Yiin v New Zealand Home Bonds Limited

[2013] NZHC 2238

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-1529 [2013] NZHC 2238

BETWEEN

ANN YIIN and EE LAU

Appellants

AND

NEW ZEALAND HOME BONDS LIMITED

Respondent

Hearing:

22 August 2013

Appearances:

EE Lau for Appellants

D M Lester for Respondent

Judgment:

30 August 2013

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 30 August 2013 at 10.30 am pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

Solicitors:             GCA Lawyers, Christchurch Counsel:              D M Lester, Christchurch Copy to:           A Yiin and E E Lau, Manukau

YIIN v NEW ZEALAND HOME BONDS LIMITED [2013] NZHC 2238 [30 August 2013]

Introduction

[1] This is an appeal against a decision of Judge David Harvey in the District Court at Auckland dated 25 February 2013.1

[2] The Appellants (“Yiin and Lau”) commenced  this  proceeding  in  2008, seeking recovery of $73,000, interest and costs. I am familiar with the proceeding because in September 2010 I heard an appeal by the Respondent (“NZHB”) from a decision of Judge Hubble in the District Court given on 27 July 2009.2 NZHB had applied for summary judgment on its defence, Judge Hubble declined that application and I declined NZHB’s appeal from his decision.3

[3]      The issues which arise on appeal are:

(a)Whether the parties to the ASP, as defined below, cancelled that ASP in about March 2007.  Judge Harvey held that they had not.

(b)Whether the homebond, again defined below, was still in effect at the time NZHB paid a demand made under the homebond. Judge Harvey held that it was.

Background

[4] The proceeding arises out of an agreement for sale and purchase (“ASP”) between Winsun Developments Limited (“Winsun”) as vendor and Yiin and Lau as purchasers dated 20 July 2004. Pursuant to the terms of the ASP, Yiin and Lau were to purchase five units (“units”) in an apartment building to be constructed in Auckland.

[5] The ASP required Yiin and Lau to pay or to secure payment of a deposit equivalent to 15 per cent of the purchase price. The obligation to pay the deposit could be met by payment of the same in cash to a stakeholder or by provision of a

1  Yiin v New Zealand Home Bonds Ltd DC Auckland CIV-2008-004-225, 25 February 2013; and District Courts Act 1947, s 72.

2 Yiin v New Zealand Home Bonds Ltd DC Auckland CIV-2008-004-225, 27 July 2009.

3 New Zealand Home Bonds Ltd v Yiin HC Auckland CIV-2009-404-5378, 12 November 2010.

“Development Homebond” issued by NZHB. Yiin and Lau elected to pay the deposit by provision of a homebond. Given that, the terms of the ASP required them to apply, and they did apply:

4.3... for a [homebond] ... on those terms and conditions contained in the Application Form and Contract prepared by NZHB for the Vendor’s development.

[6] Yiin and Lau applied for the issue of a homebond by written application dated 16 August 2004 (“application”). The opening words of the application state:

[Yiin and Lau] applies for a [homebond] from NZHB in accordance with the conditions stated on [sic] this document ...

[7] The application went on to set out the conditions on which it was made, including that:

Upon unconditional approval of the application by NZHB, NZHB will at the earlier of (a) four months following unconditional approval of this Application or (b) the Unconditional Date (as defined below) issue a [homebond] to the [Vendor, or the nominees of the Vendor], specified in the [ASP] upon the following terms and conditions: ...

[8] NZHB approved the application unconditionally and thereafter the terms and conditions referred to in the passage I have just quoted constituted the agreement between Yiin and Lau and NZHB (“homebond agreement”).

[9]  On 29 November 2004 NZHB issued to Winsun the homebond that Yiin and Lau had sought, being homebond 4610 for $73,000 (“the homebond”).

[10] Hanover Finance Limited (“Hanover”) appointed receivers of  Winsun’s income in August 2007. It appointed receivers to all of Winsun’s assets in or about September 2007.

[11] Yiin and Lau did not settle their purchase and Winsun served a notice or notices under the ASP, requiring Yiin and Lau to settle. From the bar Mr Lau told me that the first notice was issued in July 2007. Some of the evidence suggests that it was September 2007. None of the settlement notices are in evidence.  Regardless, it is common ground that Yiin and Lau did not settle.

[12] In November 2007 Westpac New Zealand Limited, a lender  to  Winsun, assigned all its interest in the homebond to Hanover.

[13] On 30 January 2008 Hanover made demand of NZHB for payment of the amount  of the homebond, that is $73,000.  NZHB paid the sum demanded on 7 February 2008.

[14]   Initially NZHB had protected its position by lodging a caveat against the title to a property of which Yiin and Lau were the registered proprietors. NZHB later withdraw the caveat at the request of Yiin and Lau, in return for an undertaking from their solicitor, Mr Singh, that he would hold $73,000 in his trust account “for the sole benefit of NZHB”.

[15] Mr Singh refused to pay $73,000 on his undertaking and NZHB obtained summary judgment on its claim against Mr Singh. The Court of Appeal confirmed that decision on appeal.4

[16] Although giving judgment for NZHB, the Court of Appeal said that Yiin and Lau might still pursue NZHB for paying the demand in breach of contract, if such breach could be established. That would require Yiin and Lau to establish that payment to Hanover was not in accordance with the homebond agreement, to which I refer below.  Yiin and Lau then issued these proceedings.

District Court decision

[17] Yiin and Lau’s case was that NZHB’s payment was not in accordance with the homebond agreement for two reasons.

[18] The first was that in March 2007 Winsun, Yiin and Lau had agreed to cancel the ASP. Yiin and Lau contended that, as a result of the cancellation, NZHB was not required to pay the demand and/or entitled to recover from Mr Singh.

[19]   Alternatively, Yiin and Lau contended that the homebond was not in effect as at the date of Hanover’s demand, being 30 January 2008, so that NZHB had paid Hanover in breach of clause 27.

[20] Judge Harvey determined both matters against Yiin and Lau and entered judgment for NZHB.

Cancellation

[21] As I have said, at first instance Yiin and Lau submitted that the ASP had been cancelled in March 2007, and so prior to Winsun’s issue of a settlement notice in September 2007 and prior to Hanover’s demand.

[22] It is unnecessary for me to consider where that point might have led, if Yiin and Lau had been or were able to establish such cancellation. There has been some consideration of that separate issue in related litigation, being Sim v New Zealand Home Bonds Ltd.5 I add that the evidence suggests that Winsun did cancel the ASP after Yiin and Lau failed to settle and that in late 2007 Winsun on-sold the Yiin and Lau units to an unrelated third party.   Before me, Mr Lau sought to contend that

Winsun’s cancellation and on-sale to the third party had some relevance to NZHB’s contractual position. I was satisfied that Mr Lau was seeking to raise this point for the first time and declined to allow him to do so.

[23] Judge Harvey was not satisfied that the parties had cancelled the ASP in March 2007 as Yiin and Lau alleged. He reached this view having heard evidence from Yiin and Lau and from Mr Peter Rudkin, a director of NZHB. The Judge’s reasons for rejecting Yiin and Lau’s case as to cancellation may be summarised as follows.

[24] First, Yiin and Lau relied on correspondence, emails and other documents that they contended they had exchanged with Winsun commencing March 2007. They submitted that these documents evidenced the cancellation they alleged.  The

Judge considered that there was a clear issue as to whether the documents were a fiction which Yiin and Lau had created after the event, to support their case.6

[25] Secondly, the Judge recorded that the allegation that the ASP had been cancelled in or about March 2007 was inconsistent with later correspondence from Yiin and Lau’s solicitors to Winsun’s solicitors in July and September 2007. Winsun was pressing Yiin and Lau to settle their purchase throughout this period. Yiin and Lau’s solicitors’ letters did not refer to their clients’ belief that the ASP had been cancelled or to the documents referred to in [24] above. Indeed, one letter from Yiin and Lau’s solicitors dated 31 July 2007 included a request for termination of the ASP.  As the Judge said, such a request would have been unnecessary had the ASP

been cancelled in March 2007.7

[26] Thirdly, the Judge found Mr Lau’s evidence unreliable.  The Judge said he did not consider Mr Lau a credible witness.8

[27] The Judge’s determination that the parties had not agreed to cancel, or cancelled, the ASP in March 2007 was a finding of fact. An appellate court will rarely interfere with such a finding. That is particularly so where the Judge has expressed a view on the credibility of a witness as Judge Harvey did.9   In any event, I consider the view that the Judge took of the documentary evidence to which I have referred to be unassailable.  I dismiss the appeal on this point accordingly.

Was NZHB’s payment to Hanover made in breach of the homebond agreement between Yiin and Lau and NZHB?

[28] Yiin and Lau’s case in the District Court was that the homebond was not in effect at the time Hanover delivered its demand, and that accordingly NZHB paid Hanover in breach of the homebond agreement.

[29] This submission arises from clause 27 of the homebond agreement which provides as follows:

6 Yiin v New Zealand Home Bonds Ltd, above n 1, at [19].

7 Ibid, at [24].
8 Ibid, at [32].

9 Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1993] 3 NZLR 190 at 198 and

27.Following failure by a Purchaser to settle an Agreement,  the Purchaser acknowledges that the Vendor may, before the last day of the Anticipated Bond Period (as extended) deliver to NZHB a written demand which (a) confirms the failure of the Purchaser to settle the Agreement and (b) attaches a certified copy of an expired settlement notice and proof of valid service on the Purchaser. The Purchaser further acknowledges that NZHB will within 7 days of receipt of a claim pay the amount of the [homebond] (“the Amount”) to the Vendor. NZHB may, if requested by the Vendor, delay payment of the Amount without prejudicing NZHB’s obligations to make that payment.

[30] Yiin and Lau’s case is that Hanover’s demand was not delivered “before the last day of the Anticipated Bond Period (as extended)”.

[31] There is no dispute that the homebond continued in force during whatever was the Anticipated Bond Period, that the (first) Anticipated Bond Period was to 31 July 2005 and that the homebond agreement made provision for an extension of the Anticipated Bond Period.

[32]     Clause 20 of the homebond agreement provides as follows:

20.The [homebond] will  continue  in  force  until  expiry  of  the Anticipated Bond Period (including any extension thereof).

[33] Clause 24 of the homebond agreement provides for an extension of the Anticipated Bond Period and reads as follows:

24.NZHB shall give the Vendor and to any bank nominated by the Vendor (“the Vendor’s Bank”) not less than 14 days notice of the expiry of the Anticipated Bond Period and upon receipt of the appropriate extension fee from the Vendor, NZHB shall extend the Anticipated Bond Period of the [homebond] when so requested by the Vendor or by the Vendor’s Bank.

[34] In their statement of claim, Yiin and Lau alleged that the Anticipated Bond Period was not extended after 13 March 2007.10

[35] NZHB denied this allegation. Its case was that the Anticipated Bond Period had been extended from time to time after 13 March 2007, that it had been extended in accordance with the homebond agreement, and that the final extension was from

10 Second Amended Statement of Claim, 7 July 2011 at [13] – [14].

1 January 2008 to 31 January 2008. NZHB adduced evidence of the extensions by affidavits of Ms Nicol O’Donnell and Mr Rudkin, and Mr Rudkin gave evidence and was cross-examined at trial.

[36] The particular issues which arose out of NZHB’s evidence as to extensions were:

(a)Whether NZHB was able to extend the Anticipated Bond Period if the fee payable for the extension had not been received prior to the extension taking effect, that is prior to “rollover”.

(b)Whether a request for an extension of the Anticipated Bond Period from 1 October 2007 had been made.

Extensions

[37] NZHB’s case was that there were extensions of the Anticipated Bond Period from 28 February to 31 March 2007; from 1 to 30 April 2007; from 1 to 31 May

2007; from 1 to 30 June 2007; from 1 to 31 July 2007;  from 1 to 31 August 2007;

from 1 to 30 September 2007; from 1 October to 30 November 2007; from 1 to 31

December 2007; and from 1 to 31 January 2008.

[38] In respect of each extension, NZHB produced copies of its letters to Winsun giving notice of forthcoming expiry of the Anticipated Bond Period. It also adduced evidence of the Anticipated Bond Period being extended in its internal records.

[39] In the case of most extensions, NZHB produced a copy of a written request from Winsun or its bank to extend the Anticipated Bond Period, such request having been made prior to extension or rollover; a copy of NZHB’s invoice in respect of the fee payable in respect of the extension (issued before the extension); and evidence that the fee had been paid. There was such evidence in respect of the monthly extensions from each of 28 February 2007, 1 April 2007, 1 May 2007, 1 June 2007, 1 July 2007 and 1 August 2007. NZHB did not adduce evidence that the fees for these extensions had been paid prior to rollover.  Counsel advised that Yiin and Lau

had never put that in issue. Regardless, to the extent it may have been in issue, it is covered by what is said below.

[40]  The extensions from 1 to 30 September 2007 and from 1 October 2007 to 30 November 2007 raise their own issues, to which I refer below.

[41]    There  was  evidence  that  the  fee  due  in  respect  of  the  extensions  from 1 to 31 December 2007 and from 1 to 31 January 2008 was paid prior to those extensions. Mr Lau sought to contend that the NZHB bank statements evidencing payment were not authentic or related to a different homebond. Again, that was a new point and not capable of being raised on appeal.

Extension from 1 September 2007

[42] Returning to the extension from 1 September 2007, NZHB’s evidence included a copy of Winsun’s written request for an extension and a copy of NZHB’s invoice for the extension fee, both dated 17 August 2007.  The fee was paid after 1 September 2007, so after the extension had taken effect.

[43] An issue arises as to whether NZHB could extend the Anticipated Bond Period even if it had not received the extension fee by the rollover date. Clause 24 provides that NZHB shall extend “upon receipt of the appropriate extension fee”.

[44] NZHB’s submission on this point was that it was able to extend the Anticipated Bond Period even if it had not received payment of the fee and that such is apparent from clause 26 which provides as follows:

26.On any occasion when NZHB is requested to extend the Anticipated Bond Period the Vendor shall immediately pay to NZHB extension fee ... In the event of late payment of any amounts by the Vendor to NZHB, the Vendor will pay to NZHB interest at 18% per annum (calculated on a daily basis) on those amounts and will pay any solicitor and client costs incurred by NZHB in collecting those amounts.

[45] I accept NZHB’s submission that clause 26 contemplates that the Anticipated Bond Period might be extended even if the fee due for the extension is not received

in advance and that NZHB was entitled to extend the Anticipated Bond Period from 1 September 2007 even if it had not then received payment of the extension fee.

[46]   Quite aside from clause 26, NZHB submitted on appeal that it would be open to it to waive receipt of the fee altogether if it chose, or in any event to waive receipt prior to rollover. Given the view I take of clause 26, it is unnecessary for me to determine that point. I accept, however, that in the present case payment of the fee appears to have been a provision inserted for NZHB’s sole benefit, could be severed from the remainder of clause 24 and on usual principles could be waived by NZHB

if it saw fit to do so.11

Extension from 1 October 2007

[47] NZHB was not able to produce a copy of a written request for extension in respect of the extension from 1 October 2007. There is also no evidence that NZHB invoiced the extension fee prior to 1 October 2007, which itself might evidence a request for extension. There is, however, an email from NZHB to Winsun dated 25 October 2007 requesting payment of an overdue invoice for the fee. The fee was paid on 6 November 2007. I have held above that it is irrelevant that the fee was paid after rollover.

[48] NZHB’s evidence was that it would not have extended an Anticipated Bond Period in the absence of a request from the bondholder, and that the Court should infer that such a request was made in respect of the extension from 1 October 2007.

[49] NZHB’s evidence was that usually but not invariably a request to extend the Anticipated Bond Period is made in writing but it submits, correctly, that clause 24 of the homebond agreement does not require a written request.

[50] In support of NZHB’s case that there must have been a request in respect of the extension from 1 October 2007, Mr Rudkin’s evidence was that any extension lengthens NZHB’s period of risk and so NZHB will not extend of its own volition. This was especially so in the case of Winsun towards the end of 2007.  By this time

11 Hawker v Vickers [1991] 1 NZLR 399 at 402.

Winsun was in receivership. NZHB understood that Winsun might claim on any homebond still on foot and, as a result, NZHB “would have been more than happy to let the bonds lapse”. In addition to that, NZHB’s own underwriters require NZHB to follow a proper process as regards any extension. In short, there is every reason for NZHB to let a bond lapse in the absence of a request to extend and the only inference that can be drawn is that such request was made in respect of the extension from 1 October 2007.

[51] The Judge accepted this evidence and was satisfied that Winsun must have requested an extension, even though NZHB could not produce documentary evidence of the same.12 I do not consider there can be any challenge to the Judge’s decision on that point.

[52] To conclude then, I am satisfied that Winsun or its bank extended the Anticipated Bond Period up to and including 31 January 2008 and that it did so in accordance with the homebond agreement.

Result

[53] Yiin and Lau have not alleged any other breach of the homebond agreement that would affect NZHB’s right to recover the amount it paid to Hanover. I am satisfied that the Judge’s decision was correct on the two matters raised in the appeal. I dismiss the appeal accordingly.

[54] The appeal has been classified as category 2 for costs purposes.13 NZHB is entitled to costs on a 2B basis.

..................................................................

M Peters J

12 Yiin v New Zealand Home Bonds Ltd, above n 1, at [46].

13 Minute of Ellis J, 28 May 2013 at [4].