SEOK YOUNG KANG AND DONGGUN KIM and SUJEONG LEE s

[2024] NZHC 2950

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-496

[2024] NZHC 2950

BETWEEN

SEOK YOUNG KANG

Applicant

AND

DONGGUN KIM

and
SUJEONG LEE

Respondents

Hearing:	29 August 2024
Appearances:	Lawrence Ponniah for the Applicant Paul Murray for the Respondents
Judgment:	11 October 2024

JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

[Application for order to sustain a caveat]

This judgment was delivered by me on 11 October 2024 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Philip Law Office (Philip Lee), Hillcrest, North Shore, Auckland, for the Applicant CL Law Limited (Somee Chung), Takapuna, Auckland, for the Respondents

Counsel:

Lawrence Ponniah, Auckland, for the Applicant

Paul Murray/Philippa Daniels, Akarana Chambers, Auckland, for the Respondents

KANG v KIM [2024] NZHC 2950 [11 October 2024]

TABLE OF CONTENTS

Paragraph

Introduction  [1]

Background  [2]

Mr Kang’s application for caveat to not lapse  [11]

The respondent’s opposition  [12]

Legal principles  [13]

Analysis  [23]

Does Mr Kang have a caveatable interest in the property?  [24]

Was there an oral agreement?  [26]

Part performance of the oral agreement  [28]

First limb of the doctrine of part performance  [30]

Second limb of the doctrine of part performance  [32]

Third limb of the doctrine of part performance  [33] Is there a constructive trust giving rise to a caveatable interest?  [35] Was there part performance?  [39]

Is there a constructive trust?  [41]

Conclusion in respect of caveatable interest  [44]

Should the Court exercise its discretion to remove the caveat?               [46]

Result  [48]

Orders  [49]

Introduction

[1]    Seok Young Kang (Mr Kang) has applied for an order sustaining caveat number 12921783.1 (the caveat) lodged by him against the property at 182 Lake Road, Northcote, Auckland (the property) whose registered owners are Donggun Kim and Sujeong Lee (the respondents).

Background

[2]    Mr Kang found the property for his wife to operate her hairdressing business from. He negotiated a purchase price of $819,000. However, he was unable to qualify for the required finance to purchase the property.

[3]    Mr Kang claims to have approached the respondents for assistance in purchasing the property and applying for finance.

[4]    Mr Kang claims that on 18 December 2022, Mr Kang and his wife had a verbal discussion with the respondents where the respondents agreed to purchase the property on Mr Kang and his wife’s behalf and to hold the property in trust for them. He claims the agreement also included the respondents applying for the required finance to buy the property and Mr Kang would repay the respondents the purchase price plus an additional $20,000. However, the respondents claim there was never such an agreement.

[5]    On 18 December 2022, the respondents entered into an agreement for sale and purchase of the property. The purchase was settled on 20 January 2023. The respondents obtained a loan of $655,200 from ANZ, secured by way of mortgage, and paid the deposit and the balance of the purchase price.

[6]    Mr Kang and his wife, Ms Park, moved into the property shortly after the settlement date. Mr Kang and his wife made monthly payments to the respondents that correspond approximately to the interest payments on the ANZ mortgage. They also made payments for power and water bills.

[7]    It is common ground that the property was renovated, and a hairdressing studio was installed on the ground floor. The parties, however, disagree about who carried out the renovations and who paid for them.

[8]    Mr Kang claims to have transferred $91,756.62 to the respondents as a partial repayment of the purchase price. The respondents, however, claim they have not received that sum from Mr Kang or his wife.

[9]    Mr Kang lodged the caveat against the property and the respondents applied for the caveat to lapse.

[10]Mr Kang now applies for an order sustaining the caveat.

Mr Kang’s application for caveat to not lapse

[11]   Mr Kang seeks an order sustaining the caveat on, in summary, the following grounds:1

(a)  He claims an interest in the property by virtue of an implied and/or constructive trust arising from:

(i)               His contributions, direct or indirect, to the property and to the acquisition of the property.

(ii)On or about 18 December 2022, there was a verbal agreement between him and his wife with the respondents for the acquisition of the property and the obtaining of finance in the names of the respondents in consideration for payment of $20,000 to the respondents upon the transfer of the property to him and his wife.

(iii)There was a part performance of the verbal agreement by both parties including the monthly repayments by him and his wife towards the ANZ mortgage repayments and the

1 Originating application for order to sustain a caveat dated 8 March 2024 at [2].

approximate $120,000 renovation and improvement to the property at his expense.

(b) His legitimate interest in the property will be seriously prejudiced if the caveat is allowed to lapse.

(c)  The facts in support of his caveatable interest will be in dispute and credibility will need to be assessed by the Court after hearing and observing witnesses. As such this dispute is wholly unsuitable for resolution by the summary nature of the caveat application. The caveat should remain on the title to protect his interest in the property pending resolution of the claim at a substantive hearing.

The respondents’ opposition

[12]   The respondents oppose the application on, in summary, the following grounds:2

(a)  There is no reasonably arguable case for Mr Kang’s claimed interest in the property.

(b) No implied and/or constructive trust arises because:

(i)               The payments alleged to be made by Mr Kang were not contributions towards the acquisition of the property and/or were not contributions towards the property.

(ii)There was no verbal agreement for sale and purchase of the property, any agreement was not recorded in writing and the essential terms to that agreement were not agreed.

(iii)In any event, the alleged verbal agreement for the acquisition of the property does not provide a basis for an implied and/or constructive trust.

2 Notice of opposition to the application for an order that the caveat not lapse dated 19 April 2024 at [3].

(iv)Mr Kang is not ready, willing and able to purchase the property pursuant to the terms of the alleged verbal agreement.

(v)Payments alleged to be made by Mr Kang were not made in part performance of the alleged verbal agreement.

(vi)Payments alleged to be made by Mr Kang in relation to renovation and improvement to the property did not relate to the property and/or were not in respect of renovation or improvement to the property.

(c)  The amounts claimed by Mr Kang, at most, give rise to a monetary claim against the respondents, and not an interest in land against which a caveat could be registered.

(d) There is no need to resolve factual disputes between the parties. On Mr Kang’s own case and evidence, there is no reasonably arguable interest in the property.

Legal principles

[13]Section 138 of the Land Transfer Act 2017 provides, relevantly:

138     Caveats against dealings with land

(1)A person may lodge a caveat against dealings with an estate or interest in land (a caveat against dealings) on the basis that the person—

(a)claims an estate or interest in the land, whether capable of registration or not; or

(b)has a beneficial estate or interest in land under an express, implied, resulting or constructive trust[.]

…

[14]Schedule 2 of the Land Transfer Regulations 2018 provides:

Caveat against dealings document     s 138 of the Act

A description of the nature of the estate or interest claimed by the caveator (which must be stated with sufficient certainty) or, for a caveat under

section 138(1)(d)(ii) of the Act, the matters that establish that there is a risk that the estate of interest may be lost through fraud.

Details of how the estate or interest claimed is derived from the registered owner.

[15]   The principles governing the determination of applications to sustain caveats are well-established.3 The onus is on the caveator to demonstrate an interest in the land that suffices to support the caveat, and the caveator must demonstrate a reasonably arguable case to support the claimed interest.4 This means the caveator need not definitively establish his or her right to the interest.

[16]   The process by which applications to sustain a caveat are determined is ill- suited to resolving disputed factual questions. An order for removal will only be made if it is clear the caveat cannot be maintained — either because there was no valid ground for its lodging in the first place, or because the ground on which it was lodged has now ceased to exist.

[17]   Although the onus of proof lies with the caveator, any conflict between affidavits will generally be resolved in the caveator’s favour.5 This is not to say that the Court is bound to accept uncritically statements in an affidavit that lack precision, are equivocal, inconsistent with the documentary evidence or other statements of the same deponent, or inherently improbable.6

[18]   While the Court retains a residual discretion to remove a caveat or allow it to lapse even if the caveator has a legitimate and caveatable interest, that discretion is to be exercised cautiously. The Court must be completely satisfied removal would not prejudice the caveator’s legitimate interests.7

3      See generally Philpott v Noble Investments Ltd [2015] NZCA 342 at [26]. And, for a general statement of the principles, see Wallace v Studio New Zealand Ltd [2021] NZCA 392,

(2021) 22 NZCPR 408 at [39]–[41].

4      Botany Land Development Ltd v Auckland Council [2014] NZCA 61 at [24]–[25].

5      Bethell v Rickard [2013] NZCA 68 at [22]. See also MacRae v Rapana HC Auckland M633/94, 17 June 1994.

6      Barrett v IBC International Ltd [1995] 3 NZLR 170 (CA) at 175, citing Eng Mee Yong v Letchumanan s/o Velayutham [1980] AC 331 (PC) at 341; and Xie v 126 Waimumu Ltd

[2020] NZHC 1109 at [8].

7      Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] 2 NZLR 652 (CA) at 656.

[19]Section 24 of the Property Law Act 2007 (PLA) provides:

24       Contracts for disposition of land not enforceable unless in writing

(1)A contract for the disposition of land is not enforceable by action unless-

(a)the contract is in writing or its terms are recorded in writing; and

(b)the contract or written record is signed by the party against whom the contract is sought to be enforced.

[20]   Section 25 of the PLA provides for certain other dispositions to be in writing and signed by the person making the disposition, including an existing interest in land acquired by taking possession of the land. Section 25(4) specifically excludes the creation or operation of a resulting, implied or constructive trust from the requirement of writing.

[21]   By s 26 of the PLA, the operation of the law relating to part performance is not affected by ss 24 and 25.

[22]   An oral agreement for the sale and purchase of land which is unenforceable because it does not comply with s 24 may support a caveat if the purchaser can claim an entitlement to specific performance of the agreement by the equitable doctrine of part performance.

Analysis

[23]   The issue to be determined in this judgment is whether Mr Kang has an arguable interest in the property that is sufficient to sustain the caveat. Mr Kang claims an interest in the property by virtue of an implied and/or constructive trust arising from:

(a)His contributions, direct or indirect, to the property and to the acquisition of the property.

(b)A verbal agreement made on or about 18 December 2022 between   Mr Kang and his wife with the respondents for Mr Kang’s acquisition

of the property and the obtaining of finance in the names of the respondents in consideration of the payment of $20,000 to the respondents upon the transfer of the property to Mr Kang and his wife.

(c)The part performance of the verbal agreement by both parties including the monthly repayments by Mr Kang and his wife towards the ANZ mortgage repayments and the approximate $120,000 renovation and improvement of the property at Mr Kang’s expense.

Does Mr Kang have a caveatable interest in the property?

[24]   The issue of whether Mr Kang has a caveatable interest in the property divides into a number of sub-issues as follows:

(a)Was there an oral agreement?

(b)Was there part performance of the alleged oral agreement analysed under the three-staged test of the doctrine of part performance?

(c)Is there a constructive trust giving rise to a caveatable interest?

[25]I deal with each of these in turn.

Was there an oral agreement?

[26]   Mr Ponniah, for Mr Kang, submits that the oral agreement made between   Mr Kang and his wife with the respondents on 18 December 2022 was made on the following terms:

(a)In consideration for a gain of $20,000, the respondents will obtain finance, purchase the property in their name for $819,000, and hold the property on trust for Mr Kang and his wife.

(b)Mr Kang and his wife will repay the respondents the $819,000 plus

$20,000, and the respondents will transfer the property to Mr Kang and his wife.

(c)Mr Kang will reimburse the respondents’ monthly loan repayments until the above payment is made.

(d)Mr Kang and his wife will renovate the property for themselves to live in and will set up a hairdressing salon at the property (expected to take eight to 10 months).

(e)Upon completion of the renovations, the set-up, and the commencement of operations of the hairdressing salon, Mr Kang would apply for finance and repay the $819,000 plus $20,000 gain to the respondents.

(f)Upon payment of the amounts set out at [26](e) (expected to occur in

12 months), the respondents will transfer the legal title over the property to Mr Kang and his wife.

[27]   Mr Ponniah acknowledges that there was no written evidence of the oral agreement. Accordingly, the oral agreement is not enforceable pursuant to s 24 of the PLA. He submits, however, that Mr Kang is entitled to rely on the doctrine of part performance as the exception to s 24.

Part performance of the oral agreement

[28]   Mr Ponniah refers to the Court’s decision in Nguyen v S M & T Homes Ltd8 where the Court stated the issue for determination is  whether  there  were  “sufficient acts of part performance to make the composite oral transaction enforceable as a whole”. Mr Ponniah refers to the three limb tests set out by the Court in that case for the doctrine of part performance to apply as:9

8      Nguyen v S M & T Homes Ltd [2016] NZCA 581; [2017] 3 NZLR 281 at [31].

9 At [32].

(a)Is there a sufficient oral agreement such that it would have been enforceable, but for the PLA?

(b)Has there been a part performance of that oral agreement by the doing of something that:

(i)clearly amounts to a step in the performance of a contractual obligation or the exercise of a contractual right under the oral contract; and

(ii)when viewed independently of the oral contract was, on probabilities, done on the footing that a contract relating to the land, consistent with that alleged, was in existence?

(c)Do the circumstances in which the part performance took place make it unconscionable (fraudulent in equity) for the defendant to rely on the PLA?

[29]Mr Ponniah then applies the three limb tests to the present case.

First limb test of the doctrine of part performance

[30]   Mr Ponniah submits that it is reasonably arguable that the acts by Mr Kang and his wife and by the respondents noted at [32] of this judgment, on the balance of probabilities, are consistent with the existence of an oral agreement as alleged by   Mr Kang and his wife, or at least point to the existence of such an alleged oral agreement. He acknowledges that on the current affidavit evidence there is a factual dispute, with Mr Kang giving evidence of the oral agreement made on 18 December 2022 and the respondents denying the oral agreement as alleged.

[31]   Mr Ponniah submits an application to sustain a caveat is not the place to resolve bona fide disputed issues of fact (citing Green & McCahill Holdings Ltd v Ara Weiti Development Ltd).10 Accordingly, he submits whether the first limb test of the doctrine

10     Green & McCahill Holdings Ltd v Ara Weiti Development Ltd [2022] NZCA 218;

of part performance has been met is a matter that will have to be decided at trial of the substantive proceedings after the Court has heard and assessed the witnesses.

Second limb of the doctrine of part performance

[32]   Mr Ponniah submits the second limb of the doctrine of part performance has been met. He submits that the following indicates part performance of the oral agreement:

(a)The respondents purchased the property, paying the deposit of

$163,800.

(b)The respondents obtained an ANZ loan of $655,200 which was used to settle the purchase of the property on 20 January 2023.

(c)On settlement, the respondents gave possession to Mr Kang and his wife, who took possession of the property as their home and commenced the renovation works.

(d)Mr Kang and his wife repaid the respondents $21,714 towards the ANZ Bank mortgage from January 2023 until June 2023.

(e)Mr Kang and his wife paid or directed to pay the $91,750.62 to the respondents.

(f)Mr Kang and his wife paid approximately $130,566.25 for the renovations to the property and setting up the hairdressing business.

(g)After the renovations were completed and the Code Compliance Certificate (CCC) was issued on 19 June 2023, Mr Kang made offers to repay the $819,000 plus the $20,000 and take over legal title to the property. Instead, in early July 2023 the respondents asked Mr Kang and his family to vacate the property.

(2022) 23 NZCPR 259 at [82].

(h)On or about 21 November 2023, Mr Kang proposed to pay the respondents an increased amount of $928,000 for the transfer of the property but the respondents rejected the proposal and again requested Mr Kang and his family to vacate the property.

Third limb of the doctrine of part performance

[33]   Mr Ponniah submits that the third limb of the part performance has been met because in the circumstances in which the part performance described in [32] took place, it is clearly unconscionable (fraudulent in equity) for the respondents to rely on the PLA and retain the benefit of Mr Kang’s contribution to the acquisition and renovations to the property.

[34]   Mr Ponniah submits that the respondents have already taken steps to evict  Mr Kang and his family from the property and have not offered to reimburse him or his wife for the significant effort and money invested in the acquisition and renovation of the property. He highlights that Mr Kang and his family currently occupies the property as their family home and operate the hairdressing business in it. Mr Ponniah further submits that if the caveat is allowed to lapse, the respondents will evict Mr Kang and his family from the property before any substantive proceedings to decide on the interests of the parties can be determined.

Is there a constructive trust giving rise to a caveatable interest?

[35]Mr Ponniah refers to the four elements for a constructive trust as set out in

Lankow v Rose:11

(a)The applicant has made contributions, direct or indirect, to the property in question.

(b)The applicant has an expectation of an interest in the property.

(c)The expectation was a reasonable one.

11     Lankow v Rose [1995] 1 NZLR 277 (CA) at 294.

(d)The respondent should reasonably expect to yield the interest to the applicant.

[36]   Applying these criteria to the present case, Mr Ponniah submits that the facts in this case support the finding of an institutional constructive trust:

(a)Mr Kang and his wife have made contributions, direct or indirect, to the acquisition and improvement of the property.

(b)Mr Kang and his wife clearly have an expectation of an interest in the property as they took possession of it, made the property their home and business, and did all things necessary in compliance with the oral agreement. Mr Kang and his wife offered the reimbursement of the purchase price plus $20,000 commission to the respondents, in return for the transfer of ownership.

(c)In all the circumstances, on the balance of probability, Mr Kang’s expectation was reasonable.

(d)On all the evidence available, it could be reasonably argued that the respondent should reasonably expect to yield the interest to Mr Kang.

[37]   Mr Murray, for the respondents, submits that Mr Kang’s case fails the first limb test for part performance, namely that the Court must be satisfied that there is a sufficient oral agreement such as would have been enforceable, but for the Property Law Act 2007.

[38]   Mr Murray submits that Mr Kang’s evidence lacks credibility, is equivocal, lacks precision, is inherently improbable and inconsistent. Therefore, he submits that Mr Kang’s evidence should be rejected. He points to the following:

(a)Mr Kang asserts that he and his wife carried out a search for the property on the North Shore as a property for Mr Kang and his wife to live in and his wife to operate her hairdressing business from. He describes how he found the property and decided to buy it. Mr Murray

points out that there are no details of the alleged search to purchase the property nor any extrinsic evidence nor any document to show that  Mr Kang and his wife engaged with a real estate agent or the vendor in relation to a potential purchase of the property.

(b)Mr Kang asserts that they negotiated the purchase price for the property of $819,000 but does not say when the negotiations commenced, who carried them out, nor details of any process by which the purchase price was arrived at.

(c)Mr Kang alleges that he approached the respondents and asked if they would assist in Mr Kang purchasing the property by applying for finance. Mr Murray submits that there are no particulars of the “approach”, when, where, or how the “approach” was made, nor does Mr Kang provide any evidence for the assertion that he and his wife were unable to qualify for finance. He submits that a determination of their inability to obtain finance, for example by a broker or a bank, would have been recorded in writing.

(d)Mr Kang’s request was an extraordinary one to make, and Mr Kang gives no reason why he and his wife would make such a request. He provides no reason why the respondents would agree to it when there was no suggestion of any pre-existing relationship between the parties that would explain why the respondents would accept the risk of this nature for the return of slightly less than 2.5 per cent (being the respondents’ share of the profit from the project of $20,000) at an uncertain date on a property which they would be unable to occupy.

(e)Mr Kang’s evidence lacks any precision, and he does not point to any documents (for example, emails or text messages) evidencing or forming any part of the alleged agreement and gives no detail of the “verbal discussions” which he alleges resulted in the comprised agreement, including no detail of when the discussions took place.

There was no attempt to describe the process by which the alleged agreement was arrived at.

(f)There is no objective evidence of the alleged agreement described by Mr Kang, and it strains credibility to suggest that the two parties, who were strangers to each other, would verbally enter into such an arrangement (which included, on Mr Kang’s case, an express agreement to hold the property on trust) without there being a single email, text message or other document evidencing or referencing the agreement. Such arrangement is inherently improbable.

Was there part performance?

[39]   Mr Murray submits the steps taken by Mr Kang and his wife and the respondents did not “clearly amount to steps in the performance of a contractual obligation”, nor is it clear that they were “done on the footing that a contract to purchase the property was in existence”. He points to the following:

(a)Any steps taken by the respondents are irrelevant as only Mr Kang’s conduct is relevant in determining part performance, referring to the decision in Mahoe Buildings Ltd v Fair Investments Ltd.12

(b)The monthly payments to the respondents can be explained as an “occupation fee” (or rent) as the respondents submit. Further, the payments were in the sum of mortgage interest payments only, and there was no contribution to capital.

(c)The lump sum payments relied on were either made by third parties (that is, not Mr Kang or his wife) or were not made to the respondents. In the circumstances where the payments are disputed, the schedule of payments relied on by Mr Kang as evidence to support this part performance is insufficient.

12     Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 at 287.

(d)Payments to renovate the property to set up the hairdressing business are not necessarily made pursuant to an oral agreement to purchase the property. Fit-out of the hairdressing salon by Mr Kang is also consistent with a lease of “occupation agreement”.

(e)There is no objective evidence of the alleged offer by Mr Kang to pay the purchase price, nor is there any evidence that the offer to pay the increased purchase price of $928,000 was sent to the respondents.

[40]   Mr Murray also points to the fact that Mr Kang and his wife allegedly requested a transfer of the property, and when the respondents refused, Mr Kang and his wife stopped making payments to the respondents from July 2023. However, they did not make a written request to transfer the property pursuant to the oral agreement. He points out that Mr Kang has never written to the respondents calling for settlement or confirming that they are ready, willing and able to settle. Mr Murray submits that it again strains credibility to suggest there is not a single email, text message or other document recording an offer to pay the purchase price or calling for the transfer of the property in part performance of the oral agreement.

Is there a constructive trust?

[41]   Mr Murray submits that for the reasons already given in [37]–[40], Mr Kang’s claim for a constructive trust based on Lankow v Rose criteria must fail. He submits that Mr Kang’s evidence is insufficient to establish an expectation of an interest in the property pursuant to the alleged oral agreement, and the expectation was not reasonable.

[42]   Mr Murray submits that Mr Kang has not established on his own evidence contributions to the property that manifestly exceed the benefits to him and his wife. He submits the renovations and installation  of  the  hairdressing  salon  were,  on  Mr Kang’s evidence, carried out for the benefit of himself and his wife and even if it is reasonably  arguable that the work has increased the value of the property on     Mr Kang’s evidence, the respondents will not benefit from that increase. Accordingly,

in the circumstances, it is not reasonable for the respondents to expect to yield an interest in the property to Mr Kang.

[43]   In summary, Mr Murray submits that Mr Kang has not established the oral agreement or part performance of it. Accordingly, Mr Kang does not have any interest in the property under a constructive trust and the caveat should lapse.

Conclusion in respect of caveatable interest

[44]   I am of the view that Mr Kang’s application to sustain the caveat should be granted. Mr Kang has established a reasonably arguable case for an interest in the property under a constructive trust arising from his direct or indirect contributions to the property and the part performance of alleged oral agreement between Mr Kang and his wife and the respondents.

[45]The reasons for my view are:

(a)Mr  Kang’s  evidence  of  the  alleged  oral  agreement  reached  on  18 December 2022 between Mr Kang and his wife and the respondents is reasonably detailed as to the contents of the agreement. In addition, while there is no direct evidence of the agreement by way of emails or text messages or other communications, there is some evidence that the respondents acknowledged some form of agreement was entered into. In particular, the letter from the respondents’ lawyers dated 18 October 2023 to Mr Kang and his wife acknowledges some form of agreement between the parties. In  addition, the transcript of the discussion on  23 July 2023 provides implicit support for the alleged oral agreement.

(b)There are sufficient acts of part performance which Mr Kang has pointed to which are consistent with the existence of the oral contract. In particular, the fact that Mr Kang and his wife and the family moved into the house shortly after the settlement and clearly regarded it as their own home. Mr Kang and his wife state they carried out extensive renovations at a cost of approximately $120,000 and it would seem

improbable that they would incur this expenditure if they did not have an expectation of being able to acquire the property on the basis of the trust alleged under the oral agreement. In addition, Mr Kang and his wife refer to payments made to the respondents equating to payments due under the ANZ mortgage. This is consistent with the arrangement that those payments would be made pending completion of the renovations and the property  would  be  ultimately  transferred  to  Mr Kang and Ms Park.

(c)The contributions to the purchase of the property of approximately

$91,000 (although it is acknowledged that receipt of this amount is disputed by the respondents) and expenditure of approximately

$120,000 in renovating the property and establishing the hairdressing salon, in my view are sufficient contributions to the property to justify a reasonable expectation of an interest in the property. It also supports a reasonable expectation that the respondents would yield an interest in the property to Mr Kang and his wife. There is an arguable case that the elements of a constructive trust in favour of Mr Kang and his wife in relation to the property are established.

Should the Court exercise its discretion to remove the caveat?

[46]   As noted at [18] of this judgment, the Court retains a residual discretion to remove the caveat notwithstanding the caveator has established a caveatable interest. However, that discretion is to be exercised cautiously and the Court must be completely satisfied removal of the caveat would not prejudice the caveator’s legitimate interests.

[47]   I am of the view that the Court should not exercise its discretion to remove the caveat. This would be prejudicial to Mr Kang as it could potentially lead to eviction of Mr Kang and his family and sale of the property before the interest of Mr Kang in the property which the caveat purports to protect is determined in a substantive proceeding.

Result

[48]   As a result of the conclusions I have reached at [45] and [47], I am of the view the application for an order that the caveat be sustained should be granted.

Orders

[49]I make the following orders:

(a)Mr Kang’s caveat number 12921783.1 lodged against the property at 182 Lake Road, Northcote, Auckland, is sustained.

(b)As Mr Kang is the successful party, costs should follow the event. Counsel are directed to endeavour to agree costs and failing agreement being reached within a period of 20 working days from the date of this judgment, counsel for Mr Kang will file a memorandum as to costs (not to exceed five pages) within 5 working days after the expiry of the 20 working day period, and counsel for Mr Kim and Ms Lee will file a memorandum (not to exceed five pages) in response within 5 working days of receipt of counsel for Mr Kang’ s memorandum. A decision as to costs will then be made on the papers.

…………………………….. Associate Judge Taylor