IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE	
CIV-2020-404-2496
[2021] NZHC 1040	

UNDER	Part 19 of the High Court Rules and the Land Transfer Act 2017	
IN THE MATTER OF	an application for an order that Caveat No.11723464.1 not lapse	
BETWEEN	XUE SUN
Plaintiff	
AND	CHENGHUA WEI
Defendant	

	CIV-2020-092-2343	

BETWEEN	
XUE SUN
Plaintiff	
AND	CHENGHUA WEI
First Defendant

MINGJIE WEI
Second Defendant

HEZHU LIN
Third Defendant	

Hearing:	10 May 2021	
Appearances:	D Hickson for the Plaintiff
G J Thwaite and C I Barry for the First and Third Defendants No appearance for Second Defendant	
Judgment:	10 May 2021	

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

SUN v WEI [2021] NZHC 1040 [10 May 2021]

[1]	There are two proceedings: CIV-2020-404-2496, the caveat proceeding, and CIV-2020-092-2343, the debt proceeding. In the caveat proceeding, the applicant is Xue Sun and the respondent is Chenghua Wei. In the debt proceeding the plaintiff is Xue Sun, and the defendants are Chenghua Wei, Mingjie Wei and Hezhu Lin.

[2]	There are four applications. In the debt proceeding the defendants apply for summary judgment against the plaintiff on her statement of claim. They have also applied for strike-out of that statement of claim. They have counterclaimed, and they seek summary judgment on the counterclaim. In the caveat proceeding, Xue Sun, the plaintiff in the debt proceeding, applies for an order sustaining her caveat lodged against the title to a property owned by Chenghua Wei, the first defendant in the debt proceeding. The parties and issues overlap. The applications have common questions.

[3]	Chenghua Wei, the first defendant, and Hezhu Lin, the third defendant, are husband and wife. They live in Auckland. Chenghua Wei is the registered proprietor of a residential property in Flat Bush, Auckland. Mingjie Wei, their son, the second defendant in the debt proceeding, is in China. Mingjie Wei was married to Xue Sun, the plaintiff, but their marriage has failed.

[4]	In the debt proceeding Xue Sun sues the defendants for $220,000 plus interest as repayment of loans she made to them. The proceeding was started in the District Court at Manukau but was transferred to this court because the defendants’ counterclaim is outside the civil jurisdiction of the District Court.

[5]	The statement of claim pleads two loan agreements: one made in August 2016 and the other in August 2017. The second agreement discharged the earlier agreement. The statement of claim pleads that the first agreement recorded loans that the plaintiff had made to the defendants between 2010 and May 2015:

(a)	RMB 2.1 million lent to her husband to remit back to China between 2010 and 2013;

(b)	NZD 30,000 lent to the defendants in July 2014;

(c)	NZD 57,000 lent to the defendants in April 2015;

(d)	NZD 40,000 lent to the defendants in about April 2015;

(e)	NZD 15,000 lent to the defendants in about April 2015;

(f)	NZD 12,950 lent to the defendants in about May 2015 to repay credit card debts.

(g)	NZD 50,000 lent to the defendants in about May 2015.

[6]	The plaintiff would be paid interest on the loan of RMB 2.1million at the rate of 4.75 per cent per annum. There would not be any interest charged on the remaining loans. At the date of the agreement, the interest on the RMB 2.1 million totalled NZD 15,000 and the defendants’ total indebtedness was NZD 653,800. The loan was to be repaid by August 2017.

[7]	The statement of claim pleads that the second loan agreement was made in August 2017. It was backdated to 20 August 2017. The plaintiff and the first defendant signed the agreement on 25 August 2017; the second and third defendants signed it later, after they returned to New Zealand in October 2017. Under the second agreement, the defendants’ indebtedness to the plaintiff was recorded as NZD 343,800. The defendants were to pay the plaintiff $50,000. The balance of the debt of $293,800 was to be paid by March 2018. Interest would be charged at one per cent per month,
$2,938. A bank account was specified for payment. If interest was not paid, the interest rate would go up to two per cent per month. The statement of claim pleads that the defendants did not repay the full amount before 31 March 2018 and the amount outstanding is $220,000. Demand was made but there was no payment. Judgment is sought for $220,000 plus interest under the Interest on Money Claims Act 2016.

[8]	The loan agreements have been put in evidence. They are attached to Xue Sun’s affidavit in support of the caveat application. Mr Hickson objected to his client’s affidavit in the caveat application being used on the defendants’ application for summary judgment and strike-out. That is unnecessarily pedantic. The defendants have sworn affidavits in support of their applications, and I am prepared to read their affidavits for the caveat application. Similarly, I am prepared to read the plaintiff’s affidavit as evidence for the strike-out and summary judgment applications. I have done that because it is important that I be able to consider the loan agreements for all the applications.

[9]	The agreements were written in Chinese but have been translated into English. They were not drawn up by lawyers. The English versions of the agreements reflect that they have been translated, but there is no disagreement as to the general effect of the agreements as translated.

[10]	The loan agreement of 20 August 2016 provides that that the plaintiff would take security over the property of Chenghua Wei:

Should the borrower have not made repayment in accordance with the promise, the borrower should make repayment by mortgaging the real estate property located at [the address at Flat Bush], Auckland. After mortgaging, the borrower is not allowed to re-sell or mortgage that real estate property. The ownership of that real estate property and the right of sale are all assigned to the lender.

In the same agreement, the promise to pay is recorded as follows:

The borrower promises to make full repayment of the abovementioned debts for the amount of NZ$553,800 prior to 20 August 2017.

[11]	The second loan agreement also provides for security over the Flat Bush property:

Additionally, should the abovementioned funds have not been repaid prior to 31 March 2018, the real estate property located at [the address], Flat Bush, under the name of any one of the borrowers would be mortgaged or auctioned to make repayment of the rest of the loan which are still owed by the borrower. Should that real estate property have other loans or the condition of repayment not be able to be satisfied it would be subject to the court to issue verdict on it.

[12]	On the debt claim, the defendants have pleaded a number of defences: illegality, duress, mistake, misrepresentation, relief under the Credit Contracts and Consumer Finance Act 2003, penalty interest, and set-off. But, importantly for this decision, the first defence is that there was no consideration given for either agreement.

[13]	The defendants also counterclaim. They say that they have made payments to the plaintiff between May 2017 and November 2018 totalling $486,970 including interest. They claim for money had and received, for unjust enrichment, and that the payments were an unconscionable bargain.

[14]	The issue running through all of the applications is the defence that the plaintiff did not give consideration for the defendants’ promise to repay.

[15]	The defendants say that the agreements were not in the form of a deed. The formalities for a deed under s 9 of the Property Law Act 2007 were not met, with a witness who has signed and given their address and occupation. The defendants say that the agreements are bare promises, unsupported by consideration. Their case is that under the loan agreements the defendants promised to make payments, including payments of interest, and agreed to give a mortgage over the home but that the plaintiff offered them nothing in return. They use this argument to say that the loan agreements are not enforceable. There was therefore no consideration to support the payments they made under the loan agreements, and therefore that is money had and received in the hands of the plaintiff. They also say that the agreements to mortgage are unenforceable because they were not supported by consideration.

[16]	I reject that argument. It is apparent from the pleading and from the translations of the loan agreement, that it is arguable for the plaintiff that she did provide consideration. There is apparently no dispute that she did lend the defendants money as pleaded in the statement of claim. There is no pleading and no evidence as to when the funds were to be repaid. In the absence of any time fixed for payment, the loans would be repayable on demand. At any stage, the plaintiff could say to the defendants to whom she lent money “Repay me” and the debt would then fall due.

[17]	Under the agreement of August 2016, the plaintiff agreed to accept payment in the future, that is, the borrowers promised to repay before 20 August 2017. They were therefore given extended credit to repay their debts. It is arguable for the plaintiff that in giving the defendants more time to pay she was undertaking not to sue them for payment before the date of repayment fell due. That was a forbearance to sue. The translated agreements do not use those words expressly, but anyone reading the agreements would understand that the defendants were given more time to pay. Because they had been given more time to pay, the loans were not due and repayable immediately. In response, Mr Thwaite argued that the plaintiff could sue at any time, but that is not a realistic approach, given the circumstances under which this agreement was apparently made. One can imagine the defendants protesting vigorously if the plaintiff had pursued them for payment before the date for repayment. Given that forbearance to sue, there is arguable consideration for the defendants’ promises to repay the principal, pay the interest, and give security over the Flat Bush property.

[18]	There may be other ways of expressing the claim. The plaintiff might – and I do not say that she has to – plead the original loans and say that those loans have not been repaid, and then plead the agreement of August 2016 as evidencing the indebtedness for those loans, and also referring to the fresh arrangements as a re- negotiation of the original loans supported by consideration. And the second loan agreement could be pleaded in a similar manner.

[19]	Moreover, there is an argument – and it may not be a strong one – that the loan agreements are  promissory  notes under  the  Bills  of  Exchange Act  1908.  Under  s 84(1):

A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person or to bearer.

[20]	The provisions relating to bills of exchange under the Bills of Exchange Act 1908 also apply to promissory notes. Under s 27 an antecedent debt or liability can support a promissory note:

27	Value, and holder for value

(1)	Valuable consideration for a bill may be constituted by—

(a)	any consideration sufficient to support a simple contract:

(b)	an antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the bill is payable on demand or at future time.

Accordingly, the prior indebtedness under the loans made between 2010 and 2015 may count as consideration for a promissory note.

[21]	Given that the plaintiff has an arguable case that she did provide consideration, the defendants’ summary judgment application against the plaintiff on her statement of claim is dismissed.

[22]	The counterclaim is based on the absence of consideration for the original loan agreements, but as it is arguable that the plaintiff did give consideration, the defendants’ payments were in discharge of existing liabilities. That would make it difficult to run a claim in restitution because there was a proper legal basis for the payments made. Accordingly, the plaintiff has an arguable defence to the counterclaim and the summary judgment application is dismissed.

[23]	As to the strike-out application, Mr Thwaite’s point was that there was an absence of pleading of any consideration. While there is no an express reference to the consideration given, it is apparent that there was consideration given the pleading of the existing indebtedness and the agreement to give the defendants time to pay. It can be inferred from that, that there was a forbearance to sue. The present pleading can stand.

[24]	Counsel accepted that an agreement to mortgage is a caveatable interest under s 137 of the Land Transfer Act 2017. The argument against the agreement to mortgage was that it was not supported by consideration. But as there was arguably consideration for the agreement to mortgage, there is a proper basis for the caveat. I could only remove the caveat if it was patently clear that there is no basis for it. I do not regard the argument against the caveat as so patently clear that an order should be made removing the caveat.

[25]	Accordingly, I dismiss the applications for strike-out, for summary judgment against the plaintiff’s claim and for summary judgment on the defendants’ counterclaim. I also make an order sustaining the caveat. It is a condition of the order sustaining the caveat that the plaintiff is to file and serve an amended statement of claim, adding a cause of action requiring the defendants to execute a registrable memorandum of mortgage to be lodged against the title to the property.

[26]	The plaintiff is to file and serve an amended statement of claim within three weeks.

[27]	The defendants are to file and serve statements of defence within a further
three weeks.

[28]	I direct the Registrar to allocate a case management conference for further directions. Ahead of the conference the parties should confer on discovery. From discussion with counsel, it appears that there may be limited documents. They should confer with a view to ensuring that discovery is carried out as efficiently as possible.

[29]	I direct the Registrar to allocate a fixture for the proceeding for three days. Counsel advise that all witnesses will give their evidence in Mandarin. Interpreters will be required. I was also advised that there is no plan for Mingjie Wei, the second defendant, to return to New Zealand from China. Accordingly, he will have to give his evidence remotely. No doubt an interpreter will be required in New Zealand when he gives his evidence. Counsel will need to confer as to arrangements for interpreters, and to liaise with the Registrar for arrangements for evidence to be given remotely.

[30]	As Xue Sun has succeeded on her applications she is entitled to costs. Costs are category 2. I trust that counsel will confer and agree on costs, but if they cannot agree costs memoranda may be filed.

Solicitors:

…………………………………….
Associate Judge R M Bell

PCW Law Limited (Jeff Ussher), Remuera, Auckland, for the Plaintiff Xue Sun
Millennium Law (Fei Fei Teh/Christopher Barry), Auckland, for the First and Third Defendants
Copy for:
Douglas B Hickson, Sandringham, Auckland, for the Plaintiff Gregory J Thwaite, Auckland, for the First and Third Defendants