Li v Green Land Investment Ltd

[2022] NZHC 1906

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1511

[2022] NZHC 1906

BETWEEN

JICAI LI and FANG YU

First plaintiffs

Continued…

AND

GREEN LAND INVESTMENT LIMITED

First defendant

Continued…

Hearing:

21-23 March 2022

Appearances:

R O Parmenter for plaintiffs

S M Lowery and J C Suyker for first defendant Third defendant in person

M E Casey QC and A J Casey for eighth defendant

Date of judgment:

4 August 2022

JUDGMENT OF JAGOSE J

[Liability]

This judgment was delivered by me on 4 August 2022 at 2.45pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

M E Casey QC, Auckland

R O Parmenter, Barrister, Auckland S M Lowery, Barrister, Auckland

Carson Fox Bradley Ltd, Auckland

Copy to:

Third defendant

LI & ORS v GREEN LAND INVESTMENT LTD & ORS [2022] NZHC 1906 [4 August 2022]

Plaintiffs continued…

YUN SHENG

Second Plaintiff

WEN CHEN
Third plaintiff

ZHONG WEI ZHOU
Fourth plaintiff

BO LIN
Fifth plaintiff

JIYUAN WU
Sixth plaintiff

FANG YU
Seventh plaintiff

WMW TRUSTEE LIMITED

Eighth plaintiff

YANGXUAN WANG and MENGQUI WANG

Ninth plaintiffs

XIN ZHAO
Tenth plaintiff

ZELIX TRADING LIMITED
Eleventh plaintiff

QIN XIN ZENG and AIXUAN GUO
Twelfth plaintiffs

JCM NZ LIMITED
Thirteenth plaintiff

YIKAI CHEN
Fourteenth plaintiff

CHEN FENGLIANG and DING MING MING

Fifteenth plaintiffs

ZHIREN ZHANG
Sixteenth plaintiff

LOVE HOMES LIMITED

Seventeenth plaintiff

ER XIA CAO and ER SHENG CAO (as

trustees of ZION TRUST) and ER SHENG CAO and ER XIA CAO (as
trustees of CAO TRUST) together with JUN WU

Eighteenth plaintiffs

JASVINDER SINGH and TINA SINGH
Nineteenth plaintiffs

Defendants continued… REGISTRAR-GENERAL OF LAND

Second defendant

ZHONG XING

Third defendant

LEQUN ZHAO
Fourth defendant

XING ENTERPRISES LIMITED
Fifth defendant

TRINITY HOPE INVESTMENT LIMITED

Sixth defendant

FLATBUSH LAND LIMITED
Seventh defendant

HIU CHING CHAN
Eighth defendant

Contents

Introduction  [1]

Background  [7]

The applicable law  [35]

Discussion

—Mr Zhao’s ‘security’  [37]
—Green Land’s ‘default’  [47]
—duties of good faith  [52]
—Green Land’s defences: waiver and s 119 privity  [54]
—Ms Chan’s defences: bona fide purchaser without notice, and s 184              [58]

Result on plaintiffs’ claims  [61]

Green Land’s counterclaims  [62]

Remedy  [66]

Costs  [73]

Interim injunction  [74]

Schedule: Green Land’s second-stage subdivision land  [Schedule]

Introduction

[1]                 The plaintiffs — predominantly builders, property developers and investors and associated companies — have interests in 22 of 30 titles issued of subdivided land in a second stage of the first defendant’s (“Green Land”) 130-lot development of land at 411–431 Ormiston Road in Auckland’s Flat Bush and intended to be settled on the respective plaintiff by 22 February 2021.1  The whole of the land was  subject to       a mortgage in favour of the ANZ Bank, to secure lending to Green Land.

[2]                 In this proceeding, the plaintiffs allege Green Land ‘schemed’ to avoid settling the titles on the plaintiffs, first, by capitulating to caveats lodged over various of the titles by a third party, Yutian Li; and second, by contriving mortgagee sales of the land to the third to fifth defendants and, through them, to the sixth to eighth defendants. The plaintiffs seek, in essence, specific performance of their agreements for sale and purchase (or, in relation to the 18th plaintiffs, agreements to transfer land) with Green Land or damages in lieu. Its causes of action rely on the validity of agreements underlying the mortgagee sales, and good faith in their relationship. A third cause of action, in conspiracy, was abandoned by the plaintiffs in closing.

1      See the Schedule to this judgment.

[3]                 In support of their claim, the plaintiffs obtained without notice interim injunctions preventing the second defendant, the Registrar-General of Land, from registering transfers of any of the 30 titles consequent on the impugned mortgagee sales,2 later varied to exclude the eight titles to which the plaintiffs had no claim.3

[4]                 Denying the claim, Green Land counterclaims for losses incurred by the interim injunction (a third counterclaim alleging breach of fiduciary duty was not pursued at trial), and otherwise for damages arising from some of the plaintiffs’ trespass by building improvements on ‘their’ land. The now-unrepresented third defendant — Zhong Xing, principal of the fifth defendant (“Xing Enterprises”) — also generally denies the claim. So too does the eighth defendant, Hiu Ching Chan, who affirmatively pleads to have acquired her property as a bona fide purchaser without notice and seeks registration accordingly. No defence was filed by any other defendant, the Registrar-General abiding my decision.

[5]                 Except for the 18th plaintiffs (and then predominantly on the circumstances of their ‘land swap’), no oral evidence was given by any other plaintiff, they preferring to rely on prior affidavits, the common bundle and Mr Xing’s answers to interrogatories.4 Neither was any evidence given by Green Land’s directors or its contended creditor, the fourth defendant, Lequn Zhao. Oral evidence was given at trial by the 18th plaintiffs’ Er Xia Cao; Green Land’s Hao Yuan Lu; and Mr Xing, all interpreted from Chinese to English language as required.

[6]                 I did not allow Ms Cao’s evidence to be given in terms of her served English- language brief, conceded not to be “the personal statement of the … maker”,5 “in the words of the witness”.6 Mr Lu’s oral evidence also was led, without reliance on any served brief. Given his unrepresented status, I took Mr Xing’s served brief and written

2      Li v Green Land Investment Ltd HC Auckland CIV-2021-404-1511, 28 July 2021.

3      Li v Green Land Investment Ltd [2022] NZHC 187.

4      Likely as a consequence, the common bundle(s) presented for trial diverged very substantially from its required compilation, without the court’s apparent approval: High Court Rules 2016, r 9.4. The absence of a single, chronological and sequential bundle or index, particularly without comprehensive narrative oral evidence, made trial and this judgment’s preparation immeasurably more laborious. In my preliminary view, costs on steps 33 and 33A should be disallowed: r 14.7.

5      Evidence Act 2006, s 83(2)(a).

6      High Court Rules, r 9.7(4)(b).

submissions as read. By consent,7 given her personal circumstances, also in evidence was Ms Chan’s affidavit affirmed 8 November 2021.

Background

[7]                 Green Land was incorporated on  27  July  2012. On various  dates  between 2 May 2013 and 4 August 2014, it or particular of its directors and shareholders received foreign exchange transfers through Credit Investments Limited to the order of one Junwei Tang (said to be the son and husband respectively of Green Land shareholders) in the amount of some RMB 30.139 million, converting on receipt to approximately NZD 5.810 million.

[8]                 On various dates between 2014 and 2020, each (except the 18th) plaintiff entered into an agreement with Green Land for sale and purchase of land in REINZ/ADLS standard form (ninth edition 2012 (2)). The agreements each were subject to further terms of sale including the plaintiffs’ acknowledgment “separate certificates of title have not yet issued in respect of the lot(s) sold under this agreement”, to which end “[t]he agreement is conditional upon the issue of new titles for the lot(s) sold under the agreement”. A 10 per cent deposit was payable “[o]n [a]cceptance”, the balance “[b]y payment in cleared funds on the settlement date which is 10 working days from title to be issued”. The plaintiffs each were prohibited from lodging caveats against Green Land’s title “prior to the issue of separate certificates of title in respect of the lot(s)”.

[9]                 The 18th plaintiffs own 443 Ormiston Road abutting Green Land’s development. Green Land wished to ‘assimilate’ its driveway into the development. By agreement dated 2 April 2014, Green Land and the 18th plaintiffs agreed the driveway would be transferred to Green Land in exchange for three lots in the completed development.

[10]              On 25 July 2017, ANZ Bank New Zealand Limited (“ANZ”) increased an initial loan facility to Green Land from NZD 0.125 million to NZD 8.075 million, varied to NZD 13.375 million on 12 December 2018 — to be secured by personal

7      Evidence Act, s 83(1)(c)(ii).

guarantees from Green Land’s initial shareholders and directors and registered first ranking mortgage over the whole of Green Land’s Flat Bush land, and general security agreement over the whole of its property — to terminate on 30 August 2019 with amounts owing then being due and payable.

[11]              Green Land’s borrowings on the ANZ facility were refinanced on 30 August 2019, including with a NZD 3.000 million loan for nine months from Pearlfisher Trustee Limited (“Pearlfisher”), secured by registered second-ranking mortgage (subordinated to ANZ’s priority amount of NZD 11.000 million) and general and specific security deeds over Green Land’s property and guarantees from Green Land’s continuing directors. On Green Land’s subsequent failure to repay the Pearlfisher loan, by letter dated 5 June 2020, Pearlfisher gave Green Land notice of its unquantified breach. (ANZ’s mortgage was registered against the 30 lots in Green Land’s development on 25 September 2020.)

[12]              By agreement dated 18 September 2020, Green Land and the 18th plaintiffs agreed on the specific lots to be transferred under the 2 April 2014 agreement, to be transferred “one working day after 26 sections in the subdivision … are settled and [ANZ] and [Pearlfisher] are fully repaid”, as to be undertaken by Green Land’s solicitors. The agreement continued “[i]f for whatever reason” the lots could not be transferred “27 working days after date the titles for the Lots are issued”, the 18th plaintiffs may “caveat all of Green Land’s remaining sections in the Development and force Green Land to sell sufficient sections to repay Green Land’s mortgages with [ANZ] and [Pearlfisher]” to enable release and transfer of the lots to the 18th plaintiffs. The parties also agreed Green Land would sell an additional lot to the 18th plaintiffs.

[13]              On 21 and 23 October and 18 November 2020 — now to the order of Binzhi Ouyang, a Green Land director and shareholder — Green Land received further foreign exchange transfers through Credit Investments Limited  totalling  some  RMB 18.500 million, converting to approximately NZD 4.014 million on receipt.    A Chinese language document recorded (in translation):

Today, the lender Zhao Lequn agrees to loan Greenland RMB$18,500,000.00 with interest being the same standard interest rate that Greenland currently borrows at. The repayment is to be made once Greenland sells their land in New Zealand repayment amount, principal + interest.

…

Date of borrowing: 12/10/2020

“[T]he lender Zhao Lequn” is the fourth defendant, Mr Zhao. The document is signed by both Mr Zhao and Green Land’s directors, Binzhi Ouyang and Bingyan Zhou. By payments on 23 and 28 October, 20 November and 14 December 2020, Green Land repaid Pearlfisher’s loan.

[14]              Green Land’s Hao Yuan Lu explained the two tranches of foreign exchange transfers referred to at [7] and [13] above were loans from Mr Zhao, who initially had not required the borrowing formally to be documented “because that’s how usually people do business in China”:

[B]ut later on in 2020 we wanted to borrow more money from Mr Zhao to repay the second mortgage, because the second mortgage was in default and Mr Zhao said “Okay I’m going to lend you more money, but you have first to give me some sort of formal document to show the previous lending first”.

[15]              The two tranches further were documented in deeds of acknowledgement of debt respectively dated 15 September and 20 November 2020 (the “acknowledging deeds”), signed by Mr Zhao and Green Land and by its directors as guarantors, their signatures on the 20 November 2020 document witnessed in China. Mr Lu said he drafted both documents, starting with acknowledgment of the RMB 18.500 million loan at “12% per annum of interest until the Debt and interest is paid in full”. After “Mr Zhao [said] I also want another one for the previous one, which is the 30 million one”, Mr Lu said he ‘cut and pasted’ from his RMB 18.500 million draft to create     a draft acknowledgement for the RMB 30.000 million loan at “18% per annum of interest until the Debt and interest is paid in full”. He said the acknowledging deeds were dated the dates they were signed.

[16]The acknowledging deeds’ narrations each specified (with original emphases):

The Borrower has agreed that the lender has the right to lodge caveat over [the development’s second stage] properties or other means to secure his interest but such caveat must not be lodged before issue of new titles. Also the Lender has a legal right to Caveat all the Property/Properties owned by Borrowers. (The lender has legal right to lodge mortgage on the titles with the consent from borrower)[;]

in their definition of ‘property’ adding “Also the Lender has a legal right to Caveat all the Property/Properties owned by Borrowers”; and their respective clause 6, titled “CAVEAT”, stating:

The borrower agrees with for the lender to:

6.1     Agreement to mortgage by Caveat: the guarantor by express right  by virtue of an agreement mortgage authorises the Lender to caveat the property at 411-431 Ormiston Road, (Second Stage), Flat Bush, Auckland other means to secure his interest but such caveat must not be lodged before issue of new titles. Also the Lender has a legal right to Caveat all the Property/Properties owned by Borrowers. (The lender has legal right to lodge mortgage on the titles with the consent from borrower)[.]

Both deeds define ‘Debt’ to mean “the amount of RMB ¥ 18,500,000.00 …”, and ‘Term of the debt’ to mean “the date when Green Land Investment Limited’s land development in Flat Bush is completed”.

[17]              On 29 January 2021, titles issued for the lots in Green Land’s second stage development, each recording ANZ’s mortgage. On or about  5  February  2021, Green Land’s solicitors confirmed its agreements with the plaintiffs then were unconditional, for settlement on 22 February 2021. On 6 February 2021, Green Land wrote to Mr Zhao, recording (in translation) it had “promised that to repay the funds immediately after the titles issued for the investment projects”, advising of titles’ issue and repayment of his loans by 31 March 2021, and making “special request to       Mr Lequn Zhao for exemption of the previous default interest charge”.

[18]              Also from about 5 February 2021 until 8 April 2021, a third party — Yutian Li, described as a businesswoman of China — lodged caveats against the titles of the lots in Green Land’s development. The caveats asserted her interest in the lots “persuant [sic] to a constructive trust of which the registered owner as trustee”. Many of her attempts to lodge similar caveats were rejected, in part for reasons associated with her absence from New Zealand. On 1 April 2021, she appointed Mr Xing her attorney to act in her absence. Mr Xing said he had known her “[s]ince around 2014”.

[19]              By email dated 10 February 2021, Ms Li emailed Mr Lu and Mr Zhao (in translation):8

Regarding the removal of mine and Mr Lin’s caveats from Mr Mao's lands, both me and Mr Lin wanted to oppose this action however, because of the pandemic we have been unable to.

Greenland has caused us a millions of dollars in losses. What you have paid is no where near our initial investment/cost[.]

Without prejudice

We require all the purchasers to pay an extra $50,000.00. In accordance with your agreements with them, you have the ability to cancel the agreement citing pandemic, increasing costs and other such unexpected circumstances.

If the purchasers don’t agree within 48 hours, then cancel their agreements and give the rights of the agreement to us, that way we can recover our costs.

In the worst case, we give $50,000.00 to the purchasers to encourage them to back out of the agreement, or you do so within your rights in the agreement.

Once we have caveated the titles, they won’t be able to settle as you won’t be able to give them clear title.

We hope you can consider our proposal, it doesn’t matter how you approach this situation whether to increase the purchase price on the purchasers or to cancel the agreement, excess money must be paid to us to cover our costs.

The $600,000.00 Mr Mao paid us is not even close to enough to cover our investment cost of $2,000,000.00.

We hope you can consider our proposal and we look forward to hearing from you soon.

Thank you.

[20]              Ms Li’s caveats registered against Green Land’s titles have considerable history.9 They derive from her contention she was interested in land owned by Liansen Mao at 387 Ormiston Road. Mr Mao, similarly to the 18th plaintiffs’ position, was party to a Landowner Agreement dated 1 April 2015 with Green Land, by which land forming his property’s driveway was to be transferred to Green Land, for vesting in Auckland Council as a road (as was a condition of the subdivision’s consent). But the

8      Mr Xing’s Court interpreter confirmed the translation generally as accurate, except he translated Ms Li’s requirement “to pay an extra $50,000” as “to pay a minimum of an extra $50,000”. He also translated Ms Li’s penultimate sentence as “Hopefully you could consider. My email address has not changed. Hopefully we could hear from you”.

9      No evidence was led as to “Mr Lin’s” interest.

foundation for Ms Li’s caveats registered against Green Land’s titles, that she had a caveatable interest in Mr Mao’s land, comprehensively was dismissed by this Court.10 (Green Land subsequently settled contentions raised by Mr Mao, including by consent orders terminating proceedings in this Court.11)

[21]              On or about 19 February 2021, Green Land’s solicitors wrote to each of the plaintiffs’ solicitors in respect of the forthcoming settlements:

WITHOUT PREJUDICE

We refer to the above matter.

Whilst our client is preparing for settlement on Monday 22nd February, a person unrelated to our client, by the name of Yutian LI, has lodged a caveat over our client’s titles including the Lot to be sold to your client.

Our client believes that the caveator has no caveatable interest over our client's properties, however it is likely to take at least two to three months to remove the caveats by legal proceedings. In our experience even once the caveat is removed, it is possible for an unreasonable caveator to further caveats to continue causing trouble even though these maybe fabricated.

Our client hopes to resolve this matter in a commercial matter and have decided to put forward the proposal made by Yutian Li. They have proposed that the caveats will be withdrawn if either:

1.   Your client accepts an increase of the purchase price by $50,000 (inclusive of GST if any); or

2.   Yutian Li pays your client $50,000 (inclusive of GST if any) to purchase the Lot from your client and to take over the contact with Green Land. Any onsell agreements entered into by your client with another person will need to be cancelled.

You would appreciate that our client is extremely dissatisfied and frustrated with this proposal, but in the interest of getting settlement finalised, our client would appreciate if your client could consider the proposal.

If your client chooses not to accept either of the proposals above, then our client will try to remove the caveat by Yutian Li and obtain a clear title to

10 Li v Green Land Investment Ltd [2019] NZHC 2991 at [55]–[57]. On 19 May 2021, this Court injuncted Ms Li from lodging further caveats against Green Land’s titles (Love Homes Ltd v Li [2021] NZHC 1339). On 21 October 2021, Ms Li discontinued her NZD 8.718 million damages claim against Green Land on terms including Green Land would be liable to her for $5.853 million:

… if, and only if, all mortgagee sales and transfers challenged in [this proceeding] (whether now or at a later date) are held to be void, invalid or are otherwise struck down or reversed in [this proceeding].

I am not asked to consider if such terms may be unlawful, if conferring on Ms Li an illegitimate interest in this proceeding. Ms Li earlier had discontinued her proceeding against its other defendants, who are the plaintiffs in the present proceeding.

11 Li v Green Land Investment Ltd HC Auckland CIV-2021-404-1511, 29 July 2021.

transfer to your client, however our client is unsure how long this may take, and the period may extend if there are further lodgement of caveat. Out client would like to ask that your client waives any late settlement penalties for the delay in settlement, which may be payable in accordance with the agreement for sale and purchase.

Furthermore, our client’s loan with its mortgagee, ANZ bank is due to expiry at the end of March, and because of the delays with the development the mortgagee had previously indicated that it may not grant any further extension. There is a risk that the mortgagee may exercise its power of sale, to cancel all pre-sale contracts and to resell the sections at a higher current market price, in accordance with section 178 of the Property Law Act 2007. If the mortgagee elects this action, then your client’s agreement will be cancelled.

Our client requests that your client considers Yutian Li’s proposals with a commercial approach, This is not a situation which our client desires and our client is acting under coercion. Our client would appreciate your client's understanding and support.

Please confirm whether your client agrees to any of the above proposals by 4pm Monday 22 February 2021. We look forward to hearing from you.

In the event, only three intending purchasers accepted Ms Li’s offer (whether to pay or receive $50,000 is unclear), and transfer of their relevant lots was settled.

[22]              On 15 March 2021, Mr Zhao sought to register mortgages against all 30 of Green Land’s second stage development titles, in reliance on the acknowledging deeds. The Registrar requisitioned all the proposed dealings on a variety of grounds

— including the acknowledging deeds were required to be verified by statutory declarations from a signatory, and registrations required caveators’ consent — and on multiple occasions, ultimately to grant registration of a mortgage in relation to the titles of five lots only: lots 93–96 and 132. (Notably, registration did not expressly rely on either of the acknowledging deeds, but on a standard form all obligations mortgage instrument executed for Green Land under contended powers of attorney by Mr Lu and Xirong Zhou on 13 April 2021.)

[23]              Undeterred, on 12 April 2021, Aimee Yang of Auckland’s JC Legal  —  as Mr Zhao’s “solicitor and duly authorised agent” — gave Green Land notice of default under memoranda of mortgages contended for all 22 lots now claimed by the plaintiffs. The notice, expressed to be made under “section 19 of the Property Law Act 2007”, asserted Green Land’s failure to pay some NZD 11.037 million, plus interest running at a daily rate of NZD 7,559.70 and costs, contended due on 31 March 2021 under the

acknowledging deeds. The notice required Green Land’s payment of those sums “on or before 4 May 2021”, or “the mortgagee will have the right to mortgage sales the land described in the Mortgage or enter into possession of that Land”.

[24]              In mid-May 2021, through Mr Xing, Xing Enterprises entered into agreements to  sell  Green Land’s  lots 95 and 118  to  Ms Chan, for settlement  on 4 June 2021.   I apprehend Xing Enterprises entered similar agreements with the sixth and seventh defendants at  about  the  same  time.  (By  undated  agreement  for  settlement  on  24 May 2021, Mr Zhao entered into an agreement to sell Green Land’s lot 131 to one Kelly Chen. By deed dated 16 July 2021, Mr Zhao nominated Mr Xing become the vendor of that and lots 107 and 137 (although the deed’s narration proposes Mr Xing become the purchaser).)

[25]              On 21 May 2021, Mr Zhao through Ms Yang gave Green Land a second notice of default under memoranda of mortgages contended for some 29 lots (including the previous 22). This second notice, now expressed to be made under “section 119 of the Property Law Act 2007”, again asserted Green Land’s failure to pay under the acknowledging deeds. It also required Green Land’s payment of those sums “on or before 4 May 2021”, but identified the mortgagee’s “right to mortgage sales the land described in the Mortgage or enter into possession of that Land” would be triggered by Green Land’s non-payment “on or before 28 May 2021 (being 5 working days after the service of this notice)”.12

[26]              Notwithstanding title to their lots had yet to issue to the plaintiffs, Green Land became aware a number of the plaintiffs had entered their respective lots to conduct building and construction works. On 11 June 2021, Green Land’s solicitors wrote to the plaintiffs’ solicitors requiring works cease and the plaintiffs vacate the land. On 20 January 2022, Green Land’s solicitors noted to the plaintiffs’ solicitors and counsel construction nonetheless appeared to have continued, to the point “some of the dwellings are also occupied”. Formal warning to leave and stay off the land was given.

12     Mr Xing personally issued a third notice dated 11 March 2022 in relation to the 29 lots — “corrected” at some indeterminate date, asserting Green Land’s failure to pay some $16.5 million

— for payment by 7 May 2022.

[27]              Green Land did not pay  the  sums  claimed  by  Mr Zhao.  By  deed  dated  14 June 2021, Mr Zhao purported to assign his “right, title and interest” in an undefined “Loan Agreement” to Zhong Xing. The deed’s narration identifies the acknowledging deeds, which Mr Xing “has agreed to take over from [Mr Zhao] and perform the mortgage sale”. The 14 June 2021 document identified all 30 lots as “subject to the mortgage”. It is not signed by Mr Xing.

[28]              On or about 24 June 2021, Mr Xing appears to have issued a proceeding against Green Land. By consent, judgment was sealed in Mr Xing’s favour in the amount of NZD 13.846 million, “subject to any set-off, counterclaim or other claim that the defendant any [sic] have in relation to the mortgagee sale”.

[29]              By document dated 15 July 2021, Green Land’s directors gave Mr Xing notice Green Land was “unable to repay the following loans to you on time”. The loans are said to be a “[ANZ] loan around [NZD 6.500 million]” and the sums the subject of the acknowledging deeds. The document added “Green Land … agrees for you to mortgagee sales the properties under the company’s name immediately, without any delay to save costs and interest for the company”.

[30]              By agreement dated 15 July  2021,  Mr Xing  purportedly  sold  one  of  Green Land’s 30 lots to Xing Enterprises. By deed also dated 15 July 2021, Xing Enterprises agreed to hold 22 lots, including that purportedly acquired from Mr Xing, “on trust” for Mr Zhao. The deed is not signed by Mr Zhao.

[31]              By deed dated 16 July 2021 between ANZ, Mr Xing as purchaser, Green Land as borrower, and Green Land’s directors and Mr Zhao as sureties or secured parties, ANZ novated to Mr Xing its interest in Green Land’s debt, such that the debt then was payable to Mr Xing, who was “entitled to exercise all of ANZ’s rights, powers and privileges … in respect of the Debt”. The deed identified all 30 lots as “subject to the mortgages”.

[32]              On 27 July 2021, transfer of ANZ’s mortgage over 28 of Green Land’s lots to Mr Xing was lodged with the Registrar-General of Lands. Also lodged that day, in reliance on the second notice of default, was Mr Xing’s sale of the 22 lots at issue in

this proceeding to Xing Enterprises, and Xing Enterprises’ sale of 11 of those lots to the sixth, seventh and eighth defendants, the last being Ms Chan, each at a $50,000 or more premium over the original purchase price. No pre-sale valuations were obtained by Mr Xing or Xing Enterprises; the sixth and seventh defendants were known to  Mr Xing’s donor, Ms Li, and Mr Xing described Ms Chan as “the daughter of my parents’ friends”, as Ms Chan confirmed. Mr Xing used the NZD 6.8 million proceeds from Xing Enterprises’ sales (including a loan from either or both the sixth or seventh defendants  in  the  amount  of  GST  on  their   transactions)   to   settle   ANZ’s NZD 6.5 million transfer price. Settlement of the other 11 lots were said to be pending.

[33]              By deed dated 4 October 2021 executed by Green Land, Mr Zhao, Mr Xing and Green Land’s directors, together defined as “Parties”, Green Land settled its contended liability to Mr Zhao under the acknowledging deeds by agreeing its liability to him in the amount of some NZD 13.846 million, plus daily interest accruing at some NZD 12,000:

… until all amounts owed by Green Land to Mr Xing under [the acknowledging deeds] are fully discharged … subject to an as-yet unquantified deduction for any set-off, counterclaim or claim Green Land may have in relation to the mortgagee sale undertaken by Mr Xing.

The deed provides it is “in full and final settlement of all claims or potential claims any Party has or may have against any other Party under [the acknowledging deeds]”. Mr Lu comprehended payment of Green Land’s debt to Mr Zhao only was achievable by mortgagee sale of the lots.

[34]              After Davison J excluded the eight lots from the interlocutory injunction in mid-February 2022,13 the 18th plaintiffs lodged caveats on  those  lots  under their  18 September 2020 agreement with Green Land.

The applicable law

[35]              In circumstances of a mortgagor’s default under a mortgage, a mortgagee may sell mortgaged land only in compliance with s 119 of the Property Law Act 2007.14 Section 119 — and, materially, ss 120, 121 and 123 — provide:

13 See [3] above.

14     Burgess v TSB Bank Ltd [2015] NZCA 361, (2015) 16 NZCPR 728 at [55].

119 Notice must be given to current mortgagor of mortgaged land of exercise of powers, etc

(1)    No amounts secured by a mortgage over land are payable by any person under an acceleration clause, and no mortgagee or receiver may exercise a power specified in subsection (2), by reason of a default, unless—

(a)a notice complying with section 120 has been served (whether by the mortgagee or receiver) on the person who, at the date of the service of the notice, is the current mortgagor; and

(b)on the expiry of the period specified in the notice, the default has not been remedied.

(2)    The powers are—

(a)the mortgagee’s power to enter into possession of mortgaged land:

(b)the receiver’s power to manage mortgaged land or demand and recover income from mortgaged land:

(c)the mortgagee’s or receiver’s power to sell mortgaged land.

(3)    Subsection (1) is subject to sections 125 and 126.

(4)    A notice required by this section may be given in the same document as a notice under section 118.

120 Form of notice under section 119

(1)    The notice required by section 119 must be in the prescribed form and must adequately inform the current mortgagor of—

(a)the nature and extent of the default; and

(b)the action required to remedy the default (if it can be remedied); and

(c)the period within which the current mortgagor must remedy the default or cause it to be remedied, being not shorter than 20 working days after the date of service of the notice, or any longer period for the remedying of the default specified by any term that is expressed or implied in any instrument; and

(d)the consequence that if, at the expiry of the period specified under paragraph (c), the default has not been, or cannot be, remedied,—

(i)     the amounts secured by the mortgage and specified in the notice will become payable; or

(ii)   the amounts secured by the mortgage and specified in the notice may be called up as becoming payable; or

(iii) the powers of the mortgagee or receiver specified in the notice will become exercisable; or

(iv)  more than 1 of those things will occur.

(2)    A notice required by section 119 may specify that the action required to remedy the default includes the payment (whether to the mortgagee or receiver) of a specified amount, being the reasonable costs and disbursements (whether of the mortgagee or receiver) in preparing and serving the notice.

121 Copy of notice under section 119 must be served on former mortgagor, covenantor, subsequent mortgagee, and caveator

(1)    A copy of the notice served under section 119 must, as soon as possible, be served (whether by the mortgagee or receiver) on the following persons if either the mortgagee or receiver has actual notice of the name and address of the person:

(a)any former mortgagor:

(b)any covenantor:

(c)any mortgagee under a subsequent mortgage, and any holder of any other subsequent encumbrance, over the mortgaged land if—

(i)     the subsequent mortgage or other subsequent encumbrance is registered; or

(ii)   the subsequent mortgage or other subsequent encumbrance is unregistered, but either the mortgagee or receiver has actual notice of it; and

(d)any person who has lodged a caveat under section 138 of the Land Transfer Act 2017, or a notice under section 42 of the Property (Relationships) Act 1976 having the effect of a caveat, against the title to the mortgaged land or any part of it.

(2)    A failure to comply with this section does not prevent—

(a)any amounts secured by the mortgage from becoming payable; or

(b)the exercise of the mortgagee’s power to enter into possession of the mortgaged land; or

(c)the exercise of the receiver’s power to manage the mortgaged land or demand and recover income from it; or

(d)the exercise of the mortgagee’s or receiver’s power to sell the mortgaged land.

(3)    However, if there is a failure to comply with this section, the mortgagee is liable in damages for any loss arising from that failure.

…

123 Instruments have no effect so far as they conflict with section 119, 120, 121, or 122

A term has no effect if it—

(a)is expressed or implied in an instrument; and

(b)conflicts with section 119, 120, 121, or 122.

[36]And s 4 relevantly provides:

default means—

(a)    a failure—

(i)to pay on the due date any amounts secured by an instrument; or

(ii)to perform or observe any other express or implied covenant in an instrument; or

(b)    any other event (other than the arrival of the due date) on the occurrence of which any amounts secured by an instrument become payable, or may be called up as becoming payable, under any express or implied term in the instrument

…

instrument—

(a)    means any use of words, figures, or symbols (for example, an agreement, contract, deed, grant, or memorandum, or some other document that is certified, executed, or otherwise approved by or on behalf of a party or parties, or a judgment, order, or process of a court) that—

(i)creates, evidences, modifies, or extinguishes legal or equitable rights, interests, or liabilities (without being lodged, filed, or registered under an enactment, or after being so lodged, filed, or registered, or both); and

(ii)is in a visible and tangible form and medium (for example, in handwriting, print, or both), or is in an electronic form in accordance with Part 4 of the Contract and Commercial Law Act 2017 or the Land Transfer Act 2017; and

(b)    [Repealed]

(c)    includes any covenant expressed or implied (under this or any other enactment) in, and any variation of, any instrument as defined in paragraph (a) or (b); but

(d)    does not include an enactment (though it may be in a form prescribed by one, or have covenants or terms implied in it under one, or both)[.]

Discussion

—Mr Zhao’s ‘security’

[37]              I am not satisfied the evidence adequately establishes Green Land gave security over all the plaintiffs’ lots for any borrowing from Mr Zhao.

[38] Pointedly, no evidence is given by Mr Zhao or Green Land’s directors. Rather, evidence is given on Green Land’s behalf only by its project manager, Mr Lu, who expressly “[didn’t] have any knowledge” of the initial tranche of funds in 2013–2014 referred to at [7] above. The best he can evidence is the foreign currency transaction records, which do not identify funds coming from Mr Zhao. Mr Lu explained the borrowing was addressed “in person” between Mr Zhao and Green Land’s directors in China.

[39]              Instead, only in documentation of the second tranche of funds in 2020 is there reference to “the same standard interest rate that Greenland currently borrows at”,15 at least allowing inference of some prior borrowing by Green Land  from  Mr Zhao.  Mr Lu’s account of Mr Zhao’s request for formalisation is only for formal documentation of the prior borrowing;16 a further inference is the agreement to lend suffices formally to document the subsequent borrowing. That agreement to lend specifies the date of the borrowing as 12 October 2020, which may or may not be the ‘today’ of the agreement. But the second tranche funds were made available to  Green Land in RMB 5.000 million sums on 21 and 23  October  2020,  and  the RMB 8.500 million balance on 18 November 2020.

[40]              Further, the dates of the acknowledging deeds — which Mr Lu, despite not being present for their execution, purported to confirm were the dates on which they were signed — suggest at least the amount of the second tranche sum must have been known before 15 September 2020, being the date of the deed referring to the first tranche, as copied and pasted from Mr Lu’s preparation of the deed referring to the second tranche. But there is no evidence how Mr Lu’s prior knowledge arose, particularly given the 12 October 2020 “borrowing”, except for his subsequent rationalisation of the amount by reference to  the  unquantified  Pearlfisher  debt. And then  it  is   peculiar   the   second   acknowledgment   was   not   given   until  20 November 2020, well after the funds had been received and largely disbursed.

[41]              Other than the agreement to lend, there was no contemporary documentary record of the terms of any lending. If that culturally is to be expected, as Mr Lu contends,17 then I required expert evidence both of the practice and how commitments then may be established as binding, if not by oral evidence from the participants.18 Mr Lu was not present at Green Land’s ‘in person’ discussions with Mr Zhao.

[42]              Only the acknowledging deeds suggest provision of any funds may carry some obligation for security, which reference wholly is omitted in the agreement to lend, where it more naturally would accompany reference to ‘the same standard interest’.

15 See [13] above.

16 See [14] above.

17 See [14] above.

18     Donglin Deng v Lu Zheng [2022] NZSC 76 at [79(d)].

Green Land’s 6 February 2021 correspondence with Mr Zhao, advising of its delayed repayment, similarly makes  no  reference  to  any  security.  Instead,  there  only  is a request he waive default interest,19 which plainly refers to the comprehended ‘delay’, at odds with the acknowledging deeds’ specification for later repayment, as Mr Lu affirmed in evidence.20 But the acknowledging deeds’ provenance also inadequately is established. The acknowledging deeds — both in English language, defining the first tranche’s ‘debt’ in the amount of the second tranche (despite the narration’s identification of the larger borrowing), and ungrammatical in their references to security — appear to have been finalised without the benefit of legal advice.21

[43]              The acknowledging deeds’ references to security, in particular, are circular: recital D’s reference to Mr Zhao’s right to caveat Green Land’s property is followed by the parenthetical comment “(The lender has legal right to lodge mortgage on the titles with the consent from borrower).” Clause 6.1 is sub-headed “Agreement to mortgage by Caveat”. There, the parenthetical comment again follows Mr Zhao’s purported agreement “with for” Green Land, “the guarantor [ie, the directors] by express right by virtue of an agreement mortgage authorises the Lender to caveat” Green Land’s second stage properties (emphasis added). Unclear is if exercise of the legal right is contingent on the borrower’s forthcoming consent, or what the ‘agreement mortgage’ may be. If the parenthetical comments are to be construed as referring to the acknowledging deeds’ clause 7.2’s abstruse ‘special term’:

If in any case the mortgagee sales process to the securities provided, the lender has legal right to mortgagee sales the properties with serving borrower with 5 working days by way of consent to save costs.

that ‘special’ term’s short notice period alone is enough to render the term of “no effect” as conflicting with s 120(1)(c). On their face, the acknowledging deeds suggest amendment of a relatively orthodox acknowledgement of debt for caveat to refer to  a mortgage. Mr Lu, in drafting the deeds, could not identify the source of any mortgage.

19 See [17] above. The later deed also specifies a 12 per cent non-default interest rate, which without explanation transmogrifies into an 18 per cent interest rate in the earlier deed, despite the documented loan agreement specifying “the same standard interest rate that Greenland currently borrows at”.

20 See [48] below.

21 See [16] above.

[44]              The existing source of Mr Zhao’s vested mortgage interest in Green Land’s land is entirely unclear. I apprehend the deeds’ bold-emphasised narrative and operative wording generally reflects Mr Lu’s lay insertions into a document of undetermined creation intended only to acknowledge debt for caveat. I do not know if Mr Zhao’s and Green Land’s directors’ attention was drawn to that amplification, their prior and subsequent Chinese language correspondence making no reference to such security at all.22

[45]              I suspect  (although  given  the  paucity  of  contemporary  evidence,  not  to  a balance of probabilities) the draft acknowledging deeds were amended to include reference to mortgage security after Green Land’s intended settlements were put at risk by Ms Li’s caveats.23 Mr Zhao’s reliance on them in support of his attempt to register the mortgages on 15 March 2021, rather than on their purported execution in September and November 2020 or even once titles issued on 29 January 2021, may make the later timing more likely. So too does the absence of any reference to them in Green Land’s September 2020 arrangements with the 18th plaintiffs, despite express reference to the ANZ and Pearlfisher facilities as required first to be settled.24

[46]              Nonetheless, I cannot go so far as to say Mr Zhao’s registered mortgage over the five lots therefore fails. To the contrary,  that  registration  is  supported  by  Green Land’s newly-executed and stand-alone standard form all obligations mortgage instrument in relation to those five lots.25 But that is not the mortgage instrument on which Mr Zhao’s Property Law Act notices rely.

—Green Land’s ‘default’

[47]              Recalling a mortgagee may not exercise a power of sale except on compliant notice — and such notice must specify, among other things, ‘the nature and extent of the default’ — Mr Zhao’s first notice contended for Green Land’s failure under the acknowledgement deeds to pay “The Principal sum of the loan due on 31 March 2021” and interest thereafter, for remedy initially within 15 working days. His subsequent

22 See [13] and [17] above.

23 See [18]–[19] above.

24 See [12] above.

25 See [22] above.

notice contended for Green Land’s default in payment by “21 May 2021” (being the date of the notice), then for remedy within five working days. Both being terms conflicting with s 120(1)(c)’s requirement for at least a 20 working day period for remedy, they have “no effect”.

[48]              In any event, any amount payable under the acknowledging deeds expressly only is to be repaid “on or before the end of the term of debt”, the ‘term’ being defined as “the date when Green Land Investments Limited’s land development in Flat Bush is completed”. Mr Lu was clear on examination in chief such meant “after we finished subdivision and sold all the sections … subdivided and sold”; under cross examination he accepted that meant “after [Green Land] had settled all the sales”.

[49]              For Green Land, Sam Lowery submitted such interpretation would render the intended security unenforceable, no lots then remaining for mortgagee sale. That may well be the case (and I already have noted some of the acknowledging deeds’ uncertain utility),26 but it is no basis on which alternatively to specify an arbitrary date for repayment, which “31 March 2021” was not in any event.

[50]              Mr Lu’s acknowledgement of a 31 March 2021 date for repayment arose from Green Land’s 6 February 2021 voluntary notice to Mr Zhao.27 The acknowledging deeds entitled Green Land to repay early,  that is on one month’s written notice to  Mr Zhao (as Green Land’s 6 February 2021 notice may be), then only effective to relieve Green Land of payment  also  of  interest  from  the  date  of  repayment.  Any uncrystallised liability Green Land had to Mr Zhao on 31 March 2021 is not enough to specify ‘the end of the term of the debt’. This was not debt repayable on demand, but on ‘default’: relevantly, “a failure … to  pay  on  the  due  date”.28  Green Land’s 15 July 2021 notice to Mr Zhao of its inability to repay debt is equivocal as to when that was repayable.29

[51]              Even if due notice had been given to remedy any default, there is no default. Without default, a mortgagee may not exercise any power to sell mortgaged land.

26 See [43] above.

27 See [17] above.

28 See [36] above.

29 See [29] above.

Mr Zhao had no power to sell any of Green Land’s land. And, without default, there is no basis for Mr Xing to claim Green Land’s consequent default under the ANZ facility, in respect of which no s 119 notice was in any event in evidence.

—duties of good faith

[52]              The purchasing plaintiffs (that is, except the 18th plaintiffs) alternatively plead breach of duties of good faith owed them by Green Land, Mr Xing and Xing Enterprises. The focus here is protection of these plaintiffs’ interest in Green Land’s equity of redemption on assignment between Mr Zhao and Mr Xing. For these plaintiffs, Ray Parmenter argues good faith requires those defendants to be “bound by the purchasing plaintiffs’ interests”. But the question instead is if the defendants can be said to be acting contrary to Mr Zhao’s interests to preserve any security and obtain retainment of any secured debt. Power undertaken for that purpose may effect collateral advantage. The threshold for bad faith is inconsistency with actions taken to realise the security and repay the mortgagee, which is not to promote other interests above that “predominant purpose”.30 Any failure to protect the purchasing plaintiffs’ interests is not inconsistent with actions taken to realise the security to repay Mr Zhao.

[53]              But the 14 June 2021 assignment deed between Mr Zhao and Mr Xing is so lacking in specificity as almost to be meaningless.31 Its operative provisions refer to undefined “Assignment Documents”, “Debt”, “Effective Date”, “Loan Agreement” and “Novated Property”. It contends from the ‘Effective Date’: Mr Xing “has the same rights against, and owes the same obligations to” Green Land in connection with the ‘Loan Agreement’; “all references in the Assignment Documents” to Mr Zhao will be construed as references to Mr Xing; and

the Debt shall be payable to [Mr Xing] and Mr [Xing] shall be entitled to exercise all of [Mr Zhao]’s rights, power and privileges, to the extent they are exercisable, under the Assignment Documents or otherwise in respect of the Debt[;]

30     Fatupaito v Harris [2018] NZCA 497, [2019] NZAR 192 at [50]–[54], citing Coltart v Lepionka & Co Investments Ltd [2016] NZCA 102, [2016] 3 NZLR 36 at [63]–[66].

31 See [27] above.

while Mr Zhao “will have no obligations or liabilities to [Green Land] under the Assignment Documents”. But Green Land is not a party.32 If on the most charitable construction, the ‘Assignment Documents’ are the acknowledging deeds, what is the ‘Loan Agreement’ and vice versa? And what in either case is the ‘Debt’? Regardless, to the extent the assignment purports to substitute Mr Xing for Mr Zhao in the acknowledging deeds, Mr Xing obtained no greater power to sell any of Green Land’s land than was had by Mr Zhao.33

—Green Land’s defences: waiver and s 119 privity

[54]              However, as the June 2021 sealed judgment and October 2021 settlement deed affirm,34 Green Land acknowledged its debt to Mr Xing or Mr Zhao. Mr Lowery argues it was open to Green Land to waive reliance on Mr Zhao’s or Mr Xing’s performance of their s 119 duties in respect of the May 2021 notices. Further, he argues s 119 only is material as between mortgagee and mortgagor, and the plaintiffs’ remedy lies under s 121 (which he says on “common ground” was not met in relation to notice to any plaintiffs as caveators).

[55]              Although the form of the s 119 notice “must adequately inform the current mortgagor” of its required content, the importance of that content has broader application to “other persons [who] need to know what steps they might need to take to protect their own position” including as caveators on service of a copy of the notice under s 121:35

We start by considering the evident purpose of a notice under s 119 of the Act. The relevant purpose that may be inferred from its terms is to prevent the exercise of a power of sale “by reason of a default” unless a notice has been served that specifies the default and advises the current mortgagor that if the default remains unremedied after expiry of the period specified in the notice, power of sale will become exercisable. Until that occurs, the provisions in the mortgage authorising entry into possession and sale of the mortgaged land cannot be exercised “by reason of a default”. Section 123 ensures that the requirements of ss 119 and 120 override anything to the contrary in the instrument under which the default has occurred.

32 Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121, [2015] 1 NZLR 281 at [85].

33 No argument was made if Mr Xing’s multiple roles as Ms Li’s attorney (see [18] above), Mr Zhao’s assignee (see [27] above) and trustee (see [30] above) and ANZ’s novatee (see [31] above) are disqualifyingly conflictual.

34 See [28] and [33] above.

35 Burgess v TSB Bank Ltd, above n 14, at [39] and [55].

[56]              Cases  decided  under  s  119’s  predecessor,  such  as  those  relied  on  by  Mr Lowery,36 only were concerned with a copy of the notice to subsequent mortgagees.37 Section 119 has a broader audience. The plaintiffs — whether or not lodging caveats, and recalling they were prohibited from caveating Green Land’s title38 — are precisely within the scope of s 119’s purpose, ‘to protect their own positions’. Section 121 only provides, if they themselves were entitled to notice, breach of that requirement alone would not substantively affect the security. The latter section does not limit those entitled to copies of s 119 notices to remedies in damages, but only to damages for breach of that entitlement. Such breadth is affirmed by s 123’s assertion of instrument terms’ ‘no effect’, beyond the s 119 notice to the current mortgagor, to capture any document affecting legal or equitable interests.39

[57]              In any event, the test for waiver is if there was “unambiguous representation [Green Land] did not intend to pursue its rights”.40 But Green Land’s representations are to reserve “any set-off, counterclaim or other claim [Green Land may] have in relation to the mortgagee sale”.41 That  is  far from  ‘unambiguous’.  Green Land’s  15 July 2021 notice to Mr Xing “to mortgagee sales the properties under the company’s name immediately” takes the matter no further forward.42

—Ms Chan’s defences: bona fide purchaser without notice, and s 184

[58]              I turn to address the position raised for Ms Chan in equity against the interests of the fourth and tenth plaintiffs, as “a bona fide purchaser for value without notice”.43 I have my doubts Ms Chan justifiably may be characterised as a ‘bona fide purchaser’, given her unexplored links to Mr Xing,44 but the parties’ failure to challenge her evidence means that may be taken established at least on the balance of probabilities.45

36     Bank of New Zealand v Adsett [2000] 3 NZLR 446 (CA) at [16]; and Savil v Damesh Holdings Ltd [2004] 2 NZLR 289 (CA) at [37].

37     Property Law Act 1952, s 92(4).

38 See [8] above.

39 See [36] above.

40     Tea Custodians (Bluestone) Ltd v Barnett HC Wellington CIV-2011-485-17, 6 October 2011 at [29], citing Blakeley v Teal Investments Ltd (1980) 1 NZCPR 257 (HC) at 259.

41 See [28] and [33] above.

42 See [29] above.

43 See [24] above.

44 See [32] above.

45 See [5] above.

By ‘without notice’ is meant without actual or constructive notice of defects in the title she would contend equitably to have acquired in good faith.46

[59]              Ms Chan had actual notice lots 95 and 118  she  sought  to  acquire  from Xing Enterprises were not owned by it. She acquired the properties subject to that knowledge, and bore the risk Xing Enterprises could not make good, as has transpired. The absence of any basis on which Ms Chan could have known, or possibly would have been put on inquiry to discover, the fourth and tenth plaintiffs’ interests in the lots is not at issue. As between Ms Chan and the fourth or tenth plaintiffs, both have an equal equitable interest springing from their respective sale and purchase agreements, in which the fourth and tenth plaintiffs take priority in time.47 Their failure to have lodged caveats does not defer their interests.48

[60]              For Ms Chan, Matthew Casey QC also argues she is entitled to the benefit of s 184 of the Property Law Act. But that protects her from liability for the purchase money paid only if she directly or indirectly purchased mortgaged property from the mortgagee. And she did not, but from Xing Enterprises, at a date prior even to      Mr Xing’s accession to the acknowledging deeds, if that is what the 14 June 2021 assignment document was to achieve.49 Much better evidence would be required to conclude the purchase expressly was in contemplation of such mortgage being given, assigned and transferred to achieve the purchase’s end. No one is claiming money from Ms Chan. If anything, it may be Ms Chan has a claim against Xing Enterprises.

Result on plaintiffs’ claims

[61]              Not being satisfied either Green Land gave Mr Zhao security over all the plaintiffs’ lots, or Mr Zhao (or Mr Xing) gave compliant notice of default to

46 Australian Mutual Provident Society Ltd v Bridgemans Art Deco Ltd [1996] 2 NZLR 263 (CA) at 269 and 277 (not affected on appeal: Melanesian Mission Trust Board v Australian Mutual Provident Society [1997] 1 NZLR 391 (PC) at 397), citing National Provincial Bank Ltd v Ainsworth [1965] AC 1175 (HL) at 1238.

47 Australian Guarantee Corporation (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 (CA) at 135, citing Butler v Fairclough (1917) 23 CLR 78 at 91(approved in Abigail v Lapin (1934) AC 491 (PC) at 502) and Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 333 and 341 (approved in Green v Meltzer (1993) 6 NZCLC 68393 at 68396 and 68409).

48 See J D Heydon Meagher, Gummow and Lehane’s Equity Doctrines & Remedies (5th ed, LexisNexis Butterworths, Chatswood) at [8-090(a)], explaining Butler v Fairclough, above n 47, and Abigail v Lapin, above n 47.

49 See [27] above.

Green Land, I hold the mortgagee sales of each of the plaintiffs’ lots to be void, of no effect. Green Land remains liable on its agreements with the plaintiffs.

Green Land’s counterclaims

[62]              The plaintiffs obtained interlocutory injunctive relief, necessarily on terms of their undertaking they “will comply with any order for the payment of damages to compensate the other party for any damage sustained through the  injunction”.  Green Land claims damages from the plaintiffs for the July 2021 to February 2022 period they were injuncted from registering dealings with the additional eight lots in Green Land’s  second stage subdivision, in  the amount  of the interest  payable to  Mr Zhao by reference to the value of those lots as sold.

[63]              Such counterclaim necessarily rests on the proposition Green Land “could reasonably have expected to [not pay that interest], having been deprived by the injunction of the ability to do so”.50 But there is no evidence before me of any prospective purchasers of the eight lots, and in any event the significant difficulty any mortgagee sale is of no effect. Accordingly Green Land’s contended ‘loss’ is not ‘sustained through the injunction’. I dismiss this counterclaim.

[64]              Green Land also counterclaims, but now against only the 18th plaintiffs in respect of their caveats,51 for the same saving in respect of the interest on the eight lots after mid-February 2022. I understand there are separate proceedings  between  Green Land and the 18th plaintiffs relating to the lapse or maintenance of these caveats, which seem the more natural forum for their resolution. On that basis, I also dismiss this counterclaim. Otherwise I should have to  give  some  meaning  to  Green Land’s agreement with the 18th plaintiffs for such caveats,52 whether or not legally sustainable, such as would vitiate Green Land’s  claim here for damages.    My grounds for dismissal of the first counterclaim may apply here too.

[65]              Last, on Green Land’s claim for trespass damages, necessarily founded on Green Land’s continued possession of the lots, the parties have agreed an annual

50     Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [113].

51 See [34] above.

52 See [12] above.

$19,500 rate per lot. Mr Lowery has specified the periods for which such rates should apply to the trespassed lots; Mr Parmenter said in closing he accepted those calculations. I would award damages on this third counterclaim accordingly.

Remedy

[66]              Absent indefeasibility of title conferred by registration, the appropriate remedy starts with rescission of the offending transactions.53 That is consistent with the essentially restitutionary nature of the relief sought here, “to correct normatively defective transfers of value, usually by restoring parties to their pre-transfer positions”.54 Given neither Mr Zhao nor Xing Enterprises filed any defence, I might infer they accept it would be manifestly unjust for Xing Enterprises to remain registered owner of the titles at issue.55 I heard no substantial argument on how any remedy might be ordered.

[67]              My inclination is to order Green Land’s specific performance of the plaintiffs’ agreements, and the trespassing plaintiffs pay the agreed damages to Green Land.

[68]              The former further is complicated by the absence of evidence from any of the plaintiffs if they are ready, willing and able to settle, and possibly bedevilled by application of proceeds of sale to the sixth, seventh and eighth defendants to reimburse Mr Xing for his discharge of the amount of ANZ’s mortgage.

[69]              On the latter, under cross-examination, Mr Xing agreed he “paid off all of the debt owing to ANZ Bank” when he “received the money from Xing Enterprises in respect of the lots sold to [the sixth, seventh and eighth defendants]” on 27 July 2021. The precise calculation of those numbers was contested in cross-examination by    Mr Parmenter and Mr Lowery, if the ANZ debt  was fully repaid  (or,  at  least,  if  Mr Xing was made whole for meeting it, to the extent repayment included the sixth and seventh defendants’ loans to him).56

53     Stuart Bridge, Elizabeth Cooke and Martin Dixon Megarry & Wade: The Law of Real Property

(9th ed, Sweet & Maxwell, London, 2019) at [25-135].

54     Investment Trust Companies v Revenue and Customs Commissioners [2017] UKSC 29, [2018] AC 275 at [42].

55     Land Transfer Act 2007, s 55(1).

56 See [32] above.

[70]In closing, Mr Parmenter proposed:

… it would be reasonable to order that the total sum required to discharge the novated mortgage, on the basis that the moneys paid into the mortgage are refundable (somehow), would be (say) $4m over the 19 lots where payments are to be made on settlement”.

I cannot possibly assess that from the state of the evidence. And I am unclear of the basis on which such may be ordered in relief in this proceeding, in which no claim is raised between Green Land and Mr Xing, or between Xing Enterprises and the sixth to eighth defendants. But the ANZ mortgage novated to Mr Xing remains on the titles.

[71]              Instead, I direct counsel jointly to draft orders for relief reflecting my determinations at [61] and [65] above, taking into account the issues identified at [66] and [68] above and including provision for costs. If such orders are agreed, the draft and any explanatory memorandum is to be filed within 20 working days of the date of this judgment for my approval for sealing.

[72]              If such orders are not agreed, the plaintiffs’ proposal and any explanatory memorandum instead is to be filed and served within 20 working days of the date of this judgment, responses (to include counter-proposal(s)) and reply respectively to be filed and served within 10 working days after service. The Registry then is to fix a date convenient to counsel for argument before me on relief. From what I presently know of my calendar, that is unlikely to be later this or early next year.

Costs

[73]I reserve costs pending my ultimate determination of this proceeding.

Interim injunction

[74]              To avoid doubt, I continue the varied interim injunction pending my ultimate determination of this proceeding.57

—Jagose J

57 See [3] above.

Schedule: Green Land’s second-stage subdivision land

Interested plaintiff	Title identifier	Lot no	Interested defendant
1.	1st	812198	119
2.	2nd	812168	31
3.	3rd	812169	32	7th
4.	4th	812180	64	7th
5.	4th	812181	65	7th
6.	4th	812188	95	8th
7.	5th	812186	93
8.	6th	812187	94
9.	7th	812189	96	6th
10.	8th	812192	113	6th
11.	9th	812194	115
12.	10th	812197	118	8th
13.	11th	812205	126	6th
14.	12th	812207	128	7th
15.	13th	812211	132	6th
16.	14th	812178	62
17.	15th	812206	127
18.	16th	812179	63	6th
19.	17th	812191	112
20.	18th	871065	134
21.	18th	871066	135
22.	18th	871067	136
23.	N/a	871068	137	N/a
24.	N/a	690646	50	N/a
25.	N/a	690695	107	N/a
26.	N/a	812209	130	N/a
27.	N/a	812210	131	N/a
28.	N/a	812190	111	N/a
29.	N/a	812195	116	N/a
30.	N/a	812193	114	N/a