An Auckland company claiming it shouldn't have to pay a 10 per cent deposit on a cancelled $7.3 million property purchase has won in the Court of Appeal.
The High Court previously dismissed the claims of Golden Garden director Meihong Kong - known as Helen Liang - that she had entered into the agreement because she didn't understand English.
In its decision, released today, the Court of Appeal overturned the ruling after receiving further affidavits regarding Liang's grasp of the English language.
Liang, who runs a restaurant on Auckland's North Shore, last year offered $7.3m for the 4.4ha property in Kumeu, something she said she did as a favour to her agent who wanted to meet the vendors and expand her client base.
Liang claimed she was assured by the agent that the offer - subject to finance and due diligence conditions - would not be accepted, the Court of Appeal decision said.
But it was accepted, although Golden Garden's 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.
The pair subsequently resold the property but for less than the Golden Garden's offer.
Zhao and Huang chased company over the deposit and both sides squared off in the High Court, where Associate Judge Roger Bell last year said that Golden Garden's defence was not tenable and gave judgment for $730,000 in Zhao and Huang's favour.
He determined Liang was "much better at English than she has let on" and was "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," Associate Judge Bell said.
The Court of Appeal found that it was at least arguable that Liang was entitled to rely on the agent's assurance that it was a conditional offer, and that she was not negligent in signing the agreement.
It followed that Liang could offer a defence of "non est factum", meaning the document Liang signed was fundamentally different to what she thought she was signing.
"Mrs Liang was arguably not negligent in signing the agreement because she was entitled to rely on the agent's explanation of it; and Mrs Liang was arguably misled by the vendors' agent as to the effect of the agreement," Justice Murray Gilbert said.
"At this preliminary stage, we could not safely exclude the possibility of other defences succeeding, including misrepresentation, breach of the Fair Trading Act 1986 or even, perhaps, mistake."
Justice Gilbert concurred with the High Court that a text message sent to Liang from the agent presented a "considerable challenge" because it recorded that the offer was unconditional.
"However, if it is proved that Mrs Liang does not understand English and the agent knew this, and the agent also knew that Mrs Liang was relying on her to explain the agreement, then this would raise the question as to why the agent sent this important text in English."
Liang claimed that when she discovered the offer was unconditional she immediately contacted the agent and said she had never intended to buy the property
"The fact that neither of the texts [sent after that] contains an express allegation that Mrs Liang was misled does not mean that her account is completely untenable. The texts can be read in a way that is consistent with Mrs Liang's account," Justice Gilbert said.
Such evidential contests could only be resolved at trial, he said in overturning the earlier decision.