Zheng v Xing
[2023] NZHC 2692
•26 September 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV- 2023-404-1060
[2023] NZHC 2692
UNDER Section 142 of the Land Transfer Act 2017 IN THE MATTER
of an application for an order removing caveat no. 12702662.1 (North Auckland Registry)
BETWEEN
YUN ZHENG
Applicant
AND
ZHONG XING
Respondent
Cont’d
Hearing: 18 September 2023 Appearances:
R O Parmenter for Applicants Respondent in person
Judgment:
26 September 2023
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 26 September 2023 at 4.30 pm pursuant to r 11.5 of the High Court Rules 2016.
………………………………
Registrar/Deputy Registrar
Solicitors:Churton Hart & Divers, Auckland C S Ngu, Auckland
Ku & Partners, Auckland
Winston Wang & Associates, Auckland
Copy to: Respondent
ZHENG v XING [2023] NZHC 2692
CIV-2023-404-1124
UNDER Section 142 of the Land Transfer Act 2017 IN THE MATTER
of an application for an order removing caveat no. 12702677.1 (North Auckland Registry)
BETWEEN
MENGQIU WANG and YANGXUAN WANG
Applicants
AND
ZHONG XING
Respondent
CIV-2023-404-1245
UNDER Section 142 of the Land Transfer Act 2017 IN THE MATTER
of an application for an order removing caveat no. 12702686.1 (North Auckland Registry)
BETWEEN
WMW TRUSTEE LIMITED
Applicant
AND
ZHONG XING
Respondent
CIV-2023-404-1388
UNDER Section 142 of the Land Transfer Act 2017 IN THE MATTER
of an application for an order removing caveat no. 12702694.1 (North Auckland Registry)
BETWEEN
AIXUAN GUO and QINXIN ZENG
Applicants
AND
ZHONG XING
Respondent
Preliminary
[1] I have before me four applications to remove caveats lodged by the respondent, Mr Zhong Xing. As a preliminary issue, I grant leave to amend the applicant’s name in CIV-2023-404-1245 to WMW Trustee Ltd, which was inadvertently transposed in the application to “MWM”.
[2] A caveator is required to show “a reasonably arguable case” for a caveatable interest under s 138 of the Land Transfer Act 2017.1 The question is whether the caveator has a present interest in land.2 A purely contractual or personal right will not support a caveat.3
[3] Each of the caveats here are said to be founded on “a beneficial interest in [the land] [pursuant] to a constructive trust of which the registered owner as trustee (assigned sealed Court order 4.8.2022)”. For reasons I set out below I find that Mr Xing has no caveatable interest in the land he has caveated. The caveats must be removed.
Background
[4] The background is that each of the applicant parties was a plaintiff in a proceeding in the Auckland High Court4 claiming specific performance of agreements to buy their respective 22 lots from Green Land Investment Ltd (Green Land) in a 30-lot residential subdivision situated in Ormiston Road, East Tamaki. The plaintiffs contended that mortgagee sales by which the lots were transferred away from Green Land were invalid.
[5] The plaintiffs had obtained a without notice interim injunction preventing the Registrar-General of Land from registering transfers of any of the 30 titles in the subdivision consequent on the impugned mortgagee sales, later varied to exclude the eight titles to which the plaintiffs had no claim.5 The undertaking (as varied) was in
1 Sims v Lowe [1988] 1 NZLR 656 (CA) at 660 per Somers and Gallen JJ.
2 Philpot v NZI Bank Ltd (1989) 1 NZ ConvC 190,246 (CA) at 190,248.
3 Neil Campbell (ed) Hinde McMorland & Sim Land Law in New Zealand (online ed, LexisNexis) at [10.010].
4 Li v Green Land Investment Ltd [2022] NZHC 1906 [Liability Judgment].
5 At [3].
favour of all defendants. Mr Xing and his company, Xing Enterprises Ltd (XEL) were the third and fifth defendants.
[6] Following a March 2022 trial in this proceeding, on 4 August 2022 Jagose J issued a judgment on liability (Liability Judgment).6 Jagose J found in favour of the plaintiffs that the mortgagee sales of Green Land’s lots to Mr Xing and on to XEL were void and of no effect, and that Green Land remained liable on its agreements to sell to the plaintiffs.7
[7] Green Land made three counterclaims in the proceeding. Jagose J dismissed the first counterclaim founded on the plaintiffs’ undertaking to pay damages sustained through the earlier injunction relating to the eight additional lots in the subdivision released from the undertaking. This was in part on the basis that the mortgagee sale of these lots was of no effect either, so there would be no loss sustained through the injunction.8 On this basis, he also dismissed the second counterclaim which related only to the 18th plaintiff.9
[8] The third counterclaim was for trespass damages. This arose because in the delay between entering into the agreements for sale and purchase (most in 2014) and the time for settlement when titles were issued (February 2021), some of the plaintiffs had built houses on the lots they were buying. This is despite the lots not having settled and the plaintiffs not yet being registered proprietors. The plaintiffs admitted liability on this counterclaim. By the end of the hearing the parties had agreed a per annum sum for trespass damages and the period for which that would apply in each case.10
[9]In addressing the substance of this counterclaim Jagose J said:
[65] Last, on Green Land's claim for trespass damages, necessarily founded on Green Land's continued possession of the lots, the parties have agreed an annual $19,500 rate per lot. Mr Lowery has specified the periods for which such rates should apply to the trespassed lots; Mr Parmenter said in closing he accepted those calculations. I would award damages on this third counterclaim accordingly.
6 Liability Judgment, above n 4.
7 At [61].
8 At [63].
9 At [64].
10 At [65].
[10] In a following section on “Remedy”, Jagose J made observations on complications with proceeding to grant relief having regard to the limited evidence and argument before him.11 In the course of this discussion he said:
[67] My inclination is to order Green Land’s specific performance of the plaintiffs’ agreements, and the trespassing plaintiffs pay the agreed damages to Green Land.
[11] One complication arose due to outstanding issues about application of the proceeds of the settlement of the plaintiffs’ agreements. Mr Xing claimed to be entitled to some or all of these proceeds due to having paid off some of Green Land’s indebtedness arising out of the facts underlying the purported mortgagee sales.12 Jagose J also recorded that he had no evidence on whether the plaintiffs were ready, willing and able to settle.13 There was a further complication that XEL remained a registered owner of the titles at issue.
[12] In light of the complications, on which there was insufficient argument or evidence, his Honour directed that counsel file draft orders and set up a process for argument on relief if the orders could not be agreed.14
[13] The parties were unable to agree the form of the orders. These were therefore addressed at a remedy hearing on 1 May 2023, with judgment issued on 7 June 2023 (Remedy Judgment).15 Orders giving effect to this judgment were sealed on 25 July 2023 (July 2023 Orders). They included orders:
[2] The following notices of default under the Property Law Act 2007 are invalid and ineffective:
…
(c) Notice issued by Mr Xing dated 11 March 2022.
…
[7]Green Land is to specifically perform all the agreements for sale and purchase it has with the [applicants] including the payment of penalty interest in accordance with the varying provisions therefor under the
11 At [68].
12 At [68]–[69].
13 At [68].
14 At [71]–[72].
15 Li v Green Land Investment Ltd [2023] NZHC 1399 [Remedy Judgment].
respective agreements for sale and purchase to the intent that Green Land must transfer [the lots] claimed by them.
[8]All settlements arising under [the above order] are to occur within the earlier of six weeks from 7 June 2023 or 10 working days of Green Land’s notifying the [applicants] that it is ready, willing and able to complete settlement.
[9]Under Green Land’s fourth counterclaim [the applicants] shall pay to Green Land damages in trespass to land at the rate of $19,500 pa (includes GST, if any) from the given dates until settlement of [the applicants’] sale and purchase agreements as above decreed [with the dates relative to the respective plaintiffs then set out].
[10]In respect of the settlements arising under order 7 hereof:
a. The plaintiffs named in order 9 hereof shall pay Green Land the trespass damages hereunder contemporaneously with the sum required for settlement.
b. After payment by Green Land of reasonable sale-related legal fees, disbursements and land agents’ commission (if any), pending further or other order of the Court, the balances of settlement moneys shall be held on a weekly term interest bearing deposit by a neutral solicitor stakeholder …
…
[17] The first defendant’s first counterclaim is dismissed.
[14] The applicants have provided calculations indicating that the penalty interest component under the respective agreements will exceed the trespass damages.
[15] I was advised by Mr Parmenter for the applicants that appeals against both the Liability Judgment and the Remedy Judgment have recently been deemed abandoned by the Court of Appeal. There remain some cross-appeals at play which I do not need to expand on for present purposes. Mr Xing also issued proceedings on 28 October 2022 against the applicants and other parties under CIV-2022-404-2344. Mr Xing’s statement of claim in that proceeding is difficult to follow but appears to be based on losses said to flow from the undertaking as to damages referred to earlier.
[16] The plaintiffs in the proceeding are in the process of applying for ancillary orders under leave reserved to do so in the July 2023 Orders, in light of a lack of co-operation by Green Land in effecting settlement and other matters impeding settlement.
The basis for the caveats
[17] On 4 August 2022, the date the Liability Judgment was issued, Mr Xing obtained a sealed judgment from the Court (August 2022 Orders) which recorded:
The following order(s) were made:
[65] Last, on Green Land's claim for trespass damages, necessarily founded on Green Land's continued possession of the lots, the parties have agreed an annual $19,500 rate per lot. Mr Lowery has specified the periods for which such rates should apply to the trespassed lots; Mr Parmenter said in closing he accepted those calculations. I would award damages on this third counterclaim accordingly.
[18]This is the only aspect of the Liability Judgment dealt with in these orders.
[19] Each of the caveats here are said to be founded on “a beneficial interest in [the land] [pursuant] to a constructive trust of which the registered owner as trustee (assigned sealed Court order 4.8.2022)”. The latter is a reference to the August 2022 Orders.
[20] Mr Xing’s arguments for resisting removal of the caveats on the applicants’ titles appear to be as follows:
(a)The August 2022 Orders award payment of the trespass damages. He is an assignee from Green Land of the August 2022 Orders and is therefore entitled to the trespass damages.
(b)The above somehow gives rise to an interest in the applicants’ land under a constructive trust.
(c)In addition, Mr Xing seeks to rely on the undertaking as to damages, given in support of the interim injunction restraining the Registrar- General of Land from effecting registration of the transfers at the outset, to say there is or will be loss caused to him that needs to be compensated by the applicants. Mr Xing says the undertaking as to damages creates a constructive trust because the caveats are needed to protect Mr Xing’s interests.
(d)Mr Xing refers to a notice of default under the Property Law Act 2007 dated 11 March 2022 (not the subject of the Liability Judgment). On the basis of this notice he says he has cancelled the applicants’ sale and purchase agreements and hence there is no right to set-off the trespass damages against penalty interest.
(e)Loss claimed is the financial consequence of the applicants being unable to settle on the sale and purchase agreements. Mr Xing’s position is that the applicants are not ready, willing or able to settle, because they do not have the funds to do so. There is also reference to loss in terms of a claim of $10 million in the proceeding Mr Xing has issued under CIV-2022-404-2344.
(f)The caveats are said to provide security to Mr Xing and XEL against the titles over which they are lodged to ensure he receives the above sums, or the funds he may become entitled to if the agreements are in fact settled (given that there are outstanding issues as to his entitlement to proceeds of settlement).
Discussion
[21] These arguments have no merit. I find that there is no reasonably arguable interest in the titles caveated for the following reasons:
(a)The applicants’ titles that Mr Xing has caveated are not the properties subject to the underlying sale and purchase agreements with Green Land that are addressed in the Liability Judgment and Remedy Judgment. There is no relationship between the caveated properties and Mr Xing’s alleged claims to be paid money. Even if I considered there was any merit in any money claim Mr Xing asserts, at best this would be a personal claim not a claim to an interest in the property caveated. There has certainly been no identification of the basis for a constructive trust over the caveated properties, which is the interest Mr Xing asserted.
(b)Putting that fundamental issue to one side, Mr Xing faces the factual problem that I have no evidence before me of the asserted assignment by Green Land. His affidavit filed in response to the applications maintains that the “caveat suggests that Green Land assigned the benefit for the judgment for trespass damages to me”. He has provided no other documents or evidence in support of this proposition. In response to a question from me at the hearing about the basis for assignment, Mr Xing through his interpreter said that he believed that there was an assignment document lodged on one of the Court files. It is not filed in any of the applications before me, and counsel for the applicants says he has seen no such document.
(c)In any event, the August 2022 Orders simply seals paragraph [65] of the Liability Judgment on the trespass counterclaim. On its face, and also in context of the remedy section of the Liability Judgment, paragraph [65] was not a present award of damages or an award for payment of damages in a judgment sum. Sealing the paragraph did not turn it into this. If there is a valid assignment of something, it is not an assignment that gives Mr Xing a right to payment of the trespass damages from the applicants.
(d)By the Liability Judgment, the parties were directed to address the form of orders, and these were to be the subject of the remedy hearing, should orders not be agreed. In fact, the remedy hearing was then required. The July 2023 Orders giving effect to the Remedy Judgment do make an award for payment of the trespass damages in favour of Green Land. However, the trespass damages are to be paid to Green Land and settled contemporaneously with settlement of the agreements, with the settlement to account for penalty interest payable by Green Land for late settlement. The applicants say the penalty interest component will significantly exceed the trespass damages.
(e)To the extent that Mr Xing relies on a Property Law Notice he issued dated 11 March 2022, this notice is declared invalid under the July 2023 Orders.
(f)Mr Xing’s suggestion that the applicants do not have the financial means to settle the sale and purchase agreements was not supported by sufficient evidence before me. Moreover, whether the plaintiffs are ready, willing and able to settle was an issue Jagose J identified in the Liability Judgment as one he would need evidence on before granting relief. The Remedy Judgment does not specifically deal with the plaintiffs’ ability to settle, but orders for specific performance were made. It is implicit that the Court was satisfied that the applicants have an ability to settle.
(g)To the extent that Mr Xing is relying on barriers to settlement due to pending dealings that are currently impeding settlement, it appears that these are the subject of ancillary orders being sought by the applicants pursuant to leave reserved in the July 2023 Orders. The application for ancillary orders also addresses the fact that settlement has not yet occurred other than due to conduct by the applicants.
(h)Mr Xing relies on the claims advanced in CIV-2022-404-2344 and asserts to be entitled to claim against the applicants on the undertaking as to damages given by the plaintiffs to support interim relief. If there was any merit in this assertion, it would give rise to a personal claim only. Moreover, it is not the basis of the caveats that were lodged, which rely on a constructive trust due to the asserted assignment of the August 2022 Orders (relating to trespass damages). With those fundamental flaws, it is not necessary for me to consider the legal and factual basis for Mr Xing’s asserted claim on the undertaking, which was difficult to follow. As I noted earlier, Jagose J dismissed Green Land’s counterclaim under the undertaking in part on the basis of his
finding that any mortgagee sales of the lots in Green Land’s subdivision were of no effect.16
(i)To the extent that Mr Xing is concerned to secure the proceeds of settlements when they occur, the Court has directed that these are to be held by a neutral solicitor given the competing claims to those funds. The caveats lodged do not reference this issue in any case.
[22] In summary, the material provided to me demonstrates no underlying claim nor any arguable interest in the titles caveated.
Orders and costs
[23] I make an order pursuant to s 142 of the Land Transfer Act 2017 that the caveats lodged by Mr Xing that are the subject of these four applications be removed.
[24] The applicants are successful and are entitled to costs. Mr Parmenter did not seek an order for indemnity costs, while noting that this would have been appropriate. Instead he provided me with a schedule of scale costs for each application.
[25] He has claimed full 2B costs for each step where the relevant costs are discretely applicable to an application. Where steps have been for the benefit of more than one applicant he has allocated a share of these. Some are split two ways for this reason and some are split four ways, depending on the benefit for whom the relevant step was taken. All costs sought are 2B costs apart from the preparation of the bundle. For that step, Mr Parmenter sought 2C costs, to recognise that while there was one bundle, it required compilation of documents for all four applications, and hence justifies the greater time allocation.
16 Liability Judgment, above n 4, at [63].
[26] I accept that Mr Parmenter’s approach and allocations are appropriate. Accordingly, I order the following costs and disbursements in respect of each of the applications:
Costs Disbursements (a)
Zheng application (1060):
$9,289.93
$1,427.14
(b)
Wang application (1124):
$11,440.93
$1,427.14
(c)
WMW application (1245):
$8,572.93
$1,227.14
(d)
Guo and Zeng application (1388):
$10,245.93
$1,427.14
Anderson J
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