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High Court of New Zealand Decisions |
Last Updated: 14 September 2018
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV-2018-404-0290
[2018] NZHC 2225 |
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BETWEEN
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OVERLAND DEVELOPMENT LIMITED
Plaintiff
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AND
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RONGHUAN DONG
Defendant
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Hearing:
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13 August 2018
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Appearances:
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B P Rooney for the Plaintiff A Fuiava for the Defendant
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Judgment:
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28 August 2018
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JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 28 August 2018 at [ ], pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Boon B Toh, Auckland B Rooney, Auckland
Denham Bramwell, Auckland
OVERLAND DEVELOPMENT LTD v DONG [2018] NZHC 2225 [28 August 2018]
[1] The plaintiff (Overland) applies for summary judgment against the defendant (Mrs Dong). Overland says that Mrs Dong breached her obligations under a sale and purchase agreement dated 26 June 2016 (the Agreement), under which Mrs Dong agreed to purchase a section in a subdivision at Codrington Crescent, Mission Bay (the section). Overland seeks by way of summary judgment an order for specific performance directing Mrs Dong to settle the purchase of the section in accordance with the Agreement.
[2] In her notice of opposition, Mrs Dong contends that the area of the section is not what it was represented to her to be. She says that the section should have had an area of 601 square metres, but 145 square metres of that comprises a right-of-way serving other sections in the subdivision.
Background
[3] Mrs Dong is a Chinese citizen who came to New Zealand with her husband in September 2015. She is a Mandarin speaker and she says that she cannot read, write or speak any English. Her affidavits in this proceeding have been translated from the Chinese language.
[4] When they first came to New Zealand, Mrs Dong and her husband lived in a boarding house operated by a real estate agent, Ms Jessica Sun, with whom Mrs Dong developed a friendship. It was Ms Sun who raised with Mrs Dong the possibility that she might buy the section.
The Agreement
[5] The purchase price was $1.26 million, and the deposit $63,000. The area of the section "as shown in preliminary plans" was said to be 601 square metres more or less. The Agreement provided for settlement 5 working days after a search copy of the title to the section was provided to Mrs Dong or her solicitor.
[6] There were numerous conditions in the Agreement, including Auckland Council providing its consent to the subdivision, on terms satisfactory to Overland. There is no issue over any of the conditions; they were all satisfied.
[7] There were two plans attached to the Agreement. One was a "water plan" for the 15-lot subdivision, and the other was the proposed subdivision plan itself. The latter plan contained four tables headed "Memorandum of Easements in Gross", "Existing Easements", "Existing Easements in Gross", and "Memorandum of Easements". The tables were in small print and difficult to read, but it is clear from an enlarged copy of the subdivision plan produced by Overland that the last of the tables showed a right-of-way (marked "C" on the plan) with the section as the servient tenement.
[8] Clause 30 of the Agreement provided:
30. Errors and Misdescriptions
No error or misdescription of the Property or the Lot/s shall annul the sale and neither party shall be entitled to compensation for any error or misdescription of the property or the Lot/s.
[9] Mrs Dong paid the deposit soon after the Agreement was signed.
Completion of the subdivision
[10] In September 2016, Auckland Council granted a resource consent for the subdivision. The conditions of consent included a condition requiring the installation of a storm water treatment system and a storm water detention bank, which was to be the shared responsibility of the owners of the lots in the subdivision. The owners of the lots were required to form a company or residents' society to undertake the ongoing operation and maintenance of the stormwater management system.
[11] There were originally three rights-of-way affecting the section, identified respectively by the letters C, P and W on the Title Plan attached to the Certificate of Title to the section. The right-of-way designated "P" was surrendered by Auckland Council, and I need not be further concerned with it. But the right-of-way over area "C" provided for what appears to have been the main vehicular access across the section and on into the subdivision.1 It provided access from Codrington Crescent to the section, to Lots 1 and 2 in the subdivision (which lay between the section and
Codrington Crescent), and to other lots in the subdivision beyond the section, more distant from Codrington Crescent. Right-of-way "W", a right-of-way in favour of Auckland Council, affected only a very small part of the section, immediately adjacent to the right-of-way over area "C", at the northern corner of the section. It was common ground that rights-of-way C and W together affected approximately 145 square metres of the section.
[12] Titles to the sections in the first stage of the subdivision, including the section, were issued on 17 November 2017.
Correspondence between the solicitors after 1 December 2017
[13] On 1 December 2017, Overland's solicitors sent a search copy of the certificate of title to the property to Mrs Dong's lawyers. In terms of the Agreement, settlement was to take place within five working days.
[14] On 8 December 2017, Mrs Dong's solicitors asked Overland to extend the settlement date to 15 February 2018. That was agreed to by Overland (subject to certain conditions), but on 14 December 2017 Mrs Dong's lawyers made a further proposal, this time for settlement on 15 January 2018. They enquired if settlement could be effected on 15 January 2018 without any late payment penalty. That proposal was accepted by Overland on 14 December 2017.
[15] Difficulties began to emerge in mid-December 2017. On 18 December 2017, Mrs Dong's solicitors sent an email to Overland's solicitors, stating:
Our client advises that he is unable to build a house on [the section] since the right of way over parts market P and W on the title. Therefore we request you remove the right of way easement over part marked P and W on tile 809699 with ten (10) working days. If it will has not been removed until the 10th working day, the agreement will be cancelled.
[16] On 19 December 2017, Overland's solicitors wrote to Mrs Dong's solicitors stating that the Agreement had become unconditional when the title to the section was issued, and Mrs Dong had no entitlement to cancel. Overland's solicitors went on to advise that a partial surrender of Auckland Council's right-of-way had been lodged with Land Information New Zealand (LINZ) for registration.
[17] On 21 December 2017, Overland's solicitors sent a draft settlement statement to Mrs Dong's solicitors, based on settlement on 15 January 2018. At the same time, they drew to Mrs Dong's solicitors' attention Encumbrance 10941585.12 on the title to the section. It related to the operation and maintenance of the stormwater treatment and retention system required as a condition of the resource consent for the subdivision. The owners' company that was required to manage that system (Codrington Garden Ltd) had been formed in November 2017.
[18] On 15 January 2018, Overland's solicitors asked Mrs Dong's solicitors to provide an e-dealing number for the transaction. Mrs Dong's solicitors provided the number the following day. They went on to say:
We have not received the updated title. Our client is unable to settle with the current title since the right of way has not surrendered yet.
Our client may nominates a third party to complete the settlement. we await for the further instructions relation to the GST number from our client.
Can you please confirm if the title has been updated by moving the right of way?
[19] On 15 January 2018, Overland's solicitors wrote advising Mrs Dong's solicitors that Overland was ready, willing and able to settle. Mrs Dong's solicitors responded by email late the same day, in the following terms:
As per our conversation on the phone, our client would like to nominate Jiale Wang to complete the settlement on 17 January 2018. The nominee is not registered GST.
Kindly seek instructions from your client if we can settlement on 17 January without penalty.
[20] On 16 January 2018, Overland's solicitors agreed to extend the settlement date to 17 January 2018 without penalty interest, but on the basis that if Mrs Dong or her nominee did not settle on 17 January penalty interest would be charged from 15 January 2018. An amended settlement statement was provided.
[21] Late on 16 January 2018 Mrs Dong's solicitors sent an email asking for a copy of the constitution of Codrington Garden Ltd, and any shareholders' agreement. A copy of the constitution was provided by email on the morning of 17 January 2018.
Overland's solicitors advised that there was no shareholders' agreement. They then asked for a copy of Mrs Dong's deed of nomination.
[22] Mrs Dong did not settle on 17 January 2018, and nor did her nominee. In the afternoon of 17 January 2018 Mrs Dong's solicitors wrote the following email to Overland's solicitors:
Our client instructs that he does not accept the two Encumbrances on the title. There is no reason for him to join the Codrington Garden Limited as a shareholder.
He is able to settle subject to remove the two encumbrances on the title.
[23] On 18 January 2018, Overland's solicitors served a settlement notice on Mrs Dong, requiring settlement within 12 working days. Mrs Dong refused to settle.
The affidavits
[24] Mrs Dong originally represented herself. Her first affidavit, signed on 3 April 2018 was brief. She said that she had signed the Agreement without consulting lawyers, and had been misled by "the developer's agent", Ms Sun. She said that, when she signed the Agreement, she was not informed by Ms Sun that the section included a shared driveway which accounted for one-fifth of the total area of the section. Nor was she advised by Ms Sun when she signed the Agreement that "there is any additional clause in the agreement". She said that she was told by Ms Sun when she signed the Agreement that if there was any issue caused by the purchaser in settling, the worst thing that could happen would be the loss of the deposit of $63,000 – no other losses would be involved.
[25] Mrs Dong said that, when the certificate of title to the section was issued, it became clear that the right-of-way made it impossible to build a house on the section. She contended that the Agreement lacked "some critical information", and was therefore not a valid agreement.
[26] Mr Qiu, the sole shareholder and director of Overland, provided a reply affidavit on 5 April 2018. He said that two plans of the subdivision were attached to the Agreement, and they clearly showed the driveway from Codrington Crescent,
including that part of the driveway that passed over the section. He said that both Mrs Dong and himself initialled these plans, where the section was shown. He attached enlarged copies of the subdivision plans, with initials (said to be those of Mrs Dong) circled.
[27] Mrs Dong provided a further affidavit on 1 May 2018. She said that, without her knowledge, Ms Sun sent the Agreement to a law firm, Amicus Law. However, Amicus Law did not contact her until November 2017, when they invited her to sign a terms of engagement letter. She said she did not receive any legal advice during the whole process of signing the Agreement.
[28] Mr Qiu replied briefly to this affidavit, on 7 May 2018. One of the matters he addressed was the question of Mrs Dong's experience of property transactions in New Zealand. He asserted that Mrs Dong in fact entered into the Agreement for the purpose of commercial development. In support of that contention, he referred to Schedule 2 to the Agreement, which showed that Mrs Dong was registered for GST, and that she intended to use the section for the purposes of supply. She did not intend to use it as a principal place of residence. He also referred to the fact that the section was put on the market for sale in November 2017, with Barfoot & Thompson. Mr Qiu then referred to another property in Auckland which appeared to have been owned by Mrs Dong. This property (the Bayview property) had been transferred to Mrs Dong in May 2017, and she remained the registered proprietor until 31 January 2018. The Bayview property was then transferred to another party.
[29] There were two further affidavits in opposition, one from Mrs Dong dated 18 June 2018, and one from her son, Kaijun (Michael) Wang.
[30] Mrs Dong's 18 June 2018 affidavit provided more detail of her personal circumstances. She said that she and her husband had moved to New Zealand to be with Michael, who had been living in New Zealand for some 12 years. Michael was apparently acquainted with Ms Sun, and he arranged for Mrs Dong and her husband to live at Ms Sun's boarding house.
[31] In May 2016, Mrs Dong and her husband moved out of the boarding house to live at the Bayview property, which was owned by Michael.
[32] Mrs Dong said that her husband owned a rental property in Auckland for several years, but she did not have anything to do with the purchase or sale of that property or the income earned on it. Michael bought the Bayview property in January 2015, and at that time Mrs Dong was still in China. Michael asked her to borrow some money from her friends, so that he could pay the deposit. Apart from arranging that loan, Mrs Dong had nothing to do with Michael's purchase of the Bayview property.
[33] The Bayview property was transferred into Mrs Dong's name at a time when Michael was separating from his ex-wife. There were apparently concerns that an unjustified claim to the Bayview property might be made, and it was transferred into Mrs Dong's name. It was later sold to a third party.
[34] Apart from that transaction and the Agreement, Mrs Dong said she had no other experience with buying or selling property in New Zealand.
[35] Mrs Dong said that it was in late May 2016, after she had left the boarding house, that Ms Sun mentioned that she was selling a section in a subdivision in Mission Bay. This turned out to be the section. Mrs Dong said that she understood that no title had yet been issued for the section, and that the development would take some time before sections could be divided and the section sold to her. She said that Ms Sun told her that the property was 601 square metres in area, and that she would be able to fit a three storey house on it, with a floor area of approximately 400 square metres, as well as have a swimming pool next to the house. Mrs Dong said that she understood the 601 square metres area to be the "nett area".2 Mrs Dong also said that Ms Sun told her that the developer who was selling the section could provide her with a term loan to finance the building of a house on the section.
[36] Mrs Dong said that she would not have bought the section if she had known the "true buildable size".
[37] Mrs Dong described the circumstances of her signing the Agreement. She said that it was about 8.00pm on 26 June 2016 when Ms Sun brought the Agreement for her to sign. Mrs Dong's husband was present, and so was Ms Sun's mother, but neither appears to have had any input into the discussions (Mrs Dong's husband cannot speak, read or write English) and neither provided an affidavit.
[38] Mrs Dong said that she was fully reliant on Ms Sun to explain the Agreement to her. Ms Sun told her that a lawyer had reviewed the Agreement, that there were no issues, and it was fine for her to sign. She said she signed and initialled the sections of the Agreement where Ms Sun told her to sign and initial.
[39] Mrs Dong acknowledged that plans of the subdivision were attached to the Agreement, and that she signed the plans where they showed the section. She said that Ms Sun did not explain that the plans showed the section with a line that designated a right-of-way that would be a driveway.
[40] Mrs Dong said that Ms Sun confirmed that the section was 601 square metres, and the purchase price $1.26 million. Ms Sun told her that if she was to live on the section eventually, she would not need to pay tax – the entire purchase price would be
$1.26 million. Ms Sun did not ask her about GST, or tell her to circle any part of Schedule 2 to the Agreement (which was concerned with GST).
[41] Mrs Dong said that Ms Sun did not explain any of the conditions of the Agreement. She did not advise Mrs Dong to get legal advice, but said that if Mrs Dong was not able to settle then her only risk would be losing her deposit.
[42] Mrs Dong said that she trusted Ms Sun as a fellow Chinese citizen. She gave the signed copies of the Agreement to Ms Sun, and Ms Sun sent the Agreement on to Amicus Law. Mrs Dong did not get a signed copy of the Agreement until she asked for one sometime around December 2017.
[43] Mrs Dong said she did not visit the subdivision to inspect the section before she signed the Agreement. She did visit some months after she had signed the Agreement, however, and she met Mr Qiu at the property. Mr Qiu said the section
would be 601 square metres in area, but he did not say that the 601 square metres would include a driveway.
[44] Mrs Dong said that by about the middle of 2017 her family situation had changed. Michael had separated from his wife, and the financial position had changed. As a result, she discussed on-selling the section with Ms Sun. The section was eventually put on the market in around October 2017, but no buyer was found.
[45] Amicus Law contacted Mrs Dong in November 2017. Mrs Dong said that she had been arranging her finances in preparation for settlement, and at that point she had the bulk of the funds ready.
[46] Mrs Dong said that in December 2017 Michael told her that the right-of-way was a driveway that provided access to a lot of the other subdivided sections. He also told her that Amicus Law had advised that the Agreement was now unconditional, and nothing could be done to change the title.
[47] Mrs Dong obtained a copy of the Agreement from Ms Sun. She noted that Schedule 2 of the copy of the Agreement which Ms Sun provided to her did not have anything circled in the section regarding GST. Mrs Dong said this was different from the copy of the Agreement produced by Mr Qiu with his affidavit (in that copy, the relevant part of the Schedule contained a circle showing that Mrs Dong was registered for GST and intended to use the section for making taxable supplies).
[48] Mrs Dong later obtained an original of the Agreement from Amicus Law. This version of the Agreement did show the writing and circling on Schedule 2 regarding the GST information, but it was completed (by pen) in a different colour.
[49] Mrs Dong said she has never been registered for GST. She is not a property investor, and did not know why the Agreement would have shown that she was registered for GST. Her only intention was to build a house on the section for her to live in.
[50] Mrs Dong said that she and Michael tried to find an alternative buyer who might be interested in the section. On 16 January 2018, they did find a friend who was willing to purchase the section, but that arrangement fell through when the prospective nominee saw some of the requirements of the Agreement and noted that the area of the section was less than 601 square metres.
[51] The last affidavit in opposition was provided by Michael. He is an employed electrician. He arranged for his parents to stay at Ms Sun's boarding house when they arrived in New Zealand. The arrangement worked quite well, as Ms Sun spoke fluent Mandarin, and appeared to get on well with Mrs Dong and her husband.
[52] Michael confirmed that his mother does not read, write or speak any English. He said that he trusted that Ms Sun would advise his mother as to all the details she needed to be aware of when purchasing a section in New Zealand.
[53] Michael discussed the purchase of the section with his mother in mid-2017, and he became more involved in November 2017, when he was contacted by Amicus Law. Amicus Law sent him their terms of engagement letter, and he passed that on to his mother, who signed the letter.
[54] Michael said that his contacts with Amicus Law increased after the search copy of the title to the section was provided in early December 2017. He enquired of Amicus Law whether the developer could provide a term loan to build a house on the property. The answer was in the negative.
[55] Michael said that, after the search copy of the title was provided to Amicus Law, he still did not realise there was a right-of-way. Amicus Law did not advise about the right-of-way/driveway.
[56] Michael contacted a house designer on his mother's behalf, and the designer found on the title the easements affecting the parts of the section marked P and W. The designer told him that these easements belonged to Auckland Council, and they meant that no house could be built on the section.
[57] Michael raised that in an email to Amicus Law dated 18 December 2017. His email referred to the right-of-way, and noted that it did not allow for a house to be built on the section. He said that he needed Overland to contact Auckland Council within 10 working days to have the right-of-way removed from the title to the section. Otherwise, he would request the deposit back and cancel the Agreement.
[58] Michael was then advised by Amicus Law that Auckland Council had cancelled its easement insofar as it affected the area marked "P" on the title plan.
[59] Michael investigated the matter further. On 12 January 2018, he went to the Council and sought an explanation of the different easements affecting the section. He said that it was at this stage that he came to understand that the easement marked C was in fact a right-of-way/driveway over the section, that provided other sections in the subdivision with access. The Council officers told him that the right-of-way could not be changed.
[60] Michael discussed the matter with his mother, and called the legal assistant at Amicus Law who had been handling the matter on their behalf. He was told that nothing could now be done about the right-of-way identified as "C" on the title plan. Michael followed up with an email to Amicus Law on 12 January 2018. He asked Amicus Law to take the matter up with Overland's lawyer, saying that if a new title could not be issued without the right-of-way, there would be no settlement. He referred to three rights of way on the certificate of title (designated "P", "W" and "C"), and he told Amicus Law that the Council officer with whom he had spoken had told him that the Council had no record of the cancellation of the right-of-way in the area marked "P" on the title plan. Michael went on to say: "So this means on this lot couldn't build a house". He asked Amicus Law if they should cancel the Agreement.
[61] Michael said that the most serious issue was the right-of-way and the 145 square metres of lost building area. On 17 January 2018, he advised Amicus Law that his mother would not settle because of that issue.
[62] Michael briefly confirmed his mother's evidence relating to the Bayview property. He confirmed that his mother had never purchased or dealt with any other property in New Zealand.
[63] The last affidavit was an affidavit from Mr Qiu dated 11 July 2018. Mr Qiu said that Ms Sun was not Overland's agent at the time of her discussion with Mrs Dong in late May 2016.
[64] He said that Ms Sun approached him in about late May or early June 2016 to say that she had found a purchaser for the property. She asked Mr Qiu to sign a listing authority, so that she could submit an offer. Mr Qiu signed the listing authority on 8 June 2016.
[65] Mr Qiu said that the Agreement was not the first time Mrs Dong had expressed an interest in the subdivision of this land. Mrs Dong had made an offer to purchase a 442 square metre section in an earlier proposed subdivision, in September 2014. He produced a copy of an agreement for sale and purchase dated 8 September 2014, between Overland and Mrs Dong or nominee (the 2014 agreement). The purchaser's signature on the 2014 agreement was Michael's. In the event, the subdivision did not proceed in 2014, and the September 2014 agreement lapsed.
[66] Mr Qiu explained that Auckland City required a right-of-way over the section, so that it would have access to a drainage pond in the subdivision. A right-of-way was also needed to give access to the other sections in the subdivision. He said this would have been obvious to anyone, and was explained on the plans which Mrs Dong initialled as part of the Agreement.
Applications for summary judgment – legal principles
[67] Rule 12.2 of the High Court Rules materially provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of
action in the statement of claim or to a particular part of any such cause of action.
...
[68] The proper approach to be taken to such applications was considered by the Court of Appeal in Krukziener v Hanover Finance Ltd, where the Court said:3
... 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 at 3 (CA). 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: MacLean v Stewart ( 1997) 11 PRNZ 66 (CA). The Court will not 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 Young v Letchumanan [1980] AC 331 at 341 (PC). 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).
The issues to be decided
[69] The following issues are the issues:
(1) Is it reasonably arguable for Mrs Dong that she was induced to enter into the Agreement by misrepresentation(s) made by Ms Sun as to the area of the section (or the "building area" of the section), having regard to the presence of the rights-of-way shown in the areas marked "C" and "W" on the title plan to the section?
(2) If the answer to issue (1) is "yes", is it reasonably arguable for Mrs Dong that Overland was bound by the misrepresentation(s)?
(3) If the answer to issues (1) and (2) are both "yes", is it reasonably arguable for Mrs Dong that she was entitled to cancel the Agreement because of the misrepresentations(s)?
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
(4) If the answers to issues (1)-(3) are all "yes", is it reasonably arguable for Mrs Dong that she did not affirm the Agreement (and so lose the right to cancel)?
(5) Does Mrs Dong have an arguable claim for damages or compensation for misrepresentation, that she would be entitled to set off against the purchase price?
(6) If the answers to any of issues (1)-(4) is "no", is Overland entitled to the order for specific performance it seeks? If not, what is the appropriate remedy?
[70] I address each issue in turn.
Issue (1)
(1) Is it reasonably arguable for Mrs Dong that she was induced to enter into the Agreement by misrepresentation(s) made by Ms Sun as to the area of the section (or the "building area" of the section), having regard to the presence of the rights-of-way shown in the areas marked "C" and "W" on the title plan to the section?
[71] Mrs Dong's evidence as to what was said to her about the transaction by Ms Sun in late May 2016, and on the evening of 26 June 2016 when Mrs Dong signed the Agreement, is uncontradicted. Neither party provided an affidavit from Ms Sun (or from anyone else who was present at the discussions between Ms Sun and Mrs Dong).
[72] I assume, then, that Mrs Dong may establish if the case went to trial that Ms Sun told Mrs Dong the following in late May 2016:
(a) The area of the section would be 601 square metres.
(b) A three-storey house with approximately 400 square metres of floor area could be built on the section, with a swimming pool next to it.
(c) On a worst case scenario, if Mrs Dong could not complete the purchase, she would lose her deposit of $63,000.
[73] Mrs Dong's evidence is that the following statements were made by Ms Sun on the evening of 26 June 2016, prior to Mrs Dong signing the Agreement:
(a) The section was 601 square metres.
(b) If Mrs Dong was not able to settle, her only risk would be losing her deposit.
[74] At the hearing, Ms Fuiava identified the claimed misrepresentation in these terms:
The usable (buildable) area of the section would be 601 square metres.
[75] Ms Fuiava did not rely on the alleged statements about Mrs Dong's risk (if she could not settle) being limited to losing her deposit.
[76] There was clearly no literal misrepresentation about the area of the section – in fact, when the title to the section issued, the area was 604 square metres. And what Ms Sun told Mrs Dong about the area was simply what was written on the front page of the Agreement. What was missing, was any reference by Ms Sun to the right-of-way, which covered slightly under a quarter of the section.
[77] Nor is it clear that Ms Sun's statement that a three-storey house with a 400 square metre floor area could be built on the section with a swimming pool beside it, was literally false. There is no evidence that that could not be done, even with the right-of-way taking up 145 square metres of the section. However, I think it is at least arguable for Mrs Dong on the limited evidence presently before the Court that Ms Sun's statement about the ability to build a 400 square metre house on the section, and a swimming pool, was misleading.
[78] The section was relatively small at 601 square metres, and of course only 456 square metres would be available to build on. Add a swimming pool, and allowing
for some reasonable separation between house, right-of-way, and swimming pool, and I think any failure to refer to the right-of-way would arguably have been a material omission which rendered the statement about the area, and impliedly the "buildable area", misleading.
[79] Turning to the Agreement, there is no doubt that the right-of-way was disclosed, albeit without much clarity. I doubt that someone who was not aware of the presence of the right-of-way (and Mrs Dong says she had not seen the section) would have discerned from the plans attached to the Agreement that nearly one quarter of the section comprised a right-of-way serving other lots in the subdivision. The writing on the plans is very difficult to read, and it is not easy to make out the precise boundaries of the section. The memorandum of easements certainly made clear that the section was subject to a right-of-way, but only if the reader understood English and was already familiar with the expression "ROW" as an abbreviation for right-of-way.
[80] I accept that Mrs Dong must have appreciated that there was road access to the section, and to the subdivision lots beyond it. What was arguably not clear from the plans attached to the Agreement was that the right-of-way, where it was marked with the letter C, formed part of the section. Mrs Dong had signed an agreement in September 2014 to acquire a section in the subdivision that was then under consideration, but it is common ground that that subdivision (which did not proceed) had a different configuration. Overland gave no evidence that Mrs Dong inspected the site in 2014 or that, if she did, her inspection would have given her a sufficient understanding of the 2016 subdivision to realise that 145 square metres of the section was affected by the right-of-way/driveway.
[81] I accept too that there are clauses in the Agreement which placed the onus on Mrs Dong to properly inform herself about the section before she signed the Agreement. For example, clause 30 provided that no error or misdescription of the lots would annul the sale, and neither party would be entitled to compensation for any error or misdescription of the lots.
[82] In addition, cl 31.2 set out a number of undertakings by the purchaser, including that she had obtained independent legal advice, and (at cl 3.12(x)):
(x) ... has not relied on any representation, written or oral, made by or on behalf of the Vendor or its agent, which is not set out in this Agreement and this Agreement represents the entire agreement between the parties.
[83] And cl 31.2(xii) provided that the purchaser:
(xii) ... does not have any rights of setoff/equities with the Vendor under the Agreement, and [the purchaser] waives any rights of setoff/equities that it may be entitled to.
[84] The problem is that the efficacy of these clauses was dependent on Mrs Dong's ability to read them, and she says that she could not understand English.
[85] Certainly the level of trust Mrs Dong says she reposed in Ms Sun seems extraordinary – signing an agreement to buy a property for $1.26 million, apparently without understanding a word of the contract's extensive terms and conditions, and without taking legal advice was, with the benefit of hindsight, unwise. But I do not think I am concerned with any negligence Mrs Dong may have displayed at this point. This issue is concerned with whether the "buildable area" of the section was misrepresented to her, and I do not think I can say, with the level of certainty necessary for the entry of summary judgment for Overland, that it was not.
[86] What then, is the position where a vendor's agent misrepresents the contents of an agreement to buy property to a purchaser who cannot understand English, and the purchaser relies on the agent's description?
[87] Similar circumstances were considered in Golden Garden v Zhao.4 There, the Court of Appeal considered an appeal against the decision of Associate Judge Bell granting summary judgment on a claim by Zhao (the vendors) for the sum of $730,000, being the deposit payable under an unconditional agreement for sale and purchase of a property by Ms Liang on behalf of Golden Garden (the purchaser).
[88] Golden Garden contended that the vendors' agent knew that it was only prepared to purchase the property subject to conditions as to finance and due diligence, and the agent misled it into believing that the tender she presented for signing
4 Golden Garden v Zhao [2017] NZCA 227 [31 May 2017].
contained these conditions. Although the defence raised was one of non est factum, the Court noted that the evidence may also support other defences, including misrepresentation.5
[89] In the High Court, the Associate Judge found that Mrs Liang had "an adequate command of the English" language, despite her evidence to the contrary, and concluded that Mrs Liang's evidence that she had been misled could be disregarded as not credible. On appeal, however, the Court of Appeal considered that there was an arguable defence to the application for summary judgment, on the basis that the purchaser did not understand English and relied on the agent's assurance as to the effect of the agreement she was signing.6
[90] The Court of Appeal held that, if all of Mrs Liang's evidence was accepted, it was at least arguable that she was entitled to rely on the agent's assurance, and that could provide an arguable defence to the claim based on the plea of non est factum: the document was of a fundamentally different character from that intended by the purchaser. Mrs Liang was entitled to rely on the agent's explanation, and she was arguably misled by the vendor's agent as to the effect of the agreement.
[91] Golden Garden v Zhao, then, favours Mrs Dong to the extent there was any misrepresentation by Ms Sun as to the effect of the Agreement, and in particular the "buildable area" of the section.
[92] If there was a misrepresentation or misrepresentations, I think it must be at least arguable for Mrs Dong that she was induced by the misrepresentation to enter into the Agreement. While Overland challenges her evidence that she wanted to buy the section to build a house on it for her own occupation, I cannot resolve a dispute over the credibility of Mrs Dong's evidence on that point on a summary judgment
5 At [24] and [45].
application. Her evidence is not so clearly implausible that it can be rejected, especially when no evidence was given in reply by Ms Sun.
[93] Mr Rooney submitted that no evidence has been produced showing that the burden on the contract will be substantially less than Mrs Dong bargained for, or that the section is substantially different from what Mrs Dong bargained for. He submitted that there is no evidence that she cannot build a house of the kind represented on the section. Again, I do not consider the matter is clear enough on this point that Overland can say that Mrs Dong clearly has no defence. What she could or could not build on what was a relatively small section must have been an important consideration for her7 if she did intend to build a dwelling on the section, and in the context of a summary judgment application I am unable to find that the effect of the misrepresentation would not have been to substantially reduce the benefit of the contract to Mrs Dong,8 to substantially increase the burden of Mrs Dong under the Agreement,9 or to make the benefit or burden of the Agreement substantially different from that represented.10 The effect of the misrepresentation for the purposes of deciding whether or not Mrs Dong had a right to cancel could only be properly assessed at trial, with the benefit of all of the evidence.
[94] The answer on issue (1), then, is "yes".
Issue (2)
(2) If the answer to issue (1) is "yes", is it reasonably arguable for Mrs Dong that Overland was bound by the misrepresentation(s)?
[95] I do not consider that Overland could have been responsible, at the time, for representations made by Ms Sun before she was appointed to act as agent for Overland. That did not occur until 8 June 2016.
8 Contract and Commercial Law Act 2017, s 37(2)(b)(i).
9 Contract and Commercial Law Act 2017, s 37(2)(b)(ii).
10 Contract and Commercial Law Act 2017, s 37(2)(b)(iii).
[96] Mrs Dong does not say that Ms Sun made her statements about building a house on the section, and adding a swimming pool, after she became Overland's agent. Those particular statements are said to have been made in late May 2016. However, if a party makes a statement which is true at the time, but which becomes untrue in the course of subsequent negotiations, that party may have a duty to disclose the change of circumstances.11 In this case, I think it is at least arguable for Mrs Dong that Ms Sun, having created what was arguably a misleading impression of the section when she made her statements to Mrs Dong in late May 2016, arguably came under a duty to correct that impression when, with knowledge of Mrs Dong's wish to build a house of a particular size and a swimming pool on the section, she told Mrs Dong that "the contract had no issues and was fine for [Mrs Dong] to sign".
[97] My answer to issue (2) is "yes".
Issue (3)
(3) If the answer to issues (1) and (2) are both "yes", is it reasonably arguable for Mrs Dong that she was entitled to cancel the Agreement because of the misrepresentations(s)?
[98] In the view to which I have come on issue (4), relating to affirmation of the Agreement, it is not necessary to answer this question: Mrs Dong affirmed the Agreement, and in so doing lost any right she may have had to cancel on the grounds of the alleged misrepresentation.
Issue (4)
(4) If the answers to issues (1)-(3) are all "yes", is it reasonably arguable for Mrs Dong that she did not affirm the Agreement (and so lose the right to cancel)?
[99] Section 38 of the Contract and Commercial Law Act 2017 (the Contracts Act) provides:
38 No cancellation if contract is affirmed
A party is not entitled to cancel the contract if, with full knowledge of the repudiation, misrepresentation, or breach, the party has affirmed the contract.
[100] Mr Rooney referred to a number of authorities on the law relating to affirmation of a contract with full knowledge of an alleged misrepresentation or breach. In Jansen v Whangamata Homes Limited,12 the Jansens had agreed to purchase a unit from Whangamata Homes. There was a clause in the relevant contract containing a provision allowing either party to terminate the agreement by notice in writing if settlement had not occurred by a certain date. Settlement did not occur by the due date, but Whangamata Homes sent an invoice to the Jansens for extras and variations undertaken at the Jansens' request, and, two months later, its solicitors wrote to the Jansens' solicitors advising that the unit was close to completion and requesting the solicitor to forward the memorandum of transfer required by the agreement. Ten days later, Whangamata Homes' solicitor wrote again, advising that title had been issued. Three weeks after that, Whangamata Homes purported to cancel the agreement, on the basis that settlement had not occurred by the due date. It attempted to return the Jansens' deposit. The Jansens contended that Whangamata Homes had lost the right to terminate the agreement. They issued a proceeding seeking specific performance, and applied for summary judgment.
[101] In the High Court, Randerson J considered that Whangamata Homes had an arguable defence. The Court of Appeal took a different view on the facts of the case, and it ordered specific performance of the agreement.
[102] The Court of Appeal accepted the analysis of the law relating to affirmation given by Randerson J in the High Court. Randerson J referred to the leading authority of Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India, in which Lord Goff of Chieveley said:13
12 Jansen v Whangamata Homes Limited [2005] NZCA 207; [2006] 2 NZLR 300 (CA).
Election itself is a concept which may be relevant in more than one context. In the present case, we are concerned with an election which may arise in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election. Characteristically, this state of affairs arises where the other party has repudiated the contract or has otherwise committed a breach of the contract which entitles the innocent party to bring it to an end, or has made a tender of performance which does not conform to the terms of the contract. But this is not necessarily so. An analogous situation arises where the innocent party becomes entitled to rescind the contract, ie to wipe it out altogether, for example because the contract has been induced by a misrepresentation; and one or both parties may become entitled to determine a contract in the event of a wholly extraneous event occurring, as under a war clause in a charter-party. Characteristically the effect of the new situation is that a party becomes entitled to determine or rescind the contract, or to reject an uncontractual tender of performance; but, in theory at least, a less drastic course of action might become available to him under the terms of the contract. In all cases, he has in the end to make his election, not as a matter of obligation, but in the sense that, if he does not do so, the time may come when the law takes the decision out of his hands, either by holding him to have elected not to exercise the right which has become available to him or sometimes by holding him to have elected to exercise it.
(Emphasis added by the Court of Appeal in Jansen.)
[103] Randerson J also noted that an election may take the form of a deliberate or conscious act by the electing party, or may be imputed by the law treating the electing party as having exercised an election irrespective of actual intention.14
[104] Mr Rooney also referred to the decision of Harrison J in Nectar Limited v SPHC Operations (NZ) Limited, where the learned Judge held that it was unnecessary to prove at a given time during the contract's life that a party actually knew of its rights when electing to pursue a particular course. In that respect, the law of contract provided an exception to the general rule that the law requires proof that a person electing between two alternative paths must have actual knowledge of its legal rights.15
[105] In this case, Ms Fuiava accepted that Mrs Dong had full knowledge of the matters which she now relies on as misrepresentations, by 15 January 2018. By then, Michael had visited the Auckland Council, obtained details of the rights-of-way
affecting the sections, and been told that nothing could be done about removing the right-of-way over the section in the area marked C.
[106] Mr Rooney relies primarily on the email dated 15 January 2018 from Amicus Law to Overland's solicitors, in which Amicus Law said:
... our client would like to nominate Jiale Wang to complete the settlement on 17 January 2018. The nominee is not registered GST.
Kindly seek instructions from your client if we can settlement on 17 January without penalty.
[107] In my view the first paragraph of that email constituted a nomination of Jiale Wang to complete the settlement. It might perhaps be argued that the words "would like to" made the first sentence nothing more than a proposal, or suggestion, but I do not think that is consistent with the second sentence, in which Jiale Wang is referred to as "the nominee". Certainly there was a proposal relating to settlement on 17 January without penalty, but that proposal was accepted by Overland's solicitors in their letter dated 16 January 2018, and was in any event separate and distinct from the act of nomination in the first sentence of the email. (The issue on affirmation is whether Mrs Dong, with full knowledge of the matters she now relies upon as misrepresentations, took some step which unequivocally showed she was affirming the Agreement. In my view the nomination was such a step, and it was not linked to the request to extend the settlement date.)
[108] Ms Fuiava endeavoured to distinguish the cases referred to by Mr Rooney. She submitted that the correspondence from Amicus Law on behalf of Mrs Dong was not affirming in its content; rather, it sought to put conditions on the Agreement remaining on foot, and indicated cancellation was imminent if the conditions could not be satisfied. She noted that, once an innocent party has become aware of its rights, it is not required to make an election at once. It may suspend judgment, and anything said or done whilst that is the situation will not be regarded as the exercise of an election. Unequivocal acts or conduct are needed before a party will be held to have made an election.16
16 Referring to Jolly v Palmer [1984] NZHC 26; [1985] 1 NZLR 658, at 663.
[109] I do not accept those submissions. In my view, the nomination of Jiale Wang in the email of 15 January 2018 was clear and unequivocal, and constituted an election to affirm the Agreement. There was no apparent suspension of judgment while Mrs Dong considered her position. Certainly Amicus Law had raised two of the rights-of-way as an impediment to settlement in their email of 18 December 2017, but their concern appears to have been linked to the rights-of-way over areas P and W. On 19 December 2017, Overland's solicitors provided them with a copy of Auckland Council's partial surrender of easement document, in which the Council surrendered its right-of-way over a number of areas in the subdivision, including area P. Thereafter, Amicus Law does not appear to have been concerned about the rights-of-way that would remain on the title. It did write on 15 January 2018 saying that it had not yet received the updated title to the section, and saying its client could not "settle with the current title since the right-of-way has not surrendered yet", but that appears to have been a reference to the right-of-way that it had been told was being partially surrendered (the right-of-way over area P). A new title was issued without the right-of-way over area P, and thereafter the concerns expressed by Amicus Law relating to the rights-of-way appear to have been met.
[110] The rights-of-way were not mentioned in the email from Amicus Law dated 17 January 2018 as a reason for refusing to complete. Amicus Law referred only to the two "Encumbrances" registered on the title to the section, and they said that their client was able to settle subject to the removal of the Encumbrances. The Encumbrances were matters separate and distinct from the rights-of-way,17 and no argument has since been pursued to the effect that Mrs Dong was entitled to refuse to settle because of the Encumbrances.
[111] Ms Fuiava also referred to the judgment of Venning J in Tapp v Galway,18 a case in which Galway was held entitled to cancel notwithstanding that its lawyers had sent a settlement notice to Tapp's solicitors. The notice to settle was not an affirmation
17 There were two specific "Encumbrances" registered on the title to the section, being Encumbrance 10941585.12 in favour of Codrington Garden Ltd and Encumbrance 10941585.13 in favour of Overland. The second sentence of the email from Amicus Law dated 17 January 2018, which refers to Codrington Garden Ltd, makes it clear that Amicus Law was referring to the registered Encumbrances, not to the rights-of-way.
18 Tapp v Galway [2007] NZHC 666; (2007) 8 NZCPR 684.
of the relevant agreement to sell, as the settlement notice had been issued in the mistaken belief that that step was necessary to provide a basis for Galway to cancel the contract.
[112] As Venning J noted in Tapp v Galway, each case must depend on its own facts.19 The fact that the settlement notice had been issued by Galway's solicitors under a misapprehension that it was necessary to do so to cancel the contract was regarded as sufficient to avoid a finding of affirmation.
[113] There is no similar element of misapprehension in this case. The Amicus Law email of 15 January 2018 in which Jiale Wang was nominated as purchaser was, in my view, unequivocal. Tapp v Galway does not assist Mrs Dong.
[114] For all the foregoing reasons, the answer to issue (4) is "no".
Issue (5)
(5) Does Mrs Dong have an arguable claim for damages or compensation for misrepresentation, that she would be entitled to set off against the purchase price?
[115] In my view, she does not.
[116] First, there are two provisions of the Contracts Act that are relevant:
35 Damages for misrepresentation
(1) If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—
(a) A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and
...
19 At [39].
50 Statement, promise, or undertaking during negotiations
(1) This section applies if a contract, or any other document, contains a provision purporting to prevent a court from inquiring into or determining the question of—
(a) whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or
(b) whether, if it was so made or given, it constituted a representation or a term of the contract; or
(c) whether, if it was a representation, it was relied on.
(2) The court is not, in any proceeding in relation to the contract, prevented by the provision from inquiring into and determining any question referred to in subsection (1) unless the court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to the matters specified in subsection (3).
(3) The matters are all the circumstances of the case, including—
(a) the subject matter and value of the transaction; and
(b) the respective bargaining strengths of the parties; and
(c) whether any party was represented or advised by a lawyer at the time of the negotiations or at any other relevant time.
[117] Addressing s 50 first, I am prepared to accept that it is arguable for Mrs Dong that Overland is not entitled to rely on cl 31.2(x) of the Agreement, in which the purchaser undertook that she:
has not relied on any representation, written or oral, made by or on behalf of the Vendor or its agent, which is not set out in [the Agreement] and [the Agreement] represents the entire Agreement between the parties.
[118] The subject matter of the Agreement was a property agreed to be worth more than $1 million, and Mrs Dong spoke no English and was not represented by a lawyer. Those factors clearly favour Mrs Dong on each of the considerations listed at s 50(3) of the Contracts Act.
[119] Section 35(1)(a) of the Contracts Act would allow Mrs Dong to claim damages from Overland for the (arguable) misrepresentation "in the same manner" as if the misrepresentation were a term of the Agreement. If the alleged misrepresentation in
this case had been a term of the Agreement, the "manner" in which Mrs Dong's claim had to be brought, if a claim could be brought at all, was covered by cl 7 of the Agreement.20
[120] Clause 7.0 of the Agreement provided:
7.0 Claims for compensation
7.1 If the purchaser claims a right to compensation either under subclause 5.4 or for an equitable set-off:
(1) The purchaser must serve notice of the claim on the vendor before settlement; and
(2) The notice must:
(a) in the case of a claim for compensation under subclause 5.4, state the particular error, omission or misdescription of the property or title in respect of which compensation is claimed;
(b) in the case of a claim to an equitable set-off, state the particular matters in respect of which compensation is claimed;
(c) comprise a genuine pre-estimate of the loss suffered by the purchaser; and
(d) be particularised and quantified to the extent reasonably possible as at the date of the notice.
7.2 For the purposes of subclause 7.1(1), "settlement" means the date for settlement fixed by this agreement unless, by reason of the conduct or omission of the vendor, the purchaser is unable to give notice by that date, in which case notice may be given by the date for settlement fixed by a valid settlement notice served by either party pursuant to subclause 10.1.
7.3 If the amount of compensation is agreed, it shall be deducted on settlement.
7.4 If the amount of compensation is disputed:
20 See also Contract and Commercial Law Act, s 34, which provides:
34 Remedy provided in contract
If a contract expressly provides for a remedy for misrepresentation, repudiation, or breach of contract, or makes express provision for any of the other matters to which sections 35 to 49 relate, those sections have effect subject to that provision.
(1) An interim amount shall be deducted on settlement and paid by the purchaser to a stakeholder until the amount of the compensation is determined.
(2) The interim amount must be a reasonable sum having regard to all of the circumstances.
(3) If the parties cannot agree on the interim amount, the interim amount shall be determined by an experienced property lawyer appointed by the parties. The appointee's costs shall be met equally by the parties. If the parties cannot agree on the appointee, the appointment shall be made on the application of either party by the president for the time being of the New Zealand Law Society.
(4) The stakeholder shall lodge the interim amount on interest-bearing call deposit with a bank registered under the Reserve Bank of New Zealand Act 1989 in the joint names of the vendor and the purchaser.
(5) The interest earned on the interim amount net of any withholding tax and any bank or legal administration fees and commission charges shall follow the destination of the interim amount.
(6) The amount of compensation determined to be payable shall not be limited by the interim amount.
(7) If the parties cannot agree on a stakeholder, the interim amount shall be paid to a stakeholder nominated on the application of either party by the president for the time being of the New Zealand Law Society.
7.5 The procedures prescribed in subclause 7.1 to 7.4 shall not prevent either party taking proceedings for the specific performance of the contract.
[121] Clause 5.4 had in fact been deleted from the standard form part of the Agreement, and cl 30 expressly precluded compensation for any error or misdescription of the section.21 However, I think it at least arguable for Mrs Dong that cl 30 may not have been intended to apply to a claim based on a pre-contractual misrepresentation, but for which she would not have entered into the Agreement at all. But I think Mrs Dong's claim for damages or compensation relating to the "buildable area of the section" (if a claim had been made) would have been a claim to an equitable set-off. Any such claim would have been so closely connected with the Agreement
21 Clause 30 is reproduced at paragraph [8] of this judgment.
that, subject to compliance with any agreed procedural steps (including in this case the steps set out in cl 7 of the Agreement), it would not have been fair to allow Overland to enforce its rights under the Agreement without bringing Mrs Dong's misrepresentation claim to account. The claim would therefore have been a claim to an equitable set-off, of the kind discussed by the Court of Appeal in Grant v New Zealand Motor Corporation.22 The "manner" of bringing an equitable set-off claim was prescribed by s 7 of the Agreement, and once she had affirmed the Agreement Mrs Dong was bound to follow the cl 7 procedure.
[122] The amended settlement date was 17 January 2018, and by then Mrs Dong had affirmed the Agreement. The affirmation affirmed the Agreement as a whole (albeit with the misrepresentation included as a term 23), including the procedural requirements of cl 7. In Holmes v Booth,24 Tipping J summarised the relevant law on that point as follows:
Under the general law if one party is in breach of contract, either actual or anticipatory, which breach justifies cancellation, but the innocent party (A) elects to keep the contract alive, he keeps it alive for the benefit of the party in breach (B) as well as for his own benefit. Thereafter A remains subject to all his own obligations and liabilities under the contract. He may well have a right to claim damages for breach, but having elected to proceed he must proceed in terms of the contract. If he fails to do so he may thereby give B grounds for cancellation, thus putting an end to his own right to require performance. That is exactly what is said to have happened in this case. The position is a fortiori if B's breach does not entitle A to cancel.
[123] Mrs Dong did not comply with cl 7 before the 17 January 2018 settlement date. She did not provide a "genuine pre-estimate" of her loss caused by the alleged misrepresentation, and no claim was particularised or quantified. There was accordingly a failure to comply with cl 7.1(2)(c) and (d). That failure effectively made it impossible for the parties to apply cls 7.3 and 7.4 of the Agreement. As in Holmes v Booth, the failure to make a valid claim before settlement precludes any set-off by Mrs Dong against the amount that would otherwise have been payable by her on settlement.
22 Grant v New Zealand Motor Corporation [1988] NZCA 135; [1989] 1 NZLR 8. The "link" required for equitable set-off is that the two claims must be interdependent, so that judgment on one cannot be fairly given without regard to the other. The defendant's claim must impeach, or call into question, the plaintiff's claim.
23 At least insofar as Mrs Dong's entitlement to damages was concerned.
24 Holmes v Booth (1993) 2 NZ ConvC. 191, 633 at 191, 648.
[124] For those reasons, I conclude that Mrs Dong lost any right she may have had to set off her claim for damages or compensation for the misrepresentation against the balance of the purchase price that was payable on settlement. The answer to Issue (5) is "no".
Issue (6)
(6) If the answers to any of issues (1)-(4) is "no", is Overland entitled to the order for specific performance it seeks? If not, what is the appropriate remedy?
[125] Clause 10 of the Agreement dealt with notices to complete and remedies on default. Clause 10(1)(a) specifically entitled Overland to sue Mrs Dong for specific performance if she did not comply with the terms of a settlement notice served on her by Overland. Such a notice was served on Mrs Dong on 18 January 2018, and she did not comply with it.
[126] The learned authors of Equity and Trusts in New Zealand say that damages are not usually considered an adequate remedy for failure by a vendor to complete a contract for the sale of land, and specific performance is regarded as the primary remedy. Orders for specific performance of contracts for the purchase of land have usually been justified on the ground that land is generally unique and hence a purchaser cannot buy a similar property on the market. The authors of Equity and Trusts in New Zealand say that vendors of land are equally entitled to specific performance against defaulting purchasers, and standard form contracts for sale and purchase of land commonly provide for such a remedy. 25
[127] That may be considered the starting point, but specific performance remains a discretionary remedy. The interests of justice must be the ultimate determinant of the choice of remedy. In Butler v Countrywide Finance Limited, Hammond J suggested that what is required is a context-specific evaluation of which remedy is most
25 Butler & Ors, Equity and Trusts in New Zealand 2nd ed., 2009 at [24.3.2].
appropriate in the circumstances of the case. His Honour considered that the choice of remedy may, depending on the facts, be informed by the following factors:26
(a) Plaintiff autonomy. Generally speaking, a plaintiff, being the injured party, should have the first choice of remedy.
(b) Economic efficiency. The relative efficiency of specific performance versus damages may be a relevant factor.
(c) The relative severity of the remedy on the parties. Proportionality is a long-standing principle of both moral and legal force.
(d) The nature of the right being supported by the remedy. The stronger the Court's perception of the relevant right, the stronger the remedy which may be required.
(e) The moral view to be attached to the interests at stake.
(f) Any effect of a given remedy on a third party or the public.
(g) Any difficulties of calculation. Depending on the case, performance remedies may avoid intractable damages problems.
(h) The practicality of the enforcement. The parties have to live with performance-type decrees, and the Court should not be brought into disrepute by having attempts to enforce the impossible or very difficult. However that should not be an automatic bar to performance-based relief.
(i) The conduct of the parties.
26 Butler v Countrywide Finance Limited [1993] 3 NZLR 623.
[128] In this case, the parties agreed that specific performance should be available to Overland in the event of breach. The consideration of plaintiff autonomy, then, favours granting specific performance.
[129] There is no evidence of any effect a grant of specific performance would have on any third party or on the public, and nor is there any evidence one way or the other on the issue of economic efficiency or the relative severity an order for specific performance would have on Mrs Dong (there is no evidence that she would suffer undue hardship if an order for specific performance were made).
[130] There is no evidence that enforcement of an order for specific performance would be impossible or difficult.
[131] The factor which does arguably point against an order for specific performance is the conduct of the parties, and in particular my finding that it is at least arguable for Mrs Dong that she was induced to enter into the Agreement by a misrepresentation made on Overland's behalf by Ms Sun. The learned authors of Equity and Trusts in New Zealand state that, where the defendant is entitled to rescind the contract for misrepresentation or mistake, equity will not order specific performance, particularly where the plaintiff induced the defendant's mistake.27 Although the defendant's relevant mistake might not entitle him or her to relief, it might still provide a ground for refusing specific performance. The current position in New Zealand was summarised by Somers J in his dissenting judgment in Conlon v Ozolins, in the following terms:28
Commonly where specific performance is resisted in the case of mistake which does not prevent the existence of a contract and does not afford grounds for rescission, some ambiguity in the agreement or some, albeit innocent, misrepresentation by the plaintiff must be shown ...
This involves a balancing of the interests and conduct of each party.
[132] The learned authors of Equity and Trusts in New Zealand suggest that the result of the "balancing exercise" will depend on where the greater hardship lies.
27 Butler & Ors, Equity and Trusts in New Zealand, above n 22, at [24.4.3].
28 At [24.4.3], referring to Conlon v Ozolins [1984] NZCA 23; [1984] 1 NZLR 489 (CA) at 508.
[133] In this case, there was arguably a misrepresentation which induced Mrs Dong to enter into the Agreement, and on the limited evidence available on this application I think it is arguable for Mrs Dong that an order for specific performance would result in greater hardship for her than would be caused to Overland if it were left to sell the section and claim any damages from Mrs Dong. I am mindful too, that the case has not been heard with the benefit of full evidence; indeed, neither party addressed in any detail the exercise of the Court's discretion to order specific performance in the event Mrs Dong's defences on the merits were held to be beyond reasonable argument.
[134] In those circumstances I exercise my discretion against granting specific performance at this stage, on the basis that Overland will be entitled to the entry of summary judgment for liability, with questions of remedy to be determined at trial.
Result
Associate Judge Smith
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