property
f.Settlement is conditional on two conditions:
i.Payment of further deposit:
ii.My husband and I obtain finance.
g.Upon settlement, the property will be transferred to me and my husband.
[56]In his reply affidavit dated 27 May 2021, Mr Xu stated:
14.Paragraph 11 is accepted apart from point d, which I repeat the total deposit was to the $356,000, and point f, the agreement was only conditional on finance.
[57] Furthermore, the plaintiffs obtained an order for possession of the property before Associate Judge Andrew on the basis that the defendants were not tenants and were not paying rent. Associate Judge Andrew held that there was never a tenancy between the parties, and that the defendants were not tenants but purchasers in possession who had remained in possession without the plaintiffs’ consent and with no right to remain. As a result of these findings, the plaintiffs are estopped from asserting that there was any rental or leasing agreement between the plaintiffs and the
defendants and/or that the defendants owe the plaintiffs rent pursuant to a tenancy agreement.
[58]The plaintiffs’ counterclaim for rental is dismissed.
Income from boarders
[59] The plaintiffs counterclaim for the (unspecified) income received by the defendants from boarders while they occupied the property. The defendants have helpfully produced a spreadsheet which shows that they received income from boarders between 14 May 2018 and 30 September 2021 totalling $70,380.00.
[60]The plaintiffs’ amended counterclaim dated 8 September 2023 pleads:
15.The rental incomes from other renters from the Bayside property are generated from renting the plaintiffs’ Real Estate, which the defendants occupied in breach of their obligation.
16.The defendants’ receipt of the rental incomes of the other renters is an enrichment at the plaintiffs’ expense without justification or basis and without providing for compensation or restitution to the plaintiffs that led to an unjust or inequitable result.
The allegations are denied by the defendants.
[61] The counterclaim is inconsistent with the initial pleadings. It is pleaded in the initial statement of claim dated 18 March 2021 as follows:
10. Before Guan moved into the Bayside property, Xu had let rooms out for the purpose of AirB&B [sic]. Xu allowed Guan to have boarders in the house while she had possession and did not object to Guan using the money received in rent to make the agreed payments.
[62] The defendants admit that they continued to rent out some rooms but state that the rent did not cover the mortgage payments owed.
[63] The pleading in the initial statement of claim is consistent with Mr Xu’s affidavit dated 10 February 2021 in which he states:
We had previously been using the Bayside property as an AirBNB rental and were also renting out the master bedrooms. We advised Grace then she could have flatmates in the property which would bring her about $1,160 per week
and would be helpful for affording the house. Grace agreed to this arrangement.
[64]Mr Xu reiterated his position in his brief of evidence at trial:
The Bayside property, prior to selling to the defendants, was used as an Air BnB with a tangible income contributing to the property’s mortgage. To assist with her affording to pay rent to us and the outgoings on the property, we suggested to Grace that it would be a good idea to keep renting out the rooms in the property (two sets of master bedrooms were rented out at her time of occupancy). We told Grace she could use the funds from anyone renting rooms at the Bayside property to assist her with her own rental payments to us.
[65] Mx Xu has been consistent in his evidence that the defendants could use the income received from boarders to assist them to meet payments of mortgage interest, rates, insurance, and other costs associated with the property.
[66] Without considering the legal basis for the claim of unjust enrichment, the counterclaim fails on the facts. Mr Xu acknowledges that the defendants were justified in using the income from boarders to assist in the payments to be made to him. It was not an enrichment of the defendants at the plaintiffs’ expense “without justification”.
[67] The plaintiffs’ counterclaim for the income received from boarders is dismissed.
Use of property for commercial purpose
[68] The plaintiffs’ counterclaim for the (unspecified) income received by the defendants from use of the property to store and trade in commercial goods. It is pleaded in the plaintiffs’ amended counterclaim dated 8 September 2023 as follows:
22The defendants had stored and traded commercial goods from the Bayside Property without permission or knowledge of the Plaintiffs and yield incomes and profits.
23The defendants’ receipt of incomes and profits is an enrichment at the plaintiffs’ expense without justification or basis and without providing fair compensation as restitution to the plaintiffs, leading to an unjust or inequitable result.
The allegations are denied by the defendants.
[69] Without even considering the legal basis for the claim of “unjust enrichment”, the counterclaim fails on the facts. The plaintiffs have not met the burden of proving the facts necessary to establish the counterclaim.
[70]Mr Xu, in his brief of evidence, states:
During the time the defendants occupied the Bayside property they also operated their business from the Bayside property.
[71] In addition, a legal executive employed by the plaintiffs’ solicitors produces an extract from the New Zealand Companies Register which shows that the registered office of Malgholo Limited, of which Ms Guan was the sole director, was 105 Bayside Drive, Browns Bay, Auckland, for the period 11 March 2020 to 24 August 2021.
[72]That is the extent of the evidence.
[73] In the plaintiffs’ closing submissions, counsel argued that the defendants received a benefit because they were able to use the property as their company’s registered office. It was not explained what type of benefit it was. Counsel also suggested that “the rent” for the property could justifiably have been higher because of the commercial use of the property. There were, however, no pleadings or evidence about any express or implied term in the agreement for sale and purchase, the nature and scale of the business, or what income and profits it generated, if any.
[74] The plaintiffs’ counterclaim for use of the property for commercial purpose is dismissed.
Result
[75] The defendants’ counterclaim for return of their $200,000 deposit is granted. The plaintiffs are to pay the defendants the sum of $200,000 plus interest pursuant to s 10 of the Interest on Money Claims Act 2016 from 2 December 2020, the date on which the agreement for sale and purchase came to an end, to the day on which the judgment debt (including all interest payable under the Interest on Money Claims Act 2016) is paid in full.
[76] The defendants’ counterclaim for return of funds paid by them towards the principal component of the plaintiffs’ mortgage while they were in occupation of the property is dismissed. In terms of s 43 of the Contract and Commercial Law Act 2017, the defendants are to pay the plaintiffs the sum of $16,520.20 in respect of interest costs, which they agreed to pay to the plaintiffs while they were in occupation of the property prior to purchase, plus interest pursuant to s 10 of the Interest on Money Claims Act 2016, from 21 September 2021, the date on which the defendants vacated the property, to the day on which the judgment debt (including all interest payable under the Interest on Money Claims Act 2016) is paid in full.
[77] The plaintiffs’ counterclaim for rental of $162,916.19 for the period from 24 February 2020 to 21 September 2021 is dismissed.
[78] The plaintiffs’ counterclaim for income from boarders while the defendants were in occupation of the property is dismissed.
[79] The plaintiffs’ counterclaim for income from using the property for commercial purposes while the defendants were in occupation of the property is dismissed.
[80] The defendants are the most successful party and are entitled to costs on a 2B basis. If costs cannot be agreed, memoranda of no more than five pages are to be filed by 31 January 20214 and a decision on costs will be made on the papers.
Woolford J