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Chang v Lee

Chang v Lee

Case [2017] NZCA 308 19 July 2017

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA279/2016
[2017] NZCA 308

BETWEEN	CHIN-FU CHANG Appellant
AND	HSING-EN LEE Respondent

Hearing:	1 June 2017
Court:	Harrison, Venning and Simon France JJ
Counsel:	R Reed and A Manuson for Appellant G D Wiles for Respondent
Judgment:	19 July 2017 at 2.15 pm

JUDGMENT OF THE COURT

A The appeal is allowed.

BWe declare that the respondent holds 48.6 per cent of the value of the Sunnynook property on trust for the appellant. The appellant’s equitable interest is to be secured by a notice of charge against the title.
C We order that the property be sold on or before 1 January 2018 and the proceeds of sale after deduction of the associated costs be divided accordingly.
DThe respondent is ordered to pay the appellant costs on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)

Introduction

In 2011 Chin-Fu Chang advanced $275,000 to his niece, Hsing-En Lee, to buy a house in Auckland. The advance amounted to 48.6 per cent of the purchase price but its terms were never settled between Mr Chang and Ms Lee. Ms Lee took title solely in her own name but has since denied Mr Chang’s right to repayment of the advance or interest in the property.
Mr Chang’s appeal from the judgment of the High Court raises the issue of whether (a) Ms Lee holds the title to the property on a resulting or implied trust for Mr Chang proportionate to his contribution; or (b) as Fogarty J found, Ms Lee is subject to a fiduciary obligation arising on the expiry of a fixed term to repay the balance of Mr Chang’s advance then owing but without interest.[1] While both alternatives benefit Mr Chang, the financial difference between the two is significant. If Mr Chang’s contribution is held on a resulting trust he will be entitled to share pro rata in the proceeds of sale of the property with the accrued benefit of sustained inflation in the Auckland property market. If, however, the advance is an interest-free loan, its real value will have been steadily eroded over the same period.
[1]Chang v Lee [2016] NZHC 1040.
Mr Chang commenced the proceeding in the High Court seeking declaratory relief and orders for sale of the property. Ms Lee’s primary defences were that (a) Mr Chang’s advance was a gift to satisfy a family debt; or (b) she was entitled to set off the advance against Mr Chang’s prior indebtedness to her mother.[2] Both parties led a good deal of evidence at a trial lasting six days. Ms Lee does not challenge Fogarty J’s dismissal of her two defences.
[2]At [3].
The main contest at trial was on liability, with relief being of a consequential or subsidiary nature. Relief is now the only live issue between the parties and, given its narrow compass, it is unnecessary for us to examine the relevant facts in detail.

Background

Mr Chang…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Chang v Lee

Details

AGLC: Chang v Lee [2017] NZCA 308
Case: [2017] NZCA 308
Decision Date: 19 July 2017 at 2.15 pm

CaseChat Overview and Summary

Chin-Fu Chang appeals against the judgment of the High Court in respect of his claim against Hsing-En Lee for repayment of an advance made towards the purchase of a property at Sunnynook. The Court of Appeal holds that the property be sold and the proceeds divided between the parties in shares proportionate to their contributions. The appeal is allowed. The Court declares that Ms Lee holds 48.6 per cent of the value of the Sunnynook property on trust for Mr Chang to be secured by a notice of charge against the title. The Court orders that the property be sold on or before 1 January 2018 and the proceeds of sale after deduction of the associated costs be divided accordingly. Ms Lee is ordered to pay Mr Chang costs on a band A basis together with usual disbursements.

The Court of Appeal found that Mr Chang did not intend to part with beneficial ownership of the advance he made to Ms Lee towards the purchase of the property at Sunnynook. It follows that the classical elements of a resulting trust existed. The Court held that the settled principle applies that where the money to purchase a property has been provided by two persons for that very purpose the property is held in proportion to the funds provided. The Court of Appeal held that the law does not require the settlor to prove a positive intention to own of the scope proposed by Hudson. Here a resulting trust serves the purpose of filling a lacuna in the parties’ legal relationship by operating on the recipient’s conscience. The Court found that Ms Lee was not entitled to retain Mr Chang’s contribution. However, the Court was not satisfied that the Judge’s construction of a hybrid equitable loan did equity between the parties. Instead, the declaration has by its terms bestowed an unfair advantage on Ms Lee. The Court held that equity will be done in this case if an order is made pursuant to s 339(1) of the Property Law Act 2007 for sale of the property and division of the proceeds between Ms Lee and Mr Chang according to their respective shares.

Orders