Zhao v Golden Garden Limited [2016] NZHC 2204 (16 September 2016)

Last Updated: 26 September 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-1072 [2016] NZHC 2204

BETWEEN	HONGWEI ZHAO AND ZHIDONG HUANG Plaintiffs
AND	GOLDEN GARDEN LIMITED Defendant

Hearing:	16 September 2016
Appearances:	M J W Lenihan for the Plaintiffs W A McCartney for the Defendant
Judgment:	16 September 2016

_{ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL}

ZHAO AND HUANG v GOLDEN GARDEN LIMITED [2016] NZHC 2204 [16 September 2016]

[1] On 6 April 2016 the plaintiffs agreed to sell their 4.4 hectare property at

116 Station Road, Kumeu, to the defendant for $7,300,000.00 plus GST. The defendant gave the plaintiffs’ land agent a cheque for $730,000.00 in payment of the deposit. That cheque was dishonoured when presented for payment. The plaintiffs’ lawyers gave notices to the defendant’s lawyers requiring payment of the deposit. When those notices were not complied with, the plaintiffs cancelled the agreement for non-payment of the deposit. They now sue the purchaser under the agreement. They have applied for summary judgment for payment of the deposit. In the statement of claim they seek more extensive relief but I am not required to consider other relief on this application.

[2] In opposition, the defendant says that the agreement is void, relying on the defence non est factum. The defendant says that its director is under a language disability. While she speaks Mandarin and Cantonese, she has a disability in understanding English and that disability meant that the agreement is not binding on her.

[3] All the people involved are Chinese. The plaintiffs have sworn their affidavits in English but they use Chinese characters when signing their names. The real estate salesperson is Chinese but she can speak English, Cantonese and Mandarin. The director of the defendant is Chinese. Its case is that while she is conversant in Mandarin and Cantonese, she cannot read, write or speak English.

[4] In Krukziener v Hanover Finance Ltd,¹ the Court of Appeal re-stated the

principles on plaintiffs’ applications for summary judgment. It said:

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1986] NZCA 112; [1987] 1 NZLR 1 (CA) at 3. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated (McLean v Stewart (1997) 11 PRNZ 66 (CA)). The Court will not

¹ Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26], [2010] NZAR 307.

normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable, Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ

84 (CA).

[5] In this case the contest is very much on the Eng Mee Yong point, that is, whether the defence evidence can be set aside as inherently improbable.

[6] The plaintiffs listed the property at 116 Station Road with land agents in

February 2016. The property was put up for tender. The tenders closed on 6 April

2016. The highest offer was by Golden Garden Ltd for $7.3 million excluding GST. A cheque (not a bank cheque) was presented with the tender document. The defendant’s tender document has not been put in evidence. The plaintiffs’ case is that they agreed to accept the defendant’s tender. They requested the land agents to prepare an agreement for sale and purchase. That was prepared, the director of the defendant signed it, the plaintiffs signed it, and a copy was given to the defendant’s director marking acceptance and conclusion of the contract.

[7] The evidence shows that on the evening of 6 April 2016 the defendant had second thoughts about the agreement and requested the land agent to take steps to have the contract cancelled.

[8] The cheque was dishonoured when presented for payment. The plaintiffs’ lawyer gave notices under the agreement for sale and purchase calling for the deposit to be paid. The contract allows for cancellation for non-payment of the deposit. A cancellation notice was given under the agreement.

[9] The plaintiffs put the property on the market again. They received an offer for the property for less than the amount in the agreement in this case. The new agreement is not to settle until 2017. The plaintiffs say accordingly that they made a loss on the resale. Even though the agreement has been cancelled for non-payment

of the deposit, the plaintiffs are entitled to sue on obligations that have accrued before cancellation. That includes a claim to recover the unpaid deposit.²

[10] The agreement for sale and purchase uses the Auckland District Law Society form. It has been filled in with handwriting. It has one extra term:

The vendor warrants the purchaser/or the nominee to access to the property to conduct the measurement and geographic report prior to settlement.

The agreement identifies the parties, the purchase price, the deposit and the property, which is subject to a tenancy to expire on 8 July 2016. The front page of the agreement has a section for “Conditions” but that has been crossed out. The parties have initialled parts of the agreement in a number of places, in particular, the crossing out of the “conditions” section on the front page. The plaintiffs have signed the agreement and initialled it using Chinese characters. The director of the defendant has signed and initialled the agreement using cursive script.

[11] The defendant carries on business as a restaurant in Rosedale Road, North Shore, Auckland. It has one director. She uses two names. Her married name is “Helen Liang”. Her maiden name is “Meihong Kong”. She has given her affidavit in Mandarin. A qualified translator has translated it into English. According to her affidavit, Mrs Liang speaks Cantonese and Mandarin but does not read, write, or speak English or understand spoken English. She can read and write English numerals. She says that her daughter often translates for her.

[12] Mrs Liang had been dealing with the plaintiff’s land agents when considering buying other properties. The salesperson in this case had introduced Mrs Liang to a property at Wainui Road, Silverdale. Mrs Liang made a written offer of $3.38 million for that property. On 4 April 2016 the salesperson sent Mrs Liang by email an information pack about the property at 116 Station Road. That email was in English. The attachments to that email have not been put in evidence but from the

_{email it appears that they were also in English.}

² Brown v Langwoods Photo Stores Ltd [1990] NZCA 180; [1991] 1 NZLR 173 (CA) and Garratt v Ikeda [2002]

1 NZLR 577 (CA).

[13] The key events were on 6 April 2016. Mrs Liang’s account is generally as follows. The land agent had told her that the Station Road property was for sale by tender and that the tender was closing on 6 April 2016. She says that the land agent asked her, as a favour, to put in an offer for the property. Mrs Liang says that the land agent was young, had had only a few years in the industry and was keen to be introduced to the vendors so as to spread her business contacts and pick up more clients.

[14] Mrs Liang says that the agent showed her the property on her iPad and explained that it had an asking price of $8 million plus GST, and that the vendors would not sell it at $7.5 million plus GST. Accordingly, Mrs Liang could offer $7.5 million and she would not win the tender. Mrs Liang says:

I felt obliged to help her as a favour. I told her I would do it as a favour, but I said I would tender only $7.3 million plus GST, and it would have to be subject to finance, and due diligence conditions and a one year settlement. I wanted a finance condition until August 2016 and 20 working days for due diligence. I did not intend to buy the property and I did not think I would win the tender if it was subject to those conditions with a one year settlement and at a price lower than (the agent) said the vendors would accept. (The agent) knew that I was only doing it as a favour and that I did not want to buy it.

A tender document was prepared and Mrs Liang signed it. As I have mentioned, it has not been put in evidence. It is not clear what has happened to it. Mrs Liang also wrote a cheque for the deposit of $730,000.00. She says that the agent wrote on the cheque butt exactly what she wanted me to write on the cheque and she copied from the butt onto the cheque. She puts this at about 12 o’clock on 6 April and explains that she was in a hurry. The agent left her but called back a number of times during the day.

[15] She also says that the agent sent her this text:

Revised offer on 116 Station Road, Kumeu. Dear Mrs Liang

Please confirm through email on our revised offer. Unconditional $7.3MM

10 per cent deposit payable to [the land agent’s] trust account on acceptance.

Settlement: 2016-06-30.

Once get you confirmation, I’ll go to present to vendor in the office now. Cheers.

[and then the name and phone number of the land agent].

That was in English. Mrs Liang replied in Mandarin at 2:55pm. Her reply has been

translated as “Confirmed”. The agent replied in turn, this time in Mandarin.

[16] Mrs Liang says that her understanding was that the agreement was conditional. By confirming, she was agreeing to a change of settlement date to June

2016. The agent had discussed that with her. When she wrote “confirmed”, she was not confirming the text but something that had been said to her in a telephone conversation.

[17] She says that that evening, about 6:00pm when she was eating at her restaurant with friends, the land agent brought an agreement to sign. The agent’s explanation was that the settlement date had been altered but the agreement needed to be signed. She says that she signed the agreement for sale and purchase, believing it to be the same as the tender document, apart from the change to the settlement date.

[18] Later that evening, the agent emailed her a copy of the agreement signed by the vendors and told her that she had been successful in winning the tender. She says that she did not see that email at the time, but her daughter translated it later. The agent came at 9 o’clock, advising that she had won the tender and giving her the agreement for sale and purchase. She claims that she never wanted to buy the property and she later sent texts to the land agent trying to get the agreement cancelled. On that evidence, the defendant says that there is an arguable defence of non est factum.

[19] A helpful authority on that defence is Tipping J’s judgment in Bradley West Solicitors Nominee Co Ltd v Keenan where, after reviewing the authorities, he stated:³

What follows is therefore not a definition but an attempt to identify the essential points. The authorities which I have cited seem to me to justify the following analysis of what a person relying on a plea of non est factum must establish ...

(1) The person raising the plea (the proponent) must have signed the document believing it to have a particular character or effect.

(2) The document must in reality have a radically different character or effect thus creating a wholly different result from that which was understood by the proponent.

(3) The proponent’s mistaken belief must have resulted from an erroneous explanation or description of the document given to him by someone else.

(4) The proponent must be able to show that, notwithstanding his error, he acted with all reasonable care in the circumstances.

(5) If the proponent’s mistaken belief arises because, acting in reliance upon a trusted adviser such as a solicitor, he did not take steps to read and understand the document prior to signing it, the plea is not available.

[20] It is also helpful to take into account the following observations of the High

Court of Australia in Petelin v Cullen:⁴

11. The principle which underlies the extension of the plea to cases in which a defendant has actually signed the instrument on which he is sued has not proved easy of precise formulation. The problem is that the principle must accommodate two policy considerations which pull in opposite directions: first, the injustice of holding a person to a bargain to which he has not brought a consenting mind; and, secondly, the necessity of holding a person who signs a document to that document, more particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one “which must necessarily be kept within narrow limits” ... and in the qualifications attaching to the defence which are designed to achieve this objective.

³ Bradley West Solicitors Nominee Co Ltd v Keman [1994] 2 NZLR 111 at 120-121.

12. The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence, a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v Anglia Building Society.⁵

[21] Ignorance of the language of the document to be signed is relevant illiteracy. Ignorance of a foreign language may make the signatory reliant on the advice of others to ensure that they understand the effect of the document they are signing. Petilin v Cullen is an example of that. In this area it is also necessary to bear in mind the caution expressed by Huggins V-P in Kincheng Banking Corporation v Chan Siu Kit:⁶

Anyone who signs a document in a language he does not understand is necessarily negligent unless he has been actively misled as to its nature.

That was a case in which a guarantor signed a guarantee in English. He was given an explanation in Cantonese, but maintained that he could only understand Mandarin.

[22] As I understand the defendant’s case, Mrs Liang signed the agreement

believing that it was conditional as to finance and due diligence, with settlement on

30 June 2016. She did understand that the purchase price was $7.3 million plus GST, and that the deposit payable under the agreement was $730,000.00. The difference between her understanding and the agreement she signed is that the agreement was unconditional. She attributes her mistaken belief to the explanation given by the land agent.

[23] The land agent has given an affidavit, but it came in only as reply evidence. The land agent has a markedly different version of events. The assessment of the

_{defence turns very much on a consideration of Mrs Liang’s affidavit but taking into}

⁵ Saunders v Anglia Building Society [1970] UKHL 5, [1971] AC 1004, especially 1019.

account contemporary documents, some of which have been provided by the land agent. That approach avoids the need to resolve factual conflicts as to who said what in oral exchanges.

[24] Mrs Liang is the only director of Golden Garden Ltd. As a sole director of a New Zealand company she is required to have some familiarity with New Zealand business practices and law. Her company operates a restaurant. The evidence shows that the company also owned a property in Mangere. That property has been transferred to another company called Phoenix Pacific Holdings Ltd. Mrs Liang explains that Golden Garden Ltd held the property as a bare trustee for a group of investors. Once the present dispute arose, the property was transferred so that the interests of the investors would not become involved in this proceeding.

[25] The evidence shows that Mrs Liang was familiar with buying and selling real estate in New Zealand. She refers to her purchase of the Silverdale property. There is also a reference to an interest in buying a property at Hobsonville. She is clearly a business woman familiar with dealings in real estate. She understands the differences between conditional and unconditional agreements, tenders and agreements for sale and purchase, and the importance of finance conditions, due diligence conditions and settlement dates.

[26] For both her names, Mrs Liang does not write her signature in Chinese characters but in cursive script. The cheque she signed for the deposit is in evidence. That is in her handwriting in cursive script. That handwriting does not suggest that she is unfamiliar with writing English.

[27] When the land agent communicated with her on 4 April 2016 she sent an information pack in English. In the land agent’s evidence there are also copies of texts in English between the land agent and Mrs Liang. These show the same grasp of English as shown by native speakers of English when they text each other. That is, the language might not meet the standards of grammatical purists, but they are intelligible without obvious errors.

[28] Mr McCartney for the defendant submitted that Mrs Liang was to a large extent reliant on her daughter, and that I should not assume on any of these matters that Mrs Liang has any familiarity with English at all. That explanation shows that if she has any limitations in using English, she has a way of getting by, her daughter. But, even so, without having regard to the assertions by the land agent in her evidence, these matters readily show that Mrs Liang herself does have an adequate command of the English language. I bear in mind that on the day she had signed an agreement for the Silverdale property for some $3.38m, again, an agreement written in English. When she entered into important contractual arrangements, she was comfortable using English without seeking other professional assistance.

[29] Mrs Liang’s explanation for providing the tender – that she was doing it as a “favour” for the land agent - is implausible. To my mind, it does not make any sense that anyone would go through the pretence of making a serious offer in a heated property market for the purchase of a property available for development simply as an empty charade.

[30] There is no dispute as to the text that the agent sent at 2:25pm on 6 April

2016. The text is significant as showing the land agent’s understanding of the agreement which she was trying to bring about - an unconditional agreement for $7.3 million with settlement on 30 June 2016. Mr McCartney accepted that that text was not an erroneous explanation of the agreement proposed by the land agent. It also shows that Mrs Liang’s explanation of putting up a conditional agreement without a serious intent to buy the property does not wash. From the land agent’s text it is clear that she was working on trying to obtain an agreement unconditional at $7.3 million. The price offered by Mrs Liang also suggests a serious intent to buy the property at a competitive price. If Mrs Liang was only putting in an agreement to go through the motions, she would have put in an offer at a much lower sum. I do not accept her explanation. It is improbable.

[31] The text is also important when assessing Mrs Liang’s evidence as to the explanation that the agent gave when she brought the agreement for signing. According to Mrs Liang, the agent told her that the agreement was the same as what she contends the tender document was, apart from the change to the settlement date.

That requires the court to accept that the agent changed her story between 2:25pm, when she gave an accurate explanation as to the agreement, and 6:00pm, when she gave an inaccurate explanation. I cannot think of any plausible reason why the land agent would give an accurate explanation and then change that explanation later when the agreement was presented for signing. That aspect of the defendant’s case is also implausible.

[32] After the land agent brought the agreement back to Mrs Liang that evening, she decided to cancel and sent text messages to the agent. The translation of one sent at 10:00pm says:

[P]lease cancel the contract of 116 Station Road no matter what. My husband had already said that a conditional contract was needed. He said that without going through the board of directors, the purchase could not be made. Neither would the company make payment. Please hurry up and notify the property owner and your agent to handle properly please. Thanks, sincerely.

[33] The following day she texted again:

It was mainly that you called me and talked about changing to an unconditional contract. Signed without consent. He said that the rules had been breached and the company would definitely not give consent.

[34] These texts and others show the real reasons for the cancellation. Mrs Liang needed the support of other investors to purchase and they had not given their approval. She was now trying to back out. If she had been misled as to the effect of the agreement, she should have stated so clearly. But she did not.

[35] I am satisfied on the evidence that Mrs Liang is much better at English than she has let on in her affidavit. Her assertions of ignorance of English are belied by contemporary documents.

[36] I accept that if she entered into the agreement believing it to be conditional rather than unconditional, that might arguably provide a sufficient difference for the purpose of the non est factum defence. But that aside, I do not regard the company as having an arguable defence of non est factum.

[37] When properly appraised, the evidence does not show that she had a mistaken understanding of the agreement. The advice given by the land agent in a text was an accurate explanation of the intended contract. I do not accept that the agent gave misleading advice as to the effect of the agreement when she presented it for signing. It is implausible that the land agent would change her explanation between 2:25pm and 6:00pm on the same day. In any event, for the defence to be arguable, Mrs Liang has to have taken all reasonable care in the circumstances. It is not sufficient for her simply to say that she trusted the land agent. The land agent, after all, was acting for the vendors in trying to obtain an agreement for sale and purchase. On Mrs Liang’s account, it was her normal practice to rely on her daughter for advice. She has provided nothing in her evidence as to why she did not consult her daughter if she had any difficulty in understanding the documents which she signed. The matter comes very squarely within the dictum of Huggins V-P in the Kincheng Bank case.

[38] In an ordinary hearing, Golden Garden Ltd would have the onus of making out the defence. This, however, is a summary judgment application. The onus is on the plaintiff throughout. The plaintiffs have to show that there is no arguable defence. They must negate the plea of non est factum.

[39] Weighing up Mrs Liang’s evidence, in the light of contemporary documents and the circumstances, I find improbability piled upon improbability. I do not accept that the company has any show at all of arguing for a defence of non est factum. The defence is not tenable and accordingly the plaintiffs succeed on the application for summary judgment.

[40] I give judgment for $730,000.00 plus interest at five per cent from 6 April

2016 to the date of judgment, plus costs. The plaintiffs may seek more extensive relief than that but I cannot decide those aspects on this summary judgment application. If the plaintiffs wish to take that aspect further they should request the Registrar to arrange a case management conference.

[41] If counsel are unable to agree costs, memoranda may be filed.

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

Associate Judge R M Bell

Solicitors:

DT Lawyers Limited (Daniel Chang), North Harbour, Auckland, for Plaintiffs

Carson Fox Bradley Limited, Auckland, for Defendant

Copy for:

Michael J W Lenihan, Auckland, for Plaintiffs

William A McCartney, Auckland, for Defendant