GNLC Limited v Daji HC Auckland CIV-2009-404-8510 [2011] NZHC 942 (16 August 2011)

Last Updated: 2 September 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2009-404-8510}

BETWEEN GNLC LIMITED Plaintiff

AND YVONNE DAJI First Defendant

AND REALTIES BUSINESS BROKERS LIMITED

Second Defendant

CIV-2009-404-8514

AND BETWEEN GNLC LIMITED Plaintiff

AND GAVIN DAJI AND PARVATI BILKEY AS TRUSTEES OF THE G DAJI FAMILY TRUST NO. 2

First Defendants

AND REALTIES BUSINESS BROKERS LIMITED

Second Defendant

CIV-2009-404-8520

AND BETWEEN GNLC LIMITED Plaintiff

AND GAVIN DAJI First Defendant

AND REALTIES BUSINESS BROKERS LTD Second Defendant

Hearing: 4-7 July, 8 and 10 August 2011

Appearances: Mr A Commons for plaintiff

_{Mr Daji in person}

GNLC LTD V DAJI HC AK CIV-2009-404-8510 16 August 2011

Mr L Ponniah for Mrs Daji

Mr A Ross and Ms M Wisker for second defendant

Judgment: 16 August 2011 at 5:00 PM

_{JUDGMENT (NO 2) OF LANG J}

This judgment was delivered by me on 16 August 2011 at 5 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

[1] The Great Northern Land Company Limited (“Great Northern”) was the developer of an industrial park in Northland known as the Marsden Point Industrial Park. When fully developed, the complex will comprise 78 sections of a size suitable for industrial purposes.

[2] The first defendants in this proceeding entered into five contracts to acquire sections in the development. Mr Daji agreed to buy Lots 55 and 49 under agreements that he signed on 7 and 29 February 2007. He also entered into an agreement on 8 October 2007 to purchase Lot 35 on behalf of the G Daji Family Trust No 2. Mrs Daji entered into agreements on 7 February and 10 April 2007 to purchase Lots 48 and 54.

[3] Each of the contracts became unconditional, but on the date of settlement none of the defendants was able to complete the purchase of the sections. Great Northern issued this proceeding seeking an order requiring the defendants to specifically perform their obligations under the contracts.

[4] The defendants resist the application for specific performance. They say that they were induced to enter into the contracts by misrepresentations made by Mr Bruce Truscott, a real estate employed by the second defendant, Realties Business Brokers Limited (“Realties”). Great Northern had engaged Realties to market the development.

[5] The defendants have purported to cancel the contracts as a result of the alleged misrepresentations. They claim that they are no longer required to perform their obligations under them. They also contend that, in making the representations, Mr Truscott engaged in misleading and/or deceptive conduct in breach of s 9 of the purposes of the Fair Trading Act 1986. They contend that this entitles them to relief under that Act in the form of the termination of the contracts.

[6] On 22 June 2011, Great Northern transferred the land in the development to GNLC Limited (“GNLC”). It also sold the benefit of any contracts relating to the land to GNLC. The existence of these transactions was not known to the defendants

at the time of the trial. In a contemporaneous judgment I have ordered that GNLC

be substituted as plaintiff in place of Great Northern in each of these proceedings.1

Joinder of Parvati Bilkey as a first defendant in CIV-2009-404-8514

[7] In CIV-2009-404-8514 GNLC seeks specific performance of a contract that Mr Daji entered into in his capacity as a trustee of the G Daji Family Trust No. 2. When Great Northern issued this proceeding, it did not know the identity of any of the other trustees. For that reason, it named Mr Daji as the sole defendant.

[8] Great Northern initially endeavoured to obtain summary judgment against Mr Daji. When Mr Daji filed documents in opposition to the application for summary judgment, he disclosed for the first time that his sister, Mrs Parvati Bilkey, was his co-trustee. In the intituling to those documents he named both himself and Mrs Bilkey as first defendants. Although the Court did not subsequently make any order formally joining Mrs Bilkey as a party, documents filed by counsel and issued by the Court thereafter named both Mr Daji and Mrs Bilkey as first defendants in that proceeding.

[9] At the commencement of the trial, counsel for the plaintiff sought an order formally joining Mrs Bilkey as a first defendant. He advanced the application on the express basis that the plaintiff acknowledged that Mrs Bilkey’s liability as a defendant would be restricted to the assets for the time being of the G Daji Family Trust No. 2.

[10] Three factors persuaded me to make the order that the plaintiff sought. First, Mr Daji signed the relevant agreement for sale and purchase in his capacity as a trustee and purported at that time to act on behalf of his co-trustee(s). Mrs Bilkey is the only other trustee of the G Daji Family Trust No 2. Mrs Bilkey has clearly left the administration of the trust’s affairs entirely in the hands of Mr Daji. She has played no practical part in making any of the decisions that are material to the issues

_{that the proceeding raises. Mr Daji has been solely responsible throughout for}

1 Great Northern Land Co Ltd v Daji & Ors (No. 1) HC Auckland, CRI-2009-404-8510, 16 August

2011

making those decisions. Notwithstanding that fact, any remedy to which GNLC might be entitled must be directed to both of the trustees and not just to Mr Daji. Mrs Bilkey’s presence before the Court is therefore required to enable all matters in issue between the plaintiff and the trustees to be finally and effectually determined.

[11] Second, all parties have proceeded for the last 15 months on the basis that the trustees are the persons who were named as first defendants. Third, Mrs Bilkey cannot be prejudiced personally as a result of any order joining her as a defendant because of the limited nature of any liability that she may incur as a result.

The defences based on misrepresentation

[12] As currently pleaded, the affirmative defence based on misrepresentation is formulated as follows:

By facsimile dated 10 March 2010 the defendant cancelled the agreements on the basis of representations made to him by the plaintiff’s agent that were not true, false and misleading and the agreement is therefore unenforceable.

Particulars

Representations

(a) The defendant was induced to enter into the sale agreement by and relied upon the oral representations made to him by the plaintiff’s agent and representative, Bruce Truscott of Realties Property Brokers, that the state of the subdivision development and the prevailing real estate market conditions and the influences of surrounding infrastructure development were such that:

(i) The land would increase in value by settlement date to a extent that was not feasible; and

(ii) There would be no difficulty in being able to on-sell the land before the settlement was required.

[13] These pleadings must be considered in light of answers that Mr Daji gave to interrogatories on 2 September 2010:

Answers to questions

Question

5.1 In relation to each and every allegation of misrepresentation relied upon by the defendants in these proceedings:

5.1.1 Please specify with particularity the precise words used (or, if applicable, state the words used to the best of your recollection and belief).

Answer

Mr Truscott stated, “the value of the properties would increase as a result of market forces and with ongoing civil works to the industrial park.”

Mr Truscott stated, “the properties in the industrial park were selling fast and would continue to be easy to sell without difficulty.”

In reply to my question to Mr Truscott asking, “would I get

$300m² for the properties before settlement date?” Mr Truscott stated, “yes you will get $300m².”

...

Question

5.2 In each and every case, what precisely in the alleged misrepresentation(s) identified in the answers to 5.1 caused the defendant(s) to enter into any agreement the subject of these proceedings (please specify in each case the relevant agreement entered into)?

Answer

In relation to each of the sale agreements, it was the representation that there would be no difficulty in being able to on-sell the land before the settlement date for $300m².

Question

5.3 If any of the alleged misrepresentations identified in 5.1 had not been made, would the defendant(s) have entered into any of the agreements the subject of these proceedings in any event?

Answer

No.

[14] On 20 October 2010 Mr Daji provided answers to further interrogatories that Great Northern had administered. He added to the answers that he had given earlier as follows:

Answers to questions

Question

5.1 In relation to each and every allegation of misrepresentation relied upon by the defendants in these proceedings:

5.1.1 Please specify with particularity the precise words used (or, if applicable, state the words used to the best of your recollection and belief).

Answer

...

In relation to the above misrepresentations and in the context of the above statements, Mr Truscott said that a rail link was to be constructed between Whangarei and Marsden Point for transportation of goods and commuters. He also said that the Ports of Auckland company and the Whangarei port company were investing in the Marsden Point harbour.

...

The defences based on breach of s 9 of the Fair Trading Act 1986

[15] The defences based on misleading and/or deceptive conduct under s 9 of the Fair Trading Act 1986 are based on the same acts and representations as those relied upon in relation to the defence based on misrepresentation. As a result, the critical issue is whether Mr Truscott orally represented to Mr and Mrs Daji before they entered into each contract that they would be able to on-sell the sections prior to settlement for $300 per square metre or more. There is also a subsidiary issue regarding representations that Mr Truscott is said to have made regarding the construction of the rail link.

How is credibility to be assessed?

[16] The parties are sharply divided on the critical issues. Mr Truscott flatly denies that he made representations of the type that Mr and Mrs Daji allege. He agrees that he told Mr and Mrs Daji that the sections were likely to increase in value over time and he still believes that this statement is correct. He rejects, however, any suggestion that he assured Mr and Mrs Daji that they would have no trouble selling the sections prior to settlement for not less than $300m². Whilst he accepts that the rail link was proposed, he denies that he gave Mr and Mrs Daji the impression that construction of the link was imminent. The issue is therefore one of credibility. The

Court must determine whether Mr and Mrs Daji are correct on this point or whether the evidence of Mr Truscott is to be preferred.

[17] All parties have vested interests. Mr and Mrs Daji clearly stand to lose a great deal if their defence of these proceedings is unsuccessful. In that event, they will be required to pay the plaintiff the sum of $1.72 million together with interest accruing since 2 October 2009. In return, they will receive sections that are now worth considerably less than that sum. As a result, they have a significant incentive to ensure that their evidence is as persuasive as possible.

[18] Mr Truscott and Realties also have a substantial interest in the outcome of the proceedings. In the event that Mr and Mrs Daji persuade the Court that they were entitled to cancel the contracts, GNLC will look to Realties for the losses that it will suffer as a result. The proceedings may also have a wider significance so far as Mr Truscott and Realties are concerned. Other purchasers of sections in the development have also endeavoured to cancel contracts on the grounds of misrepresentations allegedly made by Mr Truscott. Great Northern has issued proceedings against those purchasers in this Court. The defendants in those proceedings are undoubtedly awaiting the judgment in the present proceedings with interest. An adverse result in the present proceedings may have ramifications for Realties in the other proceedings.

[19] The Court therefore needs to be particularly careful when considering the oral evidence given by parties who have a vested interest in the outcome. The stakes are sufficiently high that the Court will need to exercise caution before accepting such evidence at face value.

[20] As in any case involving issues of credibility, several factors assume importance. First, the inherent plausibility of the assertions made by each party. Second, the consistency of the evidence that the witnesses give. Third, whether the assertions that each party makes are supported or contradicted by contemporaneous events and documents. I will consider each of these factors in turn.

Are the claims inherently plausible?

[21] Counsel for GNLC and Realties submit that, viewed objectively, the Mr and Mrs Dajis’ core claims are inherently implausible. They point out that, like any commodity market, the real estate market can be volatile. It is affected by many factors, including supply and demand. Events such as the global financial crisis can significantly affect the ability of purchasers to obtain loan capital. For these reasons it is not possible to predict with any degree of accuracy the future state of the market. Speculative investment in the market therefore carries a substantial degree of risk. That is particularly the case where, as here, investors are participating in a greenfields development that depends on the completion of significant infrastructure for its viability. GNLC and Realties say that, given those circumstances, no reasonable person in Mr Truscott’s position would ever give a cast-iron guarantee that investors would definitely be able to on-sell their properties within 18 months and at a substantial profit.

[22] That submission has force, because any person making such a representation would be predicting a future state of affairs over which he or she has absolutely no control. To the extent that Mr Truscott is said to have suggested that the Dajis would have no problem selling their sections before settlement, I consider that the claim is inherently unlikely. I do not consider it likely that any reasonable real estate agent, no matter how keen he or she might be to promote a development, would make a firm prediction of that nature.

[23] I accept, however, that it is possible that the Dajis discussed with Mr Truscott the possibility of on-selling their sections before settlement. I say this because of the evidence of Dr Philip Haggo, who gave evidence under subpoena on Mrs Daji’s behalf. On 23 July 2007, Dr Haggo’s family trust entered into an agreement to purchase Lot 1 at the Port Marsden Industrial Park for the sum of $624,600. This was equivalent to a purchase price of $200 per square metre. Dr Haggo said that before he entered into the agreement, he discussed the proposed purchase with Mr Peter Jennings, the sales manager at Realties. He went on to say:

4. Mr Jennings advised me before I signed that he saw a potential for significant capital gain and the chances are we will not have to settle

because we will be able to sell the lot for $300 per square metre prior to the settlement date.

[24] Dr Haggo’s evidence needs to be treated with care for two reasons. First, other counsel did not receive a brief of his evidence until very shortly before he was called to give evidence. As a result, they were not able to take instructions regarding his evidence before they cross-examined him. Second, Dr Haggo spoke of discussions that he had with Mr Jennings and not Mr Truscott. Words attributed to Mr Jennings cannot be imputed to Mr Truscott.

[25] Nevertheless, Dr Haggo was an independent witness, and I gained the impression that he was careful in the way he gave evidence about his discussions with Mr Jennings. He did not appear to be prone to exaggeration or hyperbole.

[26] Dr Haggo’s evidence was instructive, because in the passage set out above he said that Mr Jennings told him that “chances were” that he would not have to settle because he would be able to on-sell the section before settlement. I take this to mean that there was a possibility that Dr Haggo would be able to on-sell the section before settlement. That is considerably different to the allegation that Mr and Mrs Daji make. It is also significant that Dr Haggo did not hold Mr Jennings to his prediction, because he duly completed the purchase of his section once title became available. He did so notwithstanding the fact that he had not been able to on-sell the property by that time.

[27] I consider that, if Mr Truscott discussed the possibility of on-selling the sections with Mr and Mrs Daji, he is likely to have adopted a similar approach to that apparently taken by Mr Jennings when he dealt with Dr Haggo. Mr Truscott may have told the Dajis that there was a prospect that they would be able to on-sell the sections before settlement. The claim that he assured them that that would definitely be the case is inherently implausible.

[28] Dr Haggo’s evidence does, however, suggest that sales staff at Realties (although not necessarily Mr Truscott) were expressing the view that prices could reach $300 per square metre by the time titles were available.

[29] In addition, Mr Daji gave evidence that during 2007 Mr Truscott sent him written material about the industrial park. This included a copy of an article entitled “Marsden Point Surges with Industrial Growth” published in the Independent on

3 October 2007. The article contained the following passage:

Realties is selling individual lots in the 40-hectare Port Marsden

Industrial Park to owner/occupier warehouse users for between $200 to

$230 per square metre.

“They won’t always stay at that price. Lots are expected to rise to about

$350 per square metre once titles are issued,” said Jennings.

Port Marsden Industrial Park has about $19 metres I pre-sales.

NorthGate will cover 100 hectares and is being built next to Port Marsden

Industrial Park.

The developer is offering only eight sections at pre-construction prices, with lots of about 2,000 square metres from $350,000.

Commercial titles for both of the industrial parks are expected to be granted in about 18 months.

... (Emphasis added)

[30] Dr Haggo’s evidence and the Independent article persuade me that I cannot discount this aspect of the Dajis’ claim as being inherently implausible.

[31] To the extent that the claim relates to the proposed rail link, the position is different. Even a layman would appreciate that a 20 kilometre stretch of railway line does not materialise overnight. An appropriate route must first be selected and designated for that purpose. The land must then be acquired from its present owners. This is likely to be a protracted exercise given the number of individual owners involved. The physical construction of the railway line must then be undertaken. These matters would inevitably require a considerable time to complete.

[32] Mr and Mrs Daji do not claim that Mr Truscott told them that the rail link would be completed prior to settlement. To the extent, however, that they suggested that Mr Truscott told them that construction of the rail link had begun or was imminent, I consider their claim to be inherently implausible.

Is the evidence of the witnesses consistent?

[33] The principal witnesses of fact were Mr and Mrs Daji, Mr Ranjit Singh and Mr Truscott. It is necessary to have examine the consistency of their evidence at trial in light of any earlier statements they may have made.

Mr Daji

[34] Mr Daji said in evidence that he met with Mr Truscott on several occasions before he signed the agreements to purchase the sections. He said that his discussions with Mr Truscott during this period “centred on the viability of buying and selling the properties in the subdivision before settlement”. He maintained that he made it clear to Mr Truscott that he and his wife were interested in buying the properties for the sole purpose of re-selling them at a profit before settlement. They needed to do so in order to fund the construction of a “dream home” on a section that they had purchased at Rockhouse Road, Whananaki.

[35] Mr Daji went on to say that Mr Truscott told him that the value of the sections would increase as a result of market forces and the civil works that were taking place at and around the development. Mr Truscott also told him that settlement would be required once titles to the sections were available. He anticipated that this would be in about 18 months time. By that time, the civil works around the project would be completed. Mr Daji said that when he asked Mr Truscott whether he would be able to get $300 per square metre for the sections, Mr Truscott told him that “that should not be a problem”.

[36] Mr Daji said that Mr Truscott also told him that a rail link was being constructed between Whangarei and Marsden Point to provide access to the area for goods and commuter trains. Mr Truscott said that property was being purchased for the rail link, and that works had already started at Oakley. Mr Daji maintained that Mr Truscott never told him that the rail link was merely a proposal, or that land for the rail link had not yet even been designated for that purpose.

[37] Mr Daji said that Mr Truscott consistently told him that properties in the development were selling fast, and that they would continue to sell without difficulty because of the overall nature of the surrounding development. Mr Truscott’s assurances regarding these issues led Mr Daji to believe that he and his wife would have no difficulty on-selling their sections prior to settlement for not less than $300 per square metre. He said that, had Mr Truscott qualified his assurances in any way, he would not have proceeded with the purchase because he never intended to hold the sections beyond settlement. He was not in a financial position to do that. Mr Daji maintained that Mr Truscott was always aware that he was purchasing the properties “for a quick re-sale prior to settlement, expected in 18 months time”.

[38] Counsel for GNLC points out that Mr Daji’s evidence at trial was significantly different to statements he had made earlier. When Mr Daji first raised the issue of misrepresentation in documents he filed in opposition to Great Northern’s application for summary judgment in March 2010, he did not specify that Mr Truscott had told him that he would be able to on-sell the land prior to settlement for not less than $300 per square metre. Nor did he seek to rely upon representations that Mr Truscott allegedly made regarding the construction of the rail link.

[39] Mr Daji’s stance altered when he subsequently filed a further affidavit on

3 June 2010. In this, he raised these two issues for the first time. He deposed that when he asked Mr Truscott whether he would be able to get $300 per square metre for the sections prior to settlement, Mr Truscott told him that “that shouldn’t be a problem”. He also deposed that Mr Truscott had told him that property was being purchased for a railway to be constructed between Whangarei and Marsden Point for commuters.

[40] When Great Northern administered interrogatories seeking to identify exactly what representations Mr Daji relied upon, Mr Daji responded by saying that Mr Truscott had told him that the value of the sections would increase as a result of market forces and the ongoing civil works around the development. He particularised the civil works to which he was referring as being the opening up of adjacent land for development, the levelling of the sections and the installation of roading, street lighting and electrical transformers.

[41] In his answers, Mr Daji also departed from his previous stance regarding the representation that Mr Truscott had made in relation to the sale price that he and his wife could obtain for the sections. Whereas he had earlier said that Mr Truscott told him it “should not be a problem” to obtain $300 per square metre, he now said that Mr Truscott told him “Yes you will get $300 per square metre”.

[42] Counsel for GNLC also pointed out that Mr Daji’s evidence regarding the rail

link has developed significantly. After he raised this issue for the first time in June

2010, Mr Daji referred to it again in another affidavit sworn on 2 September 2010. In this affidavit, Mr Daji deposed that Mr Truscott had told him that a rail link was “to be constructed” between Whangarei and Marsden Point for the transportation of goods and commuters. His brief of evidence at trial went further still. It referred to the fact that Mr Truscott had told Mr Daji that a rail link “was being constructed”. It also said that Mr Truscott also told him that property “was being purchased” for the rail link, and that work had actually started at Oakley.

[43] Finally, counsel for GNLC points to the fact that Mr Daji said in his answers to interrogatories that Mr Singh had been the only other person present when Mr Truscott made the representations that he now relies upon. In his brief of evidence, however, he said that his wife had also been present on some occasions. In cross- examination Mr Daji explained this discrepancy by saying that his memory of events had improved over time.

[44] I accept GNLC’s submission that it is significant that, up until June 2010, Mr Daji never alleged that Mr Truscott had told him that he would be able to get $300 per square metre for the sections prior to settlement. This alleged representation forms an important part of Mr Daji’s case. He nominated it in his brief of evidence as the core representation that induced him to enter into the contracts. One would therefore expect him to have raised it at the earliest opportunity. I also accept GNLC’s submission that Mr Daji’s evidence regarding the rail link has developed over time. The failure to mention the fact that his wife was present on some occasions when representations were made is also significant. Mr Daji’s evidence at trial was therefore different to some extent to what he had said on earlier occasions.

Mrs Daji

[45] Mrs Daji said that she learned about the Marsden Point development through discussions with her husband. He told her that his discussions with Mr Truscott had centred on the viability of buying and selling sections before settlement. Mr Daji told her that he had made it clear to Mr Truscott that his sole purpose in buying the sections was to on-sell them at a profit prior to settlement so as to be able to fund the construction of their dream home. She said that her husband also told her that Mr Truscott had said that he expected prices to increase to $300 per square metre prior to settlement.

[46] Mrs Daji said that she met Mr Truscott on two occasions immediately prior to signing the agreements. She said that on both occasions Mr Truscott “reiterated...his expectation that prices would increase to $300 per square metre prior to the settlement date”. She said she made it clear to Mr Truscott that she was not in a position to hold the properties beyond the expected settlement date. When she asked him what would happen if the lots did not sell, he told her that “there would be no problem”. He said that properties in the industrial park were selling fast, and that they would continue to be easy to sell.

[47] Mrs Daji says that she understood these statements to confirm that the properties would increase in value to at least $300 per square metre prior to settlement, and that they would remain easy to sell. She therefore considered that her only outlay in respect of the investment would be the required deposit and her conveyancing costs. She says that she was made to believe that on-selling the sections at a profit was an absolute certainty, and that she never considered that she would have to come up with the money to settle the purchase.

[48] Mrs Daji also says that Mr Truscott never advised her that the rail link was only a proposal, and that it might take many years to become a reality. Had he qualified his assurances in any way, she would not have agreed to purchase the sections. She says that Realties had ongoing instructions to sell the section prior to settlement, but this never eventuated.

[49] During cross-examination, Mrs Daji accepted that she ran a successful business as a midwife, and that she had earned approximately $220,000 through that business during the year ended 31 March 2010. She also confirmed that she had owned a total of nine properties before she entered into the agreements to buy the sections. She had acquired two of these as investments on the advice of her accountant.

[50] Mrs Daji also confirmed that she had relied to a large extent on the experience and expertise of her husband when she decided to purchase the sections. She left it to him to deal with the solicitors who were acting on their behalf in relation to the purchase. She did so because she trusted him to know what he was doing.

[51] Counsel for GNLC questioned Mrs Daji closely about the two occasions, on

7 February and 10 April 2007, when she met Mr Truscott immediately before signing the two agreements. In response, she said that she could not remember where either meeting was held, although she thought it would have been at her apartment or at her or her husband’s place of work. She confirmed, however, that Mr Singh was not present on either occasion.

[52] When asked to recall precisely what Mr Truscott said at the first meeting, Mrs Daji said that she could not do so. She could recall, however, Mr Truscott telling her that it shouldn’t be a problem, or that there would be no problem, obtaining $300 per square metre for the sections prior to settlement. She also said that when she asked him whether he was sure she would be able to on-sell them prior to settlement, he said “That shouldn’t be a problem. They’re going like hot cakes”. These assurances convinced her that the purchase of the sections would be a very safe investment.

[53] She says that Mr Truscott also told her at the first meeting that the rail link was coming, but he did not go into the detail of that any further other than to say that the rail had started and work had been carried out at Oakley. She took this to mean that work on the line had already started.

[54] Mrs Daji said that when she met Mr Truscott on the second occasion, he told her that prices were going up and she needed to buy the second section that month if she wished to be able to acquire it at the current price. She was not sure if he mentioned on that occasion the fact that she would have no difficulty on-selling the sections before settlement for $300 per square metre.

[55] Counsel for Great Northern drew Mrs Daji’s attention to the fact that on

19 March 2010 she had sworn an affidavit in opposition to Great Northern’s application for summary judgment against her. In that affidavit, she had deposed that Mr Truscott had told her that the value of sections in the development would continue to increase because of market forces and the ongoing civil works around the development. She also said that he told her that sections in the development were selling fast and would continue to be easy to sell. Mrs Daji did not allege at this time that Mr Truscott told her that there would be no problem selling the sections prior to settlement, or that she would be able to do so for at least $300 per square metre.

[56] Mrs Daji explained this omission by saying that her lawyers had drafted the affidavit after asking her questions, and they did not ask her any questions about these issues. She said that she did not notice the omission after they had drafted the affidavit and asked her to sign it. She agreed that she had probably not told her lawyers about these aspects of her discussion with Mr Truscott before they prepared her affidavit.

[57] I do not find Mrs Daji’s explanation on this issue convincing. She and her solicitors would have been anxious to advance a credible defence to Great Northern’s application for summary judgment. It is highly unlikely that Mrs Daji would have forgotten to tell her solicitors about such an important aspect of her discussions with Mr Truscott when she was providing them with material to be included in her affidavit. It is equally unlikely that her solicitors would have omitted to include it if she had told them about it.

[58] Mrs Daji’s failure to mention such an important issue at an earlier stage must

obviously be regarded as significant. It suggests that her claims have developed over

time. It certainly means that Mrs Daji’s evidence at trial differed in a material way to the evidence contained in the affidavit that she swore in March 2010.

Mr Ranjit Singh

[59] In 2007 Mr Singh worked on a part-time basis at Mr Daji’s panelbeating business as a bookkeeper and business administrator. He came to learn about the Port Marsden development through talking to Mr Daji about it. His company, Fiji- NZ Connection Limited, entered into an agreement on 9 October 2007 to purchase one of the sections in the development.

[60] Mr Singh said that he was in the office at Mr Daji’s business premises in Henderson on two occasions when Mr Truscott visited. He says that both visits occurred before he agreed to buy his section. He overheard the discussions that occurred between Mr Daji and Mr Truscott on both occasions. He also spoke to Mr Truscott himself on another occasion when Mr Truscott was trying to persuade him to purchase the section.

[61] During these discussions Mr Singh distinctly recalls Mr Truscott saying that the sections were worth at least, and would sell for, $300 per square metre. He also recalls Mr Truscott telling him that he would be able to on-sell the section before settlement and make a substantial capital gain. When he questioned Mr Truscott as to whether this was realistic, Mr Truscott told him that prices had already moved from $180 per square metre to $200 per square metre. Mr Truscott also said that he was expecting prices to move to $220 per square metre before the end of the month. Mr Truscott told him that there would be no problem selling the section prior to settlement, because there was huge demand.

[62] These assurances persuaded Mr Singh that he had an opportunity to invest in a profitable venture. He calculated that, if the value of the section went up to $300 per square metre, he stood to make a substantial profit. He therefore decided to invest $60,000 as a deposit on Lot 8 in the development. This represented the bulk of his savings. He said that he would not have invested in the project if he

considered that it would place his retirement savings, which he regarded as a “golden egg”, at risk.

[63] Mr Singh said that he expressly told Mr Truscott that he would not be able to commit any further funds to the investment. For that reason it was essential that he was able to on-sell the section before he was required to pay for it. He said that he would never have purchased the property if Mr Truscott had told him there was a risk that prices would not go up, or that he would not be able to on-sell the section prior to settlement.

[64] During cross-examination, counsel for GNLC drew Mr Singh’s attention to affidavits he had sworn in opposition to Great Northern’s application for summary judgment against him. Great Northern filed that application after Mr Singh failed to complete the purchase of his section in November 2009. In common with Mr and Mrs Daji, Mr Singh did not allege at that time that Mr Truscott told him that he would have no difficulty on-selling the section prior to settlement for $300 per square metre. Like them, he said only that Mr Truscott had told him that the value of properties in the development would increase as a result of market forces and with the ongoing civil works around it. He also said that Mr Truscott told him that sections in the development were selling fast, and that they would continue to be easy to sell.

[65] When asked to explain this omission, Mr Singh said that he had told the lawyers who were acting for him about that aspect of the alleged misrepresentations. He said, however, that they were unwilling to raise it with Great Northern’s solicitors. He said that his solicitors were more interested in trying to appease Great Northern so as to be able to negotiate a settlement on his behalf. For that reason he never attempted to cancel the agreement on the grounds of the misrepresentations.

[66] Mr Singh also accepted that in August 2009 his solicitors had told Great Northern’s solicitors that he would be unable to complete the purchase because of his financial position as a student. He did not at that time raise any issue relating to misrepresentation.

[67] During cross-examination Mr Singh agreed, although he did not appear to have a good understanding of exactly what had occurred, that Great Northern had eventually accepted that he did not have the financial means to complete the purchase of the section. It cancelled the agreement because he had made it clear that he would not be able to perform it. Great Northern then amended its claim against Mr Singh so as to seek damages for the loss that it will incur on the re-sale of the section. This Court will hear that claim on 26 August 2011. Mr Singh remains hopeful, however, that resolution of the claim will be possible.

[68] Counsel for GNLC made two other points about Mr Singh’s evidence. First, he pointed out that Great Northern administered interrogatories requiring Mr Daji to answer questions about the circumstances in which Mr Truscott made the allegations that now form the basis of Mr Singh’s claim. When he answered these in March

2010, Mr Daji had made no mention of Mr Singh being present at the time the representations were made. Counsel for GNLC also pointed to the fact that Mr Singh accepted that the first occasion on which he was present during discussions with Mr Truscott was in or around September 2007. As a result, Mr Singh could not have been present when Mr Truscott discussed the purchase of the first four sections with Mr and Mrs Daji. They signed agreements to purchase those sections prior to September 2007. The only agreement signed after August 2007 was that in respect of Lot 35, which Mr Daji signed on behalf of the trust on 5 October 2007.

[69] I am not convinced by Mr Singh’s explanation for his failure to raise the issue of the alleged misrepresentations earlier than he did. Once he knew that Great Northern was determined to enforce the agreement, I have no doubt that he and his solicitors would have used every argument at their disposal to persuade it to settle the claim. If Mr Singh had told his solicitors about the alleged misrepresentations at an early stage, I am sure they would have raised that issue as soon as Great Northern made it clear that it wanted him to complete the purchase. They would not have delayed raising it until after Great Northern had issued proceedings seeking specific performance of the contract.

[70] It is also clear that, like Mr and Mrs Daji, Mr Singh’s version of what Mr

Truscott said to him has developed over time. It is difficult to see why he did not

detail the misrepresentations in full when he initially filed his affidavit in opposition to Great Northern’s application for summary judgment. In addition, he still has a powerful incentive to place pressure on GNLC because of his desire to settle the claim that it has brought against him. All of these factors mean that Mr Singh’s evidence must be treated with caution.

Mr Truscott

[71] Mr Truscott said that he first met Mr Daji in early 2007. One of Realties’ directors, Mr John Adams, went to the same gymnasium as Mr Daji. He had mentioned the development to Mr Daji on one of his visits to the gymnasium, and Mr Daji expressed an interest in it. Mr Adams advised Mr Truscott of Mr Daji’s interest, and Mr Truscott then made contact with Mr Daji.

[72] Mr Truscott said that Mr Daji told him that he already owned a house in the vicinity of the development, and that he was in that area quite often. Mr Truscott arranged to show Mr Daji round the site. He said that Mr Daji already seemed to be familiar with the development at that time. Mr Truscott assumed that this stemmed from the fact that Mr Daji already owned property in the area. Mr Truscott also said that Mr Daji appeared familiar with property transactions generally, and he told Mr Truscott that he owned a number of residential properties.

[73] Mr Truscott said that he met Mr Daji on several occasions before the agreements were signed. The meetings occurred both on site and at Mr Daji’s business premises. He thought that he had also met with Mr Daji on one occasion at one of the residential properties that Mr Daji owned.

[74] Mr Truscott said that he also met with Mrs Daji, but did not have a great deal to do with her. He maintained that Mr Singh was not present on any occasion on which he met with Mr Daji.

[75] Mr Truscott also said that after Mr and Mrs Daji signed the agreements, he stayed in contact with them. Mr Daji referred other potential purchasers to him, and three persons referred to Mr Truscott in this way (including Mr Singh) subsequently

entered into unconditional agreements to purchase sections in the development. Mr Truscott paid Mr Daji a referral fee in respect of these transactions. Mr Truscott also regularly sent Mr and Mrs Daji items of interest, including newspaper and magazine articles, about the development. He accepted that one of these was likely to be the article from the Independent dated 3 October 2007.2

[76] Mr Truscott denied that he had ongoing instructions to on-sell all of the sections prior to settlement. He pointed out that this would have required Mr and Mrs Daji to provide Realties with specific authority, in the form of a listing agreement, to sell the properties. Realties never held a listing agreement authorising it to sell any of the sections to be purchased by Mr and Mrs Daji. Mr Truscott said that, if he had learned that somebody might be interested in purchasing one of the sections, he would have informed Mr and Mrs Daji. If they had confirmed that they were interested in dealing with that party, he would have arranged for them to sign a listing agreement so that negotiations could be taken further. He said that no discussions of that nature occurred because he never encountered any potential purchasers for the sections.

[77] Mr Truscott also said that Mr Daji told him that he planned to on-sell four of the five sections at some stage. He said that he initially believed that Mr Daji planned to re-locate his panelbeating business to the first section that he purchased. He did not find this surprising because the land was zoned for industrial use. He understood that Mr and Mrs Daji were purchasing the remaining sections as an investment. Mr Truscott denied, however, that Mr Daji told him that it was essential that he be able to on-sell the sections prior to settlement, or that he told Mr Daji that he would have no difficulty in doing so. He maintains that he told Mr Daji that he should allow plenty of time to sell the sections, and that others may be planning to on-sell their sections as well. Mr Truscott pointed out that he would have been reckless to permit Great Northern to enter into agreements with Mr Daji if he knew that Mr Daji did not have the means to complete them.

[78] Mr Truscott also denied telling Mr Daji that sections in the development were selling fast. He said, however, that there was strong interest in the development, and

2 Referred to above at [29]

sales were steady. More than half of the available lots were subject to contract by the end of 2007. He said that that was a very good rate of sales for a new development. Most sections had also sold at list price. Sales then stalled in 2008 as economic conditions deteriorated.

[79] Mr Truscott says that in 2007 he believed that the value of the sections would increase over time, and he maintains that belief today. He agreed that he told Mr Daji that he was of the opinion that the value of sections in the development would increase over time. He is adamant, however, that he never promised Mr Daji or anybody else that the value of the sections would increase. Nor did he make any predictions as to when the sections would increase in value, or by how much. He pointed out that the value of sections in the development did, in fact, increase to

$220 per square metre after Mr and Mrs Daji purchased their sections. Several purchasers agreed to buy sections in the development at that price and most, if not all, of those sales were subsequently completed.

[80] Mr Truscott does not recall Mr Singh ever being present when he discussed the proposed purchase of sections in the development with Mr Daji. His recollection is that he only met Mr Singh on one occasion, that being on 9 October 2007 when Mr Singh signed the agreement to purchase Lot 8. He says that on that occasion he showed Mr Singh the site plan and pointed out the sections that Mr and Mrs Daji had purchased. Mr Truscott denies making any representations to Mr Singh regarding the extent to which the value of the section would increase prior to settlement, or regarding the probability of Mr Singh being able to on-sell his section prior to settlement.

[81] Similarly, Mr Truscott denies that Mrs Daji ever told him that she needed to on-sell her sections prior to settlement, or that he told her that she would be able to do so for not less than $300 per square metre. Had she told him that she did not have the ability to complete the purchase, Mr Truscott says that he would not have allowed her to sign the agreements.

[82] Mr Truscott also says that Mr Daji approached him in March 2008 and said that he wanted to sell four of the sections that he had purchased. Mr Daji asked Mr

Truscott to calculate what price per square metre he would need to achieve for those sections in order to make a profit of $1 million. He told Mr Truscott that he wanted to exclude Lot 35 from the exercise because he had purchased that section through the trust as an investment for his son. In response, Mr Truscott prepared a spreadsheet on or about 7 March 2008 setting out the return that Mr Daji would achieve in respect of sales at $220, $250, $300 and $350 per square metre. This demonstrated that Mr Daji would need to sell the four sections for $300 per square metre in order to realise a profit of $1 million.

[83] Mr and Mrs Daji rely upon this document as supporting their argument that Mr Truscott had an ongoing instruction to sell the four sections other than Lot 35. They also suggest that the document confirms that Mr Truscott represented to them that the sections had the potential values shown in the spreadsheet. I do not accept these submissions. I consider that the spreadsheet was created for the purpose described by Mr Truscott, and that this is obvious given the narration that accompanied it. The narration said:

The following are some calculations of the returns on your blocks at Port Marsden Industrial Park at various selling prices.. The block on the left shows the actual price paid for your 4 Lots and the total deposit paid. You asked me to calculate a selling price that would enable you to make a profit of $1,000,000 and you will see below that this target is reached at a selling price of $300m². I’m not clairvoyant so can’t say when the market will reach this level but we are currently selling at $220m² which is a good increase on your purchase price last year. Earthworks are underway to remove the peat and roading is about to start so I would expect ongoing price increases as each stage is completed through to final consents and titles in approximately 18 month. The current price of land in Albany is now over

$600m² so $300m² could be achieved in the not too distant future.

[84] I found some aspects of Mr Truscott’s evidence surprising. He had very little recall, for example, of where he had met Mr Daji and Mr Singh. I am satisfied that Mr Truscott met Mr Daji on more than one occasion at Mr Daji’s office at the premises where he conducted his panelbeating business. Mr Truscott was unable to remember these meetings, however, and he was unable to name the suburb in which Mr Daji’s business was situated. I am also satisfied that Mr Truscott met Mr Singh more than once. I think it is unlikely that Mr Singh would have signed a contract to purchase a section in the development on the first occasion that he met Mr Truscott.

It is also likely that Mr Singh was present in Mr Daji’s office on at least one of the

occasions on which he met with Mr Daji.

[85] I consider, however, that these issues probably arise as a result of the time that has passed since these events occurred. Mr Truscott ceased to work for Realties in June 2008, and he probably never had cause to think about his meetings with the Dajis and Mr Singh until February 2010, when the allegations of misrepresentation surfaced for the first time. For that reason, it is not surprising that he does not now remember much of the detail surrounding his meetings with them in 2007.

[86] Mr Truscott has been consistent, however, in his evidence on critical issues. It did not suffer from the deficiencies I have identified the Dajis’ and Mr Singh’s evidence.

Are the parties’ assertions supported or contradicted by contemporaneous events

and documents?

[87] Mr Bilkey of Graham & Co acted for the Dajis and for Mr Singh on the purchase of the sections. Mr Bilkey is married to Parvati Bilkey. He was a person in whom the Dajis and Mr Singh appear to have placed their trust. They could therefore have been expected to raise their concerns about the alleged misrepresentations with Mr Bilkey at an early stage.

[88] Mr and Mrs Daji maintain that they became aware in or about July 2009 that Mr Truscott had misrepresented the true position regarding the development to them. They also say that they told Mr Bilkey about their concerns at around this time. One would therefore have expected Mr Bilkey to have some recollection of these discussions.

[89] Mr Bilkey’s evidence, however, was to the effect that he could not recall anybody raising issues about misrepresentation prior to the point at which Great Northern issued proceedings in early 2010. At that point the Dajis and Mr Singh instructed the law firm of Keegan Alexander to act on their behalf in defending the proceedings.

[90] I consider that Mr Bilkey gave his evidence honestly and fairly. He was obviously not happy that he had been issued with a subpoena to give evidence on behalf of Great Northern. His discomfort was no doubt exacerbated by the fact that his wife is now a defendant in one of these proceedings. I am sure that the last thing Mr Bilkey wanted was to become involved in the business problems of his wife’s family. I am also sure that he would have remembered if his wife, Mr Daji or Mr Singh had ever raised the issue of alleged misrepresentations with him. I consider that it is very significant that they never raised that issue with him at any stage before Great Northern issued proceedings against them.

[91] Mr Bilkey’s actions between July and December 2009 are consistent with him being unaware of any suggestion that Mr Truscott had misrepresented the position to the Dajis and Mr Singh. On 6 July 2009 the law firm of Hornabrook Macdonald, who were acting for Great Northern in relation to the development, sent survey plans for lots 35, 48, 49, 54, 55 to Mr Bilkey at Graham & Co. They advised Mr Bilkey that titles were likely to be issued in mid to late August 2009. Mr Bilkey did not respond by raising the issue of misrepresentation at that point.

[92] On 20 August 2009, Mr Bilkey wrote to Great Northern’s solicitors

requesting an extension of the settlement date for these properties until Christmas

2009. Mr Bilkey said that, if titles were to issue shortly, the Dajis would not be in a position to settle because Mr Daji had been unable to achieve sales on a number of properties he had been marketing. Again, he did not mention the issue of misrepresentation. Hornabrook Macdonald declined the request for an extension by letter dated 26 August 2009. They confirmed that Great Northern required settlement to proceed on the due date.

[93] Between 31 August and 23 September 2009 Hornabrook Macdonald sent Mr Bilkey further correspondence regarding progress in relation to the development. They indicated that settlement was likely to be scheduled for 2 October 2009. Mr Bilkey did not raise any issue about misrepresentation during this period.

[94] On 23 September 2009 the Dajis received valuation reports in respect of mortgages over lots 48, 49, 54, and 55 from Garton & Associates Ltd. These were

prepared for mortgage purposes. The valuers assessed the values of the properties at

$345,000, $330,000, $340,000 and $350,000 respectively. In their report, the valuers noted:

Our assessed current market values are generally in line with many of the presales but have eased from where the current asking prices are at around

$220 per m2. Considerable judgment is required in making our assessments

as there is limited sale evidence available in the Ruakaka location of anything comparable with the lots within this development....

The large supply of sections within this development and coming on stream next door in the Northgate Park Development will mean an over supply of lots in the short to medium term. If there are a large number of investors who seek to put their sections back on the market once settlements have occurred and these compete with the developers attempting to sell their remaining sections then a softening in price may well occur. If any vendors are forced to do so and stressed sales occur then we expect this could also affect market values. In the meantime our assessments are based on our knowledge and judgments made at this time, and as noted being approximately 25% below current asking prices. On the positive side we have run hypothetical costings for developments of buildings and other site improvements on these lots on the basis of sound leases at market rates and the residual land value derived is supported in our following valuations

....

[95] On 2 October 2009, Mr Bilkey wrote to Hornbrook McDonald stating that the Dajis were unable to settle because they were “still working on finance”. Once again, he made no mention of any misrepresentation notwithstanding the fact that the date for settlement had arrived and the Dajis had not on-sold any of their sections.

[96] On 6 October 2009 Hornabrook Macdonald issued settlement notices requiring the Dajis to complete the purchase of the sections no later than 12 working days thereafter. This did not evoke any response from the Dajis or from Mr Bilkey.

[97] At this stage Mr and Mrs Daji were still trying to obtain finance to enable them to complete the purchase of the sections. They had engaged a finance broker, Strata Funding Limited, to assist them in this endeavour. On 19 October 2009, Strata Funding sent Mr Daji an indicative offer of a funding facility that would enable them to repay existing loans and complete the purchase of four of the sections.

[98] On 13 November 2009 Hornabrook McDonald wrote to Mr Bilkey advising him that, unless the Dajis advanced a satisfactory settlement proposal by

18 November 2009, Great Northern would commence proceedings against them. They asked Mr Bilkey to advise whether he was authorised to accept service of the proceedings on behalf of his clients. Mr Bilkey did not respond to this letter.

[99] Strata Funding was still endeavouring to find suitable finance to enable the Dajis to complete the purchase of the sections. It sent an application for finance to a building society on 13 November 2009, with the covering note stating:

Jointly [Mr and Mrs Daji] have owned a number of residential investment properties though over the last 12 – 18 months they have been selling the portfolio down. This sell down being undertaken to provide for their purchase of four (4) industrial – commercial sections under development in the Port Marsden Industrial Park, Marsden Point. Combined area some

8,000 sq metres...

It is intended by clients that the One Tree residence is to be sold down also a sale and leaseback of the Lincoln Road commercial unit [Mr Daji’s business premises] be actioned in the first quarter of 2010. Surplus funds being utilised to reduce term debt The retention of the four Marsden Point sections [is] seen as a strategic term investment given total land area, corner situation and high road exposure (3 frontages).

(Emphasis added).

[100] On 17 November 2009 Strata Funding prepared a further application for finance, this time to Kiwibank. The covering notes sent with this application contained the same statements as above. As a result, Kiwibank made Mr and Mrs Daji an indicative offer of finance on 3 December 2009. Mr and Mrs Daji accepted the indicative offer on 7 December 2009.

[101] Meanwhile Great Northern was continuing to apply pressure. On 17

December 2009 its solicitors wrote to Mr Bilkey advising that they had been instructed to apply for specific performance. They again asked Mr Bilkey whether he was authorised to accept service of the proceedings on behalf of his clients. He replied in the affirmative, but did not raise any issue in relation to misrepresentation.

[102] For some reason the Kiwibank loan offer did not come to fruition. Strata Funding continued its efforts to obtain funding by sending loan applications to several other institutions on Mr and Mrs Daji’s behalf over the next two months. All of these contained statements to the effect that the Dajis saw the retention of four of

the Marsden point sections as being “a strategic term investment” or “a term investment”. As part of this process Mr Daji also asked Mr Truscott to send a letter to the Bank of New Zealand in February 2010 providing the bank with information about the Port Marsden development. During this period Mr Daji was also seeking to obtain an unconditional contract for the sale of his Lincoln Road commercial property. This occurred in January 2010.

[103] Great Northern filed its proceedings in this Court on 22 December 2009 and subsequently served them on Mr Bilkey. Mr and Mrs Daji then consulted Keegan Alexander, who acted for them thereafter until very shortly before trial.

[104] The application for summary judgment was scheduled to be called for the first time on 11 March 2010. On that date Keegan Alexander filed documents in opposition to all of the applications for summary judgment, together with a memorandum indicating they had been instructed on 25 February 2010. The documents filed by Keegan Alexander advised Great Northern for the first time that Mr and Mrs Daji alleged that misrepresentations by Mr Truscott had induced them to enter into the agreements.

[105] I consider that these aspects of the evidence are determinative of the Dajis’ claims. First, their failure to mention anything about the alleged misrepresentations to Mr Bilkey is, as I have already mentioned, highly significant. Second, their claims need to be measured against what they and their advisors said and did after July 2009. Rather than raise the issue of misrepresentation with Great Northern immediately, they instructed Mr Bilkey to seek an extension of time within which to complete the agreements. Then, with the assistance of Strata Funding, they continued their efforts to raise finance to enable them to achieve that object. These efforts continued well into February 2010, long after Mr Bilkey received the proceedings that Great Northern had issued. I find it incomprehensible that Mr and Mrs Daji would say and do nothing to alert Great Northern to such serious allegations if they were genuine about making them.

[106] In particular, it is inconceivable that Mr and Mrs Daji would have remained silent once they knew in July 2009 that they would be required to complete the

purchase of the sections within a couple of months. At that stage it would have been plain to them that they had no prospect of on-selling their sections prior to settlement, let alone for $300 per square metre. If their claims were genuine, I have no doubt that they would immediately have told Great Northern that they were not prepared to continue with the purchase of the sections. They would not have endeavoured to continue with their efforts to obtain funding to enable them to do so.

[107] I have concluded that Mr and Mrs Daji did not raise these issues earlier because Mr Truscott did not make the representations upon which they now rely. For that reason the alleged representations did not induce them to enter into the agreements.

What really happened at the time that Mr and Mrs Daji entered into the agreements?

[108] My impression of Mr Daji is that he considers himself to be an extremely astute property investor. By the time he entered into the agreements he had already bought several other properties, including the Lincoln Road commercial premises and the property situated not far from the Port Marsden Industrial Park. I believe that he formed his own view that the Port Marsden development was likely to be successful, and that he decided to enter into the agreements based on that conclusion. Whilst I accept that Mr Truscott may have been enthusiastic about the development, and justifiably so given the level of sales and prices that had been achieved when he dealt with Mr Daji, I do not consider that Mr Daji was induced to enter into the agreements as a result of anything that Mr Truscott said. Mr Daji alone must accept responsibility for his decision to purchase the sections.

[109] I am also satisfied that Mrs Daji and Mr Singh became interested in buying their sections as a consequence of their discussions with Mr Daji. I have no doubt that Mrs Daji, and probably Mr Singh, viewed Mr Daji as a person with considerable knowledge and experience in the field of property acquisitions. I am sure they took the view that, if Mr Daji was keen about the development, it must be worthwhile. For that reason I consider it likely that Mrs Daji and Mr Singh were induced to enter into the agreements by the views that Mr Daji expressed to them about the

development. They were not induced to do so by anything that Mr Truscott may have said to them.

[110] I do not accept, either, that Mr Daji ever considered that it was essential for him to be able to on-sell the sections prior to settlement. They still saw the sections as being a strategic term investment as late as January 2010. That is the only explanation for the statements that Strata Funding made on their behalf when it submitted loan applications to institutional lenders between November 2009 and February 2010. I believe that Mr and Mrs Daji remained genuinely committed to completing the purchase of the sections even after Great Northern issued proceedings seeking specific performance of the agreements. The only thing preventing them from being able to do so was their inability to obtain loan finance at that time.

[111] Eventually, however, time ran out. In March 2010 Mr and Mrs Daji were required to respond to Great Northern’s applications for summary judgment. It was only then, in my view, that they formed the view that Mr Truscott had misled them prior to the point at which they entered into the agreements. I am unable to say that they fabricated their claims against Mr Truscott. It seems more likely that, once they instructed Keegan Alexander, they viewed their earlier conversations with Mr Truscott in a new and unfavourable light. It is also likely that at this stage they placed a new interpretation on the spreadsheet that Mr Truscott had prepared at Mr Daji’s request in March 2008, and the Independent article that he had sent them during 2007.

Conclusion

[112] Regardless of how Mr and Mrs Daji formed their views, I am satisfied, for the reasons already given, that those views did not accord with what actually occurred when they discussed the purchase of the sections with Mr Truscott. Their defences based on misrepresentation and breaches of the Fair Trading Act 1986 cannot succeed.

Should orders for specific performance be made?

[113] Mr and Mrs Daji contend that the transfer of the land in the development to GNLC operates as a complete bar to GNLC’s claim for specific performance. They base this submission on clause 9.4(2) of each agreement for sale and purchase, which provides as follows:

9.4 If the purchaser does not comply with the terms of the settlement notice served by the vendor then:

...

(2) Where the vendor is entitled to cancel this agreement the entry by the vendor into a conditional or unconditional agreement for the resale of the property or any part thereof shall take effect as a cancellation of this agreement by the vendor if this agreement has not previously been cancelled and such resale shall be deemed to have occurred after cancellation.

[114] Mr and Mrs Daji submit that the transaction under which GNLC acquired the land amounted to a “re-sale” of each section in the development for the purposes of clause 9.4(2). As a consequence, it had the effect of cancelling each of the agreements between Great Northern and the defendants. For that reason it is no longer open to GNLC to seek specific performance of those agreements.

[115] Clause 9.4(2) clearly applies where the vendor re-sells the land that is the subject of the agreement in circumstances that effectively extinguish the obligations imposed by the earlier agreement. That is not the position in the present case. On 22

July 2010 Great Northern transferred to GNLC the benefit of all contracts in relation to the land in the Port Marsden development. The only means by which Great Northern could ensure that GNLC obtained the benefit of the existing agreements in respect of sections in that development was by transferring the land in the development to it. That step was necessary because, to be able to enforce the agreements, GNLC needed to be in a position to convey title to the purchasers. The transfer of the land in those circumstances was not, therefore, an act that was inconsistent with the continued existence of the earlier agreements for the sale of the sections to the defendants. Rather, it was necessary in order to enable GNLC to be able to perform its obligations as vendor under those agreements. The agreements

therefore remained in existence notwithstanding the transfer of Great Northern’s

freehold interest in the land to GNLC.

[116] For these reasons I do not accept that clause 9.4(2) has the effect for which the defendants contend. It does not operate as a barrier to GNLC obtaining an order for specific performance.

[117] Mrs Daji originally sought to defend the application for specific performance by arguing that she did not have the means to complete the purchase of the sections. Subsequently she abandoned that line of defence. Mrs Daji applied for leave to revive it after Keegan Alexander ceased to act for her just prior to the

commencement of the trial, but I dismissed that application.3 It is not now open for

Mrs Daji to contend that the Court should refrain from making an order for specific performance based on her lack of means.

[118] In the affidavit that Mrs Daji filed in opposition to the application for summary judgment she deposed that she, her husband and their family trusts had net assets of more than $1 million. During her evidence at trial she said that her current financial position is very different from that painted in her earlier affidavit. GNLC is entitled, however, to ensure that all of the defendants meet their contractual obligations. It should not be denied orders for specific performance based on Mrs Daji’s untested assertions regarding their present inability to comply with such orders.

[119] I therefore grant GNLC the orders for specific performance that it seeks. Counsel for GNLC is to file draft orders for my approval within seven days of the date of this judgment.

Costs

[120] GNLC has succeeded in each proceeding and is entitled to costs against the defendants. Realties has also succeeded in defending its position. It, too, is entitled

3 Great Northern Land Company Ltd v Daji HC Auckland CIV-2009-404-8510, 29 June 2011

to costs, though I leave open at present the issue of who should be responsible for paying those costs.

[121] If counsel cannot reach agreement regarding the issue of costs within the next

21 days, memoranda should be filed at 14 day intervals dealing with that issue. Unless counsel seek an oral hearing, I will then determine the issue on the papers.

Lang J

Solicitors:

Hornabrook Macdonald Lawyers, Auckland

Keegan Alexander, Auckland

Chapman Tripp, Auckland

Counsel:

Mr A Commons, Auckland