Liao v Liao - [2024] NZHC 3513

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1661

[2024] NZHC 3513

UNDER the Land Transfer Act 2017

IN THE MATTER OF

Caveat 13018335.3

BETWEEN

PEI-YA LIAO

Applicant

AND

A-WANG LIAO and TAN-KUEI LIAO LU

Respondents

Hearing: 20 November 2024

Counsel:

S O McAnally for the Applicant

S Jeffs / K Sun for the Respondents

Judgment:

22 November 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 22 November 2024 at 12 Midday.
Pursuant to Rule 11.5 of the High Court Rules.

…………………..
Registrar/Deputy Registrar

Solicitors/Counsel:
Croftfield Law, Auckland Capstone Law, Auckland Sean McAnnally, Auckland

LIAO v LIAO [2024] NZHC 3513 [22 November 2024]

Introduction

[1] The applicant, Pei-Ya (Phoebe) Liao (Ms Liao), is the daughter of the respondents, A-Wang Liao and Tan-Kuei Liao Lu (Mr Liao and Mrs Lu respectively). Ms Liao is married to Yat Keung (Dennis) Lam (Mr Lam).

[2] The parties have engaged in property development. They fell into dispute regarding ownership of two properties, including 4A Whites Way, Ellerslie (the property) which was registered in Ms Liao’s name.

[3] The property was a vacant residential section when Ms Liao acquired ownership. A house was constructed on the property while Ms Liao was the registered owner, by Mr Lam’s construction company, D&T Homes Limited (D&T).

[4] Mr Liao and Mrs Lu commenced a claim against Ms Liao in this Court, CIV-2021-404-1067, seeking relief as the beneficial owners of the property (the substantive proceeding).

[5] On 17 April 2024, Woolford J gave judgment for Mr Liao and Mrs Lu in the substantive proceeding, declaring that Ms Liao held the property on resulting trust for Mr Liao and Mrs Lu as the beneficial owners (the judgment).1 Woolford J declared that Ms Liao is “… entitled to recover costs incurred while the property was in her possession and the costs of construction of the dwellinghouse on the property, which may include a reasonable margin for the builder.”2

[6]Woolford J concluded the judgment on the following terms:

[94] I do not make any further ancillary orders as I expect the parties to negotiate on a good faith basis and reach agreement, in particular, on the costs associated with development of the Ellerslie property as well as any claim for use of money, interests and costs.

[95] Leave is, however, reserved for the parties to return to Court for any ancillary orders necessary to implement the terms of this judgment.

1 Liao v Liao [2024] NZHC 828.
2 At [90] and [91].

[7] On 24 May 2024, registered ownership of the property was transferred from Ms Liao to Mr Liao and Mrs Lu (the transfer). At the same time, Ms Liao registered a caveat asserting an equitable lien securing Ms Liao’s right to indemnification from the trust asset for expenses incurred while she held the property on trust for her parents. Ms Liao says that the total of those expenses is $983,581.

[8] Mr Liao and…

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: [2024] NZHC 3513
Decision Date: 22 November 2024

CaseChat Overview and Summary

Pei-Ya Liao, the daughter of A-Wang Liao and Tan-Kuei Liao Lu, sought to sustain a caveat over a property located at 4A Whites Way, Ellerslie, which had been transferred to her parents. The respondents contested the caveat, arguing that it extinguished any equitable interest Ms Liao may have had. They offered to deposit $390,600 into trust as an alternative to the caveat. The primary issue before the Court was whether Ms Liao's equitable lien, which secured her right to indemnification for expenses incurred while she held the property on trust for her parents, survived the transfer of the property. The Court found it reasonably arguable that the transfer did not extinguish Ms Liao's right to an indemnity from the trust asset. The transfer occurred after the judgment, which included a declaration that Ms Liao is entitled to recover costs incurred while the property was in her possession and the costs of construction of the house. The declaration was made on Mr Liao and Mrs Lu's cause of action for equitable relief based on a resulting trust, and there was no counterclaim by Ms Liao against Mr Liao and Mrs Lu. The declaration must be read as a declaration of the right of indemnification. Although a distribution of trust property by a trustee to a beneficiary will prima facie release a trustee’s equitable lien, the beneficiary does not receive absolute legal and beneficial ownership in all cases. The Court found that it was reasonably arguable that Ms Liao's equitable lien survived her transfer of the property to Mr Liao and Mrs Lu. The alternative security offered by Mr Liao and Mrs Lu was insufficient to protect Ms Liao's legitimate interests. The Court ordered that Caveat 13018335.3 shall lapse on the payment of $1,000,000 into a trust account approved by the applicant to be held on trust to satisfy any right to an indemnity that the applicant has in terms of the judgment of Woolford J dated 17 April 2024 in CIV-2021-404-1067, and subject to any further order made in that proceeding. If the fund required by the order is not established, the caveat shall not lapse pending further order of the Court. If the parties are unable to agree on costs, the Court will determine costs on the papers.

Orders