Zhao v Zheng - [2023] NZHC 983

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-463-71

[2023] NZHC 983

UNDER the Land Transfer Act 2017

IN THE MATTER

of an application under s 143 of the Land Transfer Act 2017

BETWEEN

TENG ZHAO

Applicant

AND

JING ZHENG

Respondent

Hearing: 23 February 2023

Appearances:

K Sun for the Applicant D Liu for the Respondent

Judgment:

28 April 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 28 April 2023 at 4.30pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Capstone Law, Auckland Heritage Law, Auckland

ZHAO v ZHENG [2023] NZHC 983 [28 April 2023]

Introduction

[1] This is an application by Ms Teng Zhao that a caveat she has lodged over a property owned by Mr Jing Zheng not lapse. Ms Zhao and Mr Zheng are parties to an agreement dated 17 January 2018 (Agreement) which states:
I, Jing Zheng, (7 Harrowglen Drive, Auckland) promise to pay Teng Zhao the sum of NZD$200,000 within 5 years time from today’s date.
If payment has failed within this range of time, Jing should sell the property of 198 Taharepa Road, Taupo. Certificate of title as attached.

[2] Ms Zhao lodged the caveat over the property at Taharepa Road, Taupo (Property) on 31 May 2022.

[3] The interest claimed on the caveat is “an equitable mortgage … pursuant to a loan agreement dated 17 January 2018”. The description continues:

Under the Agreement, if the loan is not repaid to the Caveator within 5 years from 17 January 2018, the Registered Owner must sell the property … to repay the loan.

[4] Shortly after the caveat was lodged, Mr Zheng applied for its removal. Mr Zheng says the Agreement is not enforceable as it was signed under duress. In any event, Mr Zheng strongly disputes Ms Zhao’s assertion that the Agreement amounted to an equitable mortgage over the Property.

[5] Counsel for Ms Zhao submits that if the Court does not accept that it is arguable that there is an equitable mortgage, Ms Zhao instead relies on there being an equitable charge over the Property. An issue would then arise as to whether the caveat is defective by describing the interest as an equitable mortgage rather than an equitable charge.

[6] Counsel for Ms Zhao submits that if the Court finds that the caveat is defective, one option would be for the Court to permit a second caveat to be lodged on the basis of the equitable charge.

Issues

[7]The issues are therefore as follows:

(a)Is there an arguable case for an equitable mortgage?

(b)If not, is there an arguable case for an equitable charge?

(c)If so, is the caveat description defective because it refers to an equitable mortgage instead of an equitable charge?

(d)If the caveat is defective, should leave be granted to lodge a second caveat?

(e)If leave is granted for a second caveat, should any conditions be…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 983
Decision Date: 28 April 2023

CaseChat Overview and Summary

This case involves an application by Ms Teng Zhao to prevent her caveat over a property owned by Mr Jing Zheng from lapsing. The property in question is located at 198 Taharepa Road, Taupo. Ms Zhao and Mr Zheng are parties to an agreement dated 17 January 2018, which states that Mr Zheng promised to pay Ms Zhao NZD$200,000 within five years. If the payment was not made within this time frame, Mr Zheng was to sell the property to repay the loan. Ms Zhao lodged the caveat over the property on 31 May 2022, claiming an equitable mortgage or equitable charge over the property pursuant to the loan agreement. Mr Zheng applied for the removal of the caveat, arguing that the agreement was signed under duress and that it did not amount to an equitable mortgage. The issues in this case were whether there was an arguable case for an equitable mortgage or equitable charge, whether the caveat description was defective, and if leave should be granted to lodge a second caveat. The court found that there was not an arguable case for an equitable mortgage, but it was arguable that there was an equitable charge. The caveat was defective as it referred to an equitable mortgage instead of an equitable charge. Leave was granted to lodge a second caveat on the basis of an equitable charge, with the condition that Ms Zhao must file and serve a proceeding seeking repayment of the NZD$200,000 loan and enforcement of the equitable charge by 31 May 2023. Costs were reserved for determination once the substantive outcome is known.

Orders