Tao v Chen

[2015] NZHC 581

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-345 [2015] NZHC 581

IN THE MATTER	of the Land Transfer Act 1952 s 145A
BETWEEN	HUAZHONG TAO Applicant
AND	YUE CHEN Respondent

Hearing:	26 March 2015
Counsel:	R Reed and A Manuson for Applicant D G Hurd for Respondent
Judgment:	26 March 2015

JUDGMENT OF BREWER J

This judgment was delivered by me on 26 March 2015 at 4:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:        Prestige Lawyers Ltd (Auckland) for Applicant

Kelly Flavell Law (Auckland) for Respondent

Counsel:         D G Hurd

HUAZHONG TAO v YUE CHEN [2015] NZHC 581 [26 March 2015]

Introduction

[1]      Mr Tao has applied for an order to sustain a caveat.   The matter is urgent because Ms Chen, the respondent, has an agreement to sell the caveated property, and settlement was due yesterday.

The evidence

[2]      The evidence in support of Mr Tao’s application is contained in an affidavit of his daughter.   Ms Tao deposes that around November 2013 she discussed with Ms Chen the purchase of Ms Chen’s café business.   The price was $110,000.   On

2 December  2013,  Ms Chen  asked  Ms Tao  to  make  an  early  payment  for  the purchase of the business because she needed the money to buy a house.  Ms Tao told Ms Chen that she would have to ask her father for the money.  Ms Tao did that, and on 3 December 2013 Mr Tao transferred $50,000 to the bank account nominated by Ms Chen.

[3]      On 4 December 2013, Ms Chen settled the purchase of the caveated property. Ms Chen, in her affidavit, accepts that she used at least $45,000 of the $50,000 to make up part of the purchase price.

[4]      On 24 March 2014, Mr Tao, at Ms Tao’s request, paid the balance of the purchase price of the business ($60,000). Again, payment was made by Mr Tao to an account nominated by Ms Chen.

[5]      The business dealings between Ms Tao and Ms Chen did not work out.  There are disputes between them that I do not need to discuss in this context.  However, as a result of the disputes, Mr Tao lodged his caveat.

Discussion

[6]      Mr Tao will be entitled to sustain his caveat if it is reasonably arguable that he has a beneficial interest in the property.

[7]      The beneficial interest claimed by Mr Tao is described by Ms Reed in her submissions as follows:1

The applicant claims that he has caveatable interest on the grounds that:

a.The applicant has a beneficial interest in the property by virtue of an implied  trust  which  arose  by  the  applicant  paying  the  sum  of

$110,000 to the registered proprietor and that money constituted the

purchase price of the property and was also applied towards finance arrangements over the property.

b.        The applicant did not intend to divest any of his interest in the

$110,000 provided to the respondent.

c.The  applicant  therefore  retains  a  beneficial  (sic)  in  the  property proportionate to his contribution.

[8]      Ms Reed relies on Westdeutsche Landesbank Girozentrale v Islington London Borough Council for the proposition that where a person pays money towards the purchase price of property which is eventually registered in another person’s name, the law presumes that that person did not intend to make that payment as a gift, and the registered proprietor holds the property in trust in proportion to the contribution

made by the person.2

[9]      Ms Reed submits that there is no evidence that Mr Tao intended to confer a beneficial interest in the money he paid into Ms Chen’s account.   He received no consideration for the payments as his daughter never took ownership of the business.

[10]     The first  point  of difficulty with  these submissions  is that  only the first payment  ($50,000)  was  used  to  help  buy  the  caveated  property  ($45,000  on Ms Chen’s evidence).   Therefore, any equitable retention of interest in the money which could give rise to a caveatable interest in the property is limited to the first payment.

[11]     The second point of difficulty is that the evidence shows that Mr Tao made his  payments  on  behalf  of  his  daughter  to  enable  her  to  purchase  Ms Chen’s

business.   He was not the purchaser of the business.   The Westdeutsche principle

1 Synopsis of submissions for the applicant, dated 19th day of March 2015, at [3].

2      Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL).

does not apply.   This was a simple business transaction with no question of reservation of equitable interest.

[12]     The third point of difficulty is that there is no evidence that Mr Tao even knew that his first payment was to be used by Ms Chen to help buy land.  In other words, there is no evidence that that was a purpose he had.   The evidence is that Ms Tao wanted to buy Ms Chen’s business and persuaded Mr Tao to advance Ms Tao the purchase price in two payments.   Ms Reed accepts that there was never any contact between Mr Tao and Ms Chen.  Mr Tao’s dealings were with his daughter.

[13]     I accept that intention to acquire an equitable interest in a property is not necessarily a prerequisite to the creation of an equitable interest.  But, here, there is no evidence that this was other than an arm’s length business transaction between Ms Tao and Ms Chen which Mr Tao facilitated by assisting Ms Tao with finance.

[14]     Mr Tao was never entitled to caveat the property.

[15]     I note that, in her submissions, Ms Reed advances another argument  not heralded in the originating application for orders to sustain the caveat.  She submits that there is an  arguable case that Ms Chen holds a proportion of the caveated property on constructive trust for Mr Tao in value equal to the money he advanced. Ms Reed submits that on the evidence it can be argued that there was a relationship of employer and employee between Ms Chen and Ms Tao.  Ms Chen owed fiduciary duties to Ms Tao, which Ms Chen breached by dishonestly holding herself out as capable of selling the business to Ms Tao.

[16]     The problem with this argument, taken at face value, is that no fiduciary duty was owed to Mr Tao.

Decision

[17]     The application is dismissed.

[18]     Ms Chen is entitled to costs.  I fix these on a 2B basis.  If the parties disagree

on quantum, they can be calculated by the Registrar.

Brewer J