Li v 110 Formosa (NZ) Ltd - [2017] NZHC 174

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2016-404-001650

[2017] NZHC 174

IN THE MATTER OF Section 145A of the Land Transfer Act 1952

BETWEEN

JUN LI

Applicant

AND

110 FORMOSA (NZ) LIMITED

Respondent

Hearing: 3 February 2017

Appearances:

N Campbell QC and D Huang for the Applicant D Bigio QC and H Ford for the Respondent

Judgment:

17 February 2017

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on
17.02.17 at 3:30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

JUN LI v 110 FORMOSA (NZ) LIMITED [2017] NZHC 174 [17 February 2017]

[1] Issues between the parties focus upon a caveat lodged by the applicant (Mr Li) over property owned by the respondent (110 Formosa) on 2 October 2015.

Background

[2] By an agreement dated 23 April 2014 the then mortgagees of that property at Beachlands, Auckland (the property) entered into an agreement with Meng (Eamon) Wang (Mr Wang) and Ding Zhi (Jenny) Huang (Mr Wang’s mother) for the sale and purchase of the property.

[3] On 10 August 2014 the applicant Mr Li met with Mr Wang and Mr Wang’s mother regarding purchasing an interest in the property that they had agreed to purchase with settlement to take place on 29 August 2014. Mr Wang says he informed Mr Li he wished to set up Jenny and Eamon Holdings Limited (JEHL) for the purpose of their partnership, and which would purchase the land.

[4] Later the parties and others met to discuss their purchase arrangement. The purpose was to complete a cooperation agreement. A meeting was arranged on 27 August 2014 for the purpose of signing the cooperation agreement. That signed agreement provided inter alia:

1.Cooperation and ownership ratio

…

2) Breakdown of the 100% ownership of the purchased land:

a)Party A [Mr Wang] holds 44% Party C [Mr Wang’s mother] holds 24% and Party B [Mr Li] holds 32% ownership of the Land (Party B’s first capital contribution is NZD 4.2 million; another NZD 7.96 million will be raised within six months).

b)Party A, Party B and Party C agree and Party A promise that the base price of the 100% ownership is NZD 38 million, which is the original price of the Land. Depending on the amount of capital they raise, Party B and Party C may, in future, acquire Party A’s ownership (e.g. pay NZD 3.8 million for acquiring 10% ownership).

2.Form of cooperation

1) Set up a (shareholding) limited company (“the Company”) to purchase and manage the Land and carry out joint investment and joint management and share risks as well as profits and losses. Party A, Party B and Party C shall purchase the Land at a total price of NZD 38 million.

…

[5] Mr Li agreed to pay $4.8m to acquire 32 per cent of the ownership interest. JEHL was incorporated on 27 August 2014. On 28 August 2014 Mr Li deposited $4m into the Koo and Loo solicitor’s trust…

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.

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Details

Case: [2017] NZHC 174
Decision Date: 17 February 2017

CaseChat Overview and Summary

In the High Court of New Zealand, Jun Li, the applicant, sought to protect his interest in a property owned by 110 Formosa (NZ) Limited, the respondent, by lodging a caveat. The primary dispute centered on whether the applicant had a caveatable interest in the property, given that he had paid $4.8 million towards its purchase, which he claimed was misappropriated by the respondent. The court was tasked with determining whether the caveat could be sustained pending the outcome of a substantive proceeding initiated by the applicant to claim his interest in the property.

The key legal issues the court had to resolve were whether the court could consider the validity of the caveat despite an earlier order that it should not lapse, and if there was an arguable case for sustaining the caveat based on the applicant's claims. The court examined the applicant's allegations of breach of trust and misappropriation, and whether these supported a claim for a proprietary interest in the property.

The court reasoned that the applicant had presented an arguable case for a proprietary interest in the property, based on the principles of equitable tracing and the fact that the funds were allegedly misappropriated. The court held that the earlier order, which allowed the caveat to remain pending the substantive proceeding, did not preclude the respondent from challenging the validity of the caveat. However, the court found that the respondent had not provided sufficient evidence to justify setting aside the earlier order or to demonstrate that the applicant's claims were without merit. The court concluded that the applicant had established an arguable basis for his claim, and therefore the caveat should not be removed at that stage.

The court dismissed the respondent's application to vary the earlier orders and directed that the respondent pay the applicant's costs. The matter was to be determined further on the papers.

Orders