Property deal fails: Buyer to pay $730,000 deposit despite pulling out of sale

Entrance to the property at 116 Station Road kumeu picture supplied via Google Street View credit: GOOGLE

An Auckland company argued it shouldn't have to pay a 10 per cent deposit on a cancelled $7.3 million property purchase because its director didn't understand English.

But a High Court judge was satisfied that the director, Helen Liang, is "much better at English than she has let on" and found in the seller's favour over the $730,000 deposit.

Liang's company, Golden Garden, runs a restaurant on Auckland's North Shore and this year offered $7.3m for a 4.4ha property in Kumeu.

Although Golden Garden's offer was accepted, its cheque for the $730,000 deposit was dishonoured.

The property's owners, Hongwei Zhao and Zhidong Huang, then cancelled the agreement and sued Golden Garden.

Although the pair have since resold the property, it was for less than the amount in Golden Garden's offer and is not due to settle until next year.

Zhao and Huang chased Golden Garden over the $730,000 deposit and both sides squared off in the High Court at Auckland this month for a summary judgment hearing.

In defending the bid, Golden Garden argued that Liang was under a language "disability" and that the purchase agreement was void.

She spoke Mandarin and Cantonese, but the company said that Liang doesn't understand English and that meant the agreement was not binding on her.

Associate Judge Roger Bell, in his decision on the stoush, said that on the evening when tenders for the property closed, Golden Garden had second thoughts about the deal and requested the land agent involved cancel the contract.

Liang said the agent asked her, as a favour, to put in an offer for the property and that she never intended to buy it. She did not think her bid - subject to finance and due diligence conditions - would be accepted.

Liang's case was she had thought she was signing a conditional agreement, but that it instead was an unconditional agreement.

Judge Bell said the evidence showed Liang was familiar with buying and selling real estate in New Zealand.

"She is clearly a businesswoman familiar with dealings in real estate. She understands the differences between conditional and unconditional agreements, tenders and agreements for sale and purchase, and the importance of finance conditions, due diligence conditions and settlement dates," he said.

The judge also said that when Liang entered important contracts, she was comfortable using English without seeking other professional assistance.

"Mrs Liang's explanation for providing the tender - that she was doing it as a 'favour' for the land agent - is implausible. To my mind, it does not make any sense that anyone would go through the pretence of making a serious offer in a heated property market for the purchase of a property available for development simply as an empty charade," he said.

The judge said that texts sent to the land agent showed the real reason for the cancellation of the purchase:

"Mrs Liang needed the support of other investors to purchase and they had not given their approval. She was now trying to back out. If she had been misled as to the effect of the agreement, she should have stated so clearly. But she did not," Associate Judge Bell said.

"I am satisfied on the evidence that Mrs Liang is much better at English than she has let on in her affidavit. Her assertions of ignorance of English are belied by contemporary documents," the judge said.

He said Golden Garden's defence was not tenable and gave judgment for $730,000 in Zhao and Huang's favour.