Bushpark Property Developments Ltd ((in Liquidation)) v Yang Hc Ak

JurisdictionNew Zealand
CourtHigh Court
JudgeCollins J
Judgment Date14 May 2012
Neutral Citation[2012] NZHC 973
Docket NumberCIV-2011-404-001981

[2012] NZHC 973

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-001981

Under the Companies Act 1993

In the Matter of the Bushpark Property Development Limited (In Liquidation)

BETWEEN
Bushpark Property Developments Limited (In Liquidation)
First Plaintiff
Henry David Levin and Vivien Judith Madsen-Ries as Liquidators of Bushpark Proeprty Development Limited (In Liquidation)
Second Plaintiffs
and
Pei Chi Yang
First Defendant

and

Hsiu Mei Su
Second Defendant

and

L K Trustee (No 19) Limited
Third Defendant
counsil

N H Malarao and P C Murray for Plaintiff

G J Kohler and J A Wickes for Defendants

Application by second plaintiff liquidators to recover part of a deposit from the defendants (vendors) in relation to a failed sale agreement – transaction occurred before company placed in liquidation – deposit actually paid was 15 per cent — contract provided for retention of 10 per cent deposit if contract cancelled by vendor – defendants commenced proceedings for specific performance which was abandoned in favour of retaining the deposit – whether agreement was cancelled by notice as specified – whether defendants were entitled to retain the entire deposit under s8(3)(b) Contractual Remedies Act 1979 (rules applying to cancellation – no party shall be divested of any money paid pursuant to the contract) – whether payment of deposit was a disposition which could be set aside pursuant to Part 6 subpart 6 Property Law Act 2007 (setting aside of dispositions that prejudice creditors).

The issues were: whether the agreement was cancelled by notice as specified; whether Y was entitled to retain the entire deposit under s8(3)(b) Contractual Remedies Act 1979 (“CRA”) (rules applying to cancellation — so far as the contract has been performed at the time of the cancellation, no party shall, by reason only of the cancellation, be divested of any money paid pursuant to the contract) and whether payment of the deposit was a disposition which could be set aside pursuant to Part 6 subpart 6 Property Law Act 207 (“PLA”) (setting aside of dispositions that prejudice creditors).

Held: Generally cancellation of the contract did not take effect until the cancellation was communicated to the other party. This could be done by words or conduct, or both, pursuant to s8 CRA (rules applying to cancellation). At the time Y issued a claim for summary judgment, he was preserving his options under the contract and had still to decide whether to seek specific performance or cancel the contract. On 14 November 2008 Y elected to cancel the contract by informing the Court he was abandoning a claim for specific performance in favour of a declaration that he was entitled to retain the deposit. Y could only abandon the claim for specific performance and elect to retain the deposit if he had first decided to cancel the contract. Y's argument that the Court had cancelled the contract was not persuasive. Realistically the Court could only have taken the steps it appeared to have on taken on 14 November 2008 after Y had advised the Court that he did not wish to pursue the claim for specific performance.

It was also clear that Y's decision to cancel the contract had not been communicated to Bushpark at that time. No explanation was provided as to why there was a five month delay between Y's decision to cancel the contract and the communication of that decision to Bushpark. Therefore there was nothing to suggest a factual foundation that could engage s8(1)(b) CRA (before the time at which the party cancelling the contract evinces, by some overt means reasonable in the circumstances, an intention to cancel the contract). Y had communicated his intention to cancel the contract when his solicitors wrote to the liquidators on 20 April 2009. That letter satisfied the requirements of s8(2) CRA (cancellation may be made known by words).

The language of cl 9.4(1)(b)(i) made it clear that if the vendor cancelled the contract then the vendor was entitled to retain a deposit which did not exceed 10 per cent of the purchase price. Any other interpretation would render those words otiose.

It was accepted that at the time the deposit was paid, Bushpark had been solvent. The liquidators argued that Y's decision to cancel on 14 November 2008 was a transaction under s292 Companies Act 1992 (insolvent transaction voidable) as Y had been trying to setoff the disputed amount against any damages claims Y might have against Bushpark. However the disposition of property occurred on 26 February 2007, which was the date the payment of the $345,000 in issue occurred. It was at that date that Y, subject to the terms of the contract, was entitled to retain the deposit. The liquidators had erroneously conflated the payment of the deposit with Ys decision to cancel the contract and abandon the claim for specific performance. As the relevant transaction occurred in February 2007, well before Bushpark was insolvent, this cause of action failed.

The provisions of Part 6 subpart 6 PLA did not apply to dispositions that occurred prior to 31 December 2007. Section 60 Property Law Act 1952 (alienation with intent to defraud creditors) which was in force at the time did not assist the liquidators because there had been no intent to defraud creditors. The deposit was paid and received honestly and in good faith.

Judgment for the liquidators. Y was contractually obliged to repay the $345,000.

RESERVED JUDGMENT OF Collins J

Introduction
1

This proceeding has been initiated by the second plaintiffs who are the liquidators of the first plaintiff (Bushpark). They are seeking to recover from the defendants (vendors) one-third of the deposit which Bushpark paid the vendors in relation to the purchase of a property in Karaka (the property). That transaction occurred prior to Bushpark being placed in liquidation. At all material times the vendors were the registered owners of the property.

Facts
2

On 11 February 2007 Bushpark entered into an agreement with the vendors for the sale and purchase of the property (the agreement). 1

3

The essential terms of the agreement were:

  • (1) The purchase price was $6.9 million inclusive of GST.

  • (2) The deposit was $1.03 million, representing 15 per cent of the purchase price.

  • (3) Settlement was to be on 11 February 2008.

4

Clause 9.4 of the Agreement provides:

9.4
    If the purchaser does not comply with the terms of the settlement notice served by the vendor then: (1) Without prejudice to any other rights or remedies available to the vendor at law or in equity the vendor may:
  • (a) sue the purchaser for specific performance; or

  • (b) cancel this agreement by notice and pursue either or both of the following remedies namely:

    • (i) forfeit and retain for the vendor's own benefit the deposit paid by the purchaser, but not exceeding in all 10% of the purchase price

    • (ii) sue the purchaser for damages.

    [emphasis added].

5

On 26 February 2007 Bushpark paid the deposit of $1.03 million to the vendors' real estate agents who deducted their commission ($162,000) and paid the balance of the deposit ($873,000) to the vendors.

6

On 29 January 2008 the vendors' solicitors sent Bushpark a settlement statement for sale and purchase of the property.

7

On 8 February 2008 Bushpark's solicitors informed the vendors' solicitors that Bushpark believed it had been induced to enter into the agreement because of misrepresentations made by the vendors or their agents about the development potential of the land.

8

On 11 February 2008 the vendors' solicitors wrote to Bushpark's solicitors asking, inter alia:

So that we may take instructions, please advise:

  • (a) Details of the representation(s) alleged to have been made to your client.

  • (b) The maker of the representation(s).

  • (c) The place and approximate time(s) and date(s) of the alleged misrepresentation(s).

Given settlement of this matter was scheduled for 11 February 2008 we would be grateful if you could come back to us on these matters as soon as possible.

9

On 15 February 2008 the vendors' solicitors served a settlement notice pursuant to cl 9 of the agreement on Bushpark's solicitors, requiring Bushpark to settle within 12 working days after service of the notice.

10

On 21 February 2008 Bushpark's solicitors wrote to the vendors' solicitors saying, inter alia:

  • (1) Bushpark was prepared to settle for $4.5 million.

  • (2) That the proposed reduction in purchase price was warranted because of misrepresentations made by the vendors' real estate agents about the potential development value of the property.

11

The vendors' solicitors issued an amended settlement notice on Bushpark's solicitors on 20 May 2008. The change between the settlement notices involved the second settlement notice specifying that the sum of $2.54 million would be paid into an agreed independent trust account pending resolution of the dispute between the parties over the true value of the property.

12

Bushpark did not settle in response to the amended settlement notice.

13

On 24 July 2008 the vendors commenced summary judgment proceedings against Bushpark. In that proceeding the vendors sought:

  • (1) an order that Bushpark specifically perform all its obligations under the agreement; or

  • (2) an order that Bushpark specifically perform its obligations under the agreement on an interim basis by paying the full purchase price less $2.54 million which would be paid into an independent trust account pending final settlement of the matter; or

  • (3) a declaration that the vendors were “entitled to forfeit the deposit or damages in lieu of specific performance and/or forfeiture”; and

  • (4) interest and costs.

14

On 10 November 2008 an application was made to the High Court to have Bushpark placed into liquidation. The liquidators were appointed on 29 March 2009.

15

In the meantime, on 14 November 2008 the vendors' summary judgment...

To continue reading

Request your trial
1 cases
  • Bushpark Property Developments Limited (in Liquidation) v Yang
    • New Zealand
    • High Court
    • 14 Mayo 2012
    ...HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2011-404-001981 [2012] NZHC 973 UNDER the Companies Act 1993 IN THE MATTER OF the liquidation of BUSHPARK PROPERTY DEVELOPMENT LIMITED (IN LIQUIDATION) BETWEEN BUSHPARK PROPERTY DEVELOPMENTS LIMITED (IN LIQUIDATION) First Plaintiff AND HENRY D......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT