Northwest Developments Ltd v Zhang [2018] NZHC 1736 (13 July 2018)

Last Updated: 8 August 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2625 [2018] NZHC 1736

BETWEEN	NORTHWEST DEVELOPMENTS LTD Plaintiff
AND	CHENG ZHANG, JIN KUK JUNG and PILL SOON SO Defendants

Hearing:	23 February 2018 [Further submissions filed 9 March 2018; 16 March 2018; 23 March 2018]
Counsel:	M J Fisher and K J Ng for Plaintiff R M Dillon for Defendants
Judgment:	13 July 2018

JUDGMENT OF BREWER J

This judgment was delivered by me on 13 July 2018 at 3:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Castle Brown (Auckland) for Plaintiff

Queen City Law (Auckland) for Defendants

NORTHWEST DEVELOPMENTS LTD v ZHANG & ORS [2018] NZHC 1736 [13 July 2018]

Introduction

[1] The plaintiff (“Northwest”) applies for summary judgment against the defendant (“the Jung interests”).

[2] The statement of claim pleads background facts. In summary, Northwest’s case is that it became the owner of a piece of land situated within an area known as the Huapai Triangle. The owners of five areas of land in that area agreed to work together to apply for a variation to the District Plan to enable their land to be subdivided. Their agreement was reduced to writing (“the 5 Owners Agreement”). Northwest, it pleads, became a party to the 5 Owners Agreement when it purchased its land from owners who were signatories to the agreement. The Jung interests also owned one of the pieces of land and they signed the 5 Owners Agreement.

[3] The statement of claim succinctly defines the relevant provisions of the 5 Owners Agreement:

(a) each party granted equitable easements over their respective parcels of land, including for access and roading purposes;

(clauses 14 and 15)

(b) each party agreed to do all things reasonably necessary, in relation to any part of its land required to be vested or dedicated in the Council, to enable such vesting or dedication to occur, in particular in relation to land owned by one party which is required to be vested or dedicated as road to enable Roading to service another party’s land;

(clause 16)

(c) each party agreed:

(i) to assign or transfer its rights and obligations under the 5 Owners Agreement when transferring its land to a successor in title;

(ii) to cause the successor in title to enter into a new agreement with the other parties on the same terms as the 5 Owners Agreement, or a deed of novation, so that the successor in title is bound on the same terms as the transferring/assigning party is bound by the 5 Owners Agreement;

(clauses 58 and 69)

(d) each party agreed to use its reasonable endeavours to obtain its existing mortgagees’ consent and any other security holders’ consent

to, and agreement to the extent necessary to be bound by the terms of, the agreement;

(clause 69)

(e) each party agreed with due diligence to sign all necessary deeds and documents and do everything that is reasonably required to carry out the terms of the agreement.

(clause 65)

[4] The owners of the five areas of land subject to the 5 Owners Agreement were successful in obtaining the requested variation to the District Plan. On or about 18 April 2016, the defendants, and others, consented to the subdivision and associated infrastructure works proposed by Northwest for its land, including the road.

[5] Northwest pleads, and I accept:

On 6 May 2016, the defendants as vendor and Sanli Homes Ltd as purchaser entered into an agreement for sale and purchase of 77 Nobilo Road. Under the agreement:

(a) the defendants did not assign or transfer their rights and obligations under the 5 Owners Agreement to Sanli Homes Ltd;

(b) Sanli Homes Ltd was not obliged to enter into a new agreement with the other parties on the same terms as the 5 Owners Agreement, or a deed of novation.

[6] Northwest has now completed its subdivision and all that remains is for the survey plan to be deposited so that titles can be issued. However, that will require the consent of the Jung interests and parties with interests registered against the title to their property. That is because the defendants granted equitable easements over their land for the purposes of the 5 Owners Agreement and on the deposit of Northwest’s survey plan an area of the Jung interests’ land will vest in the Auckland Council as roading. Northwest pleads, and I accept:

Before LINZ will issue titles in respect of the Plan for the subdivision of 81 Nobilo Road, it will require the consent of the parties whose interests in 77 Nobilo Road are affected by the Plan, namely:

(a) the defendants as grantors of equitable easements over their land (77 Nobilo Road) for the purposes of the Huapai Triangle development;
(b) Kookmin Bank as proprietor of a mortgage registered on the title to 77 Nobilo Road;

(c) Sanli Homes Ltd as holder of a caveat lodged on the title to 77 Nobilo Road in respect of its interest under an agreement for sale and purchase between Sanli Homes Ltd and the first defendants dated 6 May 2016;

(d) Catherine Chao as holder of a caveat lodged on the title to 77 Nobilo Road in respect of her interest under an agreement to mortgage dated 6 December 2016;

(e) Fang Deng as holder of an interest noted on the title to 77 Nobilo Road in respect of a claim under s 42(2) of the Property (Relationships) Act 1976.

[7] The Jung interests refuse to give their consent to Northwest’s survey plan, and refuse to procure parties with a registered interest over their land to consent to the plan depositing. Neither will they take any steps as may be reasonably required, in the absence of consent, to procure the withdrawal of any caveat or other interest, including through the initiation of procedures pursuant to s 145A of the Land Transfer Act 1952.

[8] The position of the Jung interests can be summarised as follows:

(a) Northwest has not completed the formalities required to make it a party to the 5 Owners Agreement. Therefore, the Jung interests have no contractual obligation to Northwest.

(b) In May 2016, the Jung interests agreed to sell their land to Sanli Homes Ltd. This was an unconditional sale and did not contain any reference to the 5 Owners Agreement. However, Sanli was aware of the 5 Owners Agreement and Northwest was aware of Sanli’s purchase of the Jung interests’ land. Northwest dealt directly with Sanli over the development of infrastructure. Any obligations owed to Northwest under the 5 Owners Agreement is owed by Sanli.

(c) The Jung interests hold the land and any rights under the 5 Owners Agreement in trust for Sanli. The Jung interests are willing to sign the survey plan to allow it to deposit, but need the consent of Sanli.
(d) In any event, at most the 5 Owners Agreement gives Northwest an equitable interest in the Jung interests’ land (equitable easements) but Northwest’s interest is subordinate to the equitable interest of Sanli as purchaser. Reliance is placed by the Jung interests on Emslie v Genuine Investments Ltd (in liquidation).¹

The application and other proceedings

[9] Northwest’s application for summary judgment seeks declarations that the Jung interests are bound to give effect to the relevant terms of the 5 Owners Agreement and orders by way of specific performance requiring the Jung interests:²

• (i) to give their consent to the Plan;

(ii) to procure any person with a registered interest in 77 Nobilo Road or who has lodged a caveat or other interest that has been noted on the title to the land, including the persons named in paragraph 22 above, to consent to the Plan to deposit;

(iii) to take such steps as may be reasonably required, in the event that such consent should not be immediately forthcoming, to procure the withdrawal of the caveat or other interest, including the initiation of procedures pursuant to s 145A of the Land Transfer Act 1952;

...

[10] The situation is complicated by the existence of another proceeding commenced by Northwest against the Jung interests. In that proceeding (“the 936 proceeding”), Northwest sues on the 5 Owners Agreement for what it alleges to be the proportionate share of the infrastructure works carried out by Northwest which the Jung interests are obliged to pay. As at the date of the statement of claim, the sum claimed is approximately $500,000. The cause of action is an injunction restraining the Jung interests from selling their land unless and until:

(a) the defendants have caused the purchaser to enter into the agreement contemplated by clause 58 of the Haupai (sic) Triangle 5 Landowners Infrastructure Agreement dated 23 June 2015 (“5 Owners Agreement);

¹ Emslie v Genuine Investments Ltd (in liquidation) [2005] NZHC 452; (2005) 7 NZCPR 161 (HC) per Asher J.

2. There are also prayers for orders that the Jung interests “execute the Deed of Novation tendered to them for execution in September 2017”. This relief is not sought in the application for summary judgment.
   • (b) the defendants have delivered to the plaintiff a duly executed copy of the said agreement;

(c) the defendants have paid to the plaintiff the amounts payable by the defendants under the 5 Owners Agreement being:

(i) the sum of $433,801.85 presently due and payable;

(ii) the sum of $66,252.65, which will have become due and payable on 20 May 2017;

(iii) the amount of interest payable on such sums in terms of the 5 Owners Agreement.

[11] Judgment in the above sums (as well as any further sums that become payable under the 5 Owners Agreement) and reasonable indemnity costs are also sought.

[12] Northwest coupled this claim with an application for interim injunction. On 11 August 2017, Jagose J granted an interim injunction in the following terms:³

I order:

(a) pending further order of this Court, the defendants are restrained from settling the sale of any part of Lot 8, Deposited Plan 116044, being all that parcel of land comprised and described in Identifier NZ66A/205, to a successor in title, unless and until the defendants have:

(i) assigned or transferred their rights and obligations under the Huapai Triangle 5 Landowners Infrastructure Agreement dated 23 June 2015 (the “Agreement”) to that successor in title;

(ii) caused the successor in title to enter into a new agreement with the other parties to the Agreement on the same terms as the Agreement, or a deed of novation of the Agreement so that the successor in title is bound on the same terms as the defendants are bound by the Agreement; and

(iii) paid any cost contributions payable under clauses 34 and/or

35 of the Agreement into an escrow account on terms including no disposition without this Court’s further order and otherwise as are submitted to the Court for approval on sealing;

(b) the defendants’ application for an order that Caveat No 10783033.1 (North Auckland Registry) affecting title NZ66A/205 be removed is refused; and

³ Northwest Developments Ltd v Zhang [2017] NZHC 1891 at [38].

(c) subject to any other relevant considerations, 2B costs on the interlocutory applications, with an allowance for second counsel, are payable by the defendants to the plaintiff.

[13] The 936 proceeding is currently being case managed towards trial. On 1 March 2018, Woodhouse J, against opposition by Northwest, granted the Jung interests leave to join Sanli as a third party.⁴

[14] The position is further complicated by a proceeding brought by Sanli against the Jung interests (“the 980 proceeding”) in which Sanli claims specific performance of the agreement for sale and purchase of the Jung interests’ land. The 936 proceeding and the 980 proceeding are being case managed together, but no trial date has been allocated.

Abuse of Process

[15] The first issue I have to determine is whether this proceeding is an abuse of process. I raised this issue at the hearing and I have subsequently received the parties’ submissions.

[16] The issue has two aspects:

(a) There are key issues in this proceeding and the 936 proceeding which are identical:

(i) Whether Northwest is entitled to enforce the 5 Owners Agreement;

(ii) Whether the Jung interests remain liable as a party under the 5 Owners Agreement.

(b) Sanli is a party to the 936 proceeding but not this one.

⁴ Northwest Developments Ltd v Zhang [2018] NZHC 298.

[17] It is trite that the Court will not allow litigants to use its processes in a way that tends to produce unfairness, oppression or injustice. Mr Fisher for Northwest succinctly gives relevant considerations:

12.1 where relief claimed in the new proceeding is already covered by the first proceeding or could have been pleaded in that proceeding;

12.2 where the new proceeding raised issues that are exactly the same, or sufficiently similar, to those raised in the first proceeding, or where the “substantial point in the proceedings is the same”;

12.3 where ordinary proceeding is still on foot, the plaintiff commences another proceeding and applies for summary judgment for effectively the same claim or relief (“changing horses in mid-stream”).

(Footnotes omitted)

[18] Mr Dillon for the Jung interests submits it would also be an abuse of process for Northwest to bring a new, but overlapping, proceeding to avoid having Sanli before the Court. He submits:

4. One fundamental issue is common to both proceeding 936 and the instant proceeding – are the Plaintiffs entitled to enforce the 5 Owners Agreement against the Defendants? That issue gives rise in turn to a number of related questions: (i) Does the Plaintiff have a right to the Defendants (sic) land in priority to any other claim? (ii) Have the Defendants discharged their obligations under the 5 Owners Agreement, by reference to the 6 Owners Agreement and/or the 2 Owners Agreement? (iii) Have the Plaintiffs compromised any rights they may have against the Defendants by virtue of either of those two other agreements, or by their actions in dealings with Sanli? These issues are all common to both sets of proceedings.

[19] Northwest could have amended its claim in the 936 proceeding and applied for summary judgment of its current claim. It has chosen not to. That adds to the expense of the Jung interests in defending Northwest’s claims. It is also the case that Sanli is not a party to this proceeding. However, I have decided that there is not an abuse of process.

[20] The key issues must be resolved between Northwest and the Jung interests. The factual issues to which the key issues are gateways are very different in the two proceedings. If summary judgment can be granted in this proceeding then that will be an expedient and cost-effective solution. If it cannot be granted then this proceeding
can either be consolidated with the 936 proceeding or case managed with it. Importantly, the hearing has taken place.

[21] I do not consider Sanli’s position to be relevant. The key issues are simple and confined to the contractual relationship between Northwest and the Jung interests. Whatever contractual arrangements the Jung interests made with Sanli are of no concern to Northwest. Sanli entered into its contract with the Jung interests knowing of the 5 Owners Agreement.

Summary Judgment

[22] The principles relevant to an application for summary judgment are well- established. They were summarised by the Court of Appeal in Krukziener v Hanover Finance Ltd:⁵

(a) The question on a summary judgment application is whether the defendant has no defence to the claim – that there is no real question to be tried. The Court must be left without any real doubt or uncertainty.

(b) The onus is on the plaintiff, but where the evidence shows there is no defence, the defendant must respond if the application is to be defeated.

(c) The Court will not normally resolve conflicts of evidence but, on the other hand, need not accept uncritically evidence that is inherently lacking in credibility. The Court may take a robust and realistic approach where the facts warrant it.

Is Northwest entitled to enforce the 5 Owners Agreement?

[23] The answer to this question is “yes”. The 5 Owners Agreement provides, relevantly:⁶

58. Subject to clause 59 the rights and obligations of each party shall run with their respective lands as detailed in Schedule A. Each party must assign or transfer its rights and obligations under this Agreement when

⁵ Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26]- [27].

⁶ Clause 59 is not relevant to this issue.

transferring any part of its interest in any part of the Landowners’ Land to a successor in title (from time to time). It will also cause such successor/s to enter a new agreement/s with the other parties on the same terms as this Agreement or a deed of novation, so that the successor in title is bound on the same terms as the transferring/assigning party is bound by this Agreement.

[24] The agreement for sale and purchase by which Northwest bought its land complies with clause 58. A novation agreement has been executed by all parties, save the Jung interests. The Jung interests cannot rely on their contractual obligations to Sanli to justify not signing the novation agreement.

Do the Jung interests remain liable as a party under the 5 Owners Agreement?

[25] The answer to this question is also “yes”.

[26] The Jung interests chose to enter an unconditional agreement for sale and purchase of their land to Sanli without complying with clause 58. As Jagose J said at
[36] of his Judgment:

... Jung inarguably is party to the 5 Owners Agreement, and obliged thereunder to cause its successor in title to be bound “on the same terms”, which Jung literally has not done...

[27] The Jung interests rely on the agency agreement they entered into with Sanli. Relevant parts are:

1.1 The parties agree that Sanli Homes may act on the Vendor’s behalf, and as if it were the owner of the Property, in relation to the Huapai Triangle and specifically that Sanli Homes may:

1.1.1 advance discussions and reach agreement with any and all of the parties of the following agreements and/or such other parties as might be affected by the following agreements:

a 5 Landowners Agreement; b 6 Landowners Agreement; c ...

[28] This does not help the Jung interests since although Sanli, as purchaser, was authorised to negotiate, it would not do so in its own right.
[29] There is also an agreement subsequent to the 5 Owners Agreement referred to as the 6 Owners Agreement. I do not accept the Jung interests’ argument that this document replaced the 5 Owners Agreement, thus rendering Northwest’s claim untenable. There is an affidavit by Mr Kent-Johnston sworn 12 June 2017. It establishes Mr Kent-Johnston as the project manager on behalf of all the land owners. In a later affidavit (to which objection is taken by Mr Dillon) sworn 17 January 2018, Mr Kent-Johnston states that the subject matter of each agreement is quite different and he explains why the 5 Owners Agreement remains in force. He says that the 5 Owners Agreement relates to the eastern portion of the Huapai Triangle. The 6 Owners Agreement relates to the western portion. Mr Kent-Johnston clarifies the distinction as follows:

The occasion for a separate agreement in relation to the eastern portion of the Huapai Triangle was that in subdividing the eastern portion the owners of that land would need to incur infrastructure costs for certain services to their land in circumstances where those services would not be required to service the land in the western portion of the Huapai Triangle. The services in question were certain roading, water and waste water reticulation and also a pedestrian overbridge. The then owners of the western portion, Todd and Cabra were not willing to agree to contribute to the cost of the infrastructure required to service the eastern portion.

[30] These comments are substantiated by reference to the 6 Owners Agreement:

Western Landowners’ Obligations

6. If any undergrounding of existing power lines running along Station Road is required, or any works on Station Road other than the Station Road/SH16 Roading Upgrade, the Western Landowners will be responsible for the cost of those works.

7. All costs of the works detailed in clause 6 shall be paid by the Western Landowners. The Eastern Landowners (except to the extent that Cabra is also a Western Landowner) shall not be required to make any contribution to those costs. Todd and Cabra will resolve any issue of cost contribution as between themselves.

Eastern Landowners’ Obligations

8. The Eastern Landowners will be responsible for constructing the Overbridge as provided for in the 5 Landowners’ Infrastructure Agreement.

9. The works carried out under clause 8 shall be funded by the Eastern Landowners under the 5 Landowners’ Infrastructure Agreement. Todd shall not be required to make any contribution to the cost of those works.

[31] Putting Mr Kent-Johnston’s opinions on the construction of the two agreements to one side, on my reading of them it is clear one is not a substitute for the other. In this regard, I note that under the heading “purpose” in the 6 Owners Agreement no mention is made of the 6 Owners Agreement replacing the 5 Owners Agreement. In fact, it is contemplated that the 5 Owners Agreement will continue to operate:

4. Other than recorded here, or in the 5 Landowners’ Infrastructure Agreement, the Landowners are individually responsible for providing and funding such infrastructure as they may individually require for the purpose of development of their lands.

(Emphasis added)

[32] Mr Dillon also raises a number of technical issues in relation to competing equitable interests held in the defendants’ land by third parties, namely:

(a) Ms Catherine Chao as mortgagee;

(b) Sanli as the purchaser for value; and

(c) Ms Fang Deng, who has registered a relationship property notice of interest pursuant to s 42 of the Relationships (Property) Act 1976.

[33] I do not find any of these arguments convincing. I accept the point made by Mr Fisher that the interests of third parties, including Sanli, will not be adversely affected by the entering of summary judgment in this proceeding. A constant thread of Mr Dillon’s submissions seems to be the Jung interests are unable to procure the consent of the third parties due to the existence of various caveats and equitable interests in the land. This fails to take into account the mechanism available to the Jung interests in s 145A of the Land Transfer Act 1952. If the Jung interests are compelled to make application under s 145A, all that will mean is that the parties with registered interests will have to show cause why their interests should prevail over the interests of Northwest to the extent that the survey plan should not deposit. This would be a matter for the third parties. I cannot see how it affects the Jung interests’ contractual obligations, owed to Northwest, to procure their consent.
[34] Similarly, Mr Dillon raises the point that Northwest has subsequently entered into a contractual relationship with Sanli under the so-called 2 Owners Agreement. He says that Northwest could compel Sanli to consent to the plan under this agreement.

[35] This point is immaterial. Sanli is not party to the current proceedings. Moreover, any contractual obligations it owes to Northwest have no bearing on the obligations the Jung interests owe to Northwest under the 5 Owners Agreement.

Is Northwest entitled to summary judgment?

[36] Northwest is entitled to enforce the 5 Owners Agreement against the Jung interests. It is manifest that the Jung interests are in breach of the agreement. The declarations and orders sought by Northwest are all within the terms of the 5 Owners Agreement and all relate to obligations of the Jung interests under it. The Jung interests have no defence to Northwest’s claims.

Decision

[37] I grant Northwest’s application for summary judgment.

[38] I make a declaration that the Jung interests are bound under the terms of the 5 Owners Agreement:

(a) To give their consent to the Survey Plan;

(b) To procure any person with a registered interest in 77 Nobilo Road or who has lodged a caveat or other interest that has been noted on the title to the land, including the persons named in paragraph 22 of the statement of claim dated 2 November 2017, to consent to the Survey Plan to deposit;

(c) To take such steps as may be reasonably required, in the event that such consent should not be immediately forthcoming, to procure the withdrawal of any caveat or other interest, including the initiation and
prosecution of procedures pursuant to s 145A of the Land Transfer Act 1952.

[39] I make orders by way of specific performance requiring the Jung interests:

(a) To give their consent to the Survey Plan;

(b) To procure any person with a registered interest in 77 Nobilo Road or who has lodged a caveat or other interest that has been noted on the title to the land, including the persons named in paragraph 22 of the statement of claim dated 2 November 2017, to consent to the Survey Plan to deposit;

(c) To take such steps as may be reasonably required, in the event that such consent should not be immediately forthcoming, to procure the withdrawal of any caveat or other interest, including the initiation and prosecution of procedures pursuant to s 145A of the Land Transfer Act 1952.

[40] I reserve leave for Northwest to apply for such further ancillary or other orders as may be necessary to give effect to the relief granted to Northwest herein. I stipulate that undue delay in complying with the above orders by way of specific performance shall constitute ground for making any such application.

[41] Northwest is entitled to costs. In the absence of agreement between the parties, I will receive memoranda as to costs no later than 3 September 2018.








Brewer J