New World (New Zealand) Limited v Wang
[2023] NZCA 35
•27 February 2023 at 11:00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA690/2021 [2023] NZCA 35 |
| BETWEEN | NEW WORLD (NEW ZEALAND) LIMITED |
| AND | SHAOJUN WANG |
| Hearing: | 18 August 2022 (further submissions received 13 February 2023) |
Court: | Katz, Wylie and Palmer JJ |
Counsel: | G P Blanchard KC and J Ding for the Appellant |
Judgment: | 27 February 2023 at 11:00 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.
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REASONS OF THE COURT
(Given by Palmer J)
Summary
Ms Qian Zhang bought a property in Auckland with the help of Ms Shaojun Wang. In 2017, Ms Zhang was employed by, and stole money from, New World (New Zealand) Ltd (New World), which commenced proceedings against her. In November 2017, Ms Zhang and Ms Wang signed a deed transferring the property to Ms Wang so Ms Zhang could return to China. In October 2020, New World obtained a charging order over the property. Ms Wang applied to vary or rescind the charging order. On 29 October 2021, Peters J in the High Court excluded the property from the charging order and cancelled the registration of the order.[1] New World appeals. We dismiss the appeal. The High Court was correct that Ms Wang had obtained Ms Zhang’s entire beneficial interest in the property.
What happened?
[1]New World (New Zealand) Ltd v Zhang [2021] NZHC 2899 [Judgment under appeal].
In May 2016, Ms Zhang bought a property in Auckland. The purchase price was met by: a loan from ASB to Ms Zhang of $826,000 secured by a first mortgage; $309,000 (including the deposit of $118,000) paid by Ms Wang; and $45,000 paid by Ms Zhang. The property was tenanted, and Ms Zhang met any shortfall between the income and outgoings (including to ASB) until September 2017.
Ms Zhang was employed by New World until she resigned in April 2017. New World subsequently realised Ms Zhang had been stealing from it. Ms Wang’s evidence is that she knew nothing about this until January 2018, when her former solicitor informed her of New World’s freezing order against Ms Zhang.
In September 2017, Ms Zhang and Ms Wang discussed Ms Wang purchasing the property so that Ms Zhang could return to China. A Deed of Declaration of Trust and Transfer of Property (the Deed) was prepared. It was executed by Ms Zhang on 1 November 2017 and she then returned to China. Relevantly, the Deed provided:
2. Transfer of Property
2.1 The parties have agreed to transfer the property from Qian [Zhang] to Shaojun [Wang] once Shaojun pays the sum of $70,000.00 NZD to Qian. However, the title of the property is to remain under Qian’s name unless and until Shaojun requests to transfer the title to her name. Upon the Settlement Date, once Shaojun’s payment of $70,000.00 is made to Qian, Shaojun will be fully and solely liable for the property and all expenses in relation to the property (i.e., mortgage, tax, insurance etc.). Shaojun will be solely entitled to any benefit and interest arising from the property which shall include and not limited to rental income, capital gains and so forth. Qian will meet all payment and expenses required in relation to the property until the Settlement Date.
2.2 The parties agree that, once the payment of $70,000.00 has been made by Shaojun, Qian will be holding the property on trust as trustee of this constructive trust under her name purely for the benefit of Shaojun and shall transfer the title of the property back to Shaojun upon her request at any time.
…
Clause 1.1(b) defined “Settlement Date” to mean “the date of this Deed that Shaojun will make payment of $70,000.00 to Qian”.
On 6 November 2017, New World commenced proceedings against Ms Zhang.
On 10 November 2017, Ms Wang executed the Deed and paid the $70,000 referred to in cl 2.2 to Ms Zhang. She lodged a caveat on the title and met all the outgoings of the property. She did not call for, or take, transfer of the title.
On 17 November 2017, New World obtained freezing orders over Ms Zhang’s assets, including the property, in the District Court. It served those proceedings on Ms Wang on 22 December 2017. On 22 November 2017, the Registrar-General of Land lodged a caveat on the title on the basis of the freezing orders granted by the District Court.
New World obtained judgment by default against Ms Zhang for $329,675.87 including interest and costs.[2] On 27 October 2020, New World obtained a charging order over the property. New World has since sought an order that the property be sold. Ms Wang applied to vary or rescind the charging order.
The High Court judgment
[2]New World (New Zealand) Ltd v Zhang DC Auckland CIV-2017-004-002645, 13 October 2020.
On 29 October 2021, the High Court varied the charging order to exclude the property from its ambit and cancelled its registration.[3] The Judge accepted that Ms Wang would have wished to take a transfer of title but could not do so because of the Registrar-General’s caveat and the order.[4] If Ms Wang had done so, she would have assumed a direct liability to ASB under ss 203 and 289 of the Property Law Act 2007 (PLA), though Ms Zhang would have continued to be liable to ASB and may have been in breach of her covenants to ASB. The Judge held that, on 10 November 2017, upon her payment of the $70,000, under cls 2.1 and 2.2 of the Deed, Ms Wang acquired Ms Zhang’s entire beneficial interest in the property.[5]
[3]Judgment under appeal, above n 1.
[4]At [30].
[5]At [31].
In Cowcher v Cowcher, the Family Division of the High Court of England and Wales held that a resulting trust arises where a person acquires a legal estate but has not provided the whole of the consideration for its acquisition, unless a contrary intention is proved.[6] Peters J distinguished that case from the situation here, where Ms Wang assumed liability under the Deed to repay the loan.[7]
[6]Cowcher v Cowcher [1972] 1 WLR 425 (Fam) at 431.
[7]Judgment under appeal, above n 1, at [33].
New World appeals. Neither party raised any issue as to this Court’s jurisdiction to hear and determine the appeal. After the hearing, the Court invited them to make submissions on that issue. New World submits the application for relief is not an interlocutory application as defined in s 4 of the Senior Courts Act 2016. It did not concern procedure nor ancillary relief but was the final word on substantive relief between the appellant and respondent. Ms Wang agrees with that submission. If leave was required, Ms Wang would not have opposed leave, which would almost certainly have been granted. We accept the submissions by both parties. The Court has jurisdiction to hear the appeal.
Submissions
Mr Blanchard KC, for New World, submits that Ms Wang’s beneficial interest in the equity of the property was a resulting or constructive trust based on her contributions. Ms Zhang’s contribution was the ASB loan, to which Ms Wang was not in a position to be a party at the time of the purchase. The Deed was not effective to transfer Ms Zhang’s interest because Ms Wang did not assume entire and sole responsibility for the mortgage until she called for transfer of the title, under cl 2.1, and she did not do so. Until the title was transferred, Ms Wang assumed responsibility for meeting mortgage payments but not the entire loan obligation secured by the mortgage. Clause 2.2 provides that, once the $70,000 was paid, Ms Zhang held the property as constructive trustee, not a bare trustee. That could have been intended to make clear that Ms Wang has to transfer the title and cannot grant an interest to anyone else. It makes sense for the status quo to remain if no indemnity was provided, which there was not. Ms Zhang remained solely liable and responsible for the mortgage to ASB. So Ms Zhang retained a substantial beneficial interest which extends to the increased capital value of the property.
Mr Holmes, for Ms Wang, submits that once the $70,000 was paid Ms Wang was “fully and solely liable” for the property and all expenses and solely entitled to any benefit and interest arising from it. The entire beneficial interest passed to Ms Wang. Ms Zhang held the property under an express trust “purely for the benefit” of Ms Wang. This was an express trust. New World’s interpretation would mean the Deed would have no effect other than as a sale and purchase agreement. Cowcher v Cowcher provides explicitly for this situation.
Did Ms Wang have the entire beneficial interest?
The key clauses of the Deed are reasonably straightforward:
(a)Clause 2.1 records the agreement to transfer the property though the title is to remain under Ms Zhang’s name unless and until Ms Wang requests it be transferred to her name. Once the $70,000 payment is made, which is the date defined to be the settlement date, Ms Wang becomes “fully and solely liable for the property and all expenses in relation to the property” and “solely entitled to any benefit and interest arising from the property” which includes “capital gains”.
(b)Clause 2.2 clarifies that, after settlement date, Ms Zhang holds the property on trust “purely for the benefit” of Ms Wang and is required to transfer title of the property to Ms Wang on Ms Wang’s request to do so.
Under these clauses, as Peters J held, Ms Wang acquired Ms Zhang’s entire beneficial interest upon payment of the $70,000. While Ms Zhang continued to hold legal title, she held it on an express trust “purely for the benefit” of Ms Wang. Ms Wang was “fully and solely liable” for the property’s expenses, including the mortgage, and “solely entitled” to its benefits, including any capital gain as may now exist from sale. This arrangement was not contingent on calling for the transfer of title. Clause 2.2 makes clear that Ms Wang could require the title to be transferred. The Deed established Ms Wang as the sole beneficiary under an express trust and was not conditional upon a transfer of legal title. Ms Zhang has no interest in any capital gain in the property.
In addition:
(a)The Judge was also correct to distinguish Cowcher v Cowcher. The Judge in that case stated explicitly that a resulting trust does not arise where there is an express trust.[8] That is the situation here.
(b)The trust lasts until title is transferred. There was no point in Ms Wang calling for the transfer when that was prevented by the freezing order, caveat and charging order.
(c)There is no need to imply an indemnity.
(d)There was some dispute about the translation of three emails. But we do not find them of assistance either way.
Result
[8]Cowcher v Cowcher, above n 6, at 431.
The appeal is dismissed.
The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.
Solicitors:
K3 Legal Ltd, Auckland for Appellant
Carter Atmore Law, Auckland for Respondent
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