Zhao v Wang
[2017] NZHC 2761
•10 November 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001608 [2017] NZHC 2761
BETWEEN RICHARD ZHAO
First Appellant
RICHARD ZHAO LAWYERS LIMITED Second Appellant
AND
MICHAEL WANG First Respondent
FRANCIS SUN Second Respondent
Hearing: 9 November 2017 Appearances:
D Zhang for Appellants
J M Skinner for RespondentsJudgment:
10 November 2017
JUDGMENT OF VENNING J
This judgment was delivered by me on 10 November 2017 at 3.00 pm, pursuant to Rule 11.5 of the
High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Richard Zhao Lawyers Ltd, Auckland
Skinners Law, Auckland
ZHAO v WANG [2017] NZHC 2761 [10 November 2017]
Introduction
[1] In a judgment delivered on 7 June 2017 Judge G M Harrison declined the appellant’s application for summary judgment as defendants.1
Background
[2] On 3 September 2012 the first respondent Mr Wang, the second respondent Mr Sun and Ms Huan (known as Jenny) made an agreement (the syndicate agreement) recording that the three of them had agreed to buy a section known as Lot 14, Silverdale (the property). They agreed to equally share the costs of the purchase and the development and to equally share the profits of the development. The agreement recorded that all three were “regarded as joint owners for this property”. The agreement also recorded that the named purchaser was not the actual owner. The named purchaser was Jeter Liu, (Jenny’s husband) who also signed the agreement. Mr Liu had previously, on 25 August 2012 entered an agreement for sale and purchase (SPA) of the section. The SPA recorded the purchaser was Mr Jeter Liu and/or nominee.
[3] In the District Court Messrs Wang and Sun plead that it was further agreed they would contribute $15,000 each prior to settlement towards the deposit. They say they paid their share to Jenny to pass on.
[4] Difficulties arose between the parties to the syndicate agreement prior to settlement of the purchase.
[5] Messrs Wang and Sun plead that, in contravention of the syndicate agreement, Jenny refused to agree to put their names on the title. Mr Wang and Mr Sun objected, but ultimately Jenny and Mr Liu used different lawyers to settle the purchase of the property. Mr Liu nominated another person, Ms Mei, as purchaser of the property. Ms Mei became the registered owner of the property on 19 December 2012.
[6] On 20 December 2012 Mr Wang and Mr Sun engaged Richard Zhao Lawyers
Limited trading as Amicus Law to represent their interests. They dealt with Mr Zhao.
1 Wang & Anor v Huan & Ors [2017] NZDC 10056.
[7] The contract of retainer included the following brief:
Re [Civil Matters]:
(a). [Perusal of evidences in preparation for the lodgement of Covenant
[sic]];
(b) [Lodge Covenant [sic] on your behalf if sufficient evidences obtained]; and
(c) [Drafting letter to other party’s lawyer on your behalf].
[8] On 21 December 2012 the appellants submitted a caveat to Land Information New Zealand (LINZ) for registration on behalf of the respondents. That application was rejected by letter dated 15 January 2013. LIMZ sought clarification of the interest claimed in the caveat as the interest claimed did not appear to disclose a caveatable interest.
[9] On 18 January 2013 the appellants presented a further caveat for registration which was accepted.
[10] In February 2013 Jenny and Ms Mei tried to sell the property but were unable
to do so because of the caveat. There then followed a series of communications between the appellants and lawyers for Jenny in an attempt to resolve the dispute. It is implicit in those communications from Jenny’s lawyers that she could direct Ms Mei to re-transfer the property if a resolution was achieved.
[11] The dispute remained unresolved. On 23 March 2015 Ms Mei applied to the Registrar-General of Land for the caveat to lapse. On 24 March 2014 LINZ sent notice to the appellants as the address for service of the respondents. The notice from the Registrar engaged the lapse provisions in s 145 Land Transfer Act 1952.
[12] The appellants did not take any steps in response to the notice and the caveat lapsed on 10 April 2015. Subsequently the property was sold to a third party.
[13] The respondents ultimately took proceedings in the District Court against
Jenny and the appellants. In their amended statement of claim they plead the
appellants owed them a duty to act with competence and in a timely way and allege that the duty of care was breached by:
failing to sustain the caveat lodged over the property within the prescribed period of time or to provide the plaintiffs with reasonably and timely advice on their rights to apply to sustain the caveat.
[14] The loss claimed is “damages to compensate for the loss”.
[15] The appellants applied to the District Court for orders:
(a) dismissing or staying the proceedings;
(b) granting summary judgment;
(c) ordering the plaintiffs to provide further and better particulars;
(d) costs and related procedural orders.
The District Court judgment
[16] The Judge focused on the application for summary judgment by the appellants as defendants. The Judge noted that the appellants’ submissions were:
(a) the respondents had no caveatable interest in the property;
(b)Mr Zhao had deposed he had never received advice from LINZ that an order sustaining the caveat had to be obtained;
(c) the respondents had suffered no loss; and
(d)the respondents had been guilty of unacceptable delay in pursuing their rights.
[17] After referring to the relevant authorities applicable to an application by the defendants for summary judgment2 the Judge noted that the caveat had lapsed because
2 Westpac Banking Corporation v M M Kembla NZ Ltd [2001] 2 NZLR 298; and Jones v Attorney-
no steps had been taken to sustain it. He noted there had been no judicial determination that the respondents did not have a caveatable interest. He considered that would require consideration of the relevant evidence at a full hearing.
[18] On the issue of notice the Judge noted that s 240D Land Transfer Act 1952 provided that, in the absence of proof to the contrary, the notice was taken to be delivered when it would in the ordinary course of business be delivered. The notice was correctly addressed and there was no evidence the notice had not been received other than Mr Zhao’s assertion he had not received it. That needed to be tested and could not be resolved without a hearing.3
[19] The Judge next rejected the proposition the respondents had suffered no loss. He considered that at the least their loss was essentially a loss of chance to benefit from the increased capital and value of the land and/or its development. The Judge rejected the submission that the respondents’ damages must be crystallised before they could claim to have suffered any loss. He considered that quantification of loss also needed to follow a full hearing on the evidence.
[20] Finally the Judge rejected the submission that delay was sufficient to defeat a caveatable interest.
[21] For completeness the Judge rejected the argument the proceedings should be struck out. The Judge directed a case management conference to deal with other procedural issues.
The appeal
[22] In support of the appeal the appellants repeat a number of the arguments raised before the Judge. Mr Zhang argued that:
(a) The respondents did not have any caveatable interest in the property in question;
General [2004] 1 NZLR 433.
3 This finding was not challenged on appeal.
(b) Any caveatable interest was lost by laches;
(c) The respondents had not suffered any loss due to the appellants’ alleged negligence;
(d)Any loss they may suffer has not been crystallised, and/or needed to be crystallised before their cause of action applied;
(e) The caveat was not on Jenny’s property. There was no nexus between the negligence and the loss pleaded;
(f) The breach of contract pleaded preceded the negligence pleaded. There was no rational connection between the two.
(g)A stay of the claims against the appellants should have been granted pending the trial against any co-defendants;
(h) The Judge failed to give due reasons and/or was plainly wrong.
[23] A number of the points, particularly on the issue of loss, overlap.
Caveatable interest
[24] The principal argument for the appellant is that the respondents did not have a caveatable interest in the property, so they have suffered no loss, even if the appellants were negligent. Mr Zhang submitted that the Judge failed to engage with his submission the respondents did not have a caveatable interest in the property. He argued the Judge should have determined that issue. He submitted that raised a question of law which could be dealt with on a strike out or summary judgment application. Mr Zhang is correct insofar as the jurisdiction to dismiss or strike out is not excluded by the need to decide difficult questions of law which may require extensive argument,4 but for the reasons that follow that was not the real point before
the Judge or on this appeal.
4 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA); and Couch v Attorney-General
[2008] 3 NZLR 725.
[25] Mr Zhang submitted the respondents had no caveatable interest on a number of grounds. First, they did not have a contract with Mr Liu. Mr Liu obtained no consideration for entering the syndicate agreement. Next, Mr Liu nominated Ms Mei to purchase the property, but the respondents make no claim against Ms Mei. Mr Zhang also submitted that Jenny denied that the respondents paid any money for an interest in the property.
[26] While Mr Liu was not named as a member of the syndicate, he signed the syndicate agreement which acknowledged the actual “owners” were Jenny and the respondents. The pleadings and the limited evidence support a preliminary finding that the respondents each paid $15,000 to Jenny for the deposit. There is evidence that Mr Wang, at least, transferred $15,000. The payment, even though made after the SPA was entered by Mr Liu, provided consideration to the extent that it either released or reimbursed Mr Liu from the obligation to pay the deposit. That enabled Mr Liu to keep the SPA on foot and ultimately to nominate the purchaser and settle the purchase of the property.
[27] It is unnecessary for the respondents to claim against Ms Mei at this time. If the appellants had advised them of the notice, the application to sustain the caveat would have named Ms Mei (as the registered owner) as the respondent. However, the opportunity to do that was lost by the appellants’ failure to advise them of the notice.
[28] While Jenny may deny the respondents paid anything towards the property, the current pleading alleges they transferred their share of the deposit to Jenny and also that they agreed and were ready to pay their share of the purchase price on settlement, but were prevented from doing so. That pleading must be deemed to be true at this stage of the proceeding.5
[29] Next, Mr Zhang submitted that even if enforceable the syndicate agreement was a joint venture type agreement which did not support a caveatable interest. Mr Zhang relied on the Court of Appeal decision of Simperingham v Martin and submitted
the present case was similar.6 In Simperingham v Martin, however, the Court rejected
5 Attorney-general v Prince & Gardner, above n 1, at 267.
6 Simperingham v Martin CA5/95, 2 June 1995.
the claim to a beneficial interest in the land because the entity that was to purchase the land was a company. The moneys contributed by the claimants were contributed for the purchase of shares in the company, not for an interest in the property itself. The present case is distinguishable. The interest in the land created by the SPA was to be held by Mr Liu or nominee on trust for the members of the syndicate until settlement when it was to pass to the members of the syndicate. The basis of the interest in the present case is quite different to that claimed in Simperingham v Martin.
[30] Mr Zhang also relied on the case of Laing v Laing for the proposition it was necessary to be able to sue the proprietor to sustain a caveat.7 Again that case is not relevant to the present facts. At the time Mrs Laing lodged the notice under the Matrimonial Property Act 1976 there was no basis to do so as she was out of time. In the present case the respondents had a caveat which, on the face of it, was validly registered. While it must now be acknowledged that the respondents have no claim against the property because it has been sold to a third party, that does not answer the respondents’s claim for the loss of chance occasioned by the alleged negligence of the appellants. They could have brought proceedings against Ms Mei to sustain the caveat if the appellants had alerted them to the notice.
[31] There is a credible argument for present purposes that the respondents had an arguable case sufficient to sustain the caveat and ultimately, to enforce their interest in the property under the syndicate agreement. The syndicate agreement confirms that although Mr Liu was the named purchaser in the SPA, the intended ultimate purchasers were the members of the syndicate. To that extent Mr Liu held the interest in the property through the SPA in trust for the syndicate investors. There is a pleading and some evidence that the respondents part performed the agreement by paying money towards the deposit and were ready to settle the purchase. It is apparent from the correspondence from Jenny’s solicitors after the caveat was lodged, that Jenny took the view that she could control Ms Mei (who was a business associate of Jenny) and direct the transfer of the property to the syndicate members on terms.8 I infer that Ms
Mei was nominated out of convenience. The above would be sufficient to sustain the
7 Laing v Laing (1988) 4 NZFLR 629.
8 Although it is not conclusive, it is of interest that Jenny considered there to be some merit in the respondents’ claim as while the caveat was registered against the title she sought to negotiate a resolution.
caveat, and perhaps ultimately have led to the claimed share in the property. The opportunity to argue for that interest was lost by the prima facie negligence of the appellants in allowing the caveat to lapse and thus the property to be sold to a third party.
[32] The applicable principles in a claim such as this, namely the loss of chance of success in a civil action were summarised in the case of Mount v Barker Austin as follows:9
1)The legal burden lies on the plaintiff to prove that in losing the opportunity to pursue his claim, he has lost something of value i.e. that his claim (or defence) had a real and substantial rather than merely a negligible prospect of success.
2)The evidential burden lies on the defendants to show that despite their having acting for the plaintiff in the litigation and charged for their services, that litigation was of no value to their client, so that he lost nothing by their negligence in causing it to be struck out. …
3)If and insofar as the court may now have greater difficulty in discerning the strength of the plaintiff’s original claim than it would have had at the time of the original action, such difficulty should not count against him, but rather against his negligent solicitors. …
4)If and when the court decides that the plaintiff’s chances in the original action were more than merely negligible, it will then have to evaluate them. That requires the court to make a realistic assessment of what would have been the plaintiff’s prospects of success had the original litigation been fought out. Generally speaking one would expect the court to tend towards a generous assessment given that it was the defendants’ negligence which lost the plaintiff the opportunity of succeeding in full or fuller measure.
[33] In the case of Sharif & Ors v Garrett & Company (A Firm) the Court of Appeal of England and Wales applied the above principles where the plaintiffs were denied a trial of their claim as it was struck out because of their solicitors’ negligence in failing to advance the proceedings.10 The Court applied the above test and concluded that the appellants had a real and substantial claim against their broker which was lost as a result of the solicitors’ negligence. Despite that, the Court acknowledged that the claim was not entirely straightforward. The Court then made an assessment of the
prospects of success which were lost as a consequence of the solicitors’ negligence.
9 Mount v Barker Austin (1998) PNLR 510 at 511. See also Kitchen v Royal Air Force Association
[1958] 1 WLR 563; and Allied Maples Group Ltd v Simmons and Simmons [1995] 1 WLR 1602.
10 Sharif & Ors v Garrett & Company (A Firm) [2001] EWCA Civ 1269.
[34] The difficulty that the appellants face with the present appeal is that at the very least the respondents have an arguable case for loss of a chance as a consequence of the appellants’ negligence. On the pleadings and limited evidence available they had an arguable case to sustain the caveat. Whether they would ultimately have succeeded in establishing the equitable interest they argue for would have been determined at a substantive hearing. Because of the appellants’ failure to advise them of the notice the respondents lost the chance of a favourable outcome.
Delay
[35] Mr Zhang next submitted the respondents’ delay meant the caveat would not have been sustained. He relied on the case of Varney v Anderson.11 In that case the Court of Appeal accepted that, on an application to remove a caveat under s 143 of the Land Transfer Act the Court could take into account delay by the caveator in asserting their right in the property. Where there is a long and unexplained delay in pursuing a caveator’s claim in the property then the caveat may be dismissed. However, in the later case of Pacific Homes Ltd v Consolidated Joineries Ltd12 the Court of Appeal confirmed that the Court will only exercise its discretion to remove a caveat where it can be satisfied the legitimate interests of the caveator will not be prejudiced.
[36] Further, in Varney v Anderson itself the Court of Appeal declined to direct removal of the caveat on the grounds of delay as there was no evidence of prejudice to the land owner. Again, nor is there any such evidence in this case at this stage of the proceeding.
[37] The issue of delay does not arise here because the caveat was allowed to lapse. In the event the application to sustain the caveat had been argued and successfully maintained, the Court would have directed that the interim order be sustained pending a substantive hearing and would have made directions for a substantive hearing. There is no basis to suggest the respondents would not have pursued such proceedings in a
timely manner.
11 Varney v Anderson [1988] 1 NZLR 478.
12 Pacific Homes Ltd v Consolidated Joineries Ltd CA 91/95, 27 June 1996.
No loss suffered, no nexus between Jenny and the appellants and no connection between the contractual breach and negligence
[38] Mr Zhang submitted the caveat by its nature had no intrinsic value and so the respondents had suffered no damage. This overlooks the point noted above which is that the respondents have at the least lost a chance to argue for an interest in the property, which the caveat provided them. The value of that lost chance may ultimately be assessed as somewhat less than suggested by the respondents, but at this stage of the proceedings it cannot be entirely discounted.
[39] Mr Zhang also suggested there was a disconnect. The breach of contract (of the syndicate agreement) by Jenny occurred when Ms Mei was registered as the owner in December 2012, while the negligence alleged occurred in 2015. That is correct, but it does not affect the respondents’ ability to sue the appellants in negligence in the circumstances of this case.
Loss not crystallised
[40] Mr Zhang also made the point that the respondents do not pursue Mr Liu or Ms Mei in the present proceedings. But the claim against the appellants is not dependent on the respondents pursuing a claim against those parties. For the reasons given above the respondents do not need to sue those parties before suing the appellants in negligence.
Stay
[41] Mr Zhang submitted that, at the least, the proceedings should have been stayed pending determination of the respondents’ claim against Jenny and in light of the fact there is no claim against Mr Liu or Ms Mei.
[42] That submission is misconceived. While the claims against Jenny and the appellants are different in nature they can conveniently be heard together. There will be an overlap in the evidence. Further, there is no need for the respondents to pursue a claim against Mr Liu and Ms Mei at this stage. It is for the respondents to determine who they wish to sue.
Result
[43] None of the grounds raised by the appellants on appeal can succeed. The appellants have failed to establish the criteria for summary judgment for a defendant. The strike out cannot succeed as the causes of action the respondents raise against the appellants are arguable. There is no basis for a stay or dismissal of the claims.
[44] The appeal is dismissed.
Costs
[45] The respondents are to have costs on a 2B basis for all steps relating to the appeal and for a half day hearing.
Venning J
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