Chang v Lee
[2016] NZHC 1040
•19 May 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-1425 [2016] NZHC 1040
BETWEEN CHIN-FU CHANG
Plaintiff
AND
HSING-EN LEE Defendant
Hearing: 2, 3, 4, 5, 6 and 9 May 2016 Appearances:
R Reed and A Manuson for Plaintiff
G D Wiles for DefendantJudgment:
19 May 2016
JUDGMENT OF FOGARTY J
This judgment was delivered by Justice Fogarty on
19 May 2016 at 3.30 p.m., pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors/Counsel:
Prestige Lawyers Ltd, Auckland
Murdoch Price, Manukau
CHANG v LEE [2016] NZHC 1040 [19 May 2016]
Introduction
[1] In 2011 the plaintiff, Mr Chang, contributed $275,000 to the purchase of a house in Auckland known as Sunnynook. The house was purchased for $566,000. The registered proprietor was his niece, Ms Lee. Mr Chang contributed $275,000 at the request of his sister in law, Ms Wang, the mother of his niece. No receipt was given for the payment of $275,000 let alone any written agreement recording any proprietary interest in Sunnynook.
[2] In this proceeding Mr Chang comes to equity and invites this Court to find that Ms Lee is obliged by her conscience to hold the Sunnynook property on trust for him, to the extent that his contribution bore to the total price. He seeks a sale of the property and an apportionment of the proceeds in the proportion of his contribution to the total price.
[3] In reply the defendant, Ms Lee, contends two alternative propositions:
(a) That the payment of $275,000 was a gift to her by Mr Chang in order to satisfy a debt owed by him to her mother.
(b)Alternatively she contends that she and her mother are entitled to set- off against the $275,000 the numerous payments her mother made to Mr Chang to reduce his debts, for some considerable time, prior to the payment.
This is an equity case
[4] Where a person pays over a large sum of money towards the purchase of land without getting his or her name recorded on the title as one of the owners, equity presumes that the registered owner holds the money or the property in trust for the person who provided the money, subject to evidence to the contrary. Equity has this presumption because it perceives that, if the facts are that simple, the person holding the money or the property would be obliged by his or her conscience to acknowledge that the person who paid part of the purchase price is the beneficial owner of, part of
the property. The dictum most frequently cited is that of Lord Browne-Wilkinson in
Westdeutsche Landes Bank Girozentrale v Islington London Borough Council:1
(i) Equity operates on the conscience of the owner of the legal interest.
In the case of a trust, the conscience of the legal owner requires him to carry out the purposes for which the property was vested in him
(express or implied trust) or which the law imposes on him by
reason of his unconscionable conduct (constructive trust).
And:2
Under existing law a resulting trust arises in two sets of circumstances: (A) where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A's intention to make an outright transfer:…
(Emphasis added.)
The arrangement contention
[5] Ms Lee, the registered proprietor of Sunnynook, says that in March 2011
Mr Chang and her mother, Ms Wang, had discussions during which they agreed that Mr Chang would raise a mortgage on his freehold home in Auckland, called Delamere Court, borrow $275,000 and give that sum to Ms Lee in order for her to settle her purchase of Sunnynook. She further says that this contribution to the purchase price was understood by them to be a partial repayment of past money advances and other valuable benefits provided by Ms Wang mother to Mr Chang. Finally, she says that they agreed that Sunnynook would be registered solely in her name and Mr Chang was not to acquire or retain any ongoing ownership interest in the property whether of a legal or equitable nature.
[6] In support of Ms Lee’s alternative set-off argument, it was pleaded that
Mr Chang had received from Ms Wang substantial monetary advances, accommodation and benefits since the 1990s right through to 2011. This included, in
1 Westdeutsche Landes Bank Girozentrale v Islington London Borough Council [1996] AC 669 at
705C-D (per Lord Browne-Wilkinson).
2 At 708A-B.
particular, a guarantee by Ms Wang of the debts of Mr Chang’s business which, following the failure of the company, cost Ms Wang as guarantor a sum about the size of the borrowing of NZ$275,000.
Mr Chang’s view of the arrangement
[7] That Mr Chang agreed to this proposition is inherently unlikely. At this time he was 63 years old and had recently received his lump sum retirement payment from the Taiwanese government. He was to leave his employment at Goal Co (Taiwan) Ltd. It had taken him 16 years to pay off the mortgage on Delamere Court. At the time of borrowing Mr Chang was in no position to repay that loan of
$275,000, let alone live in the property and service the mortgage.
[8] It was Mr Chang’s evidence that he entered into a quite different arrangement. That agreement being that he was prepared to borrow the money against Delamere Court in order to purchase Sunnynook, provided that Ms Wang, who was the CEO of Goal, would engage him as an employee:
The agreement was that I would borrow this amount for the purchase of the property for 10 years. I would continue to work in Taiwan for 10 years with Ms Wang at Goal Co Ltd so I could cover any payments over this period.
It was intended that after the purchase of the Sunnynook property Nancy (Ms Lee) would move out of the Delamere property. I would again rent out the Delamere property and the rental payments I would receive would service the interest on the new mortgage.
[There was to be a delay implementing this while Ms Lee continued to stay at Delamere.]
I authorised Nancy to manage the rental of my property … Essentially I was
paying off the interest on the Delamere mortgage with these rental monies.
…
[9] I do not think this is a complete explanation of this understanding, as I discuss later in the judgment, particularly as to his intention to lease Delamere Court over those ten years.
The chronology of family dealings
[10] I turn now to set out a chronology of the dealings between Mr Chang, Ms Wang and Ms Lee. It is necessary to do so in some detail in order to ascertain whether equitable obligations did arise between the parties, owed to each other.
[11] Mr Chang incorporated a company, Sheng Yi Enterprise Co Ltd (Sheng Yi), in Taiwan in 1990. The company had five shareholders: Mr Chang, his wife, two of their children and Ms Wang. Citibank advanced a bank loan to Sheng Yi, which was guaranteed by both Ms Wang and Mr Chang.
[12] Mr Chang and his wife purchased a property in Auckland called Delamere Court in 1995. Mr Chang’s wife is the aunt of Ms Lee and, of course, the sister of Ms Wang. To purchase Delamere Court, Mr and Mrs Chang took out a large mortgage.
[13] In 1996 Sheng Yi failed, leaving a substantial debt to Citibank. In the same year Mr and Mrs Chang left Taiwan to come to New Zealand and live at Delamere Court. Ms Wang says that they did this to run away from Mr Chang’s creditors. Mr and Mrs Chang had an apartment in Taiwan mortgaged to another bank, Cathay United Bank. The bank forced the sale of this property. Ms Wang managed the sale and also paid the shortfall on the debt being New Taiwan Dollars (NTD) 225,109 (or NZ$51,001.60).
[14] From April 1997 until 2005 Ms Wang as a guarantor also made payments to Citibank in reduction of the indebtedness of Sheng Yi. Over eight years she paid NTD4,776,807 (NZ$260,458). She made her last payment on 17 March 2005.
[15] Also, in 1997, Ms Wang paid NTD200,000 (NZ$8,888) to Mr Chang’s Taiwan bank account. There is a dispute as to whether this money was received by Mr Chang to build a memorial for his wife or whether it was paid to satisfy debts that Mr Chang owed to his creditors. I am satisfied on the evidence that it was for the debt because it was paid before his wife died.
[16] In 1997 Mr Chang’s wife became ill. She died in Auckland on 2 May 1998.
[17] In 2002 Mr Chang returned to Taiwan and commenced working for Goal Co Ltd. This is a Taiwanese subsidiary of a Japanese company. Ms Wang was its CEO. During this period Ms Wang was making payments to Citibank against the Sheng Yi debt as guarantor. Mr Chang, upon his return to Taiwan was also contributed to the reduction of the Sheng Yi debt.
[18] Following 2002 when the plaintiff returned to Taiwan (after Ms Wang had substantially reduced the indebtedness of Sheng Yi), Ms Wang had exercised her influence as CEO of Goal to provide employment to Mr Chang at that company at a substantial salary which enabled Mr Chang to make substantial payments off the Sheng Yi debt to Citibank.
[19] There is a dispute as to how this was done and the extent of it. It is common ground that Mr Chang did so by paying part of his salary to Ms Wang monthly, but there is a dispute as to whether or not all the payments he made to Ms Wang were passed on by her to Citibank in reduction of the debt. It was alleged in the trial that between 2003 and 2006 36 payments should have been made, but only 12 payments were passed on to the bank.
[20] Acknowledging the dispute as to whether all the payments that Mr Chang made to Ms Wang (normally NTD25,000 monthly) were paid on, counsel for both sides accepted that Mr Chang and Ms Wang made similar scale contributions to the Citibank to extinguish that debt. A final reckoning would depend on the unresolved issue as to whether or not all of the NTD25,000 payments were made over, or some were held back. From the evidence before the Court it is impossible to settle a comprehensive schedule of the relative contributions of Mr Chang and Ms Wang to the Sheng Yi debt on a payment by payment basis. Counsel for Ms Lee (and effectively her mother, Ms Wang) accepted that Mr Chang paid NTD3,467,115 in reduction of the Sheng Yi debts. This sum compares with the contribution by Ms Wang set out above of NTD4,776,807.
[21] Ms Wang relies on her guarantor payments to Citibank as raising a debt or an obligation of conscience, enforceable in equity against Mr Chang to reimburse her. However, she never asked, nor sued, for reimbursement. Ms Wang’s argument was
that she had only become a guarantor in order to assist her brother in law and her sister in starting up this business so that her payments as guarantor should have been understood by Mr Chang to have placed him in debt to her.
[22] During the period 2002 to 2006 the Delamere Court property was rented out at approximately $420 per week. There were, however, occasionally shortfalls for the mortgage payments. For each shortfall Mr Chang would pay the cash to his son Isaac’s account, Isaac would then transfer the money from his China Post account to his New Zealand account in order to pay the mortgage and/or the rates.
[23] Ms Wang claims that from 2005 to 2006 she paid the mortgage on Delamere
Court when the property was untenanted. More significantly, from 2006 to 2011
Ms Lee lived at the Delamere Court property. During this period Ms Wang provided an additional salary at Goal Co to Mr Chang to cover the mortgage and the rates on Delamere Court. These payments were made up to 2008 via Isaac. From 2008 to
2011 Ms Wang paid the mortgage and rates by payments to Mr Chang’s daughter Amy who transferred the amounts by internet banking to Ms Lee, who paid the mortgage back.
[24] In late 2010 Ms Wang made one payment of NTD490,000 (NZ$22,000) to pay the balance of the mortgage on Delamere Court. On 17 February 2011 Mr Chang made the last payment to Citibank and the Sheng Yi debts were fully repaid.
[25] The following week, 26 February 2011, Mr Chang, with Ms Lee and Ms Wang, arrived in Auckland for a one week stay at Delamere Court. Mr Chang’s purpose was to transfer the title of Delamere Court into his sole name as the survivor of himself and his wife.
[26] During this visit Ms Wang and Ms Lee decided to buy a house for Ms Lee. They looked at two houses and bought one, Sunnynook. Before they had settled on Sunnynook Ms Wang asked Mr Chang to borrow NZ$75,000 to be a deposit on a Takapuna house about to be auctioned. Ms Wang also asked that Mr Chang borrow
$200,000 against the security of Delamere Court, the money to be used in the
purchase of Sunnynook, having lost interest in the Takapuna property. There is a dispute as to the context of the understanding that followed.
[27] It is agreed that Mr Chang said he was prepared to contribute the $275,000, provided that he could work for ten more years. Ten more years at Goal was the core of the agreement. He would raise a mortgage on Delamere Court, borrowing
$275,000 which would be put to the new purchase and Ms Wang, as CEO of Goal would arrange for Mr Chang to work for her for ten more years on a generous income.
[28] It is common ground that the arrangement in New Zealand was incomplete, and that Ms Wang had said that they would settle the financial details upon their return to Taiwan. They never discussed further the details.
[29] From there the evidence from both sides diverged. Ms Wang’s evidence was, firstly, that Mr Chang was providing the $275,000 as a repayment to her of his indebtedness to her, which arose by reason of all the money that she had paid, particularly to extinguish the debt of Sheng Yi over the years. Secondly, that the terms upon which he borrowed (it was a 30 year table mortgage) had nothing to do with her and Mr Chang had obtained separate legal advice before borrowing the money.
[30] Mr Chang’s evidence to the contrary was that the property being purchased for the defendant, Ms Lee, would be sold and the profit shared between them and he would be able to retire in New Zealand at the Delamere Court property with profits from the investment.
[31] The money was raised in two amounts, firstly NTD900,000, NZ$75,000 for the deposit and then on 16 May 2011 ANZ Bank transferred NZ$200,000 directly to Mr Chang’s conveyancing lawyer’s trust account for the settlement. Ms Lee had found the lawyer for Mr Chang to see, a Chinese lawyer.
[32] A month after this purchase in June 2011, Mr Chang remarried. There was some suggestion, by counsel, that Ms Wang did not approve of the marriage.
[33] On 30 September 2011 Mr Chang signed a limited power of attorney to Ms Lee, to manage the renting of both properties. On 14 October 2011 Ms Lee signed a property management agreement for Delamere Court with Pinkney Property Management.
[34] In the year 2011 Mr Chang’s income from Goal went up and then reduced significantly in 2012. His income for 2010 before tax was NTD1,972,769. In 2011 from Goal it was NTD2,894,083. In 2012 from Goal it was NTD1,208,400. In 2013 from Goal it was NTD756,480.
The rift in the family
[35] In 2011, following the acquisition of Sunnynook, Ms Wang was able to reinstate Mr Chang as an employee of Goal, on very good financial terms. In 2012, however, as we have seen, his income fell significantly to almost 50 per cent of the previous year. On 4 June 2012 Mr Chang wrote this letter to his sister in law, Ms Wang.
Wang Ling Yue:
Thank you for helping me return to T-GDAL. In the past decade you solved a lot of problems for me and my return helped establishing your status. I always have the concept of helping one another – ‘fish help water and water helps fish’.
You asked me to pledge my house in New Zealand as security for a loan of
275,000NZD with the purpose of purchasing a house for Nancy Lee. That was your desire: use the house to support the house. I agreed to help you without even discussing with my children. I did require and made it clear that I would help while I was still working. I would give you ten years to pay back the loan. Then I will retire to New Zealand. It has always been my desire to live in New Zealand after retirement. It was my plan that I would leave T-GDAL once the loan is settled.
But things didn’t go my way, your plan of “Using the house to support the house” caused me to put my plan on hold. Now you changed your mind, you rejected my requests and changed everything, changed my job, my income totally. I don’t understand why you did all these things. I helped you to stabilize the situation, but you did a lot of damage behind my back. You made things difficult for me, you reduced my salary. If you don’t need my help anymore please let me know, I will respect your choice. I have my choices as well: (1) Please return the 950,000NTD (New Taiwan Dollar) which you borrowed from me for purchasing house; (2) Please return the
275,000NZD to the Bank for which my property in New Zealand was
pledged. Once you have done these things I will return to New Zealand to live.
According to the current property market Nancy’s house should be sold over
700,000NZD, you can still make a profit of over 100,000NZD. Meanwhile she can move her furniture back to my house and live with me, this way will
help ease off the pressure of the loan a bit and also help bring in some
profits.
It is easier to get a thousand soldiers than to get a General. Personnel is the asset of a company. You went to Japan for business and attended the conference, you know it is hard to achieve the goals set up in the conference without outstanding employees. Your decision was wrong (it is wrong when quality control and manufacturing are controlled by the same person). Do you think everything will be okay as long as Shu is there to pin down others? If you observe carefully you will realize Shu is nothing but a puppet. There might be more troubles coming and you might need to bear more responsibilities. Or you might expect to harvest without much labour. I believe this is the thought of the employees: “Don’t worry, the company is going to continue. Our salary is just over 20,000NTD, the manager gets paid much more. She is not going to let go of the high salary, she will do her best to save the company”.
I really admire Jin’s management skill and judgment. Before Jiang Qin Yuan seriously accused the model project Lin Zhong Dian was responsible for and questioned the company why they still used Lin. At that time Jin replied with assurance, Jiang was specialized in certain thing, but Lin was good at many things. That was why the company used Lin. Jiang then went quiet.
You kept on saying that other people in the company were against me, actually you are the problem. You don’t have the capacity to accept me. After I did my best to finish the work with IC CORE you wrote official letters to threaten me. When I questioned you about it you denied at my face. I was really angry and disappointed. This was not like your usual way of doing things: dare do something but do not have the courage to face the consequences. I have collected the IC CORE debt, which was over
100,000NTD. When I was desperate to do my work you were dragging my legs behind my back, you hurt me. If I did let go and not care, the company
would have got into a lawsuit. Have you ever considered these matters? Your husband came to me and asked me not to get into conflicts with you.
He didn’t know what was going on. I couldn’t keep silent after you have
done all these to me.
Everyone can choose their own way and plan their future. I can see you have your plan and I don’t want to say anything about it. Maybe your ill treatment helped me to put down my burden for the company. Recall the chief of staff once requested me not to leave the company even after my retirement age for the sake of the stability of the company. I promised to him then that I would not retire. Now everything changed, what you have done caused me to break my promise, but I have a good conscience before the chief – of staff.
After all, I wish you will do these for me:
1. Return my retirement money 900,000 NTD;
2. Return ANZ bank 275,000NZD loan, so I can return to New
Zealand to live.
When you go to the mountain to hunt tigers you rely on your brother, so you will not be pinned down by others.
‘Performing a drama will come to an end, while watching a drama there is
no end.’
Zhang
(Emphasis added.)
[36] On 4 October 2013 Mr Chang revoked his power of attorney to Ms Lee.
Interrelationship of claim and cross claim
The plaintiff ’s claim
[37] Mr Chang is not suing in contract. He cannot prove an express or even implied agreement between himself and his niece whereby he is a co-owner of the Sunnynook property. He therefore seeks a remedy in equity by way of resulting trust. To succeed on this claim his niece must have an obligation of conscience so that she cannot deny he is in substance the co-owner of the property with her,3 or that he loaned the $275,000 to her.
[38] Equity looks at substance over form. It is plain that for all practical purposes the decision to buy the property and the financing of the property was the responsibility of the defendant’s mother. It was Ms Wang who had all the dealings with Mr Chang. It was Ms Wang who persuaded Mr Chang to borrow against the Delamere Court property and to apply the borrowings to the purchase of a home for her daughter. It is Ms Wang’s conscience that has to be engaged before there could be any remedy. However, equity would not allow Ms Lee to defeat the obligations of her mother, because, in a substantive sense, Ms Lee holds the property by way of gift from her mother. Ms Lee can have no better rights against Mr Chang than her
mother.
3 Above.
[39] Ms Lee’s cross claim depends on the concept of setting off mutual debts. As the judgment of Somers J for the Court of Appeal in Grant v NZMC4 explains:
Equity would restrain an action or execution of judgment at law or allow a set-off where it would be inequitable or unconscionable to allow the plaintiff to proceed without bringing to account some claim by the defendant which was sufficiently linked to that made by the plaintiff.
[40] There is doubt as to the test for “sufficiently linked”, which is discussed by Tipping J in Hamilton Ice Arena Ltd v Perry Developments.5 The conflict in dicta between Grant and Hamilton Ice was discussed by myself in HV & DM Le Fleming v Awatairei Holdings Ltd.6 But both authorities agree that the ultimate test of linkage is unconscionability.7
[41] It is Ms Lee’s claim here that, should the Court recognise a resulting trust based on giving effect to a presumption that part-payment to the purchase price gives co-ownership of the property then it would be inequitable or unconscionable to allow Mr Chang the benefit of that co-ownership without taking into account the past indebtedness of Mr Chang and the conduct of Ms Wang in extinguishing that indebtedness at her cost.
Is Mr Chang obliged to indemnify Ms Wang’s payments as co-guarantor?
[42] As the narrative shows the substantial payments by Ms Wang to the benefit of her brother in law Mr Chang, were in reduction of the debt of Sheng Yi.
[43] She was obliged to do that because she was a guarantor. On the probabilities she was a guarantor of the debts because the new business of Sheng Yi would simply not have been able to obtain finance and start up without Ms Wang’s support as guarantor. Although she was nominally a small shareholder, she did not participate in the Sheng Yi venture for the purpose of making money. The local law required there be five shareholders. It was not disputed she was a shareholder to assist
making up a number to five. There is no doubt that Ms Wang made a substantial
4 Grant v NZMC [1989] 1 NZLR 8 (CA) at 11.
5 Hamilton Ice Arena Ltd v Perry Developments [2002] 1 NZLR 309 CA at [40]–[41] (per Tipping J).
6 HV & DM Le Fleming v Awatairei Holdings Ltd HC Dunedin CIV-2009-412-000848, 19 March
2010 at [15]–[22].
7 Grant v NZMC, above n 4, at 11-13; Hamilton Ice Arena Ltd v Perry Developments, above n 5, at [4].
contribution to extinguishing the debt and thus enabling her brother in law and his wife to return to Taiwan. There is also no doubt at all that Mr Chang with his family had a deep sense of gratitude for the assistance that Ms Wang had provided, utilising her wealth, which was superior to that of Mr Chang. It does not follow that at law her brother in law was obligated or indebted to her in a sum equivalent to the contributions that Ms Wang had made directly and indirectly to him and his family. Ms Wang never claimed an indemnity.
[44] Families can, and do, go through generations with a recognition of assistance from one branch to the other and where opportunities arise that are reciprocated. The law of equity does not generally impose obligations for such reciprocation.
[45] The question becomes, in this case, whether Ms Wang can set-off these payments because Mr Chang is conscience-bound to recognise a set-off against his advance of NZ$275,000. It is noteworthy that the defence were not able to cite any case with similar material facts.
A closer examination of the purchase of Sunnynook, and the loss of the Goal income, and its consequences
[46] It is necessary now to return to the facts surrounding the purchase of the property in Sunnynook and scrutinise the parties actions when purchasing that property in more detail.
[47] Ms Wang had arrived in Auckland around mid-February 2011 for a holiday. While she was there, she and her daughter decided they would buy a property in Auckland so that her daughter could settle there. They started looking at properties around North Shore and found a property in Takapuna at a price range around
$750,000.
[48] Mr Chang arrived in Auckland on 26 February. He was coming for a different reason. To change the record of ownership from himself and his late wife to solely himself. He was due to be married shortly afterwards to a Vietnamese lady. Ms Wang said he was planning to set up a new business in Vietnam.
[49] The agreement for the sale and purchase of Sunnynook was executed on
2 February. It follows the discussions between Mr Chang, Ms Wang and Ms Lee, took place over two or three days. On 1 March Mr Chang signed the loan agreement with ANZ Bank for NZ$75,000, intended at that point to be to cover the deposit of buying a Takapuna property expected to sell at auction for $750,000.
[50] There is no evidence that there was any discussion as to how the money Mr Chang borrowed would be repaid to the ANZ Bank. Ms Wang’s evidence in chief was as follows:
I asked Mr Chang to raise the money for me and he acknowledged that he did have an obligation to repay the financial assistance that I had provided to him over the years. However, he also sought to gain some advantage from any repayment. He asked me to give him paid job at Goal Co for the next ten years. On that condition he agreed to raise the money to pay me. He had just retired in September 2010. He said he needed the income to support his new family in Vietnam. Also he expected me to assist him with resources from Goal Co to help him set up a new business in Vietnam. I agreed to these terms but did not immediately discuss the actual amount of money involved.
(Emphasis added.)
We had a deal and found the way to raise the necessary funds from my daughter to purchase her property. We both agreed that we would calculate the precise figures when we got back to Taiwan. Mr Chang agreed to make this contribution in the expectation he would receive greater benefits. He also expected that I would provide him with substantial salary that I had previously given him.
(Emphasis added.)
Following this agreement, we went to ANZ Takapuna Branch to organise the documents. The mortgage manager at ANZ was a lady who could speak Chinese. Because Nancy and I had decided to go to the auction of the Takapuna property, I asked Mr Chang to give me NZ$75,000 first as a deposit if we were the successful bidders. This was ten per cent at the lower end of the estimated purchase price which the salesman had told us would be between $750,000 and $850,000.
The mortgagee manager attended on Mr Chang in relation to the loan documents. I asked Mr Chang for NZ$200,000 towards the expected purchase price. He agreed to this. Again we agreed to calculate the precise figures when we got back to Taiwan. It was quite clear between us that Mr Chang was willing to raise the necessary funds on the security of his property to help my daughter to purchase her property.
(Emphasis added.)
[51] Her evidence goes on:
One day after dinner, I went with Nancy for a walk around the streets near Mr Chang’s house at Delamere Court. We found a property in Stoneleigh Court, Sunnynook, that was for private sale. My daughter was quite interested in this property, so we made an appointment to view it. After viewing the property, my daughter told me that she had decided to make an offer. I agreed with her that the Sunnynook property was more suitable than the Takapuna property. In the end, we decided to go for the Stoneleigh Court property.
When my daughter decided to buy the Stoneleigh Court property, Mr Chang suggested I should register my name and Nancy’s name jointly on the title. As I was contributing the purchase price of the property, he said it was proper that I should own the property with her. In my view this was meant to be Nancy’s house, so I didn’t want to register my name on the title.
When I got back in Taiwan, I honoured my agreement with Mr Chang by offering his paid work at Goal Co after his retirement. I did not then realise this whole property purchasing process would cause such a problem for my daughter’s property.
[52] It is notable in this analysis that Ms Wang does not discuss expressly any link between the income he would be paid at Goal Co and his ability to repay ANZ Bank.
[53] Turning to the reason for the breakdown in the relationship, which I have described as a rift, Ms Wang’s evidence is as follows:
At some point during 2012-2013 Mr Chang had an argument with other colleagues at Goal Co. Some employees reported to me that Mr Chang had stolen some machine component parts from the company. I was placed in a difficult position in dealing with this situation. The affected employees told me that they did not want to work with Mr Chang. I warned Mr Chang that he should not repeat this behaviour. I understood that he took the items as he thought I was not willing to provide the company’s know-how to him for setting up his business in Vietnam. Mr Chang then worked only part-time during the following period. He left work around lunchtime every day. I started to reduce his work duties and prevented him from taking any components off site. As he was working reduced hours and had less responsibility, I reduced his salary accordingly.
I believe it was because of these incidents that Mr Chang decided that he would no longer honour our agreement. I understood he placed a caveat on the title to Nancy’s property in about October 2013 claiming that he loaned
$275,000 to Nancy to purchase the property.
For the reasons I have already given, I believe that Mr Chang had no grounds for claiming that the money he contributed was advanced to Nancy as a loan.
I feel so sad that I have treated Mr Chang and his family so generously and they have chosen to do this to my daughter. We had a simple arrangement whereby Mr Chang would receive a substantial salary after his retirement and an opportunity to repay at least a small portion of the monetary advances that I had made to him or for his benefit over the years. I do not understand why this property purchasing process would cause problems in New Zealand. From my understanding, Mr Chang was simply repaying a debt to me when he agreed to contribute to my daughter’s purchase of what was clearly to be her own property. It was a very simple arrangement. I feel very sorry it has caused such a problem for my daughter’s property.
(Emphasis added.)
Analysis of agreement or lack of it on the acquisition of the Sunnynook property
[54] Plainly there was no significant discussion between Ms Wang and Mr Chang on the financial details. There was no analysis done by the two of them as to how he would repay the $275,000 over the ten years. It was a presumption on Ms Wang’s part that because of what she saw as his indebtedness to her, he was giving $275,000 to her daughter. It is possible that Mr Chang was intending to pay off, or at least reduce the loan, from the high income he expected from Goal Co over ten years. It is possible that he thought that the loan could be significantly reduced, or fully repaid, over ten years provided the property was rented and he earned a high income. He knew his sister in law had the capacity to raise his income significantly. She had done this before to enable him to make payments off the Sheng Yi debt. There is no evidence that at the time, in New Zealand he thought that his name should be on the title as a co-owner.
[55] What is clear is that on the balance of probabilities Mr Chang would not have entered into the transaction without the assurance of ten more good years at Goal Co.
[56] Finally, to conclude this analysis it is important to keep in mind that neither side, the claimants nor the set-off claimants, have been able to reduce what happened to a bargain enforceable under the law of contract or a bargain which would be a contract but for the requirements under New Zealand law for agreements of the
disposal of land to be in writing.8
Analysis of whether equitable obligations arise
[57] I turn now to consider whether the defendant owed equitable obligations to
Mr Chang.
[58] The defendant’s case is that a resulting trust in favour of Mr Chang did not arise on these facts. As all that occurred was that Ms Wang called in a debt and for the sake of practical convenience, instructed Mr Chang to pay it to Ms Lee. defendant. This is not a sound argument. There was no legal debt to be called in. The principal contributions Ms Wang had made to Mr Chang’s family were her contributions as one of the guarantors of the Sheng Yi debt. But there was no basis for her as a co-guarantor to seek an indemnity from Mr Chang. Such a claim was not advanced. During the trial, I raised the question of whether there could be such a claim at a time in the trial when I did not know the relative contribution of each guarantor to the debt. Had there been an enforceable debt it is correct that a payment
by direction to the third party would be valid satisfaction.9
[59] The defendant then raised as an alternative analysis that the defendant was in the circumstances a beneficiary of a contract between the plaintiff and Ms Wang and entitled to enforce that contract under s 4 of the Contracts (Privity) Act. It again depends upon there being a legally enforceable contract between Mrs Wang and Mr Chang to pay the $275,000. It is noted this has never been pleaded.
[60] In closing submissions Mr Wiles, for Ms Lee, accepted that Ms Wang’s arrangement of payment by direction argument was too simplistic on its own. Nonetheless, Mr Wiles did not abandon the proposition that Mr Chang’s contribution at the time of $275,000 to the purchase was viewed by each of them as a contract. I do not agree. That has not been proved.
[61] Defence counsel sought to take advantage of the inconsistent positions that
Mr Chang has taken in the course of this litigation. Mr Chang’s first affidavit on 27
January 2014 claimed that the $275,000 was provided to Ms Lee as an interest free loan for ten years. His second affidavit claimed it was not a simple loan and he was
to get an interest in Ms Lee’s property. It was on this argument that this Court sustained the caveat. I consider the proposition in the first affidavit as the proposition most consistent with the facts, and on the probabilities was Mr Chang’s state of mind at that time.
[62] I think his letter to Ms Wang, of 4 June 2012, set out above in this judgment, is consistent with Mr Chang’s first affidavit. The proposition which appealed to him, and which gave him some satisfaction that he was making a contribution to Ms Wang’s family in recognition of her help to his family, was the notion of using the house to support the house, using one property to obtain another. The whole of the purchase of Sunnynook was financed by ANZ Bank. ANZ Bank lent $300,000 to Ms Lee, and $275,000 to Mr Chang.
[63] Further, it needs to be kept in mind that the overall context is that Ms Wang was the CEO of a significant company with considerable financial resources at hand. She had shown the ability, particularly as guarantor of the Sheng Yi debt, to find significant sums of money. There could have been no doubt that Ms Wang had the wear-with-all to re-establish Mr Chang with a good income, so that he and she could repay the $275,000 over ten years.
[64] There is no evidence that Ms Wang came to New Zealand with the intent of collecting any debt from Mr Chang. She was not even thinking of buying a property in New Zealand, let alone, of claiming some satisfaction from Mr Chang.
[65] The hasty and incomplete agreement may be explained as due to Ms Wang not having had the immediate ability to raise $275,000 in New Zealand dollars while she was in Auckland at the time of the purchase. She did not have a New Zealand property to borrow against. There is no evidence as to what the state of her finances were in Taiwan but, her ability to raise money in Taiwan and move it to New Zealand and settle needs to be considered in the context of the fast moving pace of events as detailed above.
[66] All this is confirmed and illuminated by the Starbucks family meeting.
The Starbucks meeting
[67] On 7 December 2013, there was a family meeting at a Starbucks cafe in Kaohsiung, Taiwan. Present were, Ms Wang, Ms Lee and Mr Chang’s son, Jason. Jason recorded secretly the meeting using a microphone recording device disguised as a pen. It is an incomplete recording.
[68] In the course of the conversation Ms Wang said:
I can tell you that when your Dad owed NZ$275,000, he said he could work for ten more years in the company to buy the house, to keep a house with another house. That’s it. Simple as that.
[69] Jason replied:
The problem is that NZ$275,000 is for a 30 year contract.
[70] Ms Wang replied:
No. The time is not the question. …the amount equals to the amount your
Dad owed me.
[71] After confirming what she said, Jason asked the question:
Did you tell my Dad about this?
[72] And her reply was:
Both of us have agreed to keep that house with this house. He could still work for ten years to pay up for the debt. Just pay it up.
[73] She went on to calculate the family inter-debtedness. For much of the conversation Ms Wang was reiterating that as far as she was concerned it was a debt that Mr Chang owed.
[74] It needs to be kept in mind that Mr Chang was still working for Goal Co at the time of this conversation. She said near the end:
You[sic] father wanted to buy a house by owning a house with me. Your father still works at the company because I promised to let him work there for 10 years. Otherwise he wouldn’t have any way to buy the house by owning a house.
(Emphasis added.)
[75] Ms Wang also discussed selling both houses and splitting the money, with Mr
Chang.
Mr Chang’s loss of his income
[76] There is no suggestion in the evidence that it was ever proved that Mr Chang was stealing know-how or secrets from Goal Co. He was never dismissed. But the important fact is that his earnings dramatically dropped. There was no prospect at all of him making any significant reduction of the debt from his earnings from Goal Co. That prospect had become a reality about the time or shortly after Mr Chang’s letter to Ms Wang, in 2012.
Submissions for the defendant
[77] Recognising that the relationship and current position between Mr Chang and Ms Wang was complex, the Court received the submission that the arrangements made at the time of the purchase “were relatively loose”. The submission recognised that financial details were to be determined when Ms Wang returned to Taiwan. That did not happen. It also recognised the importance of Ms Wang’s discretion as CEO of Goal Co to make available ongoing employment to Mr Chang.
[78] The Court then received this submission: that against that background the whole dispute between the parties could have been avoided by the simple arrangement whereby the $275,000 raised by Mr Chang was paid directly to Ms Wang first and then made available upon settlement of the defendant’s purchase of the (Sunnynook) property. That did not occur only because the deposit moneys were required urgently and it was otherwise convenient to pay the money directly to Ms Lee’s solicitor for settlement purposes. That is only a submission. It is essentially speculative.
[79] The subsequent conduct of the parties is consistent with such arrangements as were agreed, until the plaintiff encountered difficulties of his own making at Goal Co, to be discussed later.
No concluded contribution agreement
[80] Mr Wiles submitted that for the plaintiff to succeed in establishing a resulting trust it is necessary for the plaintiff at the time of making the payment towards the purchase of the property to have an intent that he would acquire proprietary rights in that property at the time of the advance. He does so by citing from Alistair Hudson’s text, Equity and Trusts10 and quoting from Lord Browne-Wilkinson in Westdeutche11 expressing the first category of purchase-price resulting trusts
[81] Mr Wiles conceded that the presumption in favour of a resulting trust does apply here on the facts but is rebutted by the past history of financial assistance by Ms Wang to Mr Chang. Mr Wiles went on to argue that Mr Chang’s intent was relevant, relying on Hudson’s text saying:
It is an important part of the operation of this form of resulting trust that the claimant has contributed to the purchase price with an intention that she should acquire proprietary rights in that property.
[82] This argument of Mr Wiles is set, quite naturally, against the pleading that Mr Chang intended to acquire a proprietary title in the land at the time of the advance. That was the evidence he advanced before Associate Judge Bell in support of the caveat. That proposition of acquiring property is not made out here on the balance of probabilities. Rather, the probability is that he intended to lend the money to enable the purchase of a house for Ms Lee, but with the expectation that the loan would be repaid over ten years, principally by the assistance of Ms Wang, on top of the rental income of Delamere Court, being applied to the table mortgage managed by Ms Lee under a power of attorney.
[83] Second, and related to the relevance of Mr Chang’s intent, Mr Wiles submitted that before resulting trusts can arise there has to be a common intention between the parties. For that proposition he cited Lord Browne-Wilkinson in the House of Lords’ case, Westdeutsche Landes Bank Girozentrale v Islington LBC
where the Judge said:12
10 Alistair Hudson Equity and Trusts (5th ed, Routledge, 2007) at [11.1.2].
11 Westdeutsche Landes Bank Girozentrale v Islington LBC, above n 1, at 708.
12 Above.
Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention.
[84] If this is intended to be a complete statement of law, I do not agree. Nor do I
think it is intended to be a complete statement of the law.
[85] All trusts be they express, resulting or constructive are identified when a person is identified as having a fiduciary or conscience obligation to another. For that is the essence of every trust. In this context, whether or not there is any kind of trust imposed on Ms Lee and Ms Wang (reflecting Ms Lee’s position as nominee of her mother), turns on whether or not mother and daughter in conscience have to acknowledge that the $275,000 was an advance in the form of a loan. If so, they are fiduciaries, at least after ten years, as from that time they have an obligation to borrow or realise assets to repay the balance of the loan to Mr Chang. In this regard Mr Wiles usefully cited the next paragraph from Alistair Hudson’s text book at [11.1.3] citing Peter Gibson J in Carreras Rothmans Ltd v Freeman Mathews
Treasure Ltd:13
The principle in all these cases is that the equity fastens on the conscience of the person who receives from another property transferred for a specific purpose only and not, therefore, for the recipient’s own purposes, so that such person will not be permitted to treat the property as his own or to use it for any other than the stated purpose… If the common intention is that property is transferred for a specific purpose and not so as to become the property of the transferee, the transferee cannot keep the property if for any reason that purpose cannot be fulfilled.
[86] I note that this dictum, does not distinguish money from property, as Lord Browne-Wilkinson did.14 That is of no moment. Money or property both are assets; they are interchangeable. Again, this quotation also seems to suggest in this latter part, that common intention is necessary. Those words fall out of the material facts before the Judge. As in many cases there is a common intention.
[87] In the case of Lankow v Rose15 Tipping J observed:16
13 Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 at 217.
14 Above n 1.
15 Lankow v Rose [1995] 1 NZLR 277 (CA).
16 At 293.
It is better to acknowledge openly that a constructive trust is being imposed in equity without the consent, express, implied or imputed, of the constructive trustee. The trust is imposed because equity will not allow the legal owner to deny the claimant a beneficial interest.
[88] So, common intention is not the criterion for identifying a trust. Trusts do not depend on agreements. Trusts depend on obligations. In the absence of a contract binding in law, when Mr Chang transferred a sum of money to Ms Wang/Ms Lee, intending it to be a loan, the recipients had to accept his intent in the absence of an incomplete agreement, and deal with the money accordingly. The conscience or obligations of the fiduciary is imposed by the person who transfers the asset often referred to as the “settlor”, after a conclusion is reached that the transfer created a fiduciary obligation on the part of the transferee. Resulting trusts are no different from express trusts in this regard. This is a particularly important proposition in this case, where the facts as proven and found in this judgment show that the transaction was not thought through and indeed, it was recognised at the time as needing further consideration (and so agreement) as to financial details; which consideration was postponed until after the transaction when Ms Wang and Mr Chang would be back in Taiwan, and which never happened.
[89] It is contrary to the facts to construct or imply a comprehensive agreement. Nor does equity allow the recipient of the funds to do so. The absence of a binding agreement is a fact which favours the transferor, Mr Chang. If a transferee receives funds, while the terms of advance are not settled, the transferee deals with the funds at his or her risk. The safe course is not to deal with the funds until the terms are settled. The risk is on the recipient, not the transferor.
[90] Given the failure of the parties to agree the financial terms the fiduciary obligation of Ms Lee and Ms Wang is to repay a sum of money, after it has been used by them. I add that qualification because it was intended to be an advance for ten years. The fiduciary obligation principally attaches to Ms Wang. The beneficiary of the advance is Ms Lee. It is Ms Wang who has the obligation ultimately to collaborate with Mr Chang in repaying the debt to ANZ Bank after ten years. Ms Lee’s status is that she can be in no better position than her mother. That does leave the curious consequence that she is a fiduciary of a trust, arising after ten years
which is also for a time for her benefit for the first ten years. Ms Lee’s fiduciary obligation does not arise until the end of the ten year period as that is the term of the advance which she and her mother relied on. Or it can be put this way, Ms Lee is entitled to the benefit of the $275,000 advance provided it is used, and was used, only for the purchase of Sunnynook and for a period of ten years, but at that time she has an obligation to return the balance of the loan back to the settlor.
[91] For these reasons I reject the submissions of Ms Lee that attempt to tie recognition of any resulting trust to prior in time to proof of an agreement between Mr Chang, herself and her mother, or to terms that they wanted.
[92] Rather, Mr Chang transferred the $275,000 ($75,000 and $200,000) to Ms Lee and her mother in the expectation that the funds would be used to purchase a house, and by the time of the second payment of $200,000 to purchase the Sunnynook house. The terms of the advance had been partly worked out, but not the financial detail: in context that meant agreement on repaying the loan to ANZ Bank. The advances of $75,000 and $200,000 were agreed. The purpose of the advance was to purchase another property so the funds could only be used for that purpose. The life of the arrangement was intended to be ten years. The all important agreement was that it contained a ten year commitment by Ms Wang. Mr Chang’s age needs to be kept in mind. There was no suggestion he would work beyond 2021. There was no suggestion he would have to sell Delamere Court to repay the loan. The financial terms were to be agreed. There had been no agreement as to how much of Mr Chang’s income from Goal Co would be set aside to go to reducing the capital of the loan (assuming the rent of Delamere Court (under the control of Nancy) covered the interest).
Conclusory remarks
[93] It was in these unsatisfactory circumstances that it was agreed that Ms Lee and her mother would use the money, borrowed against the security of Delamere Court, to purchase Sunnynook. The parties agreed that the purchase, applying the
$275,000 to satisfy the purchase price, would go ahead before the financial details as to repayment were settled. This did not make commercial sense. But one has to
recognise this was a family arrangement, which often do not make commercial sense and which happen because of a relationship of mutual trust between family members. It follows that equity, will not allow Ms Wang and her daughter, Nancy, to treat the money as a gift, nor impose unilaterally any terms of repayment. If the payment of $275,000 had been a gift there would be no financial details to be agreed.
[94] Mr Chang had a continuing appreciation of the very considerable assistance that his sister in law had given to he and his wife over the years. These were familial expectations and obligations. The fact that they were very real and powerful considerations, powerful in the sense that they dictated the conduct of the parties particularly Mr Chang, does not mean that of themselves they gave rights to Ms Wang and her daughter as recipients of the money.
[95] They are in no position now or at the end of ten years to dictate the rest of the terms. Rather, they had to be agreed at the outset or Mr Chang as the transferor of the funds on them settled the terms.
[96] On the contrary, given that the transaction was proceeding ahead of agreeing the terms of repayment, Ms Wang and her daughter had fiduciary obligations back to Mr Chang to handle the money only to the extent of the terms that had been agreed. Therefore after ten years they lost any moral entitlement to the benefit of the loan and were obligated by conscience to refund a sum amounting to the balance of the debt to Mr Chang. In as much as they have assets enabling that, they hold those assets subject to that trust obligation as fiduciaries.
[97] There are, however, contextual restraints on Mr Chang’s powers. He who comes to equity must do equity. On the facts, Mr Chang had no expectation that he would be a co-owner of Sunnynook. He was able to assist one house buying another house without becoming a co-owner of the second house. He was never offered co- ownership. In substance he was assisting with the financing of the second house.
[98] However, I am finding he is in a position to require repayment of the balance of the loan secured over Delamere Court after ten years. He is estopped from
asserting a period less than ten years. Ms Wang and Ms Lee proceeded in reliance on the ten year term.
[99] Neither side has blamed the other for the cessation of Mr Chang’s employment by Goal Co. That happened. It was unexpected. There are two sides to the story and they are not resolved. Mr Chang did not suggest that Ms Wang had in the circumstances an alternative to reducing his income and hours. For her part, Ms Wang did not go as far as to express conclusions that the allegations made against her brother in law were true.
[100] Overall, the failure of the employment to last ten years, on generous terms, is a fact that has to be addressed, as precluding an obligation on Mr Chang to reduce the debt other than by applying the rent proceeds to the table mortgage. For his part, Mr Chang, who raised the loan from ANZ Bank, did so on the basis that Delamere Court would be rented out and the proceeds applied to interest and reduction of the loan. He gave Ms Lee a power of attorney to that end. There was no evidence at the trial that Delamere Court was not rented, or that the rents were not credited to the loan account. Therefore, I assume that that is the status quo. He who comes to equity must do equity. Mr Chang is obliged for his part to meet the terms of the mortgage over Delamere from the rental income, for the ten year period. See [35] and [82] above.
[101] Accordingly, I find that Ms Lee, and her mother, Ms Wang have a fiduciary obligation to recognise that the $275,000 was a loan for a period of no more than ten years, to be used to acquire Sunnynook and the balance due to the ANZ Bank to be repaid to benefit of Mr Chang, at the end of ten years.
[102] So it follows that at the end of ten years of the term of the mortgage Ms Wang has an obligation recognised in equity, and potentially, though not pleaded, by common law to repay the balance of the ANZ Bank loan secured over Delamere Court.
Set-off
[103] The set-off cross claim by Ms Lee depends on two disputable propositions:
(a) That there is a sufficiently close connection between Ms Lee’s obligation to repay the loan and Mr Chang’s obligation to reduce, if not completely repay, his “indebtedness” to Ms Wang.
(b) Secondly, it depends on there being an existing indebtedness by
Mr Chang to Ms Wang.
[104] In HV & DM Le Fleming v Awatairei Holdings Ltd17 I said:
[20] The criteria of “link”, and “sufficiently close connection” are standards. Their application turns on a “combination of analysis and impression” per Tipping J in Hamilton Ice: [41]. There the Court of Appeal regarded as a material fact that the arrears on the lease were in respect of the Hamilton premises and the refurbishment contract was in respect of the Auckland premises, there being no practical or conceptual linkage between these debts.
[21] The ultimate issue is unconscionability. In Hamilton Ice18 at paragraph [4] Tipping J for the Court says:
[4] Equity would intervene only if the defendant in the suit at law could show some cross-claim for a sum of money which, in the eyes of equity, undermined the right of the plaintiff in the suit at law to enforce his legal claim either at all, or to the extent of the cross- claim. Equity always acknowledged the defendant's right to counterclaim but took the view that in some circumstances such right was not sufficient to do justice. The Courts of equity would not readily interfere with the proceedings at law and confined themselves to cases where the claim at law and the defendant's cross-claim were so closely interrelated that it would be unconscionable for the plaintiff to seek judgment at law without bringing the defendant's cross-claim to account.
(Emphasis added)
[22] Hamilton Ice was clearly following the reasoning in Grant v NZMC Ltd19 delivered by Somers J, and the “link” is a standard deployed to assess whether it would be unjust to allow the plaintiff's claim without set-off:
… Equity would restrain an action or execution of judgment at law or allow a set-off where it would be inequitable or unconscionable to allow the plaintiff to proceed without bringing to account some claim by the defendant which was sufficiently linked to that made by the plaintiff.
(at [11]) (Emphasis added)
17 Above n 6.
18 Above n 5 (citation added).
19 Above n 4 (citation added).
The principle is, we think, clear. The defendant may set-off a cross-claim which so affects the plaintiff's claim that it would be unjust to allow the plaintiff to have judgment without bringing the cross-claim to account. The link must be such that the two are in effect interdependent: judgment on one cannot fairly be given without regard to the other; the defendant's claim calls into question or impeaches the plaintiff's demand. It is neither necessary, nor decisive, that claim and cross-claim arise out of the same contract.
(at [12]-[13]) (Emphasis added)
[105] Given that Ms Lee is the recipient of a gift from her mother, Ms Wang, who effectively nominated Ms Lee as the purchaser, I am satisfied that the criterion of link or sufficiently close connection is met.
[106] The second essential element of a set-off though is to establish that there is an obligation on Mr Chang to repay Ms Wang for the payments she made as a guarantor of the Sheng Yi debt. I reject the submission. Mr Chang had at the time of his retirement received payment from the Taiwanese Government. He had no obligation to repay any of the salary he received from Goal Co by reason of the fact that he was engaged on favourable terms, the CEO being Ms Wang. Mr Wiles did not advance any entitlement on the part of Ms Wang to be entitled to an indemnity from her co- guarantor, Mr Chang, in respect of the payments Ms Wang made to the receivers/liquidators of Sheng Yi. Both paid about the same amount, see [22]–[24] above. He was not bound in conscience to indemnify Ms Wang. There is no evidence of her seeking any payments from Mr Chang, prior to the notion of using one house to buy another for her daughter, Ms Lee.
[107] Mr Wiles did not cite any authority of set-off being available in respect of a family obligation which did not amount at common law to a debt being available to set-off a debt enforceable by common law, equity or statute.
[108] Accordingly, the cross claim for a set-off fails.
Remedies
[109] The ANZ Bank loan advance by Mr Chang was completed on 16 May 2012. There is a declaration in favour of Mr Chang that Ms Lee is obliged to pay to Mr
Chang on 16 May 2021 the balance of the ANZ Bank loan, initially for $275,000 ($75,000 and $200,000). The balance to reflect reduction of the original advance by the continued leasing of Delamere Court, during the ten year term, as that was an agreed term evidenced by the appointment of Ms Lee as attorney for this purpose. See [8], [33] and [82] above.
[110] This declaration is more limited relief than that sought in the amended statement of claim. The amended statement of claim sought a declaration that the Sunnynook property was beneficially owned by the plaintiff as to 48.6 per cent, and that the property be sold, and the proceeds of sale divided accordingly. Or, if the property is not sold that the title be amended by the Registrar of the High Court executing a transfer from the defendant to the plaintiff of shares in the Sunnynook property proportionate to his contribution.
Equitable charge
[111] The declaration Mr Chang has obtained is sufficient to be recognised as an equitable charge on the title to Sunnynook.
[112] The reasoning is as follows. This Court has found that Ms Lee and her mother Ms Wang have fiduciary obligation to recognise that the $275,000 was a loan to be used to acquire Sunnynook,20 with an obligation to repay at the end of ten years.21 Equity will not allow Ms Lee or her mother to deny this entitlement. To ensure that the entitlement is honoured equity will recognise that Mr Chang has an
equitable charge over the money advanced of $275,000, and will follow or trace it to enabling Ms Lee to acquire the fee simple of Sunnynook. Equity allows money to be followed through into a mixed fund (the total amount used to purchase Sunnynook), and to be recovered by an equitable charge on Sunnynook.
[113] Section 137 of the Land Transfer Act addresses a caveat against dealings with land. Section 137(2) requires the nature of the land or estate, or interest claimed by the caveator to be stated with sufficient certainty. The phrase “estate, or interest” is
defined in s 2 of the Act as meaning:
20 See [100] above.
21 See [101] above.
Every estate and land, also any mortgage or charge on land under this Act.
[114] Where an equitable charge is recognised over land transfer land the charge thereby acquires an interest in the land, that, although not registrable, does support a caveat.22
[115] Mr Chang has a caveat registered against the Sunnynook title against a claim to proprietorship. That caveat cannot be sustained but can be replaced with a caveat against dealing inconsistent with the equitable charge enforcing the repayment of the loan on the terms defined in the declaration.
[116] The Court will receive a draft order reflecting the findings in this judgment particularly [109]–[110] in order to settle its terms.
Summary of findings and remedies
[117] In this judgment I have found:
(a) Ms Lee and Ms Wang have a fiduciary obligation to recognise that the
$275,000 was a loan for a period of no more than ten years, to be used to acquire Sunnynook and the balance due to the ANZ Bank. At the end of the ten year period, the $275,000 is to be repaid to the benefit of Mr Chang.
(b)There was no obligation on Mr Chang to pay to Ms Wang the amounts she paid to the receivers and liquidators of Sheng Yi. Accordingly, the cross-claim for set-off fails.
[118] With regard to remedies:
(a) I make a declaration in favour of Mr Chang that Ms Lee is required to pay to Mr Chang on 16 May 2021 the balance of the ANZ Bank loan,
initially for $275,000.
22 Hinde, McMorland and Sim Land Law in New Zealand (Vol 2, LexisNexis, Wellington, 2004) at
[15.010] and the Australian authority cited in notes five and six to that paragraph.
(b) There is an equitable charge over the title to the Sunnynook property
in Mr Chang’s favour.
Costs
[119] The plaintiff is entitled to costs on a 2B basis.
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