Jiang v GL Group Limited

[2023] NZHC 249

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-001090

[2023] NZHC 249

UNDER

the Land Transfer Act 2017

IN THE MATTER OF

caveat 11698572.1 lodged against record of title NA 123B/970 (North Auckland)

BETWEEN

PAISI JIANG

Applicant

AND

HIGHRISE APARTMENTS LIMITED

First Respondent

HONG LIANG and HUACHI GAO
Second Respondents

MING LIU

Third Respondent

CIV-2022-404-001096

UNDER

the Land Transfer Act 2017

IN THE MATTER

of Caveat 11698599.1 lodged against Record of Title NA 100C/387 (North Auckland)

BETWEEN

PAISI JIANG

Plaintiff

AND

GL GROUP LIMITED

First Respondent

HONG LIANG and HUACHI GAO
Second Respondents

YUEYING SUO

Third Respondent

Hearing: 13 October 2022

PAISI JIANG v HIGHRISE APARTMENTS LIMITED [2023] NZHC 249 [22 February 2023]

Appearances:

S W M Piggin for the Applicant

D Zhang for the First and Second Respondents P Roycroft for the Third Respondent (excused)

Judgment:

22 February 2023

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 22 February 2023 at 11.30 a.m. pursuant to Rule 11.5 of the High Court Rules.

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

Introduction

[1]    In  June  2022,  Highrise  Apartments  Ltd  (Highrise  Apartments)   and  GL Group Ltd (GL Group) applied to the Registrar-General of Land to lapse caveats on 2/239 Glenfield Road, Glenfield (the Glenfield property) and 2/1 Claude Brookes Drive, Henderson (the Henderson property), respectively. The caveator, Mr Paisi Jiang, lodged the caveats in March 2020 pursuant to a loan and security agreement dated 26 February 2020. The parties to the agreement are Mr Jiang, as lender, and Ms Hong Liang and Mr Huachi Gao (the Gaos) as borrowers. The agreement is the latest iteration of a financing arrangement behind a joint venture formed by the parties to develop land. Mr Jiang contends that the Gaos have not repaid the loan and that a considerable sum remains outstanding. He now applies to this Court for orders that the caveats not lapse. The application is opposed by the Gaos.

[2]The issues for me to determine are:

(a)Do Highrise Apartments and GL Group have standing to apply for a lapse of a caveat under s 143(1)(a) of the Land Transfer Act 2017 (LTA)?

(b)Has Mr Jiang established that it is reasonably arguable that he holds an interest in the Henderson and Glenfield properties that can support the caveats?

(c)If yes, will exercise of this Court’s residual discretion to remove the caveats prejudice Mr Jiang in light of the Gaos’ offer to deposit

$230,000 into a solicitor’s trust account pending resolution of the substantive loan dispute?

Background

[3]    In August 2016, Mr Jiang and the Gaos formed a joint venture to develop land at 34 West Coast Road, Glen Eden and 2 Galbraith Street, Mt Roskill. Exactly how the joint venture arose is unclear. The Gaos, who are in the business of land development, had a pre-existing relationship with Mr Jiang’s mother, Ms Su Jiang, a real estate agent. It appears that Ms Jiang played a central role in the formation of the joint venture and that Mr Jiang, a University student at the time, became formally involved with his name appearing on the relevant legal documents in place of his mother’s. While not strictly relevant to the application at hand, I acknowledge that extent of Mr Jiang’s involvement in the joint venture is a point of contention between the parties.

[4]    At the outset the parties agreed to contribute towards the joint venture in equal shares. However, the Gaos could not, or would not, fund their share so a loan was arranged. An initial agreement saw Mr Jiang lend the Gaos $500,000, with the Gaos putting up two properties as security. Subsequently, the parties incorporated GLJ Ltd (GLJ) as the vehicle for the joint venture with both Mr Jiang and Ms Liang appointed as its directors.

[5]    As the joint venture progressed the parties revised their initial loan agreement, doing so on three separate occasions. The first variation, agreed to in August 2017, increased the loan amount to $600,000. The second  variation,  agreed  to  in  October 2017, changed the secured properties. The third and final variation was agreed to on 26 February 2020 (the loan agreement), it is the operative agreement for

the purposes of this proceeding. Relevantly, it revised the loan amount and changed the secured properties yet again.

[6]Article 1 of the loan agreement stated the revised loan amount as follows:

[The Gaos] originally borrowed a total of $600,000 New Zealand dollars from [Mr Jiang]. As of January 2020, this principal amount is at ~$353,000 (also needs to include the difference in [project] balance and incurred interest)

[7]Article 3 set an annual interest rate of 12 per cent.

[8]    Article 6 provided the Henderson and Glenfield properties as new security for the loan and conferred a right to Mr Jiang to lodge caveats against those properties, which he did in March 2020.  The registered owner of the Henderson property is   Ms Yueying Suo. Ms Suo holds the Henderson property as a bare trustee for Mr Gao. She does not oppose Mr Jiang’s application but reserves her rights. The registered owner of the Glenfield property is Mr Ming Liu. Mr Liu holds this property as a bare trustee for Mr Gao. It appears that on 26 November 2019, Mr Liu granted a power of attorney to Ms Liang. Mr Liu has not participated in this proceeding and it is not known whether the power of attorney is still in effect.

[9]    Article 6(E) provided that Mr Jiang’s consent would be required before the Henderson or Glenfield properties could be disposed of:

… During the mortgage without the written consent of [Mr Jiang]; [the Gaos], [Ms Suo] and [Mr Liu] shall not sell the estate, gift or other person (sic) in any other way dispose of the mortgaged property.

[10]   Throughout the life of the loan, the parties maintained loan accounts recording the relative position between Mr Jiang and the Gaos. Shortly after the joint venture’s completion in June 2021, the parties were unable to settle the loan due to a dispute over the accuracy of the loan accounts. A key point of disagreement is Mr Jiang’s claim of an entitlement to compound interest on his financial contributions to the joint venture, i.e., the “difference in project balance”.

[11]   On 14 April 2022, the Gaos’ solicitor, Mr Daniel Zhang, wrote a letter to    Mr Jiang outlining the Gaos’ position. He rejected Mr Jiang’s claim for interest but noted that the Gaos had nonetheless calculated the amount owed, incorporating the

further interest claimed by Mr Jiang, to be approximately $115,000. In an effort to resolve the dispute and free up the Henderson and Glenfield properties for other development opportunities, the Gaos presented Mr Jiang two offers: in exchange for withdrawing the caveats they would either pay him $115,251.78 in full settlement of the loan or would deposit $230,000 into a solicitor’s trust account pending resolution of the dispute. On 26 April 2022, Mr Jiang responded to the letter rejecting its analysis.

[12]   In the months that followed the parties engaged in various back and forth communications regarding the loan. Eventually, both Mr Jiang and the Gaos engaged their own expert accountants to review the loan accounts. However, the accountants returned differing figures for the amount owing and, as a result, the loan dispute remained unresolved.

[13]   Meanwhile, on 10 September 2020, Highrise Apartments entered into an agreement for sale and purchase of the Glenfield property. On 27 November 2020, GL Group entered into an agreement for sale and purchase of the Henderson property. The consent of Mr Jiang to sell the properties was not obtained. Both purchasing companies are associated with the Gaos and each made applications to lapse the respective caveats in June 2022.

Legal principles

[14]   An application to sustain a caveat is determined on summary basis in which the Court has regard to the following principles:1

(a)The applicant caveator bears the onus of demonstrating that they have an interest in the land sufficient to support a caveat. However, they need not establish that definitively. It is enough if they present a reasonably arguable case.

(b)The process by which these applications are determined is ill-suited to resolving disputed questions of fact. An order for a caveat’s lapse will only be made if it is patently clear it cannot be maintained — either

1      Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813. See also Philpott v Noble Investments Ltd [2015] NZCA 342.

because there was no valid ground for lodging it in the first place or, alternatively, that such ground has now ceased to exist. A conflict between affidavits will generally be resolved in the caveator’s favour.2 However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable.3

(c)Where the applicant has discharged its burden, the Court retains a residual discretion to remove the caveat. The Court will exercise this discretion cautiously and must be satisfied removal would not prejudice the caveator’s legitimate interest.4

Do Highrise Apartments and GL Group have standing?

[15]   Mr Piggin, counsel for Mr Jiang, submits that the respondent companies do not have standing to apply to the Registrar-General for a lapse of caveat under s 143 of the LTA. That section relevantly provides:

143     Lapse of caveat against dealings

(1)The following persons may apply to the Registrar for the lapse of a caveat against dealings affecting an estate or interest in land:

(a)a person who wishes to register an instrument affecting the estate or interest protected by the caveat; or

(b)the registered owner or a person acting for or on behalf of the registered owner of the estate or interest affected by the caveat.

…

[16]   An “instrument” under the LTA means “a document in paper or electronic form and … includes a caveat document”.5

2      Bethell v Rickard [2013] NZCA 68 at [22]. See also MacRae v Rapana HC Auckland M633/94, 17 June 1994.

3      Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175 citing Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341; and Xie v 126 Waimumu Ltd [2020] NZHC 1109 at [8].

4      Pacific Homes Ltd (In Receivership) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.

5      Section 5(1).

[17]   Mr Piggin submits that an agreement for sale and purchase cannot be an instrument because an instrument as defined in the LTA connotes a registerable document. He submits, therefore, that an application for lapse was not available to the respondent companies.

[18]   I see the position in much simpler terms. Section 143 permits a person who “wishes to register an instrument” to apply for a lapse of caveat. All that is required of an applicant under s 143 is a real and genuine wish to register an instrument that will affect the estate or interest protected by the caveat. Highrise Apartments and  GL Group seek to purchase the Glenfield and Henderson properties respectively and have entered into agreements for sale and purchase. Both purchasers will be required to register a transfer instrument to become registered owners. It follows that they are persons who wish to register an instrument within the meaning of s 143.

[19]   Next, Mr Piggin submits that the Gaos are in breach of the loan agreement by seeking to sell the  Glenfield  and  Henderson  properties  without  first  obtaining  Mr Jiang’s consent. As such, he contends that Highrise Apartments and GL Group, companies associated with the Gaos, are precluded from acquiring the status of a person who wishes to register an instrument for the purposes of s 143(1)(a).

[20]   I agree that the Gaos are in breach of the loan agreement by seeking to sell the Glenfield and Henderson properties without first  obtaining  Mr  Jiang’s  consent.  Ms Liang’s evidence is that the registered owners of both properties hold them on trust as bare trustees for Mr Gao. As such, the Gaos are behind the agreements to sell the properties to Highrise Apartments and GL Group.  There  is  also  no  dispute  that the Gaos control the purchasing companies, with Ms Liang being a director and shareholder of Highrise Apartments and the sole director and shareholder of GL Group. However, the Gaos’ breach of the loan agreement sounds in damages — it does not affect the standing of the respondent companies.

Has Mr Jiang established that it is reasonably arguable that he has a caveatable interest?

[21]Determining this issue turns on the following:

(a)Did the loan agreement confer on Mr Jiang an equitable interest in the properties capable of supporting a caveat?

(b)If so, does that caveatable interest still exist?

Did the loan agreement confer on Mr Jiang an equitable interest in the properties capable of supporting a caveat?

[22]   There is no dispute that the loan agreement granted Mr Jiang a legitimate right to lodge caveats against both the Glenfield and Henderson properties. There is disagreement about whether the agreement did more than that.

[23]   Mr Piggin contends that the agreement was an equitable mortgage, namely an “agreement to mortgage”.

[24]   Mr Zhang rejects that characterisation, emphasising that the document is not described as a mortgage. He maintains that the agreement did not give Mr Jiang the right to sell the properties if the Gaos default on the loan. He submits that the only right or interest conferred under the agreement was a right to lodge a caveat against the properties.

[25]   This issue is important because there is some doubt about whether a right to lodge a caveat granted by contract confers a caveatable interest. A caveat is a creature of statute and may only be lodged by person upon whom the right to lodge it has been conferred by statute.6 Section 138 of the LTA confers a right to lodge a caveat against dealings upon any person who:

(a)claims an estate or interest in the land, whether capable of registration or not; or

(b)has a beneficial estate or interest in the land under an  express, implied, resulting, or constructive trust; or

6      Guardian Trust and Executors Co of New Zealand Ltd v Hall [1938] NZLR 1020 (CA) at 1025.

(c)is transferring the estate or interest in the land to another person to be held on trust; or

(d)is the registered owner of the estate or interest in the land and either has an interest that is distinct from that of registered owner, or establishes to the satisfaction of the Registrar-General that at the time the caveat is lodged there is a risk that the estate or interest may be lost through fraud.

[26]   This Court has held that where the effect of a contract between a registered owner of land and another person is to confer a caveatable interest on that other person, a clause granting that person the right to lodge a caveat is otiose;7 in other words, the other person need not rely on the existence of the clause to justify the lodging of a caveat under s 138 of the LTA. However, when a clause granting the right to caveat occurs in a contract where it is clear that no caveatable interest of any sort is conferred by the registered owner, the person would have no right to lodge a caveat under s 138. If, in those circumstances, the person nonetheless proceeds to lodge a caveat, the learned authors of Hinde McMorland and Sim Land Law in New Zealand suggest that an application by the registered owner under s 142 for removal of the caveat would amount to a breach of contract.8 In such a case, the caveator would have a remedy in damages and might be able to enjoin the registered owner from continuing with the application for removal.9

[27]   Therefore, it is necessary to decide whether Mr Jiang has a reasonable argument that the loan agreement conferred a caveatable interest (in terms of the LTA) independent of the contractual right to caveat.

[28]Turning to the loan agreement, I consider the following features relevant:

(a)The document is entitled a “Loan and security agreement” (emphasis added).

7      Watts v Giles-Hansen HC Tauranga M51/02, 18 November 2002.

8      DW McMorland and others Hinde McMorland and Sim Land Law in New Zealand (online ed, LexisNexis) at [10.009(y)].

9      At [10.009(y)].

(b)Article 6, the “Guarantee Terms”, states:

…

C).     [The Gaos] and [Ms Suo] agreed to secure [and to lodge a caveat against]10 the property at 2/1 [C]laude [B]rookes [D]rive, Henderson (Certificate of title NA100C/387)

D).     [The Gaos] and [Mr Liu] agreed to secure [and to lodge a caveat against]11 the property at 2/396 Glenfield [R]oad, Glenfield (Certificate of title NA123B/970)

E).   [Mr Jiang] shall arrange for the completion of relevant legal procedures, and the relevant expenses incurred shall be borne by [the Gaos]. During the mortgage without the written consent of [Mr Jiang]; [the Gaos]; [Ms Suo]; and [Mr Liu] shall not sell the estate, gift or other person (sic) in any other way dispose of the mortgaged property.

…

(emphasis added)

(c)Article 7, on “Liability for breach of contract”, states:

A). If [the Gaos fail] to repay the loan as stated in the contract, [the Gaos] shall bear the liquidated damages and the costs of legal fees … travel expenses, evaluation fees, auction fees, etc. due to the lawsuit. [Mr Jiang] has the right to apply to the local court for the auction of collateral for the purpose of repaying the principal and interest of the loan. If there is insufficient compensation, [Mr Jiang] still has the right to recover from [the Gaos] until [the Gaos pay] off all the loan principal and interest of [Mr Jiang].

…

(emphasis added)

[29]   The document was obviously not drafted by lawyers and the precise nature of the interest conferred on Mr Jiang is unclear. Mr Piggin submits that the agreement gave rise to an equitable mortgage. An equitable mortgage involves the registered owner promising to grant a registrable mortgage. It is unclear whether the agreement to Mr Jiang arranging for “completion of relevant legal procedures” refers to the registered owners executing a registrable mortgage.

10     Inserted into the contractual text as a handwritten note.

11     Inserted into the contractual text as a handwritten note.

[30]   Alternatively, the interest could be characterised as an equitable charge. An equitable charge on land is a security that confers an equitable interest in the land upon the creditor. It differs from an equitable mortgage in that it gives the charge-holder, the creditor, no right to compel the debtor to execute a memorandum of mortgage. An equitable chargee’s remedies are to apply to the Court for an order for sale or for the appointment of a receiver.12 An equitable charge is an interest in land that will support a caveat.13

[31]   Despite these uncertainties, which stem from the fact that the document was prepared by laypeople, I consider that on the plain and ordinary meaning of the words of the contract, particularly those I have quoted above, Mr Jiang has a reasonable argument that the registered owners of the Henderson and Glenfield properties intended to confer on him an equitable interest in the properties in the form of an equitable charge or equitable mortgage. I place weight on the use of the terms “security” and “mortgage” in the document. I also consider it important that the registered owners explicitly confer on Mr Jiang the right to apply to the court to sell the properties if the Gaos did not repay the loan and interest on the specified date. That right is expressed as additional to the right to lodge caveats against the properties.

Does that caveatable interest still exist?

[32]   On the basis that Mr Jiang arguably acquired a caveatable interest from the loan agreement, the question that then arises is whether that interest still exists.

[33]   This brings us to the central point of contention between the parties: whether there are amounts still owed under the loan agreement. Mr Jiang says that a significant sum remains owing, with additional interest accruing. The Gaos say that they owe him nothing, because Mr Jiang wrongly insists on receiving interest on his contributions to the joint venture. The Gaos say that even if they should be paying interest on his contributions, that amount is only $132,082.98, and they have offered to pay that amount to resolve the dispute and have the caveats lifted.

12     Cousins, The Law of Mortgages (2nd ed, 2001) at 16-126.

13     Reeves v Rawlings HC Auckland CIV 2003-404-5407, 8 October 2003 at [15].

[34]   Mr Jiang relies on the expert evidence of Mr Matthew Kemp, a forensic accountant who calculates the outstanding loan balance as $174,438.11, comprising:

(a)$157,176.56 relating to the equalisation of the parties’ contributions to the joint venture, including interest calculated as at 31 July 2022 (with interest continuing to accrue);

(b)$14,382.97, being 50 per cent of the estimated remaining net cash position in the joint venture; and

(c)$2,878.58, being 50 per cent of the post 1 November 2021 transactions in GLJ’s bank account.14

[35]   Mr Kemp also says that a potential further equalisation adjustment in respect of interest on unreconciled contributions by Mr Jiang may be in the order of $48,000 (plus interest), in addition to the above total of $174,438.11.15

[36]   The Gaos acknowledge that they owe half of the post 1 November 2021 transactions but nothing more. They maintain that Mr Jiang has no entitlement to be paid interest on his contributions to the joint venture, however, if they are wrong on that issue, they submit that interest stopped accruing in June 2021. They rely on the expert evidence of their own forensic accountant, Ms Tina Payne, who in a supplementary affidavit, calculates the outstanding loan balance as $132,082.98, comprising:

(a)$129,200.15 relating to the equalisation of the parties’ contributions to the joint venture, including interest calculated as at 10 June 2021; and

(b)$2,882.83, being 50 per cent of the post 1 November 2021 transactions in GLJ’s bank account.16

14    Affidavit of Matthew Kemp sworn 12 August 2022 [First Kemp Affidavit] at [11.1].  During the 13 October 2022 hearing, Mr Jiang applied for an order granting leave to file a second affidavit of Mr Kemp dated 11 October 2022. I reserved my decision. I now grant leave. Relevantly, in a letter annexed to that affidavit, Mr Kemp advises that, after reviewing the Gaos’ expert evidence, his opinion and reasoning remained unchanged.

15 First Kemp Affidavit, above n 14, at [11.3].

16 Supplementary affidavit of Tina Payne sworn 26 August 2022 at [110].

[37]   Ms Payne rejects the $48,000 equalisation adjustment suggested by Mr Kemp. She says that the entries which Mr Kemp could not reconcile relate to rent deposits for the property at 34 West  Coast Road and  are therefore not contributions made by   Mr Jiang to be considered in the loan calculation.17

[38]   It seems that there are two levels to the dispute between Mr Jiang and the Gaos. The first concerns whether the parties agreed that Mr Jiang would be paid interest on his contributions to the joint venture outside the loan to the Gaos. This depends on an interpretation of the loan agreement and the evidence of Mr Jiang and the Gaos.

[39]   I received very little submission on the contractual interpretation exercise. Article 3, “Loan interest”, simply records that 12% interest will be paid annually.  Mr Zhang pointed out that the loan agreement records two different sets of money, being the remaining loan principal owing (around $353,000) and the “difference in [project] balance.” He submits that the agreement does not say that the “difference in [project] balance” will attract interest.

[40]   Against that, art 1 of the loan agreement states that the “principal amount” was to “include the difference in [project] balance and incurred interest”, which may refer to Mr Jiang’s contributions to the joint venture which go beyond his 50 per cent share. Article 6(E) states that the borrowers would settle the loan “(~$353,000 NZD) plus project balance and interest [by] 26th Aug 2020”.18

[41]   I am unable to reach a firm conclusion on this issue in a caveat hearing, without hearing viva voice evidence from Mr Jiang and the Gaos as to what they agreed. Based on the words of the loan agreement, I cannot discount that the parties intended that Mr Jiang would be paid interest on his contributions to the joint venture beyond his half share.

[42]   The second level to the dispute concerns the amount owing under the loan once equalisation calculations are made to reflect the parties’ contributions to the joint

17 At [96].

18     I note that there are two clauses labelled “E” under art 6. This is the second one.

venture. There is plainly a difference of opinion and analysis between the accounting experts, even putting aside the dispute about Mr Jiang’s entitlement to interest.

[43]   It is not for this Court, in the context of a caveat proceeding, to resolve precisely how much is owing under the loan agreement. I am only required to decide whether Mr Jiang has established to a reasonably arguable threshold that some amount of the loan remains unpaid and therefore his arguable caveatable interest continues to exist. Based on the competing expert evidence, and my prima facie review of the loan agreement, I am satisfied that Mr Jiang has an arguable case that the Gaos have not fully repaid the amounts owed according to the loan agreement. At a minimum, their own expert has conceded that they owe Mr Jiang 50 per cent of the post 1 November 2021 transactions.

Should the Court exercise its residual discretion to remove the caveats?

[44]   In the event I found a caveatable interest, Mr Zhang advanced an alternative submission that I should exercise my residual discretion and remove the caveats. He reiterated the Gaos’ offer to place $230,000 in a trust account pending resolution of the substantive loan dispute and argued that that amount represented a reasonable accommodation of Mr Jiang’s interest, covering both Mr Kemp’s calculation of the loan balance and his $48,000 equalisation adjustment. Mr Zhang also emphasised what he described as a reluctance on the part of Mr Jiang to resolve the dispute. He said that considerable delay had resulted and pointed to offers made by the Gaos to Mr Jiang to progress or settle the dispute in their solicitor’s letter dated April 2022.

[45]   Mr Piggin submitted that there are no exceptional circumstances in this case that would justify exercise of the Court’s residual discretion. He argued that insofar as delay was relevant, fault laid with Ms Liang and her failure to maintain accurate loan accounts. Further, he emphasised that the Gaos are in breach of the loan agreement and that the respondent companies’ requests for notices of lapse are therefore grounded in the Gaos unlawful conduct.

[46]   Mr Piggins further submitted that the Gaos have, in utilising the lapse of caveat procedure, taken the wrong approach to resolving the substantive loan dispute. He relied on the case of Devon Nominee Ltd v Hampstead Holdings Ltd, in which the

Court of Appeal said that a mortgagor who wishes to obtain a discharge must first make  tender,  and  should  that  not  succeed,  bring  a  redemption  proceeding.19  Mr Piggins said that the Gaos’ offers in April 2022 to either make a fixed payment of approximately $115,000 or to set aside $230,000 do not accord with this approach.

[47]   Finally, Mr Piggins submitted that exercise of residual discretion would prejudice the legitimate interests of Mr Jiang and completely reverse his position as a secured creditor entitled to require the borrower to tender payment. He would accordingly be left to sue in debt to recover any amount owing under the loan agreement.

[48]   In Pacific Homes Ltd (In Receivership) v Consolidated Joineries Ltd, the Court of Appeal said:20

We are of the view that in the dictum in Sims v Low, Somers and Gallen JJ were concerned with the situation which was then before the Court and were not putting their minds to a situation in which there is no practical advantage in maintaining a caveat lodged by someone who could properly claim a caveatable interest. In such circumstances, the Court retains a discretion to make an order removing a caveat though it will be exercised cautiously. An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of the recovery of money secured over the land while specific performance of an agreement or if the caveator’s interest can be reasonably accommodated in some other way, such as by substituting a fund of money under the control of the Court then it may be appropriate for the caveat to be removed notwithstanding that the right to a claimed interest is undoubted.

(emphasis added)

[49]   I am not confident that the practical advantage of maintaining the caveats to Mr Jiang is eliminated if the Gaos deposit $230,000 into a trust account. The implication is that Mr Jiang would then have to sue the Gaos in debt for the money. Removal of the caveats would prejudice him by placing the onus on him to sue the Gaos for the money, rather than the Gaos being required to tender payment and bring redemption proceedings, or the like, if necessary.

19     Devon Nominee Ltd v Hampstead Holdings Ltd [1981] 1 NZLR 477 (CA).

20     Pacific Homes Ltd (In Receivership) v Consolidated Joineries Ltd, above n 4, at 656.

[50]   I am mindful of the Gaos’ evidence that Mr Jiang is directly obfuscating and delaying settlement of the loan. However, the Gaos have acted in breach of the loan agreement by not seeking Mr Jiang’s consent on the sales. They appear to have sought to use the lapse procedure to force a decision on the precise amount owing under a loan. Regrettably, the procedure is not suited to resolving disputes of that nature.

Result

[51]I order that caveats 11698599.1 and 11698572.1 not lapse.

[52]   As the first and second respondents have been unsuccessful, my preliminary view is that they should pay Mr Jiang’s costs on a 2B basis and reasonable disbursements. Counsel are directed to attempt to agree costs.  If agreement cannot be reached, Mr Jiang may file a memorandum within 20 working days. The respondents may reply within a further five working days. Memoranda should be no more than four pages.

Associate Judge Gardiner

Solicitors:

Advent Ark, Auckland R S Walker, Auckland

S W M Piggin, Auckland