Deng v Lu
[2015] NZHC 1531
•3 July 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-931 [2015] NZHC 1531
BETWEEN QINGQI DENG
Applicant
AND
YULIANG LU AND HONGYU YANG Respondents
Hearing: 24 June 2015 Appearances:
Ms Wickes for Applicant
Mr Pang for RespondentsJudgment:
3 July 2015
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
03.07.15 at 10.00 am, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
DENG v LU & ANOR [2015] NZHC 1531 [3 July 2015]
Introduction
[1] The applicant has filed an originating application dated 1 May 2015 seeking orders that:
a) Caveat No. 10007310.1, registered against Certificate of Title
NA 103B/841, not lapse; and
b)the Respondents pay to the Applicant the costs of this application.
Background
[2] The caveat was lodged against the title to a residential property at 52B Peary
Road, Mt Eden, Auckland (“the property”). The caveat was in the following terms:
Estate or Interest claimed
Pursuant to an agreement for sale and purchase dated 3 February 2015 between Weijie Deng as purchaser and the registered proprietors as vendor and a deed of nomination in respect of the aforesaid agreement dated 19
March 2015 between Weijie Deng as nominator and the caveator as nominee.
[3] The person known as Weijie Deng is the son of the applicant. I will describe him as the son throughout this judgment. It is also necessary to make reference to a further member of the family, Miaohe Mo, who is the wife of the applicant and the mother of the son. I shall refer to her as “the wife” below.
[4] The applicant, at the outset, accepts that he has an onus to establish that he has a reasonably arguable case for the interest claimed.1 That requirement means that the applicant needs to demonstrate that factual contentions which he puts forward are reasonably arguable. He does not need to prove on the balance of probabilities that his account of the matters is true. It is further the case that it is not the function of the court hearing a caveat application to resolve disputed matters of
fact.
[5] With that introduction, I will now outline the background facts which the applicant bases the application on.
1 Sims v Lowe [1988] 1 NZLR 656 (CA) at 660.
[6] The applicant and his wife are citizens of China. The son was at material times living in New Zealand. The parents came to New Zealand on 25 January 2015 and stayed at the property which is owned by the respondents. They found out that the respondents were intending to sell the property and that they had an auction scheduled for the sale of the property. The original auction date was 18 February
2015.
[7] The applicant and his wife said they were interested in buying the property in the name of their son. They entered into an agreement with the vendors which was written in Chinese and drafted on 30 January 2015 (I will refer to as the “Chinese Agreement”). I will set the Chinese Agreement out in full because it is of importance to the outcome of the application. The Chinese Agreement, translated into English, was to the following effect:
Sale and Purchase Agreement
Property owner YANG Hongyu and LU Yuliang agree with the buyer (in handwritten form, read as: DENG Weijie) to transact a property: 52B Peary Road, Mt Eden, Auckland at a price of NZ $1,260,000.00.
The buyer offers a starting price of NZ $1,100,000.00 in pre-auction sale and will transfer the difference of NZ $160,000.00 to the buyer’s account in advance.
(In handwritten form, read as: 12 3029 0353903 01 ASB Bank)
If the final auction price exceeds the starting price of NZ $1,100,000.00 but lower than the agreed price of NZ $1,260,000.00, then the seller will refund the overpaid amount to the buyer.
Owner:
(Signatures of Hongyu Yang & Yuliang Lu) Hongyu Yang & Yuliang Lu
Buyer:
(Signature of MO Miaohe) DENG Weijie and MO Miaohe
Date: 30/01/2015
DENG Qingqi 0221905457
DENG Weijie 02108289918
[8] I interpolate, that this document, on its face, discloses that the applicant and his family considered that the property was worth $1,260,000 and they were offering to pay $160,000 towards that expected price on the basis that, if in fact the property achieved less than that, the amount of the pre-payment of $160,000 would be scaled back by the seller refunding the overpaid amount to the buyer.
[9] It was explained to me that the Chinese Agreement was reached without the benefit of legal advice on either side. It is not wholly satisfactory to achieve the apparent objectives of the parties. It does not spell out in detail the mechanism that is intended, which may be that the applicant and his family will pay 1/10th of the price in advance; and that they assume the price will be $1,260,000 but that if it is a lesser amount then the difference between the $160,000 which they pay and 10 per cent of the actual will be refunded to them.
[10] Another feature of the Chinese Agreement to be noted is that it was signed by the mother even though its terms contemplated that the property was being acquired by the son.
[11] The funds payable under the Chinese Agreement were transferred into the respondents’ bank account on 3 February 2015. It seems likely that by the date that the funds were sent from China (which was the point of origin), the applicant and his family were already in New Zealand.
[12] The auction of the property went ahead on 3 February 2015. It was brought forward from 18 February 2015. No comment is required on the reasons for that. At the auction, the property was knocked down to the son at $1,180,000.
[13] The Memorandum of Contract executed following the auction identified the son as being the purchaser. However, the part of the agreement where that was stated was followed by the words:
and/or nominee (“the purchaser”).
[14] The settlement date provided for in the particulars and conditions of sale was
Friday 6 March 2015.
[15] Pursuant to the Memorandum of Contract, dated 3 February 2015, the applicant paid the deposit of $118,000 to the real estate agents.
[16] Also, the sum of $160,000 was received into the account of the respondents on 30 January 2015. The evidence of the applicant is that employees of his from China paid the money in.
[17] On 12 February 2015, the applicant, his wife and the son entered into a deed of nomination (original Deed). Both the applicant and his wife were nominees in terms of the Deed. The background to the original Deed stated that the nominator, the son, wished to nominate the “nominee” (that is his parents) as the persons who are to take title to the property. It also recorded the agreement of the proposed nominees to that course. The effect of the actual nomination was expressed in fairly wide terms as follows:
2.1Nomination: The Nominator nominates the Nominee as the person who is to take title to the property described in the agreement and acknowledges that with effect from the Operative Date all the rights and interests of the Nominator as purchaser under the Agreement shall pass to the Nominee.
[18] The original Deed was served on the solicitors for the vendors. On or about
22 February 2015, the solicitors served a settlement statement on the solicitors for the son, addressed to the account of the son as the purchaser. The settlement statement showed the receipt of the deposit of $118,000. There was no reference to the sum of $160,000 which the applicant had caused to be paid into the bank account of the respondents/vendors. The applicant’s solicitors communicated with the vendors’ solicitors on 4 March 2015 advising that:
our clients also advised that they had paid an extra $160,000 being further deposit to your client direct. That is to say, the total deposit paid is
$278,000. Please include these sums in your settlement statement.
[19] The solicitors acting for the respondents/vendors did not accept that there had been any additional payment. They served a settlement notice dated 6 March 2015 on the husband and the wife who were described parenthetically in that document as “purchasers”. This, of course, represented a shift from the settlement notice which was addressed to the son. The applicant’s solicitors forwarded to the solicitors acting for the vendors evidence of the payment of the $160,000 under cover of the letter 20 March 2015 but the instructions of Hong Hu, acting for the vendors, were firm that there had been no additional payment.
[20] On 19 March 2015, the son and the parents entered into a further deed
(second Deed) in terms of which the son purported to cancel the original Deed dated
12 February 2015. The operative part of the document recorded:
2.1 The nominator and the nominee hereby cancel this nomination.
[21] It is not disputed that a copy of the cancellation of the deed of nomination was served on the Hong Hu Lawyers on behalf of the respondents/vendors.
[22] The explanation which the applicant provides for the fact that the family executed the second Deed was that “the family decided it would be better if title were taken in my name alone”. It is to be observed that the applicant was not the purchaser under the Agreement and the likely effect of cancellation of nomination of any other person meant that the right to require a transfer on settlement reverted to the son and not to the father, as he seems to have assumed.
[23] The Memorandum of Contract has never been cancelled.
[24] The case which the respondents put forward is that the applicant has told only part of the story about the dealings between himself and the respondents. The respondents say that the applicant was desirous of obtaining a residency visa in New Zealand which required him to satisfy certain investment criteria in a business or businesses in New Zealand. As the respondent Yuliang Lu stated in his affidavit:
11. As he is a businessman in China, he agreed that he will input 5% of total investment value, equivalent to approximately $800 – 900 million, which is the standard industrial service rate we charge for my other clients.
[25] I also understand that Yuliang Lu, in his affidavit, says that the applicant additionally wished to have the respondents provide one year’s worth of training in matters such as property investment or design of manufacturing plant, marketing and other matters. These services were to be provided variously by one or the other of the respondents. Yuliang Lu said that the cost of providing those services, but not, I understand, the investment component, was to be $160,000. That, according to the respondents, explains why the applicant sent the sum of $160,000 to the respondents. Their account of matters is that the sum of $160,000 was not therefore paid as a part payment of the price to be paid for 2/52 Peary Road, Mt Eden.
[26] Plainly, there is an irreconcilable factual dispute between the parties concerning this matter. While it is not the function of the Court to resolve the disputes of fact that arise in this area, one factor that is likely to be of importance is the fact that the respondents and the applicant’s family have indisputably entered into a document which records a requirement that the applicant and his family would pay the same sum of money as a “pre-deposit” (as counsel referred to it) in regard to the sale of the residential property.
[27] Notwithstanding various points that Mr Pang, for the respondents, brought up about the circumstances in which the Chinese Agreement was entered into, any findings ultimately as to what actually happened has to pay regard to the fact that the parties signed a document which apparently evidenced their intention that the sum of
$160,000 be paid in relation to the residential property purchase and not for training or investment purposes.
[28] Before leaving that particular topic, I also note another aspect of the matter. When the agents of the applicant arranged to transfer the sum of $160,000 to this country from China, they completed application forms for consent to the transaction. The application forms make reference to the purpose of the payment being for training of less than one year. The applicant says that this can be explained on the basis that the remittance of the funds would only be approved if it was for training purposes and that is how the reference to that subject came to be inserted into the currency remittance application forms. In other words, as I understand it, the explanation is that the transaction was inaccurately presented as being one for
remittance of funds for the purposes of acquiring training services rather than for its true purpose. In the end, though, none of these factual differences and other matters that Mr Pang raised, including the mental competence of the applicant, is decisive.
The nomination issue
[29] A central issue that arose in the proceedings was the effect of the asserted nomination which the son executed. Such a nomination is nothing more than a statement by the purchaser identifying the person whose name is to be inserted into the memorandum of transfer as the person who is to take legal title, that is a
conveyance by direction.2 A nomination does not assign the rights of the nominator
in the agreement to the nominee. That being so, the nominee is not on account that he or she has such status, a party to the agreement who is entitled to enforce it.
[30] If it did nothing else, the original Deed directed the vendor to transfer the property on settlement to the parents. The original Deed dated 12 February 2015 was overtaken by the second Deed dated 19 March 2015.
[31] The second Deed stated that the intention of the parties was to “cancel this
nomination”, the reference being to the original Deed.
[32] From that point, the situation reverted to what it was at the beginning, that is, as if no nomination had occurred at all. Therefore, even if there had been an implied assignment contained in the original Deed, in addition to a simple requirement of settlement being with the nominee, it would appear that, to the extent that the original Deed had the effect of a nomination, that was reversed on the execution of the second Deed. From that point, the only person who could exercise the rights under the contract as purchaser was, and is, the son. This result must follow because if the nomination was cancelled, the position would revert to the usual one where the purchaser would be the party entitled under the Memorandum of Contract to call for
transfer of the property to him on tender of the purchase price being made.
2 Lambly v Silk Pemberton [1976] 2 NZLR 427 (CA). See also DW McMorland Sale of Land
(2nd ed, Cathcart Trust, Auckland, 2000) at 66.
[33] It would therefore follow that from the point of the execution of the second Deed, the entitlement to enforce the Memorandum of Contract reverted to the son. He, alone, would have the ability to enforce the agreement for sale and purchase and therefore he alone had an equitable interest in the property arising out of the agreement.
[34] One remaining point to be dealt with concerns the fact that the solicitors for the vendors issued a settlement notice to the parents (as opposed to the son). However that settlement notice would appear to have been issued in response to the original Deed, and possibly as a result of taking a mistaken view of the effect of that document. That is to say, the solicitors for the vendors apparently assumed that, from the point where the parents were nominated, it became their responsibility to perform the terms of the contract (rather than their son).
[35] The fact that the settlement notice was addressed to the parents cannot be viewed as having the effect of negating the contractual rights of the son.
[36] The effect of all of this is that the applicant does not have any equitable right to enforce the contract.
Caveat lodged against the title to the property
[37] The principles which apply in this case have been set out in the decision of
Faire AJ in Chen v ANZ National Bank Ltd:3
a) Ss 143, 145 and 145A of the Land Transfer Act 1952 give no guide as to the circumstances in which the court may make an order that a caveat be removed: Catchpole v Burke;
b) If it is clear that there was no valid ground for the lodging of a caveat, or that the interest which in the first place justified the lodging of the caveat no longer exists, such a caveat should be removed: Sims v Lowe;
c) The onus under s 143 of the Land Transfer Act 1952 lies on the caveator to show that he has a reasonably arguable case for the interest he claims: Castle Hill Run Ltd v NZI Finance Ltd;
d) The caveat, being a creature of statute, may be lodged only by a person upon whom a right to lodge it has been conferred by statute. It is not
3 Chen v ANZ National Bank Ltd [2012] NZHC 1083 at [7] (footnotes omitted).
enough to show that the lodging and continued existence of the caveat would be in some way advantageous to the caveator: Guardian Trust & Executor Co of New Zealand Ltd v Hall;
e) What the caveator must establish is an arguable case for claiming an interest of the kind referred to in s 137 of the Land Transfer Act 1952; and
f) Even if the caveator establishes an arguable case for the interest in the land claimed, the court retains a discretion to make an order removing the caveat although it will be exercised cautiously: Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd.
[38] Because of the conclusion that I came to on the point of the nomination, that being that the father did not have any rights to enforce the Agreement, it follows that he is unable to sustain the caveat lodged against the title to the property.
[39] Plainly, this will not be the end of disputes between the parties because, amongst other things, there remains the possibility that the person who appears to have rights under the Agreement, the son, will take his own proceedings against the respondents to enforce the agreement for sale and purchase if that remains legally possible. As well, the question of recovery of the deposit paid pursuant to the Chinese Agreement will need to be resolved. Those matters are, however, outside the scope of the present proceedings.
Result
[40] There will be an order dismissing the originating application dated 1 May
2015.
[41] The parties should confer on the question of costs. If they are unable to resolve that matter, they are to file memoranda not exceeding five pages in length
within five working days of the date of this judgment.
J.P. Doogue
Associate Judge