Zhang v Zhai - [2014] NZHC 2156

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-6491 [2014] NZHC 2156

BETWEEN
SHAOHE ZHANG

Plaintiff

AND

XIAOJUN ZHAI and AIDONG ZHANG Defendants

Hearing: 8 August 2014

Appearances:

E St John and D Liu for Plaintiff
C Henry for Defendants

Judgment:

8 September 2014

JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 8 September 2014 at 3:0 pm
Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

ZHANG v ZHAI & ANOR [2014] NZHC 2156 [8 September 2014]

Introduction

[1] In 2003, the plaintiff, Mr Shaohe Zhang, and the defendants, Mr Xiaojun Zhai and his wife Ms Aidong Zhang, entered into a sale and purchase agreement (“the agreement”) for a property in Auckland. Although the plaintiff paid a deposit, the transaction was never completed. In 2012, the plaintiff served a settlement notice on the defendants. When they refused to settle, the plaintiff filed an application for specific performance. I granted that application in a judgment delivered on 16 May
2014 (“the principal judgment”).1 The defendants have since appealed that decision.

[2] In the principal judgment, I reserved leave to the parties to apply for any further orders that were necessary or desirable to give effect to the order for specific performance.2 The parties have been unable to agree on precisely what the order requires. That is the subject of this decision.

Facts

[3] The facts are described fully in the principal judgment at [6]-[18]. They may be briefly restated. On 3 August 2003, the plaintiff agreed to buy the defendants’ property in New Lynn, Auckland (“the property”) for a price of $348,000. The agreement was unconditional except for the issuing of a new title. The agreed possession date was the later of 3 November 2003 or five days after the issue of the title. Title was issued on or about 22 June 2004. The defendants did not notify the plaintiff that the title had been issued but the plaintiff and his solicitor soon became aware that this was the case.

[4] Construction of the house on the property was completed in December 2003. Under the agreement, the defendants warranted that at the date of possession the property would comply with the requirements set out in the Building Act 1991 and would have a code compliance certificate (“CCC”). However, the property failed final code compliance inspections and the Council declined to issue a certificate. A
notice to rectify was issued by the Council.

1 Zhang v Zhai [2014] NZHC 1026, [2014] 3 NZLR 69.
2 At [71].

[5] On 27 January 2004, the defendants claimed through their solicitors that the agreement was frustrated and sought confirmation that the plaintiff would “withdraw from the alleged agreement”. The plaintiff declined to regard the agreement as frustrated. A determination on behalf of the Chief Executive of the Department of Building and Housing, released on 28 October 2005, held that the refusal to grant the CCC was justified because of identified defects attributable to poor workmanship. The determination held…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NZHC 2156
Decision Date: 8 September 2014

CaseChat Overview and Summary

The defendants appealed the decision of Toogood J in Zhang v Zhai, [2014] NZHC 1026, [2014] 3 NZLR 69, in which the plaintiff was granted an order for specific performance of a sale and purchase agreement for property in Auckland. The defendants contended that the terms of the agreement should be amended because of the substantial increase in property values since the agreement was signed, that the plaintiff should not have the benefit of both the capital gain and the purchase price that he had retained, and that they should be relieved of their contractual obligation to pay default interest to the plaintiff. The plaintiff resisted these arguments and contended that the order for specific performance required the contract to be performed according to its terms so far as that was possible. The Court held that specific performance was a means by which parties were held to the bargain they entered into and was a remedy which required a party “to act consistently with the contract of sale”. Although the Court had discretion to amend the terms of the agreement in order that it could be performed, it could not do so in a way that would be to substitute the original contract with another. The Court found that the defendants’ liability to pay interest for late settlement was offset against the plaintiff’s liability to pay interest on the purchase money for the period in which he had had the benefit of it. The Court rejected the defendants’ submission that the plaintiff was required to mitigate his losses, stating that this principle was relevant to assessing the level of damages, not in the context of an order for specific performance. The Court held that the property was to be transferred according to the terms of the agreement, including the parties’ respective liabilities for interest under cl 3.10. The Court granted a stay of execution of the principal judgment and any orders made in this judgment pending the final disposition of the defendants’ appeal, on the condition that the defendants keep up the current momentum in prosecution of their appeal. The plaintiff was awarded costs on a 2B scale basis.

Orders