Chen v Sanctuary Developments no.8 Limited - [2019] NZHC 1476

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001291

[2019] NZHC 1476

BETWEEN
CHAO MING CHEN

Plaintiff

AND

SANCTUARY DEVELOPMENTS NO 8 LIMITED

Defendant

Hearing: 2 February 2019

Appearances:

J A Wickes for the Applicant

L M Van and R A Idione for the Respondent

Judgment:

22 July 2019

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 22 July 2019 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Loo & Koo, Auckland Anthony Harper, Auckland

CHEN v SANCTUARY DEVELOPMENTS NO 8 LTD [2019] NZHC 1476 [22 July 2019]

Introduction

[1] This proceeding concerns a caveat lodged by the applicant, Chao Ming Chen, on 6 June 2018, over a property at 9 Princes Street, Auckland (property).1 Mr Chen applies for an order that the caveat not lapse pursuant to s 145A of the Land Transfer Act 1952.

[2]The caveat claims an interest in the Princes Street property:

Pursuant to loan agreement and deed of arrangement dated 30 June 2015 whereby Chao Ming CHEN is the lender and the registered proprietor, Sanctuary Developments No. 8 Limited, is the borrower and the loan is agreed to be secured by a second mortgage over the said land.

[3] The respondent, Sanctuary Developments No 8 Limited (Sanctuary), is now the registered proprietor of the property, having acquired it in October 2016 for conversion to residential apartments. It opposes the order sought.

[4] The Court has made an interim order that the caveat not lapse pending the outcome of the application.

The dispute in a nutshell

[5] It is not in dispute that the parties entered into the loan agreement that is cited in the caveat (Loan Agreement), or that Sanctuary is indebted to Mr Chen for
$5 million, most of which it used for the deposit on its purchase of the property. It is also common ground that pursuant to the Loan Agreement Mr Chen had an entitlement
– upon settlement of the purchase of the property – to an equitable interest in a proposed second mortgage over the property as security for his advance. But there the parties’ positions diverge.

[6] Sanctuary says it is “crystal clear” that the interest claimed in the caveat no longer exists. It argues that under the Loan Agreement the proposed mortgage was to be held by a trustee for private investors – of which Mr Chen was to be only one of a number – pursuant to an investment scheme operated by Gilligan Sheppard Ltd known

1 Title Identifier NA12D/152 – caveat number 11138144.1, registered on 6 June 2018.

as the GS Scheme (GS Scheme); and that the mortgage was obviously intended to be conditional on the GS Scheme attracting sufficient interest to satisfy Sanctuary’s bank it should become the main funder. The GS Scheme did not proceed due to lack of interest. Sanctuary contends that ultimately it made other arrangements with Mr Chen which overtook…

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 Chen v Sanctuary Developments no.8 Limited

Details

AGLC: Chen v Sanctuary Developments no.8 Limited [2019] NZHC 1476
Case: [2019] NZHC 1476
Decision Date: 22 July 2019

CaseChat Overview and Summary

Chao Ming Chen applied to the Auckland Registry of the High Court of New Zealand to prevent the lapse of a caveat he lodged over a property at 9 Princes Street, Auckland. Sanctuary Developments No 8 Limited, the registered proprietor of the property, opposed the application. The central issue in the case was whether Mr Chen had a reasonably arguable case for the interest claimed in the caveat, specifically an equitable interest in a second mortgage over the property as security for a $5 million loan he had advanced to Sanctuary. The court considered the Loan Agreement between the parties, the background facts, and subsequent arrangements that Sanctuary argued had superseded the Loan Agreement.

The court found that Mr Chen had made out a reasonably arguable case for the order he sought. While the Loan Agreement was based on an investment scheme that ultimately did not proceed, the court held that the requirement for a second mortgage over the property was not conditional on the success of the investment scheme. The court also found that subsequent arrangements between the parties, including a personal loan agreement and a fee payment agreement, did not conclusively show that Mr Chen's claimed interest had been lost. The court ordered that the caveat not lapse and directed Mr Chen to bring substantive proceedings within 15 working days to establish his entitlement to a mortgage. If Mr Chen failed to do so, Sanctuary could apply to have the caveat lapse. The court also awarded costs to Mr Chen on a 2B basis plus disbursements.

Orders