ZHONG V WANG CA CA282/05

ZHONG V WANG CA CA282/05 5 September 2006IN THE COURT OF APPEAL OF NEW ZEALAND CA282/05BETWEEN CHENG RONG ZHONG Appellant AND JIA YI WANG Respondent Hearing: 22 June 2006 Court: William Young P, Wild and Heath JJ Counsel: D P H Jones QC for Appellant M I S Phillipps for Respondent Judgment: 5 September 2006 at 11 amJUDGMENT OF THE COURT A The appeal is allowed. The orders removing the two caveats are set aside and the application to remove the caveats is dismissed. B Costs are awarded in favour of the appellant in the sum of $6,000 together with reasonable disbursements to be fixed, if necessary, by the Registrar.____________________________________________________________________Wild and Heath JJ [1] William Young P [105]REASONS OF WILD AND HEATH JJ(Given by Heath J)Table of Contents Para No Introduction [1]Background facts [5]Mr Zhong's case [26]Mr Wang's case [30]The High Court judgment [33]Analysis of competing submissions [40]Abuse of process issue [40]Specificity to support caveat [43]The estate or interest claimed by Mr Zhong [59](i) General [59](ii) The Quistclose claim [63](iii) Claim based on constructive trust [86]Availability of alternative remedies [99]Result [103]Introduction[1] Mr Zhong appeals against an order removing caveats lodged by him against two properties registered in the name of Mr Wang and his ex-wife, Jue Jin. The order was made by Associate Judge Doogue in the High Court at Auckland on 29 November 2005. An order staying execution of the judgment was made on 14 December 2005. Pending determination of this appeal, the caveats remain registered against the titles. [2] Mr Zhong claims an interest in the two titles of land as a beneficiary under a constructive trust. Mr Wang is alleged to be the trustee. [3] Mr Wang denies the trust alleged by Mr Zhong. He contends that he and his former wife hold the properties as trustees for the beneficiaries of The Great Shanghai Family Trust. That Trust is said to have been settled by Mr Wang in (hethinks) early 2001. Mr Wang says he is but "one of a number of discretionary beneficiaries" of the Trust. [4] Judge Doogue held that the caveats could not be sustained because the evidence did not disclose a caveatable interest in the properties in question. That finding is challenged on appeal.Background facts[5] The affidavits filed on the application to remove the caveats reveal conflicts between the primary witnesses. Those conflicts cannot be resolved without cross- examination. For that reason (and without making any determination on the merits of each party's case), we rely primarily on the evidence of Mr Zhong to determine this appeal. [6] In August 2001, Mr and Mrs Zhong arrived in New Zealand for a short holiday. A third party arranged a meeting between Mr Zhong and Mr Wang at the Stamford Plaza Hotel in Auckland on 12 or 13 August 2001. An immigration consultant was also present at that meeting. [7] Mr Zhong and his family intended to emigrate from the People's Republic of China to New Zealand. Mr Zhong's ability to obtain residence in New Zealand was dependent upon him meeting the criteria for the "investor" category. In 2001, the New Zealand Immigration Service required an authorised capital investment of at least $1,000,000 to be made in New Zealand for a period of at least two years as a condition precedent to the grant of residence. [8] The purpose of the meeting with Mr Wang was to identify a mechanism by which Mr Zhong could meet the "investor" category criteria. [9] Mr Zhong alleges he and Mr Wang reached an oral agreement at that meeting. Its essential terms are alleged to be:(a) Mr Zhong would advance not less than $1,000,000 to Mr Wang for the period of two years. (b) The method of payment was to be in accordance with Mr Wang's instructions. (c) Mr Wang would arrange for the money to be "invested" in Yini International Ltd. (d) On the expiry of the two year period, Mr Wang would repay Mr Zhong his money in full. [10] Mr Zhong's evidence suggests, without being definitive, that a relationship of debtor and creditor would be created between Mr Wang and Mr Zhong by reason of the payment. The money was repayable at the end of the two year period. However, on the face of it, Mr Zhong was to receive no return on his capital for the two years in question. [11] Mr Zhong says that he entered into the agreement with Mr Wang under a misapprehension. In his affidavit in opposition to Mr Wang's application to remove the caveats, Mr Zhong deposed:8. During the course of our meeting in August 2001 Mr Wang mentioned that upon payment of the money, shares in Yini [Investments Ltd] would be transferred to me but he did not say how many. It was my understanding and intention, however, that any money I paid to Mr Wang would be paid to the company. Under Chinese company law, if a person wishes to invest in a company, that person is required to pay the money directly to the company. The company will then issue shares to that person and redistribute the remaining shares among the other shareholders. 9. I was not aware, and Mr Wang never told me, that the law in New Zealand is different and that it is the individual shareholder who receives the purchase price from the sale of the shares, not the company. (Mr Zhong's emphasis)[12] Mr Zhong describes the sequence of events and payments as follows:(a) On 28 August 2001, Mrs Zhong paid a deposit of RMB 174,603 into a bank account in the name of Wang De Quan. (b) On 30 August 2001, Mr Zhong and Mr Wang met in Shanghai. At that meeting Mr Wang presented Mr Zhong with a share transfer agreement providing for the transfer of 100 shares in Yini International Ltd to Mr Zhong. Mr Zhong signed that agreement. (c) The following day, Mr and Mrs Zhong presented Mr Wang with a bank cheque in the sum of RMB 1,000,000. (d) Just over a week later, on 8 and 9 September 2001, Mr and Mrs Zhong say they made cash payments of RMB 600,000 and RMB 620,000 respectively to Mr Wang. Mr Wang denies those payments were made. (e) On 30 October 2001 Mrs Zhong made a deposit of RMB 460,000 into a bank account of Yong Cao. The following day she deposited sums of RMB 400,000 and RMB 320,000 into the bank account of Zhun Fa Lin. It appears that payments were made through circuitous routes in order to avoid compliance with strict foreign currency laws in China. [13] Mr Zhong deposes that the total sum paid was RMB 3,574,603, the equivalent of NZ$1,010,499.50 on prevailing currency rates. [14] By November 2001, Mr Zhong had made a residency application on behalf of himself and his family. A letter was drafted by Mr Wang and provided to the New Zealand Immigration Service confirming that HKD$3,190,750 had been received from Hong Kong trading banks on behalf of Mr Zhong. A handwritten note at the foot of the letter (by an unknown author) refers to a sum of over NZ$1,000,000.[15] Having made that investment, Mr Zhong qualified for residence in New Zealand. His application for residence was granted on 16 November 2001. Mr Zhong and his family arrived in New Zealand in January 2002. [16] The two properties were purchased in April and May 2002. On 24 April 2002, Mr Wang and Ms Jin purchased the property at 77 Bassett Road, Remuera. On 24 May 2002, they purchased the property at 17 Portage Road, New Lynn. [17] Although Mr Wang disputes the amount of money he received from Mr Zhong, it seems clear that, at least, some of the money was used to acquire the two properties. Mr Wang's position is that he became the legal owner of the money, subject to an obligation to repay the money in two years time. On his evidence, he was entitled to use the money as he saw fit. [18] In late October 2002, Mr Wang brought a document into existence which purported to record the terms on which Mr Zhong authorised the investment. The document was signed by Mr Wang. It has never been signed by Mr Zhong. [19] The agreement was written in both Chinese and English. The English version of the document reads: Party A and Party B agree to reach the following agreement as a result of discussions in order to specify mutual rights and liabilities: 1. (ONE MILLION NEW ZEALAND DOLLARS). (ONE MILLION NEW ZEALAND DOLLARS). Party A invested 100 shares into Party B's company, the FUND in total is NZ$1,000,000.00. Party B has received this FUND in September 2001. Party A and B both confirmed. 2. Party A authorized Party B to represent Party A to operate and manage the FUND with its full power. Any debts occurred in the company is borne by party B. Party A will not share dividends, profits, neither to bear any debts. Party B will take all the responsibilities for the company. 3. If during the operating, the share capital of company is reduced due to unpredicted accident like fire or earthquake, Party A will not claim back the invested FUND. 4. Party B will guarantee the safety of the FUND. The total amount of the FUND invested will not shrink in the period from 15 November 2001 to 31 December 2003.5. In case of any change happened due to registration or shareholders of the company, Party A will be notified by Party B in written and with Party A's consent conditional to The copy of the agreement made available to us does not complete cl 5 of the agreement. Nothing turns on that. We note that the agreement casts doubt on Mr Wang's assertions that Mr Zhong paid less than $1,000,000 to him. [20] The document is entitled "Agreement of Authorisation of Investment". It purports to be between Mr Zhong and Yini International Ltd. It describes the parties as Party A and Party B respectively. Mr Zhong is Party A. Yini International Ltd is stated to be Party B. However, cl 1 of the English version of the document suggests that Party B ought to have been Mr Wang: see the reference to "Party B's company". [21] On 23 September 2003, Mr Zhong lodged caveats against the Bassett Road and Portage Road properties. By that time, he had grown suspicious of Mr Wang's use of the money. Each of the two caveats described the interest claimed as follows:[Cheng Rong Zhong] claims a beneficial interest in the land contained in the above Certificate of Title as cestui que trust of which the registered proprietor, Jia Yi Wang, is trustee.[22] The second anniversary of the grant of Mr Zhong's residence application passed on 16 November 2003. No repayment of the $1,000,000 (or any part of it) has been made by Mr Wang to Mr Zhong. [23] Proceedings were issued by Mr Zhong in the High Court at Auckland to recover the money in 2004. Those proceedings were brought on contractual and restitutionary grounds. The hearing was completed recently and judgment was reserved. [24] At the hearing of the appeal Mr Jones QC, for Mr Zhong, informed us that another set of proceedings had been issued a few days earlier. Mr Phillipps informed us that he had not then seen those proceedings. At our request, a copy of the Statement of Claim was obtained.[25] In the new proceedings (HC AK CIV 2006-404-3423) Mr Zhong sues Mr Wang and Ms Jin. The Statement of Claim was filed on 19 June 2006. Two causes of action are pleaded. Both are consistent with the claims made to support the caveat. Under the first cause of action reliance is placed on a Quistclose trust (a trust deriving its name from Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (HL)). The second cause of action is based on a constructive trust. The constructive trust is pleaded on the basis that Mr Wang received the money in a fiduciary capacity and proceeded to misapply it, contrary to instructions given by Mr Zhong. A third cause of action alleges money had and received.Mr Zhong's case[26] Mr Jones contended that Mr Zhong's evidence supported a caveatable interest in the two properties, either on the basis of a Quistclose trust or a constructive trust. [27] The case was put on the basis that Mr Zhong paid the sum of NZ$1,000,000 to Mr Wang for the sole purpose of qualifying for residence status in New Zealand. On the Quistclose argument, Mr Jones submitted that the purpose of the payment had failed, thereby giving rise to a resulting trust in favour of Mr Zhong. The purpose is said to have failed because Mr Wang failed to keep the money intact. [28] The alternative argument is that Mr Wang received the money in a fiduciary capacity. The money was intended to be applied for investment in Yini International Ltd. The money was not applied for that purpose. Therefore, Mr Wang misappropriated the moneys in circumstances giving rise to a constructive trust. [29] Mr Jones submitted that a relationship of trustee and beneficiary arises, entitling Mr Zhong to claim proprietary interests in the two properties. Mr Jones argued that the relationship of trustee and beneficiary could co-exist with the relationship of debtor and creditor that the parties intended to create by the oral agreement to which Mr Zhong refers.Mr Wang's case[30] Mr Phillipps, for Mr Wang, submitted that the relationship between Mr Zhong and Mr Wang was, at best on Mr Zhong's evidence, one of debtor and creditor. He submitted that, on the facts disclosed in Mr Zhong's evidence, the relationship could not also be characterised as one of trustee and beneficiary. Mr Phillipps submitted that the two relationships were inconsistent. He noted that Mr Zhong had originally sued Mr Wang in debt. In that proceeding, no claim had been made based on either of the forms of trusts on which Mr Zhong presently relies. [31] On Mr Wang's evidence, Mr Phillipps submitted that Mr Zhong agreed to buy shares in Yini Investments Ltd and to pay the money to Mr Wang for that purpose. Mr Phillips submitted that Mr Zhong had the status of a shareholder of Yini; not a creditor of Mr Wang. [32] Mr Phillipps raised three further arguments to support the Associate Judge's decision. They were: (a) The caveats were not expressed with sufficient particularity. For that reason they ought to be removed. (b) The caveats ought to be seen as a device to secure, inappropriately, Mr Zhong's position pending resolution of the proceedings in which no claim based on trust is made. (c) The appeal should be regarded as an abuse of process because it is inappropriate to rely on affidavit evidence which has been overtaken by oral evidence given at trial in substantive proceedings.The High Court judgment[33] Mr Wang applied to remove the caveats under s 143 of the Land Transfer Act 1952 (the Act). Section 143 states:143 Procedure for removal of caveat(1) Any such applicant or registered proprietor, or any other person having any registered estate or interest in the estate or interest protected by the caveat, may, if he thinks fit, apply to the High Court for an order that the caveat be removed. (2) The Court, upon proof that notice of the application has been served on the caveator or the person on whose behalf the caveat has been lodged, may make such order in the premises, either ex parte or otherwise, as to the Court seems meet.[34] Judge Doogue outlined the principles to be applied in determining whether to remove a caveat under s 143 of the Act. We deal with relevant principles later. For present purposes, it is sufficient to say that Judge Doogue applied correct principles to his consideration of the removal issue. [35] As will become clear, it seems to us that the Judge did not receive the benefit of full argument on the circumstances in which the relationship of trustee and beneficiary might co-exist with the relationship of debtor and creditor. The Associate Judge's decision also suggests that the basis of the fiduciary relationship was put to him differently than it was before us. [36] After analysing the evidence, Judge Doogue said:[11] It is significant that Mr Zhong agrees that there was an agreement to buy shares in the company and says no more than that it was "his understanding and intention, however, that any money I paid to Mr Wang would be paid to the company". Subjective understandings and private reservations do not influence the Court's conclusion as to what matters were included in contract. I conclude that the contract in this case was simply concerned with a purchase from Mr Wang of shares in Yini with an obligation to repurchase the shares in two years time. [12] The immediate purpose of the caveats is clearly to obtain some security for the applicant's $1 million. The argument is that the respondent has used the money he acquired from Zhong to fund the purchase of the two properties. The timing of the purchases alone would suggest, the applicant says, that it was his money that was being used for this purpose. [13] It may well be that the applicant has used the funds that he obtained from Mr Zhong for this purpose but that of itself does not entitle Mr Zhong to sustain his caveats. Something more is required which resulted in Mr Wang, in his capacity as legal owner of the properties, being constituted a trustee in regard to those properties with the beneficiary of that trust being Mr Zhong.[14] The simple fact that B is indebted to A does not entitle A to assert that B holds property purchased with the funds that are the subject of the debt as a trustee for the creditor. The usual circumstances in which a trust is imposed is where a fiduciary deals with property in such a way that a constructive trust is imposed to protect the claimant in regard to property which was entrusted to the fiduciary ought to have retained in his or her hands. No such circumstance is made out in this case. There is nothing to suggest that.[37] The Judge then considered the trust argument in light of his legal analysis. The Associate Judge said:[38] While it is open to the Court to draw inferences from such evidence as is before the Court, there is a limit to how far these may be taken. On its face, the arrangement between the parties is explicable as being no more than interaction between two businessmen. I have not overlooked that there is a suggestion of some distant link between Mr Wang and Mr Zhong by marriage but that is not of great evidential value in assisting an argument that Mr Wang was acting in a fiduciary capacity. [39] The closest that Mr Wang comes to advancing material which might give rise to a inference of a fiduciary relationship is that he left it to Mr Wang to structure the arrangements for investment in the New Zealand company. It seems to be implied that he did this because Mr Wang had greater familiarity with the New Zealand legal environment. But he does not say that he asked Mr Wang for advice on the matter of what the result of the structuring of the business arrangement would be or what occurred can be analysed as Mr Zhong had the objective of investing in a company and that he simply left it to Mr Wang to arrange that. [40] Then there is the matter of whether or not there has been breach of any posited fiduciary obligation. That requires an assumption that the fiduciary obligation that the applicant contends for made it illegitimate for Mr Wang to sell shares in his company, Yini. It was clear, though, that Mr Zhong was happy to invest in a company by some means. I find it difficult to see what material difference there could be between the two approaches. Either way it seemed that Mr Zhong was going to entrust his money on an unsecured basis to Mr Wang with Mr Wang with the object in view that one way, or another, Mr Zhong was to end up having an interest in Yini. Even if Mr Wang was a fiduciary to Mr Zhong I would not be prepared to conclude that what actually happened amounted to a breach of the fiduciary relationship between the two. In hindsight, Mr Zhong seems to have been imprudent in advancing money without obtaining security. But that is not a matter that he was lured into doing because of a breach of fiduciary duty. [41] My conclusion, which is necessarily tentative given the nature of the proceedings and the paucity of evidence, is that Mr Wang was not a fiduciary for Mr Wang and, even if he did, the nature and the scope of the arrangements that he entered into affecting Mr Zhong and his property did not amount to a breach of the fiduciary obligation.[38] Next, the Judge considered an alternative argument that Mr Wang received the $1,000,000 subject to a Quistclose trust. Judge Doogue said at [42]: I do not accept that the existence of such a trust has been made out. For such an arrangement to be binding there would have had to have been a clear direction from Mr Zhong to Mr Wang that the money was not to be used to buy shares in Yini from Mr Wang and that the only approved purpose was an investment by some other means in Yini. But what those other means were has not been adequately explained. I therefore conclude that the applicant does not have a reasonably arguable claim under this heading. The existence of a Quistclose Trust is nothing more than a theoretical possibility.[39] The Associate Judge, while noting Mr Phillipps' submission that the caveats ought to be removed because the interests claimed were not sufficiently particularised, did not find it necessary to decide that point.Analysis of competing submissionsAbuse of process issues[40] We deal first with Mr Phillipps' suggestions that the appeal ought to be regarded as an abuse of process. We do not agree. [41] Although extant proceedings in debt were before the High Court, that does not prevent a plaintiff, within the appropriate limitation period or subject to the application of laches, from bringing a separate claim based on the trust alleged to support the caveat. In fact, that is what has happened in this case. The new proceeding puts these issues squarely before the Court. If we were to accede to Mr Phillipps' submission, it may have the effect of removing the caveats summarily, without inquiry into the arguability of the case, in a manner which might later prejudice Mr Zhong's ability to obtain repayment of any judgment awarded in his favour by realising a proprietary interest in the land. Potentially, that approach could cause injustice to Mr Zhong. Equally, Mr Wang cannot be heard to say that he is prejudiced if Mr Zhong can establish the grounds upon which the caveats ought to remain. [42] Nor are we prepared to shut out Mr Zhong's appeal because oral evidence has already been given in the extant proceeding. That evidence was not directed to theexistence or otherwise of a trust. That was not in issue in that proceeding. In the absence of any suggestion of a clear conflict between what Mr Zhong said at that trial and what he says in his affidavits, we rely on Mr Zhong's affidavits on the removal applications to determine the appeal.Specificity to support caveat[43] We deal first with Mr Phillipps' submission that the interests claimed in the caveats were not sufficiently particularised. This claim is based on ss 137(1) and (2)(a), (b) and (c) which provide:137 Caveat against dealings with land under Act(1) Any person may lodge with the Registrar a caveat in the prescribed form against dealings in any land or estate or interest under this Act if the person— (a) claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or (b) is transferring the land or estate or interest to any other person to be held in trust. (2) A caveat under this section must contain the following information: (a) the name of the caveator; and (b) the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty; and (c) how the land or estate or interest claimed is derived from the registered proprietor; and [44] The present form of s 137 was substituted for an earlier version when changes to the land transfer regime were made in 2002 to give effect to computer registration and electronic lodgement of documents: see s 49 of the Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act 2002. As a result of that amendment s 137(2)(c) was added. It deals with the basis on which the claim is derived from the registered proprietor. Prior to the 2002 amendment, thederivation requirement was set out in reg 24 of the Land Transfer Regulations 1966, a provision repealed by reg 44 of the Land Transfer Regulations 2002. [45] Mr Phillipps submitted that the caveats did not adequately describe the interest claimed by Mr Zhong or the derivation of that interest. The nature of the interest is set out at [21]. [46] In our view, the question is one of degree. Did the caveats describe adequately the land and the interest (and its derivation) claimed? [47] We deal with the two issues raised by s 137(2)(b) and (c) together. [48] The caveat procedure has been described as an interim measure, "designed to freeze the position until an opportunity has been given to a person claiming" a caveatable right to regularise the situation by registering the interest claimed:Miller v Minister of Mines [1963] NZLR 560 (PC) at 569. We agree with the view endorsed in Hinde, McMorland & Sim, Land Law in New Zealand (1997) at [2.145] that Miller should be regarded as authority for the proposition that the caveat should remain until the interest claimed becomes capable of registration. [49] A caveator may claim an interest in the land as a beneficiary under a constructive or resulting trust: s 137(1)(a) of the Act, Re Bielfeld (1894) 12 NZLR 596 at 597, Re Peychers' Caveat [1954] NZLR 285 at 286 and Buddle v Russell[1984] 1 NZLR 537. In Buddle v Russell, Casey J said, at 539: Mr Buddle wants to protect whatever interest he may have in the land as beneficiary under the constructive trust alleged. It is of the same character as that upheld in Peychers' case, where the husband claimed simply "ascestui que trust of which my wife . . . is trustee". In my view this "states with sufficient certainty" the nature of the interest he claims, to comply with s 138(1). I see no reason to require anything further, and with respect I see a danger in following the line adopted by the Australian Courts, that we will lose the simplicity and speedy protection afforded by this procedure, which would be contrary to the whole philosophy of the Act. I prefer to follow the path taken by Williams J [in Bielfeld] and Archer J [in Peychers' Caveat].[50] A contrary, and stricter, approach is evidenced by New Zealand Mortgage Guarantee Co Ltd v Pye [1979] 2 NZLR 188, in which Vautier J reviewed theAustralian lines of authority to which Casey J referred in Buddle v Russell. At 197, Vautier J said: if by statute a person is given the right to take a step which will prevent someone dealing with his own land as he thinks fit the person seeking to avail himself of this right must comply with the statutory requirements which are precisely laid down. These requirements are, in my view, clearly mandatory as the Australian Courts have held in respect of provisions to just the same effect. Moreover, the inconvenience and injustice which is likely to arise from the upholding of caveats of this kind expressed in loose and general or inaccurate words is very obvious when one considers the scheme of the provisions as a whole. It is not simply a matter, as counsel for the applicants' argument would imply, of acquainting the registered proprietor with the general nature of the claim made against his land.[51] Mr Phillipps referred us to a review of the relevant authorities undertaken by Ellen France J in Norrie v The Registrar-General of Land (2005) 6 NZCPR 94. [52] In Norrie, counsel for the Registrar-General submitted that an interest under a trust was caveatable and all that is necessary was for the caveator to articulate the nature of the interest claimed, something that s 137(a) refers to "as any trust express or implied". Counsel submitted that Buddle v Russell ought to be preferred overNew Zealand Mortgage Guarantee Co Ltd v Pye. At [36]-[45], Ellen France J reviewed the authorities in some detail. She concluded, at [38]-[42]:[38] What will be "sufficient certainty" ("adequate" to the purpose –Oxford English Dictionary (2ed 1989)) will vary according to the circumstances. Clearly, also, the Registrar on receipt of a caveat is not exercising an adjudicative function. The plaintiff did not dispute that. And, in Holt v Anchorage Management [[1987] 1 NZLR 108 (CA)] at 115, McMullin J refers to the Registrar's "administrative" act in accepting a caveat for lodgement. [39] On the other hand, equally clearly, the Registrar must be satisfied that the requirements as to form are met. One purpose of requiring adherence to the form is to provide a threshold of some sort albeit there are avenues of redress for the registered proprietor (making an application for removal of a caveat under s 143 and the ability under s 146 to seek damages from the caveator). [40] On balance, I do not consider it was necessary here to make reference to the fact the interest claimed was as a discretionary beneficiary. Although it is the "bare minimum", the description here equates with that in In re Peychers' Caveat in terms of the description of the nature of the interest (see Equity and Trusts in New Zealand (2003) (general editor Andrew Butler): ch 3.1.4(5), p 53) and with the form in the "Land Titles" precedents booklet.[41] Hinde, McMorland Sim in Land Law in New Zealand (2004) at 10.013 suggest that where a registered proprietor claims a caveator has not complied with s 137(2)(b), "frequently the real complaint" is noncompliance with s 137(2)(c) and I consider that is the case here. It was necessary to explain how the interest derived from the registered proprietor. In some cases this factor may be obvious from the title but that was not so here. "M & H Trustee Services" are not so clearly linked to the "Norrie Family Trust". [42] Accordingly, I consider the plaintiff is correct in that the requirements of s 137(2)(c) were not met.The Judge considered that the caveat described the interest claimed sufficiently but did not describe the derivation to the required standard. But we do not read her judgment as suggesting that the criteria in s 137(2)(b) and (c) be judged by different tests. [53] We read Norrie preferring the Buddle v Russell line of cases. We agree. What is important is that the registered proprietor and the Court understand the nature of the interest claimed and the basis of that claim. [54] As a general rule (for s 137(2)(b) purposes), it is sufficient to identify the form of trust alleged. While it would have been preferable for Mr Zhong's caveats to refer expressly to a resulting or constructive trust, there can be no doubt that an interest of the type to which s 137(1)(a) refers was claimed. In our view, the caveats complied with s 137(2)(b). [55] Applying the same test, did the caveats comply with s 137(2)(c)? In our view, they did. There was a clear link between the named trustee (Mr Wang) and the registered proprietors, of which he was one. The caveats made it clear that the interest was derived from Mr Wang's involvement with Mr Zhong. The nature of the involvement would have been self-evident to Mr Wang. [56] No suggestion was made to us that the caveat ought to be removed because Ms Jin was a co-owner of the property. [57] It is unnecessary to require a caveator to explain the precise basis from which the interest qua beneficiary arises. Section 137(2)(c) applies to all types of interests that give rise to a caveatable interest. The derivation of those claimed interests mayneed greater explanation in some cases than in others. In this case a linkage between the claimed interest and Mr Wang suffices. [58] The purpose of the caveat procedure is to enable those with proper claims to proprietary interests to protect themselves against loss by forbidding dealing with the land pending resolution of substantive claims. The underlying purpose of the caveat regime could be undermined if too strict an approach were taken to the detail required to describe the interest claimed and its derivation from the registered proprietor.The estate or interest claimed by Mr Zhong (i) General[59] Section 143 of the Act creates a summary remedy whereby, without either party having an opportunity to cross-examine evidence given on behalf of the other, the High Court may order that a caveat be removed. It too must be read in the context of the broad purposes of the caveat procedure identified in [48] above. [60] As Somers J said, delivering the joint judgment of himself and Gallen J, inSims v Lowe [1988] 1 NZLR 656 (CA) at 659-660: it has been consistently held, that an order for the removal of such a caveat will not be made under s 143 unless it is patently clear that the caveat cannot be maintained either because there was no valid ground for lodging it or that such valid ground as then existed no longer does so. See eg Plimmer Bros v St Maur, Re Caveat No 2538 (1906) 26 NZLR 294, 296; Catchpole v Burke [1974] 1 NZLR 620, 623-624, 625 (a case under s 145); Mall Finance & Investment Co Ltd v Slater [1976] 2 NZLR 685, 686, 688. The patent clarity referred to will not exist where the caveator has a reasonably arguable case in support of the interest claimed. Catchpole v Burke, New Zealand Limousin Cattle Breeders Society Inc v Robertson [1984] 1 NZLR 41, 43 and Holt v Anchorage Management Ltd [1987] 1 NZLR 108 show that the same test applies to both s 143 and s 145.Bisson J concurred in those observations. His Honour's separate judgment dealt solely with a question of fact he regarded as giving rise to a reasonably arguable case.[61] In holding that the same test applied to both ss 143 and 145 the Court, inSims v Lowe, expressly overruled observations in Re Peychers' Caveat to the contrary on that point. [62] In our view, this case turns on whether Mr Zhong can establish a reasonably arguable case that he has a beneficial interest in the properties, either under aQuistclose or a constructive trust.(ii) The Quistclose claim[63] The primary basis on which Mr Jones put his case was the existence of aQuistclose trust. [64] The label "Quistclose trust" is a shorthand expression, designed to describe a particular method by which a relationship of trustee and beneficiary is created. It generally arises when a party to whom money is paid with a direction that it be applied for a particular purpose becomes insolvent and enters a formal insolvency regime. [65] Quistclose was a case involving the collapse of a company called Rolls Razor Ltd. At a board meeting of Rolls Razor in May 1964 the directors had recommended a final dividend to shareholders of 120% of the reported trading profit. However, the company had no liquid resources to pay the dividend – a net sum, after deduction of tax of over ₤200,000. [66] The Annual General Meeting of the company, held on 2 July 1964, approved payment of the dividend. While no date was fixed for payment, all directors contemplated that it would be paid on 24 July. Provision of the sum required to pay the dividend, as well as a further injection of working capital, was the subject of negotiations with others. [67] Arrangements were made for the money to be borrowed from Quistclose Investments Ltd. A resolution passed by the directors of Quistclose on 15 July 1964made it clear that the loan was for the express purpose of enabling Rolls Razor Ltd to pay the final dividend on 24 July 1964. [68] The money advanced by Quistclose Investments Ltd was specifically cleared and credited to an account held by Rolls Razor Ltd with Barclays Bank on 17 July 1964. On the same day the directors of Rolls Razor Ltd resolved to put the company into voluntary liquidation. [69] The intervention of the formal insolvency regime brought about a dispute between Quistclose and Barclays Bank about entitlement to the money advanced by Quistclose. Quistclose argued that because Rolls Razor had not applied the money for the purpose for which it was advanced, the bank ought to be required, as a constructive or resulting trustee, to restore the money to Quistclose. On the other hand, the bank contended that no relationship of trustee and beneficiary arose and that it was entitled to keep the money. [70] Other creditors in Rolls Razor's liquidation were unaffected by the dispute between the bank and Quistclose. Ultimately, a debt was payable by Rolls Razor to either the bank or Quistclose. Only one of them could prove in the liquidation. The imposition of a trust would not infringe the pari passu principle requiring distribution of the proceeds of an insolvent entity's assets among all creditors rateably, in accordance with the statutory priorities. The issues between the bank and Quistclose were twofold: who gets the money and who proves in Rolls Razor's liquidation? [71] Lord Wilberforce gave the leading speech in Quistclose. Lord Reid, Lord Morris of Borth-y-gest, Lord Guest and Lord Pearce agreed with it. Lord Wilberforce, at 580, said that arrangements of this character, for the payment of a person's creditors by a third person, gave rise to a relationship of a fiduciary character or trust in favour, as a primary trust, of the creditors and, secondarily, if the primary trust were to fail, of the third person. Lord Wilberforce opined that such a characterisation had been recognised in a series of cases over some 150 years.[72] Lord Wilberforce's legal analysis continued, at 580-581:In Toovey v Milne (1819) 2 B & A 683, part of the money advanced was, on the failure of the purpose for which it was lent (viz, to pay certain debts) repaid by the bankrupt to the person who had advanced it. On action being brought by the assignee of the bankrupt to recover it, the plaintiff was nonsuited and the nonsuit was upheld on a motion for a retrial. In his judgment Abbott CJ said at p 684: "I thought at the trial, and still think, that the fair inference from the facts proved was that this money was advanced for a special purpose, and that, being so clothed with a specific trust, no property in it passed to the assignee of the bankrupt. Then the purpose having failed, there is an implied stipulation, that the money shall be repaid. That has been done in the present case; and I am of opinion that that repayment was lawful, and that the nonsuit was right." The basis for the decision was thus clearly stated, viz, that the money advanced for the specific purpose did not become part of the bankrupt's estate. This case has been repeatedly followed and applied (see Edwards v Glynn (1859) 2 E & E 29; Re Rogers, Ex p Holland and Hannen (1891) 8 Morr 243; Re Drucker (No 1) [1902] 2 KB 237, Re Hooley, Ex p Trustee[1915] HBR 181. [Re Rogers] was a decision of a strong Court of Appeal. In that case, the money provided by the third party had been paid to the creditors before the bankruptcy. Afterwards the trustee in bankruptcy sought to recover it. It was held that the money was advanced to the bankrupt for the special purpose of enabling his creditors to be paid, was impressed with a trust for the purpose and never became the property of the bankrupt. Lindley LJ decided the case on principle but said that if authority was needed it would be found in Toovey v Milne and other cases. Bowen LJ said [at 248] that the money came to the bankrupt's hands impressed with a trust and did not become the property of the bankrupt divisible amongst his creditors, and the judgment of Kay LJ at p 249 was to a similar effect.[73] One of the arguments advanced in opposition to Quistclose's claims was that it was merely a creditor of Rolls Razor. That status was said to exclude the implication of any trust, enforceable in equity in favour of Quistclose. It was contended that a relationship of debtor and creditor was inconsistent with one of trustee and beneficiary. Lord Wilberforce dismissed that argument at 581-582:My lords, I must say that I find this argument unattractive. Let us see what it involves. It means that the law does not permit an arrangement to be made by which one person agrees to advance money to another, on terms that the money is to be used exclusively to pay debts of the latter, and if, and so far as not so used, rather than becoming a general asset of the latter available to his creditors at large, is to be returned to the lender. The lender is obliged, in such a case, because he is a lender, to accept, whatever the mutual wishes of lender and borrower may be, that the money he was willing to make available for one purpose only shall be freely available for others of the borrower's creditors for whom he has not the slightest desire to provide.I should be surprised if an argument of this kind–so conceptualist in character–had ever been accepted. In truth it has plainly been rejected by the eminent judges who from 1819 onwards have permitted arrangements of this type to be enforced, and have approved them as being for the benefit of creditors and all concerned. There is surely no difficulty in recognising the co-existence in one transaction of legal and equitable rights and remedies: when the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose (see Re Rogers where both Lindley LJ and Kay LJ explicitly recognised this): when the purpose has been carried out (i.e., the debt paid) the lender has his remedy against the borrower in debt: if the primary purpose cannot be carried out, the question arises if a secondary purpose (i.e., repayment to the lender) has been agreed, expressly or by implication: if it has, the remedies of equity may be invoked to give effect to it, if it has not (and the money is intended to fall within the general fund of the debtor's assets) then there is the appropriate remedy for recovery of a loan. I can appreciate no reason why the flexible interplay of law and equity cannot let in these practical arrangements, and other variations if desired: it would be to the discredit of both systems if they could not. In the present case the intention to create a secondary trust for the benefit of the lenders, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it.[74] Finally, Lord Wilberforce considered the question of notice. He proceeded on the assumption that it was necessary for Barclays Bank to have had notice of the trust, or of the circumstances giving rise to the trust, when it received the money, on 15 July 1964. His Lordship endorsed the proposition that a mere request to put money into a separate account was insufficient to constitute notice. If notice were available of the terms upon which the money had been advanced by the third party that was sufficient to attach an equitable obligation on the bank. The fact that the bank was unaware of the identity of the lender was irrelevant. [75] The Quistclose decision has led to much judicial and academic debate. An important contribution to the debate was made by Peter Millett QC in his seminal article "The Quistclose Trust: Who Can Enforce It?" (1985) 101 LQR 269. More recently, a series of essays discussing Quistclose and the subsequent cases has been published: William Swadling (ed), The Quistclose Trust: Critical Essays (2004). [76] In General Communications Ltd v Development Finance Corporation of New Zealand Ltd [1990] 3 NZLR 406 (HC and CA) the approach suggested by Mr Millett QC's Law Quarterly Review article was adopted.[77] After discussing authority subsequent to Quistclose, this Court considered the article by Mr Millett QC. At 432-433, Hardie Boys J, for the Court, said:. . . While not necessarily differing from the result that was reached, [Mr Millett] expressed the view that both Megarry VC and Peter Gibson J had proceeded on a faulty analysis of Quistclose; and that the true position is that prima facie (ie in the absence of intention to the contrary), and in the absence of special circumstances raising an equity against him, the lender is free to change his mind and release the borrower from his obligation to pay only for the specified purpose; for the borrower's obligation in respect of the loan is owed exclusively to the lender and not to his own creditors; and the beneficial interest in the money must remain in the lender unless and until it is finally disposed of either to the creditors or the borrower. Put shortly, he argued that Quistclose is no more than an example of an illusory trust, one where the beneficial interest remains in the settlor. But he went on to emphasise that all depends on the intention, to be ascertained from the language used, the conduct of the parties, and all other relevant circumstances. And so he suggested the following guidelines for ascertaining that intention (A being the lender, B the borrower and C the creditor of B): 1. If A's intention was to benefit C, or his object would be frustrated if he were to retain a power of revocation, the transaction will create an irrevocable trust in favour of C, enforceable by C but not by A. The beneficial interest in the trust property will be in C. 2. If A's intention was to benefit B (though without vesting a beneficial interest of him), or to benefit himself by furthering some private or commercial interest in his own, and not (except incidentally) to benefit C, then the transaction will create a trust in favour of A alone, and B will hold the trust property in trust to comply with A's directions. The trust will be enforceable by A but not by C. The beneficial interest will remain in A. 3. Where A's object was to save B from bankruptcy by enabling him to pay his creditors, the prima facie inference is that set out in paragraph 2 above. Wherever that is the correct inference: (i) Where A has an interest of his own, separate and distinct from any interest of B, in seeing that the money is applied for the stated purpose, B will be under a positive obligation, enforceable by A, to apply it for that purpose. Where A has no such interest, B will be regarded as having a power, but no duty, to apply it for the stated purpose and A's remedy will be confined to preventing the misapplication of the money. (ii) Prima facie, A's directions will be regarded as revocable by him; but he may contract with B not to revoke them without B's consent. (iii) Communication to C of the arrangements prior to A's revocation will effect an assignment of A's equitable interest to C, and convert A's revocable mandate into an irrevocable trust for C.This formulation, which with respect we are content to adopt, suggests that it is the lender's intention that is relevant. In Quistclose the emphasis was on mutual intention. Intention being ascertained objectively, there is really no difference: what one party is objectively seen to have intended must ex hypothesi have been appreciated by the other and accepted by him when he participated in the arrangement.[78] Twinsectra Ltd v Yardley [2002] 2 AC 164 (HL) involved a claim of a resulting trust arising out of a transaction in which a solicitor had paid out money from a trust account contrary to the terms on which it had been advanced. The allegation was that the solicitor had dishonestly assisted in breach of trust. One of the members of the House of Lords in that case was Lord Millett, the author of the Law Quarterly Review article. [79] The majority of Their Lordships (Lord Slynn of Hadley, Lord Steyn, Lord Hoffmann and Lord Hutton) decided the case by applying Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC), the leading authority on dishonestly assisting breach of trust. Lord Millett dissented and took the opportunity to discuss in some detail the nature of a Quistclose trust. [80] After a scholarly exposition of relevant principles Lord Millett concluded:68. ... But it is well established that a loan to a borrower for a specific purpose where the borrower is not free to apply the money for any other purpose gives rise to fiduciary obligations on the part of the borrower which a court of equity will enforce. In the earlier cases, the purpose was to enable the borrower to pay his creditors or some of them, but the principle is not limited to such cases. 102. Like all resulting trusts, the trust in favour of the lender arises when the lender parts with the money on terms which do not exhaust the beneficial interest. It is not a contingent reversionary or future interest. It does not suddenly come into being like an 18 th century use only when the stated purpose fails. It is a default trust which fills the gap when some part of the beneficial interest is undisposed of and prevents it from being "in suspense".[81] Does a Quistclose trust arise on the facts of this case? [82] Mr Jones submitted that the relationship between Mr Zhong and Mr Wang gave rise to fiduciary obligations. He adopted the "resulting trust" classification to which Lord Millett referred in Twinsectra. Mr Jones contended that becauseMr Zhong paid money to Mr Wang for the purpose of meeting the residential criterion of investing $1,000,000 or more in New Zealand, a trust arose, enforceable against the properties allegedly acquired with those moneys by Mr Wang. [83] In our view, that analysis is strained. Mr Zhong did not advance money to Mr Wang so that it could be applied in a particular way. Rather, the money was paid for the general purpose of making an investment. The precise arrangements between Mr Zhong and Mr Wang were vague: in particular, it was unclear on what basis the money would be invested for the term of two years. [84] Mr Zhong's objective in paying money to Mr Wang, was met. He and his family gained status as residents in New Zealand as a result of the "investment". Mr Zhong's complaint is not that he was denied the advantage he sought to gain from the investment but, rather, that Mr Wang has not repaid the money to him. [85] In our view, the nature of the transaction between Mr Zhong and Mr Wang does not give rise to a Quistclose trust.(iii) Claim based on constructive trust[86] The alternative argument on behalf of Mr Zhong is that the property acquired by Mr Wang is subject to a constructive trust. The argument is premised on a fiduciary making an improper profit from his or her fiduciary position. [87] Mr Jones, placing reliance upon Estate Realties Ltd v Wignall [1991] 3 NZLR 482, at 491-492 and New Zealand Netherlands Society "Oranje" Inc v Kuys[1973] 2 NZLR 163 (PC), submitted that it was sufficient that Mr Zhong reposed trust and confidence in Mr Wang, either generally or in relation to the particular transaction, for the purpose of establishing a fiduciary obligation. [88] In Estate Realties Ltd, Tipping J discussed the types of relationship that would likely give rise to a fiduciary obligation. He referred to the Privy Council decision in Kuys. At 492, Tipping J said:The word "fiduciary" derives from the Latin word "fiducia" the primary meaning of which is trust. Important secondary meanings are confidence and reliance. The cases demonstrate that a fiduciary relationship will arise where one party is reasonably entitled to repose and does repose trust and confidence in the other, either generally or in the particular transaction: see per Casey, J in Day v Mead [[1987] 2 NZLR 443 (CA)] where His Honour said that the relationship in question in that case "generated that degree of confidence and trust which in my view justifies the intervention of equity". What must be asked is whether the circumstances in the present transaction were such that Estate Realties Ltd were reasonably entitled to and did place confidence and trust in Egden Wignall & Co. The answer in my view must be in the affirmative.[89] The relationship discussed in Estate Realties Ltd was that of sharebroker and client. That relationship is based on agency. It is indisputable that an agent owes fiduciary obligations to its principal in respect of transactions undertaken on its behalf. [90] Mr Phillipps relied upon Judge Doogue's finding that the relationship was one of debtor and creditor only. The reasons that led Judge Doogue to that conclusion are set out in [37] and [38]: particularly at [39] and [40] of his judgment. [91] With respect, we take a different view. On evidence common to both Mr Zhong and Mr Wang, money paid by Mr Zhong was paid to or at the direction of Mr Wang. In that context Mr Wang must be regarded as Mr Zhong's agent for the purpose of applying the money in terms of Mr Zhong's instructions. [92] Mr Zhong makes it clear that he intended Mr Wang to make an investment in Yini Investments Ltd. Mr Zhong deposes that the money was to be repaid after two years. On any view, unless Mr Wang's evidence that the money was paid to him to acquire shares in Yini were accepted, Mr Wang was not authorised to use the money paid by Mr Zhong for the purpose of acquiring land for the benefit of himself or others associated with him. [93] There is no doubt that the relationship of agent and principal gives rise to a fiduciary obligation. We adopt what was said by Mason J in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (HCA) at 96-97:The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf Boardman vPhipps [[1967] 2 AC 46 at 127; ]) viz trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of", and "in the interests of" signify that the fiduciary acts in a "representative" character in the exercise of his responsibility ...[94] In Attorney-General for Hong Kong v Reid [1994] 1 NZLR 1 (PC) the long standing authority of Lister & Co v Stubbs (1890) 45 Ch D 1 (CA) was overruled, with the consequence that the existence of a relationship of debtor and creditor as between parties did not prevent a relationship of trustee and beneficiary from co- existing with it. [95] In delivering the advice of the Privy Council, Lord Templeman (at 7-8) discussed Lister & Co v Stubbs. His Lordship referred to Lindley LJ's observation, (Lister, at 15) about the relationship between Lister & Co (as employer) and Stubbs (as an employee) who had betrayed his trust and received a bribe. Lindley LJ said that the relationship:... is that of debtor and creditor; it is not that of trustee and cestui que trust. We are asked to hold that it is - which would involve consequences which, I confess, startle me. One consequence, of course, would be that, if Stubbs were to become bankrupt, this property acquired by him with the money paid to him by Messrs Varley would be withdrawn from the mass of his creditors and be handed over bodily to Lister & Co. Can that be right? Another consequence would be that, if the Appellants are right, Lister & Co could compel Stubbs to account to them, not only for the money with interest, but for all the profits which he might have made by embarking in trade with it. Can that be right?[96] Lord Templeman continued, at 8:For the reasons which have already been advanced Their Lordships would respectfully answer both [of Lindley LJ's] questions in the affirmative. If a trustee mistakenly invests moneys which he ought to pay over to his cestui que trust and then becomes bankrupt, the moneys together with any profit which has accrued from the investment are withdrawn from the unsecured creditors as soon as the mistake is discovered. A fortiori if a trustee commits a crime by accepting a bribe which he ought to pay over to his cestui quetrust, the bribe and any profit made therefrom should be withdrawn from the unsecured creditors as soon as the crime is discovered. The decision in Lister v Stubbs is not consistent with the principles that a fiduciary must not be allowed to benefit from his own breach of duty, that the fiduciary should account for the bribe as soon as he receives it and that equity regards as done that which ought to be done. From these principles it would appear to follow that the bribe and the property from time to time representing the bribe are held on a constructive trust for the person injured. A fiduciary remains personally liable for the amount of the bribe if, in the event, the value of the property then recovered by the injured person proved to be less than that amount. The decisions of the Court of Appeal in Metropolitan Bank v Heiron [(1880) 5 Ex D 319 (CA)] and Lister v Stubbs are inconsistent with earlier authorities which were not cited. Although over 100 years has passed since Lister v Stubbs, no one can be allowed to say that he has ordered his affairs in reliance on the two decisions of the Court of Appeal now in question. Thus no harm can result if those decisions are not followed.[97] Once the problem of a co-existing relationship is removed, there is no basis on which to deny that a constructive trust could arise in this case. [98] We are satisfied that, in terms of Sims v Lowe, a reasonably arguable case to support a constructive trust on this basis has been made out. For those reasons, the caveats should remain pending determination of the new proceeding issued by Mr Zhong or earlier order of the High Court.Availability of alternative remedies[99] This appeal has demonstrated the difficulties that can sometimes arise when there is doubt about whether a fiduciary obligation exists on which a claim for a constructive trust can be based to sustain a caveat. [100] In this case, the preferable course may have been for Mr Zhong to apply for aMareva injunction to prevent Mr Wang from disposing of assets up to the value of Mr Zhong's claim pending resolution of the substantive issues between the parties. [101] We draw attention to Allen v Commissioner of Inland Revenue (2004) 21 NZTC 18,718 (CA). Delivering the judgment of the Court, William Young J said:[105] The grant of a Mareva injunction is most obviously appropriate in cases where the assets to be frozen unquestionably belong to the defendant. But the availability of a Mareva injunction is not confined to that situation. For instance, there may be disputes as to the beneficial ownership of the property in question. The existence of such a dispute is not in itself an objection to the grant of an injunction.[102] A Mareva injunction operates to protect a claimant's ability to enforce a judgment and does not purport to determine the existence or otherwise of a proprietary remedy. In each case, consideration ought to be given to the type of interim protection that best fits the particular circumstances.Result[103] For the reasons we have given, the appeal is allowed. The orders removing the two caveats are set aside. The application to remove the caveats is dismissed. [104] There is no reason to deny Mr Zhong costs, notwithstanding the late filing of the trust proceeding in the High Court. We award costs in his favour in the sum of $6000 together with reasonable disbursements to be fixed, if necessary, by the Registrar.WILLIAM YOUNG P[105] I agree that the appeal should be allowed but my reasons are not precisely the same as those set out by Heath J. For this reason I am writing separately. [106] The underlying arrangements were, in substance, a device to facilitate Mr Zhong obtaining residence status with the New Zealand immigration authorities. This is why Mr Zhong did not seek a normal return on his "investment". This and an apparent unwillingness to conform to the exchange control laws of the People's Republic of China may explain the informality of the arrangements between Messrs Zhong and Wang. The waters are further muddied by the high degree of conflict between the accounts of events which each has given in evidence. The upshot is that I have very little feel for what that underlying agreement was. I am, however,reasonably confident that Mr Zhong expected to get his money back and did not expect it to be dissipated in circumstances which (a) benefited an entity closely associated with Mr Wang and (b) meant that the party he had placed the money with (be it Mr Wang or Yini) was not able to pay the money back. [107] Assuming that Mr Zhong's account of events is broadly correct (which is appropriate given that the case turns on whether he has established an arguable case), there is scope for debate as to the true nature of his remedies, particularly as to whether he can have direct resort to the properties purchased in April and May 2002. [108] I am not prepared to dismiss the possibility that there was a Quistclose trust in relation the funds paid over by Mr Zhong. I think it arguable that the funds were paid on terms which required their retention both for limited purposes and as an identifiable fund capable of being later recovered by Mr Zhong. On this analysis, the relevant purpose – the purpose that arguably created the Quistclose trust - was repayment to Mr Zhong. On this approach, Mr Zhong would in effect have had a continuing security interest in the money which he paid over. Such an interest might be within at least the broadest conception of what constitutes a Quistclose trust (cf the remarks of Lord Millett in Twinsectra Ltd v Yardley at [68]). In any event, even if the Quistclose label is not entirely apt (and I agree that it is not usually applied where the purpose in question in a sense is simply repayment), that is not inconsistent with the funds themselves being subject to an express trust. I accordingly disagree with the analysis which appears at [83] – [85] of the judgment prepared by Heath J. [109] In any event, I am satisfied that it is well arguable that: (a) Mr Wang was a fiduciary for Mr Zhong both as his adviser in relation to immigration and necessarily related financial transactions and as an agent for the investment of the money which was paid to him. (b) The dissipation of the funds involved in the acquisition of the two properties involved a breach of Mr Wang's fiduciary duties to Mr Zhong either as inconsistent with the express terms on which hewas to invest the money or alternatively as involving him placing his personal interests (including those of the Great Shanghai Family Trust) ahead of his duties to Mr Zhong. (c) If the Great Shanghai Family Trust (personified by Mr Wang and his former wife) acquired the two properties in question with funds provided originally by Mr Zhong (which is to be assumed for present purposes), this involved dishonest and knowing participation by them in Mr Wang's breach of fiduciary duty with the consequence that they hold the properties on a constructive trust for Mr Zhong. [110] I would accordingly allow the appeal.Solicitors: Hesketh Henry, Auckland for Appellant Carson & Co, Auckland for Respondent