Xu v Meng
[2021] NZHC 1936
•29 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000508
[2021] NZHC 1936
BETWEEN WEI XU and JUNHUI ZHANG
Plaintiffs
AND
XING MENG and HUIMIN GUAN
Defendants
Hearing: 20 July 2021 Appearances:
H L R McDermott for Plaintiffs C J Pendleton for Defendants
Judgment:
29 July 2021
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 29 July 2021 at 3.45 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date ………………………
XU & OR v MENG & OR [2021] NZHC 1936 [29 July 2021]
Introduction
[1] The plaintiffs seek, by way of summary judgment, an order for recovery of possession of their property at Browns Bay.1
[2] The defendants, in possession, dispute the jurisdiction of the Court to make the order. They counterclaim on the basis they are entitled to remain in possession pending a refund of a deposit they paid as purchasers under an oral agreement for the sale and purchase of the Property.2
[3] The defendants obtained a caveat over the Property, protecting their interest as conditional purchasers, in March 2020. They failed to obtain the necessary finance by a Court-imposed deadline and the caveat has now lapsed. They have made no payments of any kind to the plaintiffs for well over 12 months.
[4] Part 13 of the High Court Rules 2016 provides for summary proceedings to recover land from “unlawful occupiers”, but the definition of that term expressly excludes occupiers holding over after the termination of a tenancy.3
[5] To determine the ultimate issue of whether the plaintiffs have established the defendants have no defence, I must resolve the following questions:
(a)Are the defendants “unlawful occupiers” in the meaning of pt 13 of the Rules, or does the tenancy exclusion apply meaning the Court has no jurisdiction to make the orders sought?
(b)Do the defendants have a contractual, or other, legal right to remain in possession pending the refund of the deposit?
(c)Should I, as a matter of discretion, decline to enter summary judgment and instead, direct that the plaintiffs’ claim and the defendants’ counterclaim be tried at the same time?
1 The Property.
2 The Agreement.
3 Rules 13.1 and 13.2.
Factual background
[6] The plaintiffs, Wei Xu and Junhui Zhang, own the Property, at 105 Bayside Drive, Browns Bay. Mr Xu and one of the defendants, Huimin Guan have known each other for over 20 years.
[7] In May 2018, the defendants moved into the Property on the basis of the Agreement that they would ultimately purchase it.
[8]The Agreement was an oral one, and included the following terms:
(a)The purchase price would be $1.78m;
(b)A deposit of 20 per cent would become payable when the defendants, the purchasers, sold their own property;
(c)The defendants would pay the mortgage payments for the Property and other outgoings, including rates and insurance, up until settlement; and
(d)The Agreement was conditional upon the defendants obtaining finance.
[9] There was no agreed date by which the defendants were required to obtain finance to enable them to complete the purchase.
[10] In October 2018, the parties agreed to a reduced deposit of $200,000. The defendants paid the deposit.
[11] Between 2018 and March 2020, the defendants paid the mortgage payments, rates and insurance for the Property. There have been no further payments since March 2020, and the defendants have remained in possession since without making payment of any kind to the plaintiffs.
[12] On 3 March 2020, Ms Guan sent Mr Xu a WeChat message stating that the bank needed a formal sale and purchase agreement for the Property in order for the defendants to obtain finance.
[13] Shortly after, the defendants lodged a caveat against the title to the Property to protect their interests as conditional purchasers. Mr Xu says he found out Ms Guan had lodged the caveat when LINZ alerted him on 6 March 2020.
[14] On 2 September 2020, Lang J granted orders sustaining the caveat until 2 December 2020 to enable the defendants to obtain finance.4 The plaintiffs say that their solicitors gave the defendants’ solicitors a written agreement for sale and purchase for execution on the day of the caveat hearing. That written agreement has never been executed.
[15] On 19 November 2020, the plaintiffs’ solicitors wrote to the defendants’ solicitors noting that the caveat would soon lapse, on 2 December 2020. The letter stated that in the absence of a caveat, the defendants could not claim any right to occupy the Property and that “it is now time” for the defendants to vacate. As to the deposit, a final calculation would be made as to what the defendants owed in rent and the balance of the deposit “if any” would be returned, less any costs awarded.
[16] In a minute issued on 24 November 2020 in the caveat proceedings, Lang J noted that the defendants had not applied to sustain the caveat beyond 2 December 2020, and it would lapse on that date accordingly. He also noted that the plaintiffs had agreed to return to the defendants their deposit, and that any outstanding dispute would need to be resolved in another forum.
[17]The plaintiffs have not refunded the deposit.
[18] In his costs judgment of 10 February 2021 in the caveat proceedings,5 Lang J proceeded on the basis the defendants had been unable to arrange finance and, as a consequence, the Agreement had come to an end and the caveat lapsed.6
[19] By letter dated 21 January 2020, the plaintiffs’ solicitors wrote to the defendants’ solicitors contending the defendants were occupying the land without the consent or licence of the plaintiffs, and needed to vacate. The plaintiffs also claimed they were entitled to bring a proceeding for the summary recovery of the land.
[20] On 12 February 2021, the defendants’ solicitors responded that until the defendants were fully refunded for their deposit amount, the Agreement remained in
4 Meng and Guan v Zhang and Xu HC Auckland CIV-2020-406-816.
5 Meng and Guan v Zhang and Xu [2021] NZHC 131.
6 At [2].
force. The defendants asserted they continued to have the right to occupy the Property as a purchaser in early possession.
[21] The defendants say that during the period from 2 September 2020 to 2 December 2020, they tried to obtain finance but were unable to do so due to bank lending restrictions as a result of COVID-19 and the fact Mr Meng’s employment as an airline pilot was not secure enough to obtain a mortgage.
[22] On 21 June 2021, Nation J dismissed an application by the plaintiffs for a stay of execution of Lang J’s costs orders.7
Relevant legal principles
[23]Rule 12.2(1) of the High Court Rules provides:
The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[24] The “well settled” principles on a summary judgment application are summarised in Krukziener v Hanover Finance Ltd:8
[26] … The question … whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). 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 with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end 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: Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
[25] Rule 13.2 of the High Court Rules provides that Part 13, summary proceedings for the recovery of land, applies to every proceeding in which the plaintiff claims the recovery of land that is occupied by “unlawful occupiers”.
7 Meng and Guan v Zhang and Xu CIV-2020-404-000816 (Minute of Nation J).
8 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.
[26]“Unlawful occupier” is defined in r 13.1:
In this Part, unlawful occupier means a person who –
(a)occupies or continues to occupy land of the plaintiff without the licence or consent of the plaintiff or the plaintiff’s predecessor in title; and
(b)is not a tenant or subtenant holding over after the termination of a tenancy or subtenancy.
Analysis and decision
Issue (a) – Does the Court have jurisdiction under r 13.1?
[27] It is clear that because r 13.1 expressly excludes tenants whose right to occupy has expired, the Court has no jurisdiction to grant summary judgment against them for the recovery of land.
[28] The defendants contend that they have a reasonably arguable case they are tenants, falling within the exclusion in r 13.1(b). They submit the plaintiffs have not maintained a consistent position as to whether the defendants have early possession rights or whether they treated them as tenants. There are said to be disputed factual matters going to the status of the defendants, whether tenants or purchasers in possession, and these matters cannot be resolved at a summary stage.
[29] Ms Pendleton, on behalf of the defendants, therefore submitted the plaintiffs have not demonstrated the defendants have no defence of want of jurisdiction.
[30] I accept that some of the terminology used by the plaintiffs in their pleadings and affidavits, with reference to the term “rent”, might suggest that the defendants are tenants. But such references are far from decisive. Equally, the evidence establishes the defendants have taken a consistent legal position that they were purchasers in possession. The fundamental basis on which they obtained a caveat was that they were purchasers under a conditional agreement for sale and purchase. As recently as 12 February 2021, the solicitors for the defendants claimed that the defendants continued to have the right to occupy the Property as a “purchaser in early possession”.
[31] Bearing in mind the principles summarised in Krukziener v Hanover Finance Ltd,9 I consider a robust and realistic approach to assessing the defendants’ status is required. This is not a case where there are truly relevant material conflicts of evidence.
[32] In substance, the agreed basis for the defendants to occupy the Property is not in issue. The defendants clearly intended to purchase the land and were allowed to take possession prior to the settlement of the Agreement. This was done on the clear and express understanding that the defendants would become the de facto owners of the Property, assuming all outgoings, including mortgage, rates and insurance payments, that would otherwise be the responsibility of the plaintiffs. At no time have the defendants paid rent as such; the $200,000 is clearly a deposit and the other payments made are ordinarily the responsibility of the owners of the Property.
[33] As already noted, the clear legal basis for the caveat and the extension of time for the defendants to obtain finance was that they were conditional purchasers. Significantly, most of the references in the plaintiffs’ evidence to “rent” are in the context of the defendants remaining in possession after 2 December 2020 and at a time where, understandably, the plaintiffs were concerned that the defendants were continuing to occupy without making payment of any kind to the plaintiff. Indeed, the defendants stopped making any payments in March 2020, but have remained in occupation since that time and well beyond the 2 December 2020 deadline granted by Lang J.
[34] If the defendants were tenants, then they would, on the face of it, be the tenants of a residential premises subject to the Residential Tenancies Act 1986.10 However, purchasers under an agreement for sale and purchase are expressly excluded from that Act.11 That is no doubt a recognition of the fact that a different legal regime applies, namely ss 28 and 29 of the Property Law Act 200712 where a purchaser is in possession. Section 29 of the PLA requires a vendor seeking to cancel an agreement for sale and purchase where the purchaser is in possession, to give a notice to the purchaser that complies with specified, mandatory statutory criterion. I address later
9 Krukziener v Hanover Finance Ltd, above n 4.
10 RTA.
11 RTA, s 5(1)(o).
12 PLA.
in this judgment the question of whether the plaintiffs’ failure to give a notice under ss 28 and 29 of the PLA is a basis for refusing summary judgment.
[35] The exclusion of the RTA does not provide a complete answer to the question of whether the tenancy exception to Part 13 of the High Court Rules arguably applies here. It does, however, provide an indication that a purchaser in possession is in a different legal relationship with the owner of the property (than a tenant) and is subject to a different legal regime.
[36] The meaning of “tenancy” and “tenant”, as defined in the RTA, is useful to the interpreting of the exception in r 13.1(b):
tenancy, in relation to any residential premises, means the right to occupy the premises (whether exclusively or otherwise) in consideration for rent; and includes any tenancy of residential premises implied or created by any enactment; and, where appropriate, also includes a former tenancy
tenant, in relation to any residential premises that are the subject of a tenancy agreement, means the grantee of a tenancy of the premises under the agreement; and, where appropriate, includes –
(a)a prospective tenant; and
(b)a former tenant; and
(c)a lawful successor in title of a tenant to the premises; and
(d)the personal representative of a deceased tenant; and
(e)an agent of a tenant.
[37] The defendants do not fit within either of these definitions. There was never a tenancy to terminate and so the defendants have never been “holding over”. They have never paid rent, as such. They were purchasers in possession, but since the Agreement came to an end they have remained in possession without the plaintiffs’ consent and with no right to remain. Therefore, I reject Ms Pendleton’s submission there is an arguable case the Tenancy Tribunal has jurisdiction here.
[38] I find that the defendants are unlawful occupiers for the purposes of pt 13 of the High Court Rules. Accordingly, this Court has jurisdiction to grant summary judgment for recovery of the land.
Issue (b) – Do the defendants have a contractual or other right to remain in possession pending refund of the deposit?
[39] The defendants submit the Agreement has not been formally cancelled by either party. They note that the plaintiffs have not filed a statement of defence to their counterclaim in which they seek recovery of a deposit paid of $200,000. They note that Lang J, in his minute of 24 November 2020, recorded the plaintiffs’ agreement to return their deposit to them. They submit that until such time as the deposit is fully refunded, the Agreement remains in force and they continue to have the right to occupy. They also contend that because the plaintiffs have not complied with the notice requirements under ss 28 and 29 of the PLA, summary judgment cannot be granted.
[40] However, I reject all of those contentions. It is clear, as Lang J held in his costs judgment of 10 February 2021,13 that the Agreement came to an end on 2 December 2020, the same time as the caveat lapsed. The finance condition was not met by the defendants and the Agreement did not continue beyond 2 December 2020.
[41] I accept that there is a reasonably arguable claim that the defendants are entitled to a full refund of their deposit and a reasonably arguable claim that they have an equitable lien over the Property for the unpaid deposit.14 However, at best, those claims might give rise to a caveatable interest; they do not confer any rights of possession on the defendants.
[42] In conclusion, the Agreement does not remain in force and the defendants cannot claim any right to remain in possession pending the refund of the deposit.
[43] I also reject the submission that the plaintiffs’ failure to comply with ss 28 and 29 of the PLA means they have no right to summary judgment. Those sections do not apply here. The Agreement failed because they could not obtain finance and not because the defendant purchasers were in breach.15 A breach of contract by the
13 Meng & Guan v Zhang & Xu, above n 2, at [2].
14 Hewitt v Court (1983) 149 CLR 639 at 97.
15 In Jeremy Finn, Stephen Todd and Matthew Barber (ed) Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018), the authors note at [18.6] that if a contract for the sale of land is conditional on the purchasers obtaining suitable mortgage finance, and the contract fails because the purchaser after making reasonable efforts cannot find the money, then there is no room for the application of the cancellation provisions in the Contract and Commercial Law Act 2017.
purchaser is a prerequisite to the application of ss 28 and 29. In addition, the parties were put on notice in December 2020 by Lang J that the Agreement had come to an end. It would not make sense to now find the plaintiffs have to take formal steps to cancel the Agreement when the defendants accept they cannot pay the purchase price.
[44] In any event, the defendants have, in substance, enjoyed all of the rights to relief and reasonable opportunity to remedy any breach that ss 28 and 29 provide for. The caveat was extended by Lang J, giving the defendants the opportunity to meet the finance condition and with due notice of the consequences of their failure to do so by the date of 2 December 2020. This proceeding has also provided the defendants with an opportunity to be heard on substantively similar arguments to the considerations in an application for relief against cancellation.16
Issue (c) – Should I exercise my discretion to dismiss the application for summary judgment17 and direct both the claim and counterclaim be determined at trial?
[45] In support of their contention that I should dismiss the application for summary judgment and direct that the plaintiffs’ claim and the defendants’ counterclaim proceed together to trial, the defendants rely upon the following passage of McGechan J’s judgment in Roberts’ Family Investments Ltd v Total Fitness Centre (Wellington) Ltd:18
Rather than give an immediately enforceable judgment to the plaintiff on the plaintiff’s claim, perhaps allowing that plaintiff to bankrupt the defendant before the latter’s counterclaim can be brought to judgment and offset, the Court may and commonly does grant the plaintiff summary judgment accompanied by a stay of execution of such judgment pending resolution of the counterclaim, or occasionally dismisses the summary judgment application, directing trial of both claim and counterclaim.
[46] In addressing this issue, I accept, as noted above, that the defendants have an arguable claim for return of the full amount of the deposit. However, that does not form a proper basis for declining to grant summary judgment and directing a trial of both claim and counterclaim. Likewise, I reject the application that any summary judgment should be stayed pending determination of the counterclaim.
16 PLA, s 33.
17 High Court Rules, r 12.12(2).
18 Roberts’ Family Investments Ltd v Total Fitness Centre (Wellington) Ltd [1989] 1 NZLR 15, (1988) 1 PRNZ 88 at 92.
[47] The present application is confined to the issue of recovery of land. As Ms McDermott, for the plaintiffs, submitted, the question of possession is quite separate and distinct from whether the defendants are entitled to a return of their deposit. The defendants have remained in possession for approximately 16 months without making payment of any kind to the plaintiffs. They have been on notice for well over six months that they do not have the consent of the plaintiffs to remain in possession. The plaintiffs wrote to them on 19 November 2020 requiring them to vacate. In all the circumstances, I reject the contention that it would be in the “interests of justice” to exercise my discretion in such a way as to defer summary judgment.
[48] The better approach is, as provided for in the orders set out below, to give the defendants four weeks to move out of the premises. I do so in recognition of the particular circumstances of the defendants, including the fact that Ms Guan is living at the Property with her children without her husband, Mr Meng. He is in China and having difficulties returning to New Zealand because of COVID-19.
Result
[49] I grant the plaintiffs’ application for summary judgment and make an order against the defendants for recovery of the Property. The plaintiffs are entitled to vacant possession.
[50] The order is to come into force 28 days after the date of this judgment by which time the defendants are required to have vacated the Property.
[51] As to costs, I am of the preliminary view that having succeeded, the plaintiffs are entitled to costs and on a 2B basis plus disbursements.
[52] If costs cannot be agreed, then memoranda (no more than three pages’ length) are to be filed and served within 14 days.
Associate Judge P J Andrew
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