Liang v Han
[2023] NZHC 2070
•8 August 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000547
[2023] NZHC 2070
BETWEEN CHAO LIANG
Applicant
AND
YANGFENG HAN
Respondent
Hearing: 24 July 2023 Appearances:
C Liang in Person (with J Young as Translator)
D van Hout / R Selby for the Respondent (with A Gu as Translator)
Judgment:
8 August 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 8 August 2023 at 12.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Russell Legal, Auckland
LIANG v HAN [2023] NZHC 2070 [8 August 2023]
Introduction
[1] Chao Liang claims that Yanfeng Han, a real estate agent, tricked him into selling his two properties at Kelwyn Road in Auckland at an undervalue of around
$2.4 million.
[2] Mr Liang has lodged a caveat over a property at Vaughans Road, Auckland owned by Mr Han as a trustee for NB Vaughans Limited (the Trust). Mr Han has applied to the Registrar-General of Land for the caveat to lapse. Mr Liang now applies to the Court under s 143 of the Land Transfer Act 2017 (Act) for an order that the caveat not lapse.
[3] The essential issue is whether Mr Liang has demonstrated that he holds a beneficial interest in the Vaughans Road property sufficient to support the caveat.
Further background facts
[4] In December 2018, Mr Liang listed his properties at 12 and 14 Kelwyn Road for sale with Barfoot & Thompson’s Glenfield branch. The listing agents were Lars Kuo and Sharon Lim. The listing report records the method of sale being by negotiation, with a price range of $920,000 to $970,000 for number 12; and $830,000 to $850,000 for number 14.
[5] Mr Han, a newly qualified real estate agent at Barfoot & Thompson’s Milford branch, became aware of the listings. Mr Han and his supervisor, Kai Deng, acted for the property developer Precise Homes Limited (Precise Homes). On 23 January 2019, Mr Han visited Mr Liang at home and presented him with offers from Precise Homes for the Kelwyn Road properties. Ms Lim was also present.
[6] The events of that day are heavily disputed, but formal agreements for sale and purchase signed and initialled by Mr Liang record that he agreed to sell 12 and 14 Kelwyn Road to Precise Homes for $970,000 and $850,000 respectively. The settlement date was stated to be 29 April 2019. Mr Liang claims that he was tricked into the sales by Mr Han; and that Mr Han forged his signature and initials on the agreements. Mr Han denies this allegation.
[7] Two months later, in March 2019, Mr Liang laid a complaint about Mr Han with Barfoot & Thompson. He complained that: Mr Han had deceived him about the net amount he would receive from the sale of the Kelwyn Road properties; that he did not understand what he was signing as he did not speak English; that he withdrew his counter-offer before it was accepted by Precise Homes; and that he was not provided with a copy of the signed agreements until three days later. Barfoot & Thompson responded by letter on 22 March 2019 saying that aside from not providing the signed agreements to Mr Liang until three days after they were signed, Mr Liang’s allegations were not proven. Barfoot & Thompson noted that the signed agreements were provided to Mr Liang’s nominated solicitor, Fei Chan at Chan & Co Legal, on 24 January 2019. Barfoot & Thompson recommended that Mr Liang take legal advice on his obligation to settle the transactions.
[8] Mr Liang completed the Kelwyn Road sales on 29 April 2019. He says that he understood that he had no choice but to do so.
[9] Six months later, in November 2019, Mr Liang laid another complaint about Mr Han, this time with the Real Estate Authority (REA). He alleged that: Mr Han and Ms Lim had pretended to have a loud argument on 23 January 2019 to confuse and trick him into accepting Precise Homes’ offers; that they did not explain the agreements to him, and he did not understand what he was signing. The REA undertook a review and concluded that the agents explained the contract to Mr Liang, and he chose to sign the agreements after negotiating the price. The REA advised that it would not take any further action.
[10] In October 2022, Mr Han entered into an agreement to sell a property he owned personally at John Brian Drive, Albany. Mr Han had purchased this property in 2016. The day before settlement was to take place, Mr Liang applied to lodge a caveat over the property. The pending caveat delayed settlement. Ultimately, Land Information New Zealand rejected the application due to non-compliance with registration requirements. The sale of the John Brian Drive property was completed in November 2022.
[11] Subsequently, on 26 January 2023, Mr Liang lodged the caveat over the Vaughans Road property. The Vaughans Road property was purchased by the Trust on 8 November 2021 for $4.15 million. Mr Han is the sole trustee of the Trust.
Legal principles
[12] An application to sustain a caveat under s 143 of the Act is determined on a summary basis with the Court having 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. They need not establish that interest definitively — it is enough if they present a reasonably arguable case.
(b)An order for a caveat’s lapse will only be made if it is patently clear it cannot be maintained — either because there was no valid ground for lodging it in the first place or, alternatively, that such ground has now ceased to exist.
(c)The process by which these applications are determined is ill-suited to resolving disputed questions of fact. A conflict between affidavits will generally be resolved in the caveator’s favour. 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.
(d)Where the applicant has discharged its burden, the Court retains a residual discretion to remove the caveat. The Court will exercise this
1 Botany Land Development Ltd v Auckland Council [2014] NZCA 61; Philpott v Noble Investments Ltd [2015] NZCA 342; Bethell v Rickard [2013] NZCA 68 at [22]; MacRae v Rapana HC Auckland M633/94, 17 June 1994; Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175 citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 at 34; Xie v 126 Waimumu Ltd [2020] NZHC 1109 at [8]; and Pacific Homes Ltd (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.
discretion cautiously and must be satisfied removal will not prejudice the caveator’s legitimate interest.
What caveatable interest does Mr Liang claim to have?
[13] Section 138(1)(b) of the Act provides that a person may lodge a caveat against dealings with an estate or interest in land on the basis that the person has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust.
[14] The caveat form completed by Mr Liang describes the nature of his alleged interest in the Vaughans Road property as:
…a beneficial interest in the land…as beneficiary of an implied trust of which the Registered Proprietor Yangfeng Han is a trustee. The proprietor forged my signatures and sold my two properties at 12 and 14 Kelwyn Rd, Kelston, Auckland. Then he uses the profits of $400,000 to pay the interest of his loan for this property now lodged against.
[15] In his originating application to sustain the caveat, Mr Liang describes his interest as:
The respondent forged the applicant’s signature and sold the applicant’s two properties. The litigation against the respondent and his employer has been filed at Auckland High Court. The applicant has beneficial interest in the land by way of extant proceeding or in any event a constructive or implied trust such that the Court clearly should exercise its discretion in favour of sustaining the caveat.
[16] Mr Liang refers to substantive proceedings he commenced in this Court on the same day he filed his caveat application.2 In his statement of claim Mr Liang claims that Mr Han forged his signatures and initials on the Kelwyn Road sale and purchase agreements, causing Mr Liang to sell the properties at an undervalue. He brings the claim under s 256 of the Crimes Act 1961; and seeks damages of $1.2 million.
[17] Given these variations, during the hearing I asked Mr Liang to confirm the nature of the beneficial interest he claims to have in the Vaughans Road property. Mr Liang referred to his written synopsis of submissions in which he states:
2 CIV-2023-404-531.
The forging of two SPs involved a breach of Mr Han’s fiduciary duties to me, which caused my huge loss of 2.4 millions with the consequence that he holds the property on a constructive trust for me.
…
As Mr Han has forged SPs and sold two properties continuously and may have committed crimes against s256 of the Crimes Act. Further, now s108 of Crimes Act may be applied to him, which provides that perjury is an assertion made in any judicial proceeding that is known to be false and is intended to mislead the court, which can come with a prison sentence of up to 7 years. Therefore, if the caveat lapse, Mr. Han will abscond abroad. Where will I seek justice and claim my huge damages? I’m still looking for a criminal attorney or the Serious Fraud Office to prosecute Mr. Han. If Mr. Han fled abroad, who and where should I sue?
[18] I summarised my understanding of Mr Liang’s claim to him: that he has an interest in the Vaughans Road property because he considers that Mr Han tricked him into selling the Kelwyn Road properties for around $2.4 million less than their market value and he now looks to recover that amount from Mr Han and Barfoot & Thompson in separate proceedings. Mr Liang confirmed that my understanding as correct.
[19]Consistent with that, in his affidavit of reply, Mr Liang states:
Why I sustain the caveat against Han’s property? As I lost $2.4 millions.
[20] At para 10 of his synopsis of submissions, Mr Liang submits that Mr Han sold the two properties for $1.82 million, about $2.4 million below the market price of the land. He concludes by asking the Court to sustain the caveat or order Mr Han to deposit $2.4 million into Court until the decision is made on his claim.
[21] A caveat protects a beneficial estate or interest in the land in question. It is not a tool for a plaintiff to deploy to secure the property of a defendant from whom the plaintiff claims damages.
[22] To sustain the caveat, Mr Liang must demonstrate that he has a reasonably arguable estate or interest in the Vaughans Road property. Mr Liang claims damages from Mr Han to compensate him for profits he says he would have made had Mr Han not tricked him into selling the Kelwyn Road properties at an undervalue. This is a personal claim against Mr Han for compensation for a loss of chance. It is not a claim that creates a beneficial interest in the Trust’s Vaughans Road property. In fact,
nowhere in his evidence or submissions does Mr Liang assert or seek to prove any form of proprietary interest in the Vaughans Road property.
[23] I conclude that Mr Liang has not discharged the onus on him to demonstrate that it is reasonably arguable that he holds a beneficial interest in the Vaughans Road property. His claim to damages for an alleged loss of chance to make an additional
$2.4 million on the Kelwyn Road sales does not amount to an arguable estate or interest in the Vaughans Road property sufficient to support the caveat.
An alternative basis for a caveatable interest?
[24]As noted, in the caveat form Mr Liang states that Mr Han used “profits of
$400,000 to pay interest of his loan for [the Vaughans Road property]”. He also refers in his synopsis of submissions to authorities which have held that where property is acquired using money derived from fraud, the property is held on constructive trust for the plaintiff.3 Mr Liang concludes: “I pray Han’s property be held on constructive trust for me as beneficiary who suffered huge loss as Han forged my signature … to sell my properties.”
[25] From this, Mr van Hout for Mr Han anticipated that Mr Liang might contend that Mr Han had used funds derived from the alleged fraud to acquire or service the mortgage on the Vaughans Road property. With the next logical step in the argument being that Mr Han held the property on constructive trust for Mr Liang.
[26] In Trustees Executors Ltd v Steve G Limited this Court recognised that if a plaintiff can trace funds impressed with a trust into the hands of the defendant, and the property to which the plaintiff lays claim is still owned by the defendant, the Court may treat the defendant as holding the property on constructive trust for the plaintiff.4 If the plaintiff’s money has been used not to acquire the property but to discharge a debt secured by a mortgage against the defendant’s land, the Court may treat the land as subject to a charge by way of subrogation in favour of the plaintiff.
3 Attorney-General for Hong Kong v Reid [1994] 1 NZLR 1 (PC) at 4.
4 Trustees Executors Ltd v Steve G Limited [2013] NZHC 16 at [38], [39] and [111].
[27] As I have noted, Mr Liang did not pursue a claim along these lines at the hearing. In fact, he objected to Mr van Hout addressing this possible alternative ground for the caveat. Rather, he maintained that he had a caveatable interest in the Vaughans Road property because of his $2.4 million damages claim against Mr Han arising out for Mr Han’s alleged fraud.
[28] For the avoidance of any doubt, I would not have sustained the caveat based on this line of argument had Mr Liang pursued it. The undisputed evidence of Mr Han is that the only funds he received in relation to the Kelwyn Road properties was his share of the commission on the sale from Mr Liang to Precise Homes, an amount of
$16,574.08. Mr Han deposes that he has no connection with Precise Homes, other than as its real estate agent; and Mr Liang does not dispute this evidence.
[29] Mr Liang does not provide any evidence or explanation for the allegation in the caveat form that Mr Han used profits of $400,000 to service the Vaughans Road properties. It is unknown what this $400,000 refers to. In his written synopsis, Mr Liang refers to the fact that Precise Homes subdivided the two properties and sold them at a substantial profit, alleging that Mr Han benefited from these sales. But this is pure speculation without any supporting evidence; and is contradicted by the sworn evidence of Mr Han and Yuntao Cai, the director of Precise Homes.
[30] Mr Cai confirms that Mr Han does not have any personal or business relationship with Precise Homes aside from being one of several real estate agents Precise Homes uses to buy and sell properties. Mr Cai deposes that Mr Han was not involved in the subsequent subdivision and development of the Kelwyn Road properties and Mr Han did not receive any profit from Precise Homes’ development, including for the Kelwyn Road properties. While Mr Han was one of several real estate agents engaged to sell the resultant sections, Mr Han did not sell any and therefore did not receive any commission or financial gain from the developed properties.
[31] Consistent with that evidence, Mr Han confirms in his affidavit that he did not receive any commission on the subsequent sales by Precise Homes.
[32] At its highest, the commission is the only funding that Mr Liang could attempt to claim ownership over and seek to trace to the Vaughans Road property. Yet Mr Liang’s evidence does not mention this commission and he makes no allegation that it can be traced to the Vaughans Road property.
[33] If Mr Liang was to seek to trace this commission, Mr Han’s bank statements reveal that he used all but around $7,000 of it on his day-to-day living and expenses within one month of receiving it. Even if Mr Liang was to establish a reasonably arguable case to ownership of the $7,000, and that it was applied by Mr Han towards acquiring the Vaughans Road property or paying the debt secured by the mortgage over the property, this would be an appropriate case for the Court to exercise its residual discretion to discharge the caveat so long as this modest amount (plus a reasonable allowance for interest) was secured.
Conclusion and result
[34] Mr Liang has not discharged the onus on him to demonstrate that it is reasonably arguable that he holds an estate or interest in the Vaughans Road property sufficient to support the caveat.
[35] Accordingly, I order that Mr Liang’s application to sustain the caveat 12655280.1 listed over the property at 106 Vaughans Road is dismissed.
[36] In accordance with the usual principle, Mr Liang should pay Mr Han’s costs. Mr Han seeks increased or indemnity costs because the caveat was lodged for an improper purpose and with no reasonable cause. I invite Mr Han to make submissions of no more than four pages within ten working days. Mr Liang may file submissions of no more than four pages within a further ten working days.
Associate Judge Gardiner
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