Chen v PL Trustee (no.2) Limited

[2017] NZHC 653

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-332 [2017] NZHC 653

UNDER

the Land Transfer Act 1952, Section 145A

IN THE MATTER OF

an originating application to sustain caveat no.10683698.1

BETWEEN

XIAOWU CHEN Applicant

AND

PL TRUSTEE (NO.2) LIMITED First Respondent

SHILIN ZHANG Second Respondent

Hearing:	5 April 2017
Appearances:	J A L Guy for the Applicant P O Oh for the Defendant (given leave to withdraw)
Judgment:	5 April 2017

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Northern Legal (James Guy), Brown’s Bay, Auckland, for the Applicant

Forest Harrison (P O Oh), Auckland, for Respondents

CHEN v PL TRUSTEE (NO.2) LIMITED [2017] NZHC 653 [5 April 2017]

[1]      Mr Chen applies to sustain caveat 10683698.1 lodged against the title to the property at 75 Golden Morning Drive, Albany Heights, Auckland.  That property is described in identifier 615157 (North Auckland Registry). The registered proprietors are PL Trustee (No.2) Ltd and Shilin Zhang. The interest claimed in the caveat is:

The caveator is the beneficiary of a constructive trust.  The caveator claims interests under the constructive trust whereas the legal proprietors as the constructive trustees hold this interest on behalf of the caveator.

[2]      Shilin Zhang and PL Trustee (No.2) Ltd became the registered proprietors on

21 December 2015.  Mr Chen lodged his caveat on 24 January 2017.  The present application is under s 145A of the Land Transfer Act 1952.  The case was given a prompt hearing as it was understood that there was to be a sale of the property.  This case is being heard today ahead of the intended settlement date. As it turns out, there is now no clear indication that the property is to be sold.

[3]      Under directions that Edwards J gave on 14 March 2017, the respondents were required to file and serve any notice of opposition and affidavits by 24 March

2017.  Mr Chen had until 31 March 2017 in which to file and serve any affidavits in reply.  The respondents did not file any opposition within time, even though they had filed a memorandum when the case was called on 14 March 2017.  When the matter was called this morning, Mr Oh appeared to advise that his firm had received no instructions. He sought leave to withdraw and I granted leave.  I am dealing with this application on an undefended basis.

[4]      There are affidavits by Mr Chen and by Ms Jing Jiang.   They have sworn their affidavits in Mandarin.  A qualified translator has provided English versions of those affidavits.  Jing Jiang is the girlfriend of Mr Chen.  She has a son, Zunlong Guan, also known as Peter.  Shilin Zhang, also known as Angela, is Zunlong Guan’s wife.

[5]      On  24  November  2015  Mr  Chen  lent  Shilin  Zhang  and  Zunlong  Guan

$120,000.   That was to help them buy the property at 75 Golden Morning Drive,

Albany Heights.  Mr Chen’s evidence includes a bank statement showing the transfer

of funds into an account in the name of Shilin Zhang.   He has also produced a document in Chinese, signed by Shilin Zhang, which has been translated as follows:

The borrowers below hereby certify that they have borrowed from Xiaowu Chen NZD$120,000.00 (one hundred twenty thousand NZD) which shall be repaid in full amount within three months.

Borrowing date:  25th November 2015

[6]      Shilin Zhang and Zunlong Guan have signed as borrowers and Jing Jiang has signed as guarantor.  Mr Chen also says that it was agreed he was to be paid interest of $10,000.

[7]      The loan was due for repayment on 25 February 2016, but it was not repaid. In May 2016 there was a meeting of the four of them – Mr Chen, Jing Jiang, Shilin Zhang and Zunlong Guan.  Mr Chen says that it was agreed at that meeting that as Shilin Zhang and Zunlong Guan were unable to repay the loan, the loan would be converted into an interest in the property.  He was to have a stake of $130,000 and he would also share in the profit from any eventual re-sale of the property.  That share would be a percentage  which  Shilin  Zhang and  Zunlong Guan  considered  they should give him according to their consciences.  He confirms that the percentage of the profit was not agreed at the meeting, and there has been no agreement since then as to the amount.  He also says that there were discussions on other matters at the meeting, but they are not relevant to the caveat claimed in this case.

[8]      Jing Jiang’s affidavit corroborates Mr Chen’s affidavit.

[9]      If  Mr  Chen  were  purely  an  unsecured  creditor,  there  would  not  be  a caveatable  interest  because  a  liability  for  an  unsecured  debt  does  not  give  a caveatable interest in the property.1     Instead, what gives Mr Chen  a caveatable interest in the property is the agreement in the meeting in May 2016 to confer an interest in the property.   There are potential objections to the claim, but in the

absence of opposition, I find that there is a caveatable interest.

1      Hinde McMorland and Sim Land Law in New Zealand (online looseleaf ed, LexisNexis) at

10.010(a).

[10]     The first potential objection is that whereas the loan was to Zunlong Guan and Shilin Zhang, the registered proprietors of the property at Golden Morning Drive are PL Trustee (No.2) Ltd and Shilin Zhang.  Shilin Zhang is common to both the interest in the property and the advance of the funds.  PL Trustee (No.2) Ltd appears to  be  corporate  trustee  through  which  Zunlong  Guan  holds  his  interest  in  the property.  In the absence of any opposition, it is reasonable to infer that he had the authority of PL Trustee (No.2) Ltd to confer an interest in the property in favour of Mr Chen.

[11]     Another  potential  objection  is  that  there  is  some  uncertainty  as  to  the agreement because the percentage of any profit which Mr Chen was to receive was not fixed at the meeting in May 2016.  I regard the arrangement as enforceable.  The interest in the property is certain up to the amount of $130,000.  The question of a share of any profit from the proceeds of sale was left to the discretion of Shilin Zhang and Zunlong Guan.  That did not confer any enforceable obligation in favour of Mr Chen.  But the reservation of such a discretion does not make the agreement unenforceable.

[12]     I am satisfied  that there was  consideration for the arrangements because Mr Chen agreed not to enforce the debt against Shilin Zhang and Zunlong Guan, when the debt had already fallen due.  That forbearance is adequate consideration for the arrangement.

[13]     The  arrangements  were  purely  oral  and  never  reduced  to  writing.    Any objection as to absence of writing goes to enforceability.  If absence of writing is to be a bar, for example under s 24 of the Property Law Act 2007, it must be expressly pleaded.2      Here,  there  is no  opposition  and  therefore  the  absence of  a pleaded affirmative defence does not bar Mr Chen from relying on the arrangements agreed in May 2016 in support of his caveat.

[14]     Mr Chen is required to show only an arguable case.  In the absence of any evidence challenging his account, I find that he has an arguable case for a beneficial

2      See High Court Rules, r 5.19(1) and (2), Boviard v Brown [1975] 2 NZLR 694 (SC) at 700-702,

Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 (CA) at 284.

interest in the property.  The evidence points more in favour of an express trust, as opposed to a constructive trust.  Notwithstanding that, I do not regard any clumsiness in the drafting of the caveat as invalidating it.

[15]     Accordingly I make these orders:

(a)       The caveat is not to be removed until further order of the court.

(b)It is a condition of that order that Mr Chen is to begin proceedings to enforce the interest he has claimed in his caveat.  Mr Chen is to file and serve that proceeding by 3 May 2017 and he is to prosecute that claim with due diligence.

(c)     The respondents are to pay Mr Chen costs of $5,017.50 and disbursements of $1,180.00.

(d)      Leave is reserved to apply for orders removing the caveat.

……………………………….

Associate Judge R M Bell