Zhong v Wu

[2022] NZHC 3322

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-001822

[2022] NZHC 3322

UNDER

The Land Transfer Act 2017

BETWEEN

XING ZHONG

Applicant

AND

XIAOQING WU

First Respondent

TOWER LAW LIMITED

Second Respondent

CIV-2022-404-001823

UNDER

The Land Transfer Act 2017

BETWEEN

XING ZHONG

Applicant

AND

ERYUN CAO

First Respondent

SAM C S NGU
Second Respondent

…/2 cont’d

Hearing:	(On the papers)
Judgment:	9 December 2022

JUDGMENT OF VENNING J

This judgment was delivered by me on 9 December 2022 at 3.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

ZHONG v WU & ORS [2022] NZHC 3322 [9 December 2022]

CIV-2022-404-001942

UNDER

The Land Transfer Act 2017

BETWEEN

XING ZHONG

Applicant

AND

NIKUL PANSILA

First Respondent

CHURTON HART AND DIVERS LIMITED

Second Respondent

Solicitors:           Carson Fox Bradley Ltd, Auckland Counsel:   R O Parmenter, Auckland

Copy to:            Applicant

Introduction

[1]    In these three applications Xing Zhong seeks an order against the named respondents that caveats lodged by the respondents and described in the applications be removed upon the registration of transfer by him to a mortgagee’s purchaser pursuant to power of sale. He also seeks orders that the respondents, by their agents or otherwise, be permanently restrained from lodging, attempting to lodge, or instructing any other person or entity to lodge any caveats against the titles to the properties.

[2]The applications are opposed by the respondents.

Background

[3]    The basis for the applications is that Mr Xing says he has cancelled the sale and purchase agreements between Green Land Investment Limited (Green Land) and the purchasers which the respondents, either directly or indirectly, derive their interest in the property through. Mr Xing says that Green Land is now insolvent and any agreements signed between Green Land and other parties are voidable.

[4]    The respondents in each case oppose the application to remove the caveats. They rely on a judgment of Jagose J in Li & Ors v Green Land Investment Ltd & Ors,1 which confirmed their interest in the lots. They note that, subject to any appeals or cross-appeals Mr Xing is bound by the judgment of Jagose J in which His Honour held the various mortgagee sales relied on by Mr Xing, (including that of the subject land) are “void, of no effect”, and that Green Land “remains liable on its agreements with the plaintiffs”.2

[5]    As to the proposed injunction the respondents say there is no basis for a quia timet injunction and the balance of convenience favours not restricting the respondents from what could be a legitimate action in lodging a caveat, particularly given the proscription of a second caveat under s 146 of the Land Transfer Act 2007, and that there is no undertaking as to damages to support the application.

1      Li & Ors v Green Land Investment Ltd & Ors [2022] NZHC 1906.

2 At [61].

[6]    This judgment should also be read with a further judgment in Li & Ors v Green Land,3 in which the Court rejected Mr Xing’s application to vary an injunction which prevents him from, inter alia, exercising any power of sale under mortgages in respect of the land.

[7]    The starting point in each case is whether the respondents have a caveatable interest sufficient to support the caveat lodged against the property.

CIV-2022-404-1823 – Eryun Cao

[8]    Eryun Cao claims a caveat in relation to lot 95, DP 517973 pursuant to an agreement for sale and purchase dated 14 July 2018 between Zhong Wei Zhou, as vendor, and Eryun Cao as purchaser. Zhong Wei Zhou in turn had a prior agreement with Green Land dated 29 August 2014. An unconditional agreement for sale and purchase passes a beneficial or equitable estate to the purchaser which supports a caveatable interest.4 An assignee of the purchaser’s interests under an agreement for sale and purchase or subsequent purchaser can maintain a caveat. Even a conditional contract will not necessarily prevent the caveator from obtaining an equitable interest in the land capable of sustaining a caveat.5 Further, in the present case, in Li & Ors v Green Land, Jagose J has in any event confirmed that he was inclined “to order Green Land’s specific performance of the plaintiffs’ agreements”.6

CIV-2022-404-1942 – Nikul Pansila

[9]    Nikul Pansila claims a caveatable interest over lot 64, DP 517973, on the basis of an agreement for sale and purchase dated 6 March 2018 between Zhong Wei Zhou, as vendor, and the caveator, Nikul Pansila as purchaser. Zhong Wei Zhou in turn had an unconditional agreement for sale and purchase with Green Land dated 29 August 2014.

3      Li & Ors v Green Land Investment Ltd & Ors [2022] NZHC 3321.

4      Foreman v Hazard [1984] 1 NZLR 586, 594; and Holt v Anchorage Management Ltd [1987] 1 NZLR 108, 114.

5      McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612.

6      Li & Ors v Green Land Investment Ltd & Ors, above n 1, at [67].

CIV-2022-404-1822 – Xiaoqing Wu

[10]   Xiaoqing Wu claims a caveat over lot 94, DP 517973. Mr Wu claims a caveatable interest in an agreement for sale and purchase dated 1 September 2020 (sic). The original agreement for sale and purchase was an unconditional agreement between Green Land and G L Zhang, dated 1 September 2014. By deed of nomination dated 24 April 2015 G L Zhang nominated Jiyuan Wu as purchaser under the agreement. Then by deed of nomination dated 17 June 2020 J Wu nominated Xiaoqing Wu as purchaser.

[11]   The reference to a sale and purchase agreement dated 1 September 2020 is in error. It should be 1 September 2014, as the date of the original agreement for sale and purchase. Mr Wu, as a sub-purchaser, has an equitable interest in the land which will support a caveat.7

[12]   The position then is that all caveators have an interest in the land subject to the caveat which would support the maintenance of their caveats over the property at present.

The application

[13]   Mr Xing has filed an affidavit in support of his application. In it he makes submissions and refers to correspondence with Green Land’s lawyers. Mr Xing submits the sales and purchase agreements (and nominated/assignment) were never consented to by Green Land, or the mortgagors.

[14]   The difficulty for Mr Xing with that submission is that Green Land’s and the ANZ’s consent was not required for the sub-purchases and the agreements provided for the possibility of a nominee. Further, in terms of Jagose J’s judgment the purchaser (including the assignees and nominees) are prima facie entitled to specific performance. The Judge held the purported mortgagee sales, which Mr Xing relied on, were void, of no effect.

7      Scott v Broadlands Finance Ltd [1972] NZAR 268; and Catchpole v Burke [1974] 1 NZLR 266, [1974] 1 NZLR 620 (CA).

[15]   In the correspondence Green Land’s solicitors has confirmed that neither its shareholders nor directors will be making any further capital contributions to the company. However, that does not affect the caveators’ abilities to settle with Green Land and put it in funds.

[16]   While s 141 of the Land Transfer Act 2017 provides that the Registrar may register an instrument to transfer an estate or interest in land if the transfer results from the exercise of a power of sale under a registered mortgage over the estate or interest, that is subject to the caveat being lodged after registration of the registered mortgage.8 In the present case each of the caveats was lodged prior to the transfer of the ANZ mortgage to Mr Xing.

[17]   For the reasons given in the judgment issued contemporaneously in Li & Ors v Green Land & Ors,9 it is at least arguable that Mr Xing should cede priority to the caveators’ interests in the land in those circumstances and given the circumstances in which the ANZ mortgage was assigned to Mr Xing.

[18]   The caveators have a clearly arguable case for the interest they claim. In Pacific Homes Limited (in receivership) v Consolidated Joineries Limited the Court of Appeal considered the residual discretion to remove a caveat once a reasonably arguable case has been established for the caveatable interest.10 The Court confirmed that:

An order will be made for removal only where the Court is completely satisfied that the legitimate interests of the caveator will not thereby be prejudiced. If, on the facts of a case, it can be seen that the caveator can have no reasonable expectation of obtaining benefit from continuance of the caveat in the form of the recovery of money secured over the land or specific performance of an agreement … then it may be appropriate for the caveat to be removed notwithstanding that the right to the claimed interest is undoubted.

In the present case the appellant has not put before the Court information on the basis of which the Court can be sure that there will in the end result be no legitimate benefit to the respondent from maintaining its caveat. …

8      Land Transfer Act 2017, s 141(1)(b).

9      Li & Ors v Green Land & Ors, above n 3.

10     Pacific Homes Limited (in receivership) v Consolidated Joineries Limited [1996] 2 NZLR 652.

[19]   Similarly, in the present cases, given the undoubted caveatable interest the respondents hold Mr Xing fails to satisfy the Court that there is no legitimate potential benefit to the caveators (which in this case would be by way of an ultimate order for specific performance) from the maintenance of their caveats.

[20]   For those reasons the application to remove the caveat in each case is dismissed.

Costs

[21]   The caveators are entitled to costs on a 2B basis for the notices of opposition and affidavits in opposition in each case, but only one set of submissions is allowed. They are also to have disbursements as fixed by the Registrar.

Venning