(29 November 2024)

Home | Databases | WorldLII | Search | Feedback High Court of New Zealand Decisions You are here:   NZLII >> Databases >> High Court of New Zealand Decisions >> 2024 >> [2024] NZHC 3604 Database Search | Name Search | Recent Decisions | Noteup | LawCite | Download | Help Elysian Property Trustee Limited [2024] NZHC 3604 (29 November 2024) Last Updated: 10 December 2024 IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE CIV-2022-404-2167 [2024] NZHC 3604 BETWEEN ELYSIAN PROPERTY TRUSTEE LIMITED Plaintiff AND DABIN WANG Defendant Hearing: 29 October 2024– 31 October 2024 Appearances: S Jeffs for Plaintiff M Davies and K L Chiu for Defendant Judgment: 29 November 2024 Reissued: 4 December 2024 JUDGMENT OF WILKINSON-SMITH J This judgment was delivered by me on 29/11/ 2024 at 12 pm Pursuant to Rule 11.5 of the High Court Rules .............................. Registrar/Deputy Registrar Solicitors: S Jeffs, Auckland Speakman Law, Auckland Meredith Connell, Auckland ELYSIAN PROPERTY TRUSTEE LIMITED v WANG [2024] NZHC 3604 [29 November 2024] Introduction [1] Background [9] The pleadings as to quantum [33] Issues [43] Discussion [44] The evidence [44] Is Elysian able to rely on cl 11.4(3) in the Agreement to calculate the loss based on resale within 12 months? [67] What is the correct date at which to assess Elysian’s loss? [75] Failure to mitigate [91] Chain of causation [98] Outcome [109] Default interest [1 17] Other interest [123] Result [135] Costs [136] Introduction [1] Elysian Property Trustee Ltd (Elysian) seeks damages against Dabin Wang for breach of an agreement for sale and purchase (Agreement) in respect of two commercial properties situated at Northcroft Street, Takapuna (the Properties). [2] On 29 June 2023, Associate Judge Taylor granted Elysian’s application for summary judgment as to liability for breach of the Agreement. 1 Judgment as to damages was declined on the basis that the quantum of damages should be determined at trial. Elysian says it suffered loss because the price it was able to obtain upon resale was lower than the price in the Agreement. [3] The purchase price in the Agreement was $15,000,000. Elysian resold the Properties for $10,500,000 in June 2023 after the application for summary judgment was heard, but before judgment was given. The resale of the Properties settled on 21 June 2023. [4] Elysian says that its loss crystallised at the time of resale. In its opening submissions it sought damages of $2,783,454.89; plus default interest on the unpaid amount in accordance with the Agreement, from the date of settlement to the date of settlement of the resale; interest under the Interest on Money Claims Act 2016 (IOMCA); and costs. In closing submissions Elysian sought damages of $4,482,690.44 inclusive of default interest. [5] Mr Wang’s position is that Elysian suffered no loss for which he is liable. He pleads three affirmative defences. [6] First, he says that Elysian’s loss should be assessed at the time it elected to retain the Properties in August 2022 at which time Mr Wang says the Properties were worth in excess of $13,000,000. [7] Secondly, Mr Wang says Elysian failed to take reasonable steps to mitigate its loss by failing to accept an offer of $13,000,000 from LDW Ltd in February 2023. [8] Thirdly, Mr Wang says that there was a novus actus interveniens because the Properties were sold to a third party at auction in April 2023 for $13,200,000. Although that sale did not proceed, Mr Wang says the entry into an unconditional binding contract for resale of the Properties at auction was an intervening act that broke the chain of causation of loss. 1 Elysian Property Trustee Ltd v Wang [2023] NZHC 1639. Background [9] Elysian is the trustee of the Elysian Property Trust. It owned the Properties which are multilevel tenanted commercial properties on separate titles. Susan Dickson is the director and sole shareholder of Elysian. Ms Dickson managed the Properties prior to the sale in June 2023. [10] Mr Wang is a property developer based on the North Shore. [11] In early October 2020, a Barfoot & Thompson agent, Bruce Jiao, approached Elysian on behalf of Mr Wang to make an offer to purchase the Properties. [12] On 20 October 2020, Elysian and Mr Wang entered into the Agreement. Mr Wang agreed to purchase the Properties for $15,000,000. Mr Wang paid a deposit of $2,000,000. The Agreement became unconditional on 2 December 2020 and the settlement date was 2 June 2022. [13] Mr Wang did not settle on 2 June 2022. The following day Elysian issued a settlement notice requiring Mr Wang to settle within 12 working days. He did not do so. On 27 June 2022, Elysian cancelled the Agreement. [14] In July 2022, Elysian engaged Bayleys to resell the Properties. Before the Properties were listed, Elysian gave Mr Wang an opportunity to purchase the Properties on the condition that he paid a further $500,000 deposit and settled within 50 working days of payment of the deposit. Mr Wang declined. [15] On 21 July 2022, Bayleys began marketing the Properties for sale by deadline private treaty to expire at 4 pm on 25 August 2022. By 25 August 2022, Bayleys had only received one offer to purchase the Properties. The offer was for $9,295,000. Bayleys advised Ms Dickson that no other interested party would buy the Properties for an amount that would satisfy Elysian. Elysian was still motivated to sell the Properties if a buyer could be found, and it continued to engage Bayleys for that purchase. However, the Properties were not actively marketed following the unsuccessful deadline sale process. [16] On 10 November 2022, Elysian commenced proceedings against Mr Wang for breach of the Agreement and sought summary judgment as to liability. The quantum of loss claimed was based on the market value of the Properties being $9,295,000, which was the highest price offered for the Properties as a result of the deadline private treaty campaign. [17] In February 2023, Bayleys received an unsolicited offer to purchase the Properties for $13,000,000 from a company called LDW Ltd. The terms included a five per cent deposit and settlement within six months. By this stage summary judgment proceedings had been commenced and there was a suspicion on the part of Elysian that the LDW Ltd offer was not genuine but was designed to assist Mr Wang’s position in the summary judgment proceedings. Elysian sought assurances including undertakings that LDW Ltd was not connected to Mr Wang. The assurances were given. Elysian counteroffered accepting the proposed purchase price but requiring a 10 per cent deposit and settlement within three months. [18] LDW Ltd did not engage with the counteroffer and disclaimed any interest in the Properties. [19] In February 2023, Bayleys recommended Elysian sell the Properties by auction. Bayleys shared Elysian’s concern that the LDW Ltd offer was not genuine and anticipated that there could be interference in the sale process to artificially inflate the apparent market value of the Properties. [20] From March 2023, Bayleys began marketing the Properties for sale by auction to take place on 12 April 2023 with a reserve of $12,000,000. Mr Wang was advised of the intention to offer the Properties for sale at auction. Michael Nees, the Bayleys agent, reported to Elysian pre-auction that Bayleys was struggling to attract interest above $10,000,000. [21] The night before the auction Bayleys received phone bidding forms from two women based in China, Lisa Li and Xia Yu. Bayleys had no background information on these prospective bidders, and no identification documents were provided. [22] The auction began slowly. After 20 minutes the highest bid in the room was $8,000,000. The auction was paused at 11.35 am for negotiation and resumed at 11.55 am with a bid of $11,000,000. Within eight minutes Ms Li and Ms Yu traded bids up to $13,200,000. Ms Yu placed the winning bid. [23] Ms Yu did not follow through with the sale process. She did not sign the agreement for sale and purchase or pay the deposit. By 17 April 2023, Ms Yu had ceased responding to Bayleys altogether. Elysian instructed the auctioneer to sign the auction agreement on behalf of Ms Yu and subsequently cancelled it. [24] Bayleys then followed up with the underbidder, Ms Li, but she too was disinterested and became uncontactable. [25] Bayleys then contacted other parties that had shown interest in the Properties. Mr Nees’ evidence was that there was no serious interest in the Properties and what interest there was, was at or below $10,000,000. On 4 May 2023, Ms Dickson told Bayleys on behalf of Elysian that she was not interested in selling the Properties for a “below market bargain” and that Bayleys’ agency agreement would terminate on 11 May 2023. [26] On 22 May 2023, Elysian amended its claim and application for summary judgment to rely upon a market valuation it had obtained for the Properties of $9,550,000. That valuation was provided by Ben Johnson of JLL Valuers. [27] Mr Wang filed a notice of opposition on 29 May 2023. [28] In late May 2023, a further potential buyer emerged and on 1 June 2023 Bayleys presented Elysian with an offer by V&V NZ Ltd to purchase the Properties for $9,500,000. The summary judgment hearing was imminent, and Ms Dickson asked Bayleys to pause negotiations to allow her to deal with the litigation and with serious health issues that she was experiencing. [29] The application for summary judgment was heard on 9 June 2023. [30] On 16 June 2023, Bayleys presented Elysian with a further offer from V&V NZ Ltd for $10,000,000. Elysian counteroffered at $10,900,000. After further negotiation the parties reached agreement on the amount of $10,500,000. Settlement took place on 21 June 2023 and Elysian received the amount of $10,234,210.21 —being the purchase price less commission. [31] On 29 June 2023, Associate Judge Taylor granted summary judgment as to liability. [32] On 12 September 2023, Elysian amended its claim to account for the resale price of the Properties. The pleadings as to quantum [33] The original statement of claim sought $3,904,310.03 based on a market value of $9,295,000 being the amount of the only offer received as a result of the deadline sale process in August 2022. [34] The amended statement of claim, dated 22 May 2023, varied the quantum of the claim to $3,649,310.03 based on a market value of $9,550,000 as valued by Mr Johnson in March 2023. [35] The second amended statement of claim, dated 12 September 2023, reduced the quantum of the claim as a result of the sale price achieved in the resale of the Properties in June 2023. Elysian sought total damages of $3,025,010 broken down as follows: (a) The $4,500,000 difference between the $15,000,000 purchase price in the Agreement and the $10,500,000 price at which the Elysian resold the Properties on 21 June 2023. (b) Associated costs totalling $525,010 comprised of: commission paid to Barfoot & Thompson on the sale to Mr Wang ($172,500) and to Bayleys on the June 2023 resale ($241,500); wasted legal costs ($19,124.50); wasted marketing costs for campaigns to sell the Properties ($12,117.63); the costs of the JLL valuation reports prepared for summary judgment ($12,212.33); and the costs of mortgages obtained by a different entity (Elysian Investment Ltd) relating to its purchase of a different property ($67,555.09). (c) Less the $2,000,000 deposit paid by Mr Wang. [36] Elysian further sought default interest at 14 per cent per annum from 2 June 2022 until satisfaction of the judgment sum; and scale costs for the proceeding. [37] In written opening submissions, Elysian further reduced the quantum of the claim to $2,783,485.89 accepting that the Barfoot & Thompson commission and the interest costs on Elysian Investment Ltd’s mortgages could not properly be claimed. Default interest was sought from the date of settlement to the date of resale of the Properties, calculated to be $1,915,726.03 with interest also claimed under the IOMCA on the sum awarded by the Court. Costs were sought in the usual way. [38] In oral opening submissions, Elysian changed its position in respect of the application of cl 11.4(3) of the Agreement which states: The damages claimable by the vendor under subclause 11.4(1)(b)(ii) shall include all damages claimable at common law or in equity and shall also include (but shall not be limited to) any loss incurred by the vendor on any bona fide resale contracted within one year from the date by which the purchaser should have settled in compliance with the settlement notice. The amount of that loss may include: (a) interest on the unpaid portion of the purchase price at the interest rate for late settlement from the settlement date to the settlement of such resale; and (b) all costs and expenses reasonably incurred in any resale or attempted resale; and (c) all outgoings (other than interest) on or maintenance expenses in respect of the property from the settlement date to the settlement of such resale. [39] In its written opening submissions, Elysian said that the resale of the Properties occurred slightly over 12 months from the date when Mr Wang should have settled. As a result, it did not initially rely on cl 11.4(3) to quantify its loss as the deficiency on a bona fide resale. Elysian said that the lack of reliance on cl 11.4(3) for that purpose did not change its entitlement to recover damages for the difference between the purchase price in the Agreement and the resale price. Elysian’s position was that the resale price was at market value, so the distinction was immaterial. It’s loss crystallised upon resale in June 2023 and was the difference between the sale price in the Agreement and the price achieved on resale plus associated costs. [40] In oral opening submissions, Elysian submitted for the first time that the resale occurred one year to the day after Mr Wang should have settled. As a result, cl 11.4(3) applied so that the Court need only consider the bona fides of the resale and need not grapple with a determination of the market value at the time of resale. [41] Mr Wang’s statement of defence was filed on 29 September 2023. Mr Wang pleaded three affirmative defences being: (a) Elysian’s losses crystallised when it opted to retain the Properties on or about 25 August 2022; and at that date Elysian had suffered no loss as it retained the deposit of $2,000,000 and the Properties were worth at least $13,000,000. (b) Elysian failed to mitigate its loss as it declined an offer of $13,000,000 for the Properties in February 2023; and resold the Properties at auction for $13,200,000 on 12 April 2023 before cancelling the unconditional agreement before settlement. Elysian then sold the Properties for $10,500,00 in June 2023. (c) Elysian entered into an unconditional sale and purchase agreement with a third party on 12 April 2023 with a purchase price of $13,200,000. The defendant is not liable for losses suffered by Elysian as a result of Elysian cancelling the agreement with the third party including any subsequent loss as a result of the second resale in June 2023. [42] In respect of the application of cl 11.4(3), Mr Wang says that late reliance on that clause to quantify damages should not be permitted. It confers an advantage on Elysian that was not pleaded because it makes it unnecessary to prove that the resale price represents the market value at the date of resale. Issues [43] The issues are: (a) Is Elysian able to rely on cl 11.4(3) in the Agreement to calculate its loss as the difference between the price in the Agreement and the price achieved on resale in June 2023? (b) If so, was the resale bona fide? (c) If not, what is the correct date at which to assess Elysian’s loss? (d) What was the market value of the Properties at the date the loss crystallised? (e) Did Elysian fulfil its duty to mitigate loss? (f) Did the unconditional agreement with Ms Yu at the auction break the chain of causation? (g) If damages are to be awarded, what is the quantum? (i) How is interest to be calculated? (ii) How are the rental returns to be accounted for? Discussion The evidence [44] Elysian called three witnesses, namely Ms Dickson, Mr Nees and Mr Johnson. Mr Johnson was engaged by Elysian in March 2023 to undertake a market valuation of the Properties and provided valuation reports for each property dated 21 March 2023. [45] Various objections were taken to the evidence of Ms Dickson by Mr Wang. Those objections primarily concerned Ms Dickson’s evidence about her suspicions as to the bona fides of the offer by LDW Ltd and the bona fides of the two overseas bidders at the auction in April 2023. [46] Ms Dickson’s evidence on those matters is not admissible to prove that her suspicions were correct, however, the evidence is admissible to explain actions taken by her on behalf of Elysian. Had Ms Dickson believed that there were genuine buyers willing to pay in excess of $13,000,000 for the Properties, her subsequent decision to accept an offer of $10,500,000 would be difficult to explain. Ms Dickson’s evidence, that she did not regard the offer by LDW Ltd or the bids by Ms Li and Ms Yu as genuine, is relevant and admissible evidence to explain the decisions she made and is relevant to the issue of mitigation of loss. [47] I found Ms Dickson to be an honest and credible witness who was motivated to put Elysian back in the position it would have been had Mr Wang not defaulted on the Agreement. Ms Dickson clearly had a view of what she was willing to accept for the Properties at various stages, but that view did not necessarily reflect the reality of the market at the time. During cross-examination, Mr Davis asked Ms Dickson: Q. So, your brief is accurate? At the time – A. Yeah. Q. – you wanted a price of around 13 million. A. That would’ve been perfect for everyone, wouldn’t it? We wouldn’t be here. Q. Exactly. And that was consistent with what you considered at the time anyway was the market value of the properties. A. I think the market was moving so much at that stage and there was just – because there was absolutely no buyer in the market, the market was just very, very hard to read. [48] It was put to Ms Dickson that the decision to sell the Properties for $10,500,000 in June 2023 was motivated by the options available to Elysian in its legal claim against Mr Wang. Ms Dickson denied that, and I accept her evidence. When asked whether it would have been unreasonable for Elysian to accept a low offer to maximise the damages claim against Mr Wang, Ms Dickson was unhesitatingly in agreement. Further, the sale did not maximise the damages, rather it reduced the damages claimed by $1,000,000. [49] When asked in cross-examination whether she ever had a discussion with anybody about the benefits to Elysian of having a valuation as low as pos