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High Court of New Zealand Decisions |
Last Updated: 29 June 2023
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV-2022-404-001385
[2023] NZHC 589 |
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BETWEEN
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TINGSONG QIU
Applicant
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AND
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ROBERT JUNGAN WANG
Respondent
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Hearing:
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16 November 2022
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Appearances:
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T A Hwang for the Plaintiff
S R J Hamilton for the Defendant
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Judgment:
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24 March 2023
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JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 24 March 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Queen City Law, Auckland Simpson Lawyers, Auckland
S R J Hamilton, Auckland
QIU v WANG [2023] NZHC 589 [24 March 2023]
Introduction
[1] Tingsong Qiu (Mr Qiu) applies for an order that caveat 12385681.1 registered against a property in Albany, Auckland (the Property) not lapse.1 Mr Qiu says he has an interest in the Property as a beneficiary of a constructive trust, alleging that after purchasing the Property the respondent agreed to hold it on trust for his benefit. He states that he would suffer significant prejudice if the caveat were removed.
[2] The respondent, Robert Wang (Robert), opposes the application. He says that Mr Qiu has no interest in the Property as he never agreed to hold the Property on trust for Mr Qiu. He says if the Court finds it is reasonably arguable that Mr Qiu has an interest, it should exercise its discretion to remove the caveat.
[3] The issues to be determined are:
(a) Has Mr Qiu established that it is reasonably arguable that he has an interest in the Property capable of supporting the caveat?
(b) If yes, can the caveat be removed without prejudicing Mr Qiu’s interest?
Factual background
[4] The property at issue is 14 Stevensons Crescent, Albany, Auckland (legally described as Lot 5 Deposited Plan 430542, record of title 518767). The Property was previously owned by Rivava Trustee Company Ltd (Rivava). Rong Jiang is the sole director and shareholder of Rivava, albeit Mr Qiu controlled the company.
[5] Mr Qiu had been a friend and business associate of Robert’s father, Youren Wang (Mr Wang), for several years. On 30 July 2020, Mr Wang advanced
$2,300,000 to Rivava. The parties entered into a mortgage agreement over the Property, with the mortgage being registered by Mr Wang on 3 August 2020. That year Mr Wang also loaned Mr Qiu $773,220 and the parties entered into a mortgage
1 Land Transfer Act 2017, s 143.
agreement and term loan agreement on 30 July 2020 over a property in Flat Bush, Auckland (Flat Bush property).
[6] On 16 September 2021, Mr Qiu, Rivava and Mr Wang signed a Deed of Arrangement (the Deed). The Deed stated that Rivava and Mr Qiu owed Mr Wang
$3,600,000 plus interest for the sums he had lent them. It recorded how Mr Qiu and Rivava would repay Mr Wang by selling the Property and the Flat Bush property. The Deed provided:
(a) Mr Qiu and Rivava would put the Property on the market for sale in September 2021 and remove an earlier caveat lodged by MR Capital Ltd prior to settlement.
(b) If the net sale proceeds exceed $3,100,000 but are less than $3,600,000,
$3.1 million would be repaid to Mr Wang on the settlement date with the surplus paid to Mr Qiu. If the proceeds exceed $3,600,000, all the balance would be repaid to Mr Wang on the settlement date for full settlement of the loan.
(c) Mr Qiu would enter into an agreement to sell the Flat Bush property to Mr Wang for $900,000, with the deposit of $500,000 to be paid by repayment of the loan in that amount. If the net sale proceeds of the sale of the Property exceed $3,600,000, the Flat Bush property agreement would be cancelled.
[7] On 29 September 2021, Rivava and Robert entered into a sale and purchase agreement for the Property (the Agreement). Robert deposes that he did so on behalf of Mr Wang. The Agreement recorded that the purchase price was $3,291,500 and the deposit of $3,073,200 had already been paid (the sum of the $2,300,000 loan to Rivara and the $773,220 loan to Mr Qiu). The settlement date was 8 October 2021. The Property was transferred to Robert on 23 November 2021.
[8] Mr Qiu deposes that he, Mr Wang and Robert agreed that Robert would hold the Property on trust for Mr Qiu as beneficiary until the Property was on-sold on the
open market. Once the Property was sold, Mr Wang and Robert would account to Mr Qiu for the sale proceeds under the terms of the Deed. Mr Qiu says that, contrary to the Agreement and the Deed, Mr Wang and Robert showed no intention of selling the Property and told Mr Qiu that they would not account to him if any sale occurred. Mr Qiu deposes that Robert kept turning down offers, including an offer to purchase the Property for $3,600,000.
[9] Mr Wang and Robert deny that they ever agreed to hold the Property on trust for Mr Qiu.
[10] On 25 February 2022, Mr Qiu lodged a caveat against the Property.
[11] In March 2022, Mr Qiu found a listing for the Property on the Barfoot & Thompson website.
[12] On 8 March 2022, Queen City Law (for Mr Qiu) wrote to William Gong Lawyers (for Mr Wang and Robert). Mr Qiu stated that Mr Wang had agreed to purchase the Property, even occupying it from February 2021, and that Mr Qiu had held it “for Mr Wang’s benefit” and paid holding costs and rates to Auckland Council totalling $5,909.10. The letter demanded payment of this sum and other debts allegedly owed by Mr Wang and Robert to Mr Qiu. It stated that Mr Wang and Robert had failed to pay the debts owed to Mr Qiu, and had refused to pay Mr Qiu his share of the sale proceeds of the Property.
[13] Mr Gong replied by email on 9 March 2022, advising that William Gong Lawyers had not been instructed in the matter. The same day Queen City Lawyers forwarded a copy of the letter to Mr Wang and Robert. They did not receive a response.
[14] On 23 March 2022, Queen City Lawyers emailed Mr Wang and Robert stating that given their failure to make payment, Mr Qiu would be commencing legal action. Again, there was no response.
[15] On 28 July 2022, Mr Qiu received a notice of lapse of caveat from LINZ. Mr Qiu filed this application on 11 August 2022.
Legal principles
[16] An application to sustain a caveat is determined on summary basis in which the Court regards the following principles:
(a) The applicant caveator bears the onus of demonstrating that they have an interest in the land sufficient to support a caveat. However, they need not establish that definitively. It is enough if they present a reasonably arguable case.2
(b) The process by which these applications are determined is ill-suited to resolving disputed questions of fact. An order for a caveat’s lapse will only be made if it is patently clear it cannot be maintained either because there was no valid ground for lodging it in the first place or, alternatively, that such ground has now ceased to exist.3 A conflict between affidavits will generally be resolved in the caveator’s favour.4 However, the Court is not bound to accept uncritically statements in an affidavit that are equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable.5
(c) Where the applicant has discharged its burden, the Court retains a residual discretion to remove the caveat.6 The Court will exercise this
2 Botany Land Development Ltd v Auckland Council [2014] NZCA 61, (2014) 14 NZCPR 813; and
Philpott v Noble Investments Ltd [2015] NZCA 342.
6 Botany Land Development Ltd v Auckland Council, above n 2 at [24].
discretion cautiously and must be satisfied removal would not prejudice the caveator’s legitimate interest.7
Is it reasonably arguable that Mr Qiu has an interest in the Property under a constructive trust?
[17] Section 138 of the Land Transfer Act 2017 confers a right to lodge a caveat against dealings upon any person who:
(a) claims an estate or interest in the land, whether capable of registration or not; or
(b) has a beneficial estate or interest in the land under an express, implied, resulting, or constructive trust; or
...
[18] Mr Qiu lodged a caveat against the certificate of title claiming an interest in the Property:
As a beneficiary of a constructive trust between the Caveator Tingsong QIU (as beneficiary) and the owner Robert Jungan WANG (as constructive trustee) regarding property at 14 Stevenson Crescent, Albany, Auckland legally described as Lot 5 DP 430542 and contained in the Record of Title 518767 (the Property).
[19] Mr Qiu advances three bases for his claim to a beneficial interest in the Property because of a constructive trust. I will deal with each in turn. In each case Mr Qiu must satisfy the Court that he has a reasonably arguably beneficial interest in the Property that can support a caveat.
Loan to Rivava
[20] Mr Qiu claims that he acquired an equitable interest in the Property when his company QNZ Holding Limited,8 sold the Property to Rivava on 21 November 2019. Mr Qiu says he gained a beneficial interest in the Property when he loaned Rivava the
$900,000 it was short.
7 Pacific Homes Limited (in rec) v Consolidated Joineries Ltd [1996] NZCA 264; [1996] 2 NZLR 652 (CA) at 656.
8 Later MR Civil Contractors Limited.
[21] A loan itself does not confer an equitable interest in land. An unsecured creditor has only personal rights against the debtor. Mr Qiu has not put forward any evidence that Rivava conferred a beneficial interest in the land on him when it became the registered owner, such as an equitable mortgage or equitable charge.
[22] Nor does the fact that Mr Qiu holds a corporate power of attorney for Rivava create a beneficial interest in the Property.
[23] Consequently, Mr Qiu’s first ground for his claim to a beneficial interest in the Property through a constructive trust has no merit.
Contributions to the Property
[24] Next, Mr Qiu claims to have a caveatable interest through a Lankow v Rose institutional constructive trust arising out of contributions he made to the Property, and a reasonable expectation of acquiring an interest.9 To successfully establish a constructive trust of this kind, a plaintiff must show that they have contributed in a ‘more than a minor way’ to the acquisition, preservation, or enhancement of the defendant’s assets.10
[25] Mr Qiu’s claim to a Lankow v Rose institutional constructive trust is not reasonably arguable, for three main reasons. First, Mr Qiu has not provided any evidence of contributions he made to the Property. He makes a passing reference to ‘holding costs’ in an affidavit and attaches his solicitor’s 8 March 2022 letter to Mr Wang’s and Robert’s solicitors. But the assertions in the letter that Mr Qiu held the Property for Mr Wang’s benefit and had paid holding costs and rates are unsupported by specific evidence from Mr Qiu.
[26] Second, the claim to a Lankow v Rose constructive trust is misconceived. This type of constructive trust arises where a person, who is not the registered owner of a property, makes more than minor contributions to the acquisition, preservation, or enhancement of the property. The courts developed this concept to deal with the
10 Lankow v Rose, above n 9 at 282 per Hardie Boys J.
situation where a partner in a de facto relationship had contributed to the value of property owned by the other partner over the course of their relationship and it would be unconscionable for that partner to not yield an interest proportionate to their partner’s contribution.11
[27] The assertion is that Mr Qiu paid rates and incurred holding costs during the period when the Property was owned by Rivava but was allegedly held for Mr Wang’s benefit, before Robert became the registered owner in November 2021. Thus, there can be no question of Robert, on behalf of Mr Wang, yielding a beneficial interest in the Property proportionate to Mr Qiu’s contributions, when Robert was not the registered owner at the time the contributions were allegedly made.
[28] Three, ‘holding costs’ are not a contribution made towards the acquisition, preservation, or enhancement of the Property. Furthermore, payment of rates of
$5,909.10 is not a ‘more than minor’ contribution to the maintenance of the Property, even if there was evidence of such a payment before the Court.
Agreement to hold on trust
[29] This appears to be Mr Qiu’s primary argument. He contends that the parties agreed that Robert would hold the Property on trust for the benefit of both Mr Wang and Mr Qiu until it was on-sold, and Mr Wang and Mr Qiu could share the profits in accordance with the Deed. Thus, he says there is a common intention constructive trust arising out of an agreement between Mr Qiu, Mr Wang, and Robert.
[30] Mr Qiu says that the Deed and WeChat messages exchanged with Mr Wang about selling the Property are evidence that the parties agreed to sell the Property with a share to be given to Mr Qiu. Mr Qiu says that the Property was transferred to Robert (rather than Mr Qiu selling the Property) because Mr Wang wanted to take control of the sale process.
[31] Mr Wang denies that he agreed to Robert holding the Property for Mr Qiu as constructive trustee or any kind of trustee. He says that the parties did not proceed
with the arrangement under the Deed. He says that in the end, it seemed more convenient if Mr Qiu simply transferred the Property to him in satisfaction of the debt Mr Qiu owed him. He says that Robert was the purchaser because he was a New Zealand citizen and therefore would not need consent from the Overseas Investment Office. He says that he advanced a further $218,300 to Mr Qiu on settlement date and that, together with the deposit of $3,073,200 ‘already paid’ (being the amount of the earlier loans) satisfied the purchase price.
[32] Robert also denies that he agreed to hold the Property on trust for Mr Qiu. He says he did not know what a constructive trust was until these proceedings. He states that he could not have agreed to be a trustee as he never met or spoke with Mr Qiu as he was overseas at that time. He says he only agreed to take title in the Property for his father.
[33] I am not persuaded that Mr Qiu has a reasonably arguable claim to a beneficial interest in the Property arising out of a constructive trust. While disputes in evidence are usually resolved in favour of the caveator in a caveat hearing, there must be some credible basis for the interest asserted.
[34] Here, Mr Qiu relies on two aspects of the evidence to support his claim: the Deed and WeChat messages between himself, Mr Wang, and a real estate agent (Ms Xu). However, no part of the Deed supports the notion that Mr Qiu had a beneficial interest in the Property. The Deed provided that Mr Wang was owed
$3,600,000 by Mr Qiu and Rivava, that the Property would be placed on the market for sale, that Mr Qiu would remove the caveat placed on the Property by his company MR Capital Ltd prior to settlement, and that the net proceeds from the sale of the Property would be shared between Mr Qiu and Mr Wang. Rivava did not, in this Deed, purport to confer a beneficial interest in the Property on Mr Qiu.
[35] Mr Qiu provides a series of WeChat messages between himself, Mr Wang, and Ms Xu. I note that the message thread between Ms Xu and Mr Qiu discusses listing the Property. However, there is nothing in this WeChat thread that lends support to Mr Qiu’s claim that he was a beneficial owner of the Property. The fact that Mr Qiu
planned the sale of the Property with a real estate agent does not mean that he had a beneficial interest in the Property.
[36] Mr Wang also relies on WeChat messages between himself and Mr Qiu. These messages are negotiations on how the two can clear the debt between them and do not establish that Mr Qiu had a beneficial interest in the Property.
[37] Nor is there any basis for inferring that Mr Qiu acquired a beneficial interest in the Property by virtue of the Agreement on 29 September 2021 by which the Property was sold by Rivava to Robert. If Mr Qiu’s account is accepted, all that changed between the arrangement envisaged by the Deed and the Agreement, was that Robert, rather than Mr Qiu, would arrange for the Property to be sold on the open market.
[38] There is no basis for concluding that Mr Wang and/or Robert agreed to hold the Property as constructive trustee for Mr Qiu. Rather, the evidence points to an agreement between Mr Qiu, Mr Wang and Rivava that the Property would be sold on the open market, with Mr Qiu and Mr Wang sharing the net sale proceeds as per the Deed. Initially, the arrangement was that Mr Qiu would arrange the sale. According to Mr Qiu, the plan changed to Robert arranging the sale (for Mr Wang). Either way, an agreement of this nature does not give Mr Qiu a beneficial interest in the land. At best, it gives Mr Qiu a contractual claim against Mr Wang and/or Robert for his agreed share of the net proceeds of sale.
[39] I note that the first time Mr Qiu asserted a constructive trust was in his solicitor’s letter three months after settlement of the sale to Robert, at the same time he demanded payment of holding and other costs in relation to the Property. Although not determinative, this lends further support to the conclusion that there was never an agreement that the Property would be held by Robert on trust for the benefit of Mr Qiu.
[40] As Mr Qiu has not satisfied the Court that he has an interest in the Property capable of supporting the caveat, it is unnecessary to consider whether removing the caveat would prejudice his interest.
Result
[41] The application that caveat 12385681.1 not lapse is dismissed.
[42] As to costs I am of the preliminary view that, having succeeded, Robert is entitled to costs on a 2B basis. If costs cannot be agreed, then the parties are to file written submissions within 14 days.
Associate Judge Gardiner
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URL: http://www.nzlii.org/nz/cases/NZHC/2023/589.html