Imperial Garden Investment Limited v Singh [2024] NZHC 1593 (17 June 2024)

Last Updated: 9 July 2024

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

CIV-2023-404-2702 [2024] NZHC 1593

BETWEEN	IMPERIAL GARDEN INVESTMENT LIMITED Plaintiff
AND	ADILAKSHMI SINGH First Defendant AISHWARYA SINGH Second Defendant AISHWARYA TRADING LIMITED Third Defendant

Hearing:	28 May 2024 Further Submissions 4 and 11 June 2024
Counsel:	N Tabb for the Plaintiff D Purusram for the Defendants
Judgment:	17 June 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 17 June 2024 at 4 pm.

Pursuant to Rule 11.5 of the High Court Rules.

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

Registrar/Deputy Registrar

Solicitors/Counsel:

N Tabb, Auckland

Victorian Lawyer, Auckland

IMPERIAL GARDEN INVESTMENT LTD v SINGH [2024] NZHC 1593 [17 June 2024]

Introduction

• [1] The plaintiff, Imperial Garden Investment Ltd (Imperial Garden) and the third defendant, Aishwarya Trading Ltd (Aishwarya Trading) were parties to an agreement for sale and purchase of a property at 15 Downpatrick Drive, Flatbush, dated 12 November 2021 (the contract). Imperial Garden was the vendor and Aishwarya Trading the purchaser.

• [2] The settlement date was 30 November 2022. Aishwarya Trading was to pay four deposits of $50,000 with the last due on 30 September 2022. Aishwarya Trading paid the first two deposits but defaulted in payment of the third and fourth deposits.

• [3] Aishwarya Trading was entitled to possession of the property pending settlement in return for payment of an occupation rent of $1,350 per week. This was both a term of the contract and recorded in a deed of licence to occupy, the latter executed by Imperial Garden alone.

• [4] Aishwarya Trading failed to settle on 30 November 2022. On 10 June 2023, Imperial Garden, Aishwarya Trading, Aishwarya Singh (Mr Singh, the second defendant) and Adilakshmi Singh (Ms Singh, the first defendant) signed a written agreement varying the contract and recording a nomination of Mr Singh and Ms Singh to complete the purchase (the June 2023 variation). The settlement date was enlarged to 30 June 2023.

• [5] The defendants did not settle on 30 June 2023 and Imperial Garden served a settlement notice on 13 October 2023. On 5 December 2023, Imperial Garden served a notice on the defendants as purchasers in possession, under ss 28 and 29 of the Property Law Act 2007 (PLA).

• [6] The defendants did not comply with the settlement notice and the PLA notice. On 22 December 2023, Imperial Garden cancelled the contract and the licence to occupy.
• [7] On 9 November 2023, Imperial Garden commenced this proceeding and applied for summary judgment seeking an order for possession and damages. The defendants vacated the property on 18 April 2024.

• [8] Imperial Garden has not yet resold the property. The application for summary judgment was initially advanced on the basis that Imperial Garden is immediately entitled to a judgment for part of the damages resulting from Aishwarya Trading’s failure to settle the contract, with the application for summary judgment to be brought back on for a second hearing once Imperial Garden has resold the property and loss of bargain damages have crystallised.

• [9] During argument at the hearing, Imperial Garden conceded that it is appropriate for all claims for damages arising from Aishwarya Trading’s failure to settle to be determined in one hearing following a resale of the property. Imperial Garden now seeks:

(a) summary judgment on liability and quantum for unpaid occupation rent; and

(b) summary judgment on liability for breach of contract by failing to settle.

• [10] The plaintiff’s application for summary judgment raises the following issues:

(a) Are Mr Singh and Ms Singh parties to the contract?

(b) Did Imperial Garden breach its duty to mitigate its loss by failing to cancel the contract immediately following Aishwarya Trading’s default in payment of the deposits?

(c) Did the June 2023 variation waive Imperial Garden’s rights to claim default interest and to serve a settlement notice if Aishwarya Trading failed to settle?

(d) Was Imperial Garden obliged to make a claim under cl 11.0 of the contract for compensation for disputed default interest, and to resolve that dispute by expert determination, before issuing a settlement notice?

(e) Are the settlement notice and the PLA notice invalid because they incorporated a claim for outstanding occupation rent?

(f) Was the contract discharged by frustration when Aishwarya Trading was unable to obtain finance?

(g) Is Aishwarya Trading entitled to relief against forfeiture under s 33 of the PLA?

Summary judgment principles

• [11] The Court may give judgment against a defendant if satisfied that the defendant has no defence to a cause of action in the statement of claim.

• [12] The leading authority on applications for summary judgment is Krukziener v Hanover Finance Ltd.¹ The Court of Appeal set out the following principles:²

(a) 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. The Court must be left without any real doubt or uncertainty.

(b) 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.

(c) The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically

¹ Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162.

² At [26].

evidence that is inherently lacking in credibility, as, for example, where the evidence is not consistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgement. The Court may take a robust and realistic approach where the facts warrant it.

• [13] The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.³

• [14] If the defendant fails to provide an evidential foundation for a defence, then the plaintiff’s verification of the statement of claim stands unchallenged and ought to be accepted, unless it is patently wrong.⁴

[15] Amendment of the claim

• [16] Imperial Garden originally pleaded two causes of action:

(a) the first cause of action is against all defendants as contracting parties, for breach of the contract by failing to settle; and

(b) the second cause of action is against Aishwarya Trading for breach of the deed of licence to occupy the property by failing to pay the occupation rent.

• [17] During the hearing, Imperial Garden sought leave to file an amended statement of claim adding two new alternative causes of action:

(a) a claim against all defendants for breach of the contract by failing to pay the occupation rent; and

(b) a claim against Mr Singh for breach of a guarantee.

³ Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.

⁴ Australian Guarantee Corp (NZ) Ltd v McBeth [1992] NZCA 244; [1992] 3 NZLR 54 (CA) at 58–59.

• [18] On 11 June 2024, after the filing of further written submissions, I granted leave.⁵

• [19] No issue has been taken with the quantum of the outstanding occupation rent to 18 April 2024, which is $113,400.

• [20] The cause of action against Mr Singh for breach of guarantee has not yet been heard and is not determined in this judgment.

Are Mr Singh and Ms Singh parties to the contract?

• [21] The June 2023 variation was signed by Imperial Garden, Aishwarya Trading, Mr Singh and Ms Singh, and comprised the following terms:

1. The purchaser has nominated the following parties to complete the purchase: Adilakshmi Singh and Aishwarya Singh

2. The purchase price is varied to be as follows: $2,500,000 including GST

3. The settlement date is 15 working days from the date of this variation.

4. All other terms in the agreement remains the same.

5. No penalty or any other remedies apply for the delay in completing settlement under the agreement.

• [22] Counsel for Imperial Garden argued that the effect of cl 1 was that Mr Singh and Ms Singh assumed the responsibilities of the purchaser under the contract, rendering them jointly and severally liable with Aishwarya Trading.

• [23] It is well established that a nominee can never be a party to the contract. In the absence of compelling language to the contrary, the named purchaser remains the only party to the contract.⁶

• [24] The June 2023 variation confirmed a nomination. There is nothing in the language used in the document to suggest that there was a novation, an assignment, or a sub-sale.

⁵ Imperial Garden Investment Ltd v Singh HC Auckland CIV-2023-404-2702, 11 June 2024.

⁶ Lambly v Silk Pemberton Ltd [1976] 2 NZLR 427 (CA).

• [25] There is no evidence of any other contractual terms, either in writing or oral, to support the argument that the parties intended that Mr Singh and Ms Singh had assumed the contractual obligations of the purchaser under the contract.

• [26] I find that Mr Singh and Ms Singh are not liable as parties to the contract, and Aishwarya Trading is liable as the contracting party.

Did Imperial Garden breach its duty to mitigate its loss by failing to cancel the contract immediately following Aishwarya Trading’s default in payment of the deposits?

• [27] Clause 4.2 of the contract provides:

4.2 If the deposit is not paid as set out in subclause 4.1, the vendor may cancel this agreement by serving notice of cancellation on the purchaser.

• [28] Counsel for Aishwarya Trading argued that Imperial Garden ought to have exercised its rights under cl 4.2 immediately following Aishwarya Trading’s first failure to pay a deposit.

• [29] Clause 4.2 conferred a discretion on Imperial Garden to cancel the contract. Counsel for Aishwarya Trading could not point to any authority to support the proposition that a vendor’s duty to mitigate loss obliges a vendor to elect to cancel an agreement for sale and purchase on non-payment of a deposit.

• [30] Even if this proposition was arguable, there could be no breach of such a duty in the present case. The June 2023 variation affirmed the contract and required settlement to be completed within 15 working days of 10 June 2023. By agreement, Imperial Garden waived any remedy that it then possessed for Aishwarya Trading’s past default in completing settlement. It is implicit that this waiver included any remedies in respect of non-payment of the deposit.

Did the June 2023 variation waive Imperial Garden’s rights to claim default interest and to serve a settlement notice if Aishwarya Trading failed to settle?

• [31] Aishwarya Trading argues that cl 5 of the June 2023 variation amounts to a waiver by Imperial Garden of its right to any default interest and any right of

cancellation that would otherwise arise if Aishwarya Trading failed to settle on the new settlement date. In other words, cl 5 was prospective and retrospective.

• [32] Clause 3 of the June 2023 variation fixed a new settlement date. Clause 4 preserved all other terms in the contract. Clause 5 did not vary the operation of any of those terms in the future and was limited to waiving a right to a remedy that already existed for a past default. The words “... the delay in completing settlement ...” in cl 5 are limited to Aishwarya Trading’s delay in completing settlement on the original settlement date of 30 November 2022.

• [33] Given Aishwarya Trading’s history of defaults at the time of the June 2023 variation, it would not make commercial sense for Imperial Garden to waive any rights that might arise if Aishwarya Trading failed to settle in the future.

Was Imperial Garden obliged to make a claim under cl 11.0 of the contract for compensation for disputed default interest, and to resolve that dispute by expert determination, before issuing a settlement notice?

• [34] The relevant terms of the contract are:

(a) Clause 11.2(2)(a), which provides:

The provisions of this clause apply if ... there is a dispute between the parties regarding any amounts payable ... under subclause 5.12 ...

(b) Clause 5.12(1), which provides:

If any portion of the purchase price is not paid upon the due date for payment, then, provided that the vendor provides reasonable evidence of the vendor’s ability to perform any obligation the vendor is obliged to perform on that date in consideration for such payment ... the purchaser shall pay to the vendor interest at the interest rate for late settlement on the portion of the purchase price so unpaid for the period from the due date for payment until payment ...

(c) Clause 11.3(1), which provides:

To make a claim under this clause 11.0 ... the claimant must serve notice of the claim on the other party on or before the last working day prior to the settlement date (except for claims made after the settlement date for amounts payable under subclause 5.12 ... in

respect of which the claimant may serve notice of the claim on the other party at any time after a dispute arises over those amounts) ...

(d) Clause 11.8, which provides that if the amount of compensation claimed is disputed, then an interim amount shall be paid on settlement by the party required to a stakeholder until the claim is determined, and if the parties cannot agree on the interim amount, the interim amount would be determined by an experienced property lawyer or litigator.

• [35] Counsel for Aishwarya Trading argued that there was a dispute regarding Imperial Garden’s entitlement to default interest, because the parties differed on the interpretation of cl 5 of the June 2023 variation. Therefore, Imperial Garden was not entitled to issue a settlement notice unless the dispute resolution process under cl 11.0 of the contract had been completed.

• [36] Clause 11.2 sets out the different circumstances where a claim for compensation under clause 11.0 is available. Clause 11.3 confirms the dispute resolution process to be followed if a party wishes to proceed under cl 11.0. The wording of cls 11.2 and 11.3 does not render the dispute resolution process mandatory.

• [37] Where a purchaser has failed to settle, the vendor retains its right to issue a settlement notice under cl 12 of the contract. Clause 12.1(1) provides:

If the sale is not settled on the settlement date, either party may at any time thereafter serve on the other party a settlement notice.

• [38] Imperial Garden was entitled to issue a settlement notice following Aishwarya Trading’s failure to settle 15 working days after 10 June 2023.

• [39] In any event, Aishwarya Trading’s argument that the June 2023 variation amounted to a waiver by Imperial Garden of its right to default interest was not raised before the settlement notice was issued. There was simply a failure to settle without a dispute raised.

Are the settlement notice and the PLA notice invalid because they incorporated a claim for outstanding occupation rent?

• [40] The settlement notice specified the default as failing to pay the balance of the purchase price of $2,484,810.22. Imperial Garden’s solicitors had issued a settlement statement which sets out how the $2,484,810.22 was calculated. It included a claim for outstanding rent of $81,000.

• [41] The PLA notice specified the failure to pay weekly rent, which by then totalled

$87,750, as a breach of the contract requiring remedy.

• [42] Counsel for Aishwarya Trading submitted that inclusion of the claim for rent rendered both the settlement notice and the PLA notice invalid.

• [43] Section 29 of the PLA prescribes the requirements for a notice under s 28. The notice must adequately inform the purchaser of the nature and extent of the breach of the agreement for sale and purchase of land.

• [44] Clause 26 of the contract provides that Aishwarya Trading would pay $1,350 weekly rent from the date of occupancy until the settlement date. This term was confirmed in a written variation of the contract dated 17 November 2021.

• [45] The solicitors for Imperial Garden subsequently prepared a “Deed of Licence to Occupy” dated 1 December 2021, which provided for Aishwarya Trading to pay a licence fee of $1,350 per week, “as per the variation executed by the parties on 17 November 2021.” The defendants did not execute the deed and it did not purport to supersede the existing contractual obligation to pay rent.

• [46] Aishwarya Trading’s obligation to pay rent of $1,350 per week arose pursuant to the contract. It was appropriately specified as a breach of the contract in the settlement notice and the PLA notice.⁷

7. See Johal v Stariha (2005) 6 NZCPR 230 (HC) where a settlement notice incorporating rent arrears was held to be valid notwithstanding the rent not being due on settlement.

• [47] The PLA notice complied with the requirements in s 29 of the PLA. Aishwarya Trading failed to remedy its breaches of the contract, and Imperial Garden was entitled to cancel the contract when it did so on 22 December 2023.

Was the contract discharged by frustration when Aishwarya Trading was unable to obtain finance?

• [48] The contract was not conditional on Aishwarya Trading obtaining finance. Aishwarya Trading assumed the risk of entering into an unconditional contract to purchase real estate. The evidence on behalf of Aishwarya Trading is that it was not able to obtain finance due to a change in market conditions.

• [49] The doctrine of frustration may apply to discharge the parties from performance of a contract where unforeseen events beyond the control of the parties occur which prevent performance of the contract. The threshold for frustration is very high. Performance must have become impossible or totally different. The obligation must have been fundamentally altered.⁸

• [50] A party cannot rely on an event that it has caused or induced as grounds for frustration to terminate a contract.⁹

• [51] Aishwarya Trading was responsible for ensuring it was able to procure funding to complete its obligations. Aishwarya Trading’s inability to raise finance is not an event that frustrates performance of the contract. Performance was not impossible in the sense required to amount to frustration.

Is Aishwarya Trading entitled to relief against forfeiture under s 33 of the PLA?

• [52] Section 33 of the PLA relevantly provides:

33 Relief against cancellation of agreement for sale of land

(1) A purchaser may apply to a court for relief against cancellation of an agreement for the sale and purchase of land only if—

(a) the purchaser has, under the agreement, entered into possession of the land; and

⁸ D W McMorland Sale of Land (4th ed, Cathcart Trust, 2022) at [12.69].

⁹ Perkins v Purea [2008] NZHC 807; (2008) 9 NZCPR 266 (HC) at [118].

(b) the vendor has served on the purchaser a notice that complies with section 29; and

(c) the vendor has, after serving that notice, applied to a court for an order for possession of the land, or peaceably re-entered the land.

...

• [53] Section 37 of the PLA relevantly provides:

37. Purchaser may apply for order requiring refund of deposit, etc, in respect of certain agreements

(1) This section applies to an agreement for the sale and purchase of land if—

(a) it comes into operation after 31 December 2007; and

(b) a court has not ordered, and no court would order, the specific performance of it by the purchaser; but

(c) the purchaser is not entitled to cancel it.

(2) The purchaser may apply to a court for relief under this section in respect of the agreement.

(3) On the application, the court may make an order doing all or any of the following in respect of the agreement:

(a) cancelling it:

(b) requiring the vendor to refund the deposit and any other

amounts (including interest) paid by the purchaser under it:

(c) declaring that the purchaser has a lien on the land to which it relates to secure payment by the vendor of any amounts ordered under this section to be refunded to the purchaser.

• [54] Section 38 of the PLA relevantly provides:

38. Court awarding damages against purchaser must take into account relief granted under section 37

(1) The granting of relief under section 37 in respect of an agreement for the sale and purchase of land does not deprive the vendor of any right to claim damages from the purchaser for the failure to perform the agreement.

(2) However, a court awarding damages against the purchaser for the failure to perform the agreement must take into account any relief granted under section 37.

• [55] In The Three Sisters Vineyard Ltd v Storey,¹⁰ the High Court considered the application of s 33 of the PLA as a ground of opposition to a vendor’s application for

¹⁰ The Three Sisters Vineyard Ltd v Storey [2014] NZHC 471, (2014) 15 NZCPR 1.

summary judgment for possession of land, following cancellation of an agreement for sale and purchase.

• [56] Whata J noted that case law on s 33 is sparse, holding that the Court’s discretion to grant relief is wide, but not unfettered. There must be an injustice demanding relief, informed by a range of matters including:¹¹

(a) the nature, form and gravity of the breach;

(b) the conduct of the purchaser;

(c) the conduct of the vendor;

(d) the ability of the purchaser to remedy the breach; and

(e) proportionality between the parties.

• [57] In the present case, Aishwarya Trading has not filed an application for relief against cancellation of the contract or for relief under s 37.

• [58] There is no basis for relief against cancellation of the contract. On its own evidence, Aishwarya Trading is unable to remedy its breaches of the contract, in particular its failure to pay the occupation rent and its failure to tender settlement. The evidence on behalf of Aishwarya Trading is that it remains unable to raise finance to complete the purchase. There is no prospect of Aishwarya Trading complying with its obligations on settlement.

• [59] Aishwarya Trading did not present any evidence or submissions to suggest an arguable basis to a claim for relief under s 37 of the PLA.

¹¹ At [23].

Conclusions on liability

• [60] Mr Singh and Ms Singh were not parties to the contract and are not liable as purchasers for any default in settling the purchase. The first cause of action against Mr Singh and Ms Singh fails.

• [61] Aishwarya Trading remained liable as the purchaser under the contract. Imperial Garden validly cancelled the contract following Aishwarya Trading’s default, and Aishwarya Trading is liable on Imperial Garden’s first cause of action.

• [62] The deed of licence to occupy was not executed by any of the defendants and is not binding. Imperial Garden’s second cause of action against Aishwarya Trading for breach of the deed of licence to occupy fails.

• [63] Aishwarya Trading failed to pay the occupation rent due under the contract. Imperial Garden’s third cause of action against Aishwarya Trading succeeds. The quantum of the claim is $113,400 for outstanding rent to 18 April 2024.

Orders

• [64] I enter judgment for the first and second defendants on the plaintiff’s first cause of action.

• [65] I enter judgment for the plaintiff on liability against the third defendant on the plaintiff’s first cause of action.

• [66] I enter judgment for the third defendant on the plaintiff’s second cause of action.

• [67] I enter judgment for the plaintiff against the third defendant on the plaintiff’s third cause of action for the sum of $113,400.

• [68] I grant leave to the plaintiff to file a second application for summary judgment:

(a) for an award of damages against the third defendant on the plaintiff’s first cause of action; and

(b) on the plaintiff’s fourth cause of action against the second defendant for breach of guarantee.

• [69] The proceeding is adjourned to the Summary Judgment List on 3 September 2024 for review.

• [70] Costs are reserved, to be determined after the second application for summary judgment is resolved.

Associate Judge Brittain