Mo v Yang

[2019] NZHC 2712

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-000997

[2019] NZHC 2712

BETWEEN

QINGHUA MO and YU HUANG

First Plaintiffs

DH and PM LIMITED
Second Plaintiff

AND

ZHE YANG

First Defendant

YAN YANG

Second Defendant

Hearing:	17 October 2019
Appearances:	G D Wiles and R Kaur for Plaintiffs I Hutcheson for Defendants
Judgment:	31 October 2019

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 31 October 2019 at 4.00 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

Date……………………….

MO & OR v YANG & OR [2019] NZHC 2712 [31 October 2019]

Introduction

[1]    In these summary judgment proceedings, the plaintiffs (Pat and David)1 seek an order for sale of a property at Dairy Flat, pursuant to s 339 of the Property Act 2007. The property is registered in the name of the second defendant (Emily). The plaintiffs say they are entitled to an 87.32 per cent share of any sale proceeds on the basis that that percentage represents the proportion of the funds they advanced for the purchase.

[2]    The plaintiffs rely upon a Deed of Nomination between themselves and the first defendant (Calvin) nominating them as the purchasers of the property. They sue in contract and alternatively contend for a resulting trust in their favour.

[3]    The defendants do not object to a sale of the property but say that there is a dispute between the parties as to their respective shares in it. They submit that given the disputed factual circumstances, this critical issue is wholly unsuitable for summary judgment. The defendants contend that the arrangements between the parties were for the plaintiffs to have a one-third share in the property and the balance of the funds they advanced were loans.

[4]    The critical issue I must determine is whether the plaintiffs have established the defendants have no defence. That turns on a determination of whether the arrangements for which the defendants contend are so inherently improbable or lacking in credibility (on the basis of inconsistency with undisputed contemporary documents) that they cannot rebut the presumption of a resulting trust for an 87.32 per cent share.

Background facts

[5]    In December 2014, Calvin, the brother of Emily, signed an agreement for sale and purchase of Lot 4, Bawden Road, Dairy Flat (the property) with Kim Valerie Campbell for $750,000. He paid a deposit of $105,000.

[6]    Pat and David say they first became involved in property dealings with Calvin and his colleague, Jackson Law (Jackson), in 2015.

1      The first named plaintiffs are the directors of the second plaintiff company.

[7]    Pat, David, Jackson and Calvin are currently involved in litigation in the High Court at Auckland relating to the following Auckland properties:

(a)12 Ropata Avenue, Point England, and the subject of proceedings Mo v Tamaki Homes Ltd, CIV-2018-404-2619. That is an ordinary proceeding that has recently been the subject of case management directions.

(b)3 Huxley Place, Glen Innes, the subject of proceedings Mo v Yang, CIV-2018-404-1927. In a decision dated 27 September 2019, Associate Judge Sargisson dismissed the plaintiffs’ application for summary judgment.2

(c)8 Taurima Avenue, Glen Innes and 47 Union Road, Howick, the subject of proceedings Yang v DH & PM Ltd, CIV-2019-404-506. Calvin and Jackson filed interlocutory application for interim injunction orders in relation to both these properties, but they were unsuccessful. The proceedings are unresolved.

[8]In May 2017, a separate Certificate of Title was issued for the property.

[9]    On 19 May 2017, the solicitors instructed by Calvin (the Solicitors) prepared a Deed of Nomination with Calvin as the nominator and the second plaintiff, DH & PM Ltd, the nominee. The Deed of Nomination was executed by both Calvin and the first named plaintiffs, Pat and David, in their capacity as directors of the second plaintiff. Under the Deed, the second plaintiff became the purchaser of the property.

[10]   On 20 May 2017, Pat obtained a bank cheque for $656,334.08 and deposited it into the Solicitors’ trust account. The funds were applied to the settlement of the property.

[11]   Settlement occurred on 22 May 2017 and the title was transferred into the name of Emily.

2      Mo v Yang [2019] NZHC 2447.

[12]   Pat says that the relationship between the parties broke down in about June 2017. There were discussions between the parties at various stages, including WeChat communication in February 2018, but, Pat says, attempts to reconcile were unsuccessful.

[13]   In May 2019, Pat wrote to the Solicitors seeking an explanation as to how, after she and David paid the settlement amount, the property was transferred into the name of Emily.

[14]The Solicitors replied by email dated 28 May 2019 as follows:

We were instructed by the nominator (Zhe [Calvin] Yang) to prepare a Deed of Nomination to DH & PM Ltd [the second plaintiff] on 9 May 2017. This was signed on 10 May 2017. Subsequently he contacted us and advised that he wanted to nominate his sister [Emily] to complete the purchase instead and instructed us to prepare a replacement Deed of Nomination to his sister which we did. The settlement funds were subsequently brought to us by bank cheque on settlement date and we applied same to settlement.

[15]   There have been recent attempts by the parties to try and settle the proceeding. The relevant exchange of correspondence between the parties’ solicitors has been disclosed to the Court. The parties are in agreement that the property should be sold but have not been able to reach agreement on a reserve price or a marketing strategy. The defendants have proposed that the proceeds be held in a solicitor’s trust account (or the equivalent) pending a determination at trial of the outstanding issue of the extent of the plaintiffs’ share in the property.

[16]   The plaintiffs say that the defendants’ proposed reserve price of $1,400,000 is well above the market price. The plaintiffs proposed using the purchase price ($750,000) as the reserve price for sale.

[17]   The defendants say that the capital value (CV) as at July 2017 was $2,100,000. The property is 2.15 hectares of bare land.

Relevant legal principles

[18]Rule 12.2(1) of the High Court Rules 2016 provides:

The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.

[19]The principles are summarised in Krukziener v Hanover Finance Ltd:3

[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at

341. In the end the court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[20]   In Gardner v Gardner, Associate Judge Osborne summarised the general principles of summary judgment.4 These include:

(a)Common sense, flexibility and a sense of justice.

(b)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.

(c)In assessing a defence, the Court will look for appropriate particulars and a reasonable level of detailed substantiation. The defendant is

3      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.

4      Gardner v Gardner [2015] NZHC 2018 at [20].

under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the Notice of Opposition.

(d)In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences in certain factual matters, if the lack of a tenable defence is plain on the material before the Court.

(e)The need for judicial caution in summary judgment applications has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case.

Analysis and decision

[21]   The plaintiffs’ real concerns are to secure a sale of the property and a determination that they should be paid, from the proceeds, their 87.32 per cent share. In these circumstances, I do not see any real merit in addressing the first cause of action (namely, breach of contract) in any detailed way. The best that the plaintiffs might achieve is a declaration of breach of contract with an order that the question of damages be determined at a trial. In any event, the contract contended for is an oral investment agreement with disputed evidence as to its terms, and it is difficult to accept that summary judgment could therefore be entered, even to the limited extent of a declaration of breach.

[22]   In my view, the real issue is whether the plaintiffs have established that the defendants have no defence to the claim for a resulting trust and a determination that the plaintiffs are entitled to an equitable interest to the extent of their contribution. In other words, have the plaintiffs established that the arrangements for which the defendants contend (the “one-third share plus loan” arrangement) is so inherently improbable or implausible that, at this summary stage, it can be rejected by the Court?

[23]In Chang v Lee, the Court of Appeal referred to a resulting trust as follows:5

[20]     The rationale for a resulting trust is that, absent evidence to the contrary, the law presumes a person intends to retain the beneficial ownership

5      Chang v Lee [2017] NZCA 308, [2017] NZAR 1223.

of funds which he or she advances towards the purchase price of a property. The legal owner holds title to the property subject to the payer’s equitable interest. In this way a trust results to the payer to the extent of his or her contribution. Evidence which might contradict or rebut the presumption is traditionally of an intention to gift or of consideration in the nature of satisfaction of independent indebtedness, both of which Fogarty J rejected here.

[24]   I accept that the plaintiffs have established a strong evidential foundation for the presumption of a resulting trust. This includes the Deed of Nomination of 10 May 2017, the payment of the substantial portion of the purchase price, the very last-minute change made to register the property in the name of Emily and, on the face of it (albeit untested by evidence), some real issues as to the role of the Solicitors instructed by Calvin. However, the fundamental problem for the plaintiffs is that there is disputed evidence as to the parties’ intentions; importantly, there is some credible evidence, supported by contemporary documentation generated by the plaintiffs themselves, that establishes that the presumption of a resulting trust, and the 87.32 per cent share contended for, is capable of being rebutted. A critical and careful analysis of the chronology (as attached to the defendants’ submissions) supports the position that the defendants’ claims are not inherently improbable or implausible and are supported, to some extent, by contemporary documentation. And, as Mr Hutcheson, for the defendants, submitted, summary judgment is wholly inappropriate for determination of these material, factual disputes.

[25]   The plaintiffs contend that, in the critical period leading up to settlement in May 2017 and following the Deed of Nomination, Calvin assured them that title to the property could not be transferred to Emily unless Pat and David waived their rights as nominated proprietors under the Deed of Nomination executed on 10 May. They also contend that no satisfactory explanation has ever been given to them as how, in clear breach of the investment agreement entered into, the title to the property was registered in Emily’s name. They say that at no time did they waive their rights under the Deed of Nomination.

[26]   However, there is clear and credible evidence that, prior to settlement and subsequent to the Deed of Nomination of 10 May, there was discussion between the parties about the title being registered in the name of Emily. The WeChat correspondence dated 19 May 2019 from Pat to Calvin could be interpreted as consent

by Pat to Calvin instructing the Solicitors to prepare a fresh Deed of Nomination providing for the property to be purchased in the name of Emily. Whether the translation of the word “good” should be “okay” is immaterial – and whether that ultimately might prove to be consent by Pat to fresh arrangements as to who was to hold title, and the implications of that, are not matters that I can determine at this summary stage. The evidence will need to be carefully tested and examined.

[27]   There is further evidence from Pat, albeit after settlement, which tends to provide support for the defendants’ contentions that the parties did agree to the title being registered in the name of Emily and that the “one-third share plus loan” arrangement (that Calvin contends for) had been agreed to. It may be, as Ms Kaur, for the plaintiffs, submitted, that the communications in February 2018 (after the event) represent an attempt by Pat to try and resolve a dispute between the parties (and that she made concessions that she should not have or now regrets). Likewise, the translations may not adequately reflect Pat’s intentions or reflect the correct tense. However, I cannot determine such matters at this summary stage. On their face, the WeChat emails are capable of being interpreted that Pat and David had agreed, at least by the time of settlement, to Calvin’s contended “one-third share plus loan” arrangement.

[28]In the WeChat from Pat to Emily on 11 February 2018, Pat stated:

Regarding the land on [Dairy Flat] Lot 4 [that is, the property] which is held by you on behalf of us, we need to prepare a Deed of Trust that proves your elder brother [Calvin] owns one-third, I own one-third and Jackson owns one- third, and I lent two-third of the money to them.

[29]   In a further WeChat email from Pat to Calvin and Jackson on 13 February 2018, Pat stated:

Calvin owns one-third of the property; Jackson owns one-third of the property and Pat’s mother, Mrs Huang, owns one-third of the property.

…

We will find a lawyer to draw up a Deed of Declaration of Trust … the reason why we will ask Emily to sign documents is the land is in Emily’s name.

[30]   Ms Kaur submitted that while Jackson was involved with other investment projects involving the parties, he at no time put any money into the purchase of Lot 4 and was never part of any discussions about who the co-owners of the property should be. That might ultimately prove to be correct, but the WeChat email of 13 February 2018 tends to suggest otherwise. Pat wrote that email and I am simply in no position to resolve that issue.

[31]   I further note that, on 11 February 2018, Pat wrote a WeChat email to Emily as follows:

The land that is jointly owned by me, your elder brother and Jackson was registered under your name … I did not put my name on the title because I trust you 100 per cent right? … I don’t ask your elder brother [Calvin] to provide me with any kind of security because I trust him.

[32]   I acknowledge Pat’s explanation as to the context in which that WeChat email was written, but again it does provide some support for the defendants’ position as to the arrangements agreed to and contradicts, to some extent, the plaintiffs’ submissions that the registering of the title in the name of Emily came as a surprise to them. It also supports, of course, the loan of the balance of the funds for which Calvin contends.

[33]   I also reject the contention of the plaintiffs that the arrangements for which the defendants contend (the “one-third share plus loan”) is so commercially absurd and unreal, particularly when considered in relation to the timing issue, that I can, at this stage, reject it.

[34]   In the Notice of Opposition and his affidavit in support, Calvin has explained the arrangements between the parties in the following terms:

(a)The first plaintiffs (Pat and David) were not involved with the initial purchase of the property and Calvin paid the deposit of $105,000;

(b)By the time of Pat and David’s involvement, the property had increased very substantially in value;

(c)The agreement with Pat and David is, and always was, that Pat and David would take a one-third share in the property calculated on the original purchase price of $750,000, and thereby benefit from the substantial increase in value, in return for funding the full balance of the purchase price on settlement; and

(d)The difference between the one-third share (calculated on the original purchase price) and the amount paid on settlement was agreed as being a personal loan from the first plaintiffs to Calvin and Jackson.

[35]   There may be some merit in the plaintiffs’ contention that this was not a commercial arrangement that experienced commercial operators such as Pat and David would ever have agreed to. However, in my view, it does not reach the threshold of inherently implausible or improbable. The uncontradicted evidence of Calvin is that in 2017 the CV for the property was $2,100,000. In this regard, I note that counter- proposal from the plaintiffs to the defendants’ settlement proposal (made in an open letter) to sell the property includes a proposed reserve price of $750,000 (as opposed to Calvin’s proposed reserve price of $1,400,000). I accept that the plaintiffs say that the defendants’ proposed reserve price of $1,400,000 is well above the market price, but the uncertainties that this all gives rise to simply provide further support for the defendants’ contention that summary judgment is inappropriate.

[36]   I also accept that, in the circumstances, there is merit to Mr Hutcheson’s submissions that the broader relationship between the parties (and the other property transactions in dispute and the subject of litigation) might well be related and that it would be wrong to determine this particular dispute in isolation from the others. I of course make no final determination on the point, but it again reinforces the need to apply some caution in considering whether there is a proper basis for summary determination.

[37]   The plaintiffs’ reliance on the doctrine of estoppel by deed, while undoubtedly providing some support for a resulting trust, does not, in my view, ultimately assist them in establishing that the defendants have no defence to their claim for an 87.32 per cent share in the property.

[38]   A party who executes a deed is estopped in a court of law from saying that the facts stated in the deed are not truly stated.6 In Bowman v Taylor, the defendant, a licensee of patent rights, was estopped from denying that the plaintiff was the inventor as he had executed a deed of licence which recited that this was the case.7 The governing principle was said to be the same as that which underlies estoppel by statements contained in the body of the deed: “[i]f a party has by its deed directly asserted a specific fact, it is impossible to say that he should not be precluded from disputing that fact.”8

[39]   In this case, the defendants do not deny the existence of the Deed of Nomination of 17 May 2017, nor do they contend that it did not have validity at that time. As noted above, the Deed tends to support the presumption of a resulting trust. However, it does not expressly state the respective shares of the parties in the property and, there is to the arguable case threshold, evidence that Pat knowingly agreed to her rights under that Deed being waived and that a substitute Deed of Nomination in favour of Emily was to be drafted by the Solicitors and given effect to. I further note that the property was ultimately transferred into the name of Emily, with the solicitors who drafted the original Deed of Nomination acting on the transaction and aware of it; and Pat, prior to paying the sum of $656,334.08, received a settlement statement from the Solicitors in the name of Emily Yang as purchaser. This evidence supports the defendants’ contention that Pat and David had waived their rights and agreed to a new Deed of Nomination.

[40]   Having said that, I acknowledge that Pat and David have raised what appear to be legitimate questions about the role of the Solicitors acting on instructions from Calvin. The implication of the plaintiffs’ evidence is that the Solicitors were, at best, negligent and possibly committed more serious breaches of their professional obligations. However, those are yet further matters that cannot be determined at this summary stage.

6      Baker v Dewey (1823) 1 B & C 704 at 707, 107 ER 259 (KB) at 260. See also Matthew Downs (ed)

Cross on Evidence (online looseleaf ed, LexisNexis) at [4.20].

7      Bowman v Taylor (1834) 4 LJKB 58.

8      Bowman v Taylor, above n 7, as cited in Downs, above n 6, at [4.20], n 5.

[41]   There are some obvious parallels between this case and the arguably interrelated proceedings, the subject of Associate Judge Sargisson’s summary judgment decision of 27 September 2019.9 The Judge observed:

[23] As is naturally the case when dealing with comparatively informal negotiations which did not result in a single written contract, the evidentiary picture is somewhat complicated. The key issues for this hearing are also somewhat obscured by the fact that the parties were involved in a series of investments in property, beyond the two that are relevant at present.

[42]   Those comments equally apply here. I also note that, in that decision, Associate Judge Sargisson concluded that, despite the fact that the plaintiffs (Pat and David) were able to cast doubt on the defendants’ interpretation of the agreement at issue, the plaintiffs have not met the summary judgment threshold of establishing the defendants had no defence. I reach a similar conclusion on the facts of this case.

[43]   I accept that the defendants do not contest the claim that the plaintiffs have a share in the property and that the property should be sold. However, the real dispute is, of course, the extent of the plaintiffs’ interest. The problem for the plaintiffs is that they have not established that the defendants have no defence to the plaintiffs’ claim to an 87.32 per cent share. In my view, that critical issue can only be determined at trial (absent agreement between the parties).

[44]   I also note the Court of Appeal’s comments in Bayly v Hicks that the summary judgment procedure is not well-suited an application for sale orders under s 339 of the Property Law Act 2007.10

[45]   Having reached those conclusions, it is not necessary for me to determine the remaining contentions of Mr Hutcheson that the plaintiff has not established the statutory requirements for a sale pursuant to s 339. First, s 339 orders are made in respect of co-owners of a property; however, none of the plaintiffs are registered on the title and cannot, on the face of it, claim to be a tenant in common or a joint tenant. Second, there is the potential difficulty of having regard to the mandatory factors in s 342, including “the extent of the share in the property of any [applicant] co-owner”,

9      Mo v Yang, above n 2.

10     Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [31].

and whether, given the uncertainty here as to the extent of the plaintiffs’ share, I could properly address that factor at this summary stage.

[46]   Despite my conclusion, I note, that the parties are not far apart in their attempt to negotiate a solution to the outstanding issues and have agreed (subject to reaching consensus on the mechanism reserve price and marketing campaign) to a sale of the property. I would urge the parties to continue (as they intend) to try and reach a settlement along those lines. It is clearly the sensible and obvious solution.

Result

[47]The plaintiffs’ application for summary judgment is dismissed.

[48]Costs are reserved.

[49]   I direct that the Registrar is to arrange for a case management conference as soon as reasonably practicable to make directions for the future disposal of the proceedings.

Associate Judge P J Andrew