Turn and Wave Ltd v Northstar Accounts Pty Ltd Hc Ak

• Jurisdiction: New Zealand
• Judge: Bell
• Judgment Date: 23 December 2010
• Court: High Court
• Docket Number: CIV-2010-404-002268 CIV-2010-404-002294 CIV-2010-404-002292 2010-404-002256 CIV-2010-404-002181
• Date: 23 December 2010

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-002268

CIV-2010-404-002272

CIV-2010-404-002294

CIV-2010-404-002292

2010-404-002256

CIV-2010-404-002181

BETWEEN

Turn and Wave Ltd

Plaintiff

and

Northstar Accounts Pty Ltd

Defendant

BETWEEN

Turn and Wave Ltd

Plaintiff

and

Zenn Pty Ltd

Defendant

AND BETWEEN

Turn and Wave Ltd

Plaintiff

and

Newsau Pty Ltd

Defendant

AND BETWEEN

Turn and Wave Ltd

Plaintiff

and

Derek Clement Stanning and Elizabeth Rose Stanning

Defendants

AND BETWEEN

Turn and Wave Ltd

Plaintiff

and

Ken Edmonds, Sue Edmonds and Mark Edmonds

First Defendants

and

Scomarg Investments Pty Ltd

Second Defendants

and

Tried Hard Pty Ltd

Third Defendant

and

Brett Sheather, Marc Wilson and Robin Walker

Fourth Defendants

AND BETWEEN

Turn and Wave Ltd

Plaintiff

and

Robert Ernest Weber, Deborah Jane Weber and John Price

First Defendants

and

Kerrie Anne Schoots and Pieter Lauurence Schoots

Second Defendants

and

Donald Mcmichael and Renee Le Grande

Third Defendants

and

William Staples and Lynette Jones

Fourth Defendants

and

Tony Peter and Wendy Peter

Fifth Defendants

Appearances:

W A McCartney for Plaintiff on 26 August 2010

D Chisholm/G Blanchard for Plaintiff on 20 September 2010

S H Barter and R S Phillips for all Defendants (except Sheather) M J Robinson for B Sheather

JUDGMENT OF ASSOCIATE JUDGE Bell

Introduction

1 Turn and Wave Ltd has built two apartment towers, called Bianco off Queen, on a site at the corner of Turner and Waverly Streets in central Auckland. In these proceedings, it claims that all the defendants have defaulted under agreements to buy apartments off the plan. It seeks orders for specific performance against all defendants except the first defendants in CIV-2010-404-2181, where it seeks damages. All the defendants live in New South Wales or Australia Capital Territory. They have filed protests to jurisdiction under r 5.49. They say that the claims by Turn and Wave Ltd should be heard in Australia instead of New Zealand.

2 Turn and Wave Ltd applied under r 5.49(5) to set aside the defendants' appearances. The applications for the proceedings against North Star Accounts Pty Ltd, Zenn Pty Ltd, Newsau Pty Ltd and D C & E R Stanning were heard on 26 August 2010. The applications for the other proceedings were heard on 20 September 2010. At the beginning of the hearing on 20 September 2010, Mr Robinson, appearing for Mr Sheather, one of the defendants in CIV-2010-404-2256, was granted leave to withdraw on the basis that Mr Sheather abided the decision of the court.

3 The litigation has its origins in investment schemes devised by the Blue Chip group of companies. Those companies have now failed and are insolvent. Turn and Wave Ltd is not a Blue Chip company. Tim Manning, an experienced developer, is the man behind Turn and Wave Ltd.

4 Monrad Ltd, a subsidiary of Blue Chip New Zealand Ltd, owned the site and had consents for the development. In 2006 Turn and Wave Ltd entered into an agreement with Monrad Ltd to buy the site. Features of the agreement included:

Monrad was to underwrite the sale of units necessary to meet 75 per cent of the total value of the units.

The total value of the price list for the units was agreed at about $76.1 million.

There was to be a separate underwrite agreement. Monrad was to be paid an underwrite fee.

Of the purchase price of $8.4 million, $1,000,000 was left in by way of vendor finance. The vendor loan was repayable on 100 per cent of sales.

5 There was also an agreement for the sale of intellectual property. Its terms are not relevant for this case.

6 Under the underwrite agreement, Monrad Ltd underwrote the sale of the units. It included this:

2.2 The underwriter shall use its best endeavours to procure a real estate firm at the cost of the underwriter, to introduce purchasers to purchase the units, for the sale prices and on the terms and conditions set out in the sale and purchase agreement and the addendum and shall act as liaison between the vendor and those purchasers as and when required by the vendor in facilitating payment of the deposits under and effecting settlements pursuant to the sale and purchase agreement and will actively co-operate with the vendor's solicitors as required to achieve this.

This clause made Monrad Ltd Turn and Wave's agent for marketing the units.

7 There was also an indemnity agreement between Turn and Wave and Blue Chip New Zealand Ltd. The units were to be sold subject to leases to either Auckland Residential Tenancies Ltd or ART Apartments Ltd, both Blue Chip subsidiaries. Blue Chip New Zealand Ltd guaranteed performance by the lessees. Turn and Wave Ltd's funders required it to be substituted as guarantor. Turn and Wave Ltd would retain the right to substitute Blue Chip New Zealand Ltd as guarantor. Mark Bryers, a director of Blue Chip New Zealand Ltd, was to indemnify Turn and Wave Ltd personally up to $5,000,000 if Turn and Wave Ltd was not able to substitute Blue Chip New Zealand Ltd.

8 Later the Blue Chip companies collapsed.

9 Blue Chip Financial Solutions Australia Ltd, an Australian Blue Chip company and its licensees, marketed the units in Australia. They did so as sub-agents of Monrad. But the units were not marketed alone. They were tied in with a form of investment that Blue Chip called the Premium Income Product. The defendants all bought the Premium Income Product. A fact sheet for the premium income product says this:

Overview

Invest in a premium income residential property investment.

Blue Chip's premium income product offers a simple and easy way to access the benefits of direct residential property investments.

Investors enter into a sale and purchase agreement for an off the plan property in New Zealand and pay 10% deposit which is secured in a solicitor's trust account.

Investors receive monthly cash distributions of 15% p.a. on the full deposit amount until completion of the property.

Blue Chip holds a call option to call the property from the investor and settle on the property at completion.

The investor holds a “put” option to put the property to Blue Chip and require Blue Chip to settle on the property on completion.

10 The document also says:

Key benefits

• • Assured income stream — annual return of 15% p.a. fixed for the term

• • Protection from downturn in the property market — put option investors favour provides protection

• • Access future benefits immediately — potential future returns are distributed monthly direct to investor's bank account through a 15% p.a. return

• • Capital secured — investor's capital is held in a solicitor's trust account

• • Security — the product is issued by Blue Chip Financial Solutions Australia Ltd, its parent being a publicly listed company on the ASX

• • Specialists — Blue Chip are specialist providers of residential property investment solutions.

11 The defendants were introduced to the product. They each signed an authority to proceed authorising Blue Chip Financial Solutions Australia Ltd to allocate a residential property and prepare an agreement for sale and purchase of the property. Later they received a letter from Blue Chip Financial Solutions Australia Ltd with an option fee notification, a property pack, an agreement for sale and purchase (to be signed) and a put and call option deed (to be signed).

12 Under the option fee notification, Blue Chip Financial Solutions Australia Ltd confirmed receipt of a signed unconditional sale and purchase agreement and payment of the 10% deposit. An option fee of 15% p.a. was to be paid monthly to the defendants' nominated account until completion of the agreement for sale and purchase. The option fee notification confirmed that the deposit was held in the developer's solicitor trust account in New Zealand. The option fee notification did not identify the developer.

13 Information in a property pack identified and described Turn and Wave's apartments.

14 The put and call option deed between each defendant and Blue Chip Financial Solutions Australia Ltd gave Blue Chip the option to buy the property and also gave the defendant the option to require Blue Chip to purchase the property. The put and call option deed was governed by the law of New South Wales. Turn and Wave Ltd was not a party to the put and call option deed. Turn and Wave Ltd's sale and purchase agreement does not refer to the put and call option deed. Two of the defendants, Price and Weber and Walker and Wilson, signed power of attorneys. Blue Chip Financial Solutions Australia Ltd signed the deed on behalf of these defendants. All the other defendants signed the deed themselves.

15 The defendants also signed agreements for sale and purchase, apart from those who gave powers of attorney to Blue Chip Financial Solutions Australia Ltd.

16 The defendants say that, with two exceptions, they are Australian self-managed superannuation funds. Under Australian legislation, there are restrictions on borrowing by trustees of self-managed superannuation funds. They say that they signed two pages of an agreement for sale and purchase, plus an addendum, but other pages relied on by Turn and Wave as part of the agreement for sale and purchase were not signed by them and do not form part of the agreement for sale and purchase. All of them say they signed the agreement for sale and purchase on the basis that it was subject to the put and call option. They say that Blue Chip representives in Australia represented to them that the agreement for sale and purchase was in the REINZ form used by lawyers in New Zealand. Many of them say that Blue Chip representatives told them that they would not have to complete the purchase of the apartments in New Zealand.

17 These matters are in issue...