LI v 110 FORMOSA (NZ) LIMITED [2019] NZHC 70

LI v 110 FORMOSA (NZ) LIMITED [2019] NZHC 70 [5 February 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2016-404-001650CIV-2016-404-001878[2019] NZHC 70BETWEEN JUN LIApplicantAND 110 FORMOSA (NZ) LIMITEDFirst RespondentAND MENG WANGSecond RespondentContinued overleafHearing: 30 January 2019Appearances: D M Connor and D J D van Hout for Applicant (in 1650)D W Grove for First Respondent (in 1650)A J B Holmes and L E Mannis for Second, Fourth and FifthRespondents (in 1878)Judgment: 5 February 2019JUDGMENT OF VAN BOHEMEN J(ON APPLICATIONS FOR STAY OF JUDGMENT ANDDISCHARGE OF CAVEAT)This judgment was delivered by me on 05 February 2019 at 3.00pmPursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors:Carson Fox Bradley Ltd, Auckland (X Li)Foy & Halse, Auckland (G Halse)Cook Morris Quinn, Auckland (D Morris)Robertson, Auckland (M Robertson)ANDContinued from previous pageDINGZHI HUANGThird Respondent [Discontinued]GOLDEN BEACHLANDS HOLDINGS LIMITEDFourth RespondentJENNY AND EAMON HOLDINGS LIMITEDFifth RespondentLOO & KOO BARRISTERS, SOLICITORS,NOTARY PUBLICSixth RespondentIntroduction[1] On 30 January 2019, I heard applications from:(a) the first respondent, 110 Formosa (NZ) Ltd, for orders to discharge thecaveat registered by the applicant, Jun Li, against the title to theproperty comprising the Formosa Golf Course at Gulf Harbour (theFormosa property) following the judgment issued on 19 December2018 by Fitzgerald J Li v 110 Formosa (NZ) Ltd in which the Judgeheld that Mr Li had no interest in the Formosa property;1(b) Mr Li for a stay of the execution of Fitzgerald J's judgment pendingdetermination of the appeal Mr Li says he intends to file by 8 February2019.[2] Although Mr Li's application to stay Fitzgerald J's judgment was filed afterand in response to 110 Formosa's application to discharge Mr Li's caveat, counselagreed that the outcome of the application to lift the caveat was largely contingent onthe outcome of the stay application. Accordingly, the submissions by Mr Connor forMr Li and by Mr Grove for 110 Formosa addressed the applications together with aprincipal focus on the application for stay.[3] Mr Li's solicitors served the stay application on all parties. However, only thesolicitors for Mr Li and 110 Formosa were notified there was to be a hearing of theapplications on 30 January 2019. Counsel for the second, fourth and fifth respondents,Meng Wang, Golden Beachlands Holdings Ltd (GBHL) and Jenny Eamon HoldingsLtd (JEHL), were present but the sixth respondents were not represented. All counselpresent agreed, however, that the hearing should proceed as scheduled.[4] Mr Holmes for Mr Wang, GBHL and JEHL did not make submissions on thesubstance of the applications but said his clients supported the position advanced by110 Formosa in opposing the stay and supporting the discharge of the caveat.1 Li v 110 Formosa (NZ) Ltd [2018] NZHC 3418.Relevant Background[5] Mr Li says that in 2014 he paid $4.8 million to Mr Wang in part payment ofthe sum of $12.16 million, the amount which Mr Li was to pay to acquire a 32 per centshare in the purchase of the Formosa Golf Course (the property) through JEHL. Thetotal price for the purchase of the Formosa property to be paid by JEHL was $38million. Mr Li says the proposed deal was cancelled by the vendors because of non-performance by Mr Wang of the agreement for the sale and purchase of the Formosaproperty and that Mr Wang used Mr Li's money, without Mr Li's authority, to partfund the purchase of the Formosa property through GBHL and then 110 Formosa inwhich Mr Li had no interest.[6] At the end of that process, ownership of the Formosa property vested in 110Formosa, of which Mr Wang was the sole director at the time of purchase. Mr Li alsosays that solicitors Loo & Koo, the sixth defendant, who acted for 110 Formosa,Mr Wang, GBHL and JEHL, were complicit in these arrangements. Because thepreviously agreed arrangements had fallen over, Mr Li did not pay the remaining $7.36million of his share of the purchase price.[7] On 2 October 2015, Mr Li registered a caveat against the title to the property.The caveat asserted that Mr Li had a beneficial interest in the Formosa propertypursuant to an equitable lien or implied, resulting or constructive trust between 110Formosa and Mr Li. On 25 July 2016, Formosa and Mr Li filed a consentmemorandum in which they recorded their agreement that, unless they agreed to thecontrary, the caveat should not lapse pending the determination of Mr Li's proceedingthat he intended to bring to establish his interest in the property.[8] On 26 July 2016, Lang J made orders that the caveat should not lapse pendingfurther order of the Court and that the first order was conditional upon Mr Li seekingto establish the interest protected by the caveat by filing a substantive proceeding by10 August 2016. Mr Li filed his proceeding as directed.[9] In October 2016, 110 Formosa applied to vary Lang J's orders to remove thecaveat on the basis that the statement of claim filed by Mr Li did not disclose acaveatable interest in the property. By judgment dated 17 February 2017,Christiansen AJ dismissed the application and held that Mr Li had established anarguable basis for his caveat and that it was further arguable that he could trace hisclaim of an interest in the property.2[10] Mr Li's substantive proceeding was heard by Fitzgerald J between 18 June and13 July 2018. The decision was reserved.[11] In August 2018, before the release of Fitzgerald J's judgment, 110 Formosamade a further application to vary Lang J's orders to discharge the caveat to allow itto obtain $3 million in secured funding to undertake urgent maintenance andremediation works and thereafter to allow Mr Li to re-register the caveat. In ajudgment given on 27 September 2018, Andrew AJ dismissed the application.3Andrew AJ proceeded on the basis Mr Li had a reasonably arguable claim to a 32 percent interest in the land and said that if he granted the application he might complicateany relief that Fitzgerald J might award to Mr Li giving him such an interest in theland.4 Andrew AJ held 110 Formosa had failed to provide the Court with sufficientinformation about the financial position of the company and the value of its shares forthe Associate Judge to be completely satisfied that removal of the caveat would notprejudice Mr Li's interest.5Fitzgerald J's judgment[12] Fitzgerald J issued her judgment on 19 December 2018. She dismissed allMr Li's claims against 110 Formosa, including Mr Li's claim to an interest in theFormosa property by way of constructive trust in favour of Mr Li. She also dismissedall Mr Li's claims against all the other defendants except Mr Wang. With regard toMr Wang, Her Honour decided that Mr Wang held that proportion of his shares in 110Formosa representing the $4.8 million paid by Mr Li pursuant to a resulting trust infavour of Mr Li. She also decided that Mr Wang was liable to Mr Li for breach ofcontract for utilising Mr Li's money and then cancelling his allocated shareholding,that liability being limited to damages in the value of Mr Li's original contribution of2 Li v 110 Formosa (NZ) Ltd [2017] NZHC 174 at [61].3 Li v 110 Formosa (NZ) Ltd [2018] NZHC 2529.4 At [32]-[33].5 At [34]-[35].$4.8 million. Fitzgerald J directed that Mr Li file a memorandum within 20 workingdays from the date of her judgment confirming his election between the two remedies.Consideration of application for a stay[13] Mr Li's application stated that it was made pursuant to r 17.29 of the HighCourt Rules 2016, under which a liable party may apply for a stay of the enforcementof a judgment to avoid against a substantial miscarriage of justice if the judgment wasenforced. However, it was agreed at the hearing that the appropriate rule is r 12(3) ofthe Court of Appeal (Civil) Rules 2005. Under that rule, pending the determination ofan appeal, the court appealed from or the Court of Appeal may, upon application, ordera stay of the execution of the decision. Mr Connor said that, in any event, similarconsiderations apply under both rules.[14] While it is correct that both rules involve a balancing exercise, the rules aredistinct and the onus on an applicant under rule 17.29 of the High Court Rules ishigher, requiring an applicant to demonstrate that a substantial miscarriage of justicewould be likely to result if the judgment were enforced. I doubt Mr Li could dischargethat onus. However, because there was agreement that the appropriate rule is r 12(3)of the Court of Appeal (Civil) Rules I have considered the application on that basis.[15] In Keung v GBR Investment Ltd, the Court of Appeal said:6[11] In determining whether or not to grant a stay, the Court must weighthe factors "in the balance" between the successful litigant's rights to thefruits of a judgment and "the need to preserve the position in case the appealis successful". Factors to be taken into account in this balancing exerciseinclude:(a) Whether the appeal may be rendered nugatory by the lack of a stay;(b) The bona fides of the applicant as to the prosecution of the appeal;(c) Whether the successful party will be injuriously affected by the stay;(d) The effect on third parties;(e) The novelty and importance of questions involved;6 Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].(f) The public interest in the proceeding; and(g) The overall balance of convenience.That list does not include the apparent strength of the appeal but that has beentreated as an additional factor.[16] I address each of these factors to be weighed in the balancing exercise set outin Keung v GBR Investment Ltd in determining whether a stay of execution should begranted.Would the appeal be rendered nugatory by the lack of a stay?[17] Whether Mr Li's appeal would be rendered nugatory if a stay is not granted iscritical to the balancing exercise. As Cotton LJ said in Polini v Gray,7 in a passagecited with approval by the Court of Appeal in New Zealand Insulators v ABB Ltd andmore recently by Collins J in Accident Compensation Corporation v Stafford:8 when there is an appeal about to be prosecuted the litigation is to beconsidered as not at an end, and that being so, if there is a reasonable groundof appeal, and if not making the order to stay the execution of the decree orthe distribution of the fund would make the appeal nugatory, that is to say,would deprive the Appellant, if successful, of the results of the appeal, then itis the duty of the Court to interfere and suspend the right of a party who, sofar as the litigation has gone, has established his rights.[18] Mr Connor says there is a high risk that if the caveat is removed the Formosaproperty will be sold or encumbered and its value dissipated. Mr Connor offers theexample of 110 Formosa taking out a loan secured by a mortgage on the property,defaulting on the mortgage and then the principal shareholder of 110 Formosa, GuiRong Wen, buying the Formosa property back at a mortgagee sale. Mr Connor offersno evidence in support of this scenario other than the deep lack of trust between Mr Lion the one hand and 110 Formosa and Mr Wang on the other. However, Mr Connorsays that when dismissing the application 110 Formosa brought last year to dischargethe caveat Andrew AJ held 110 Formosa had not provided adequate information aboutits financial position. Mr Connor says that continues to be the case. For these reasons,he submits that the caveat should be sustained on the same basis as that decided by7 Polini v Gray (1879) 12 Ch D 438 (CA) at 446.8 New Zealand Insulators v ABB Ltd (2006) 18 PRNZ 459 at [19]; Accident CompensationCorporation v Stafford [2018] NZHC 488 at [8].Andrew AJ, namely that the Court cannot be satisfied that removal of the caveat willnot prejudice Mr Li's interest.[19] Mr Connor also says that the caveat is necessary to secure not only Mr Li'sclaim to a 32 per cent interest in the Formosa property (if the Court of Appeal upholdsMr Li's appeal on that point) but also the value of any monetary award that may bemade against 110 Formosa and Mr Wang. That, he argues, is because Mr Li has noknowledge of the financial position of 110 Formosa or of the value of Mr Wang'sshareholding in 110 Formosa or of Mr Wang's other assets. Mr Connor says the sameconsiderations apply to the orders already made by Fitzgerald J and that because Mr Lidoes not know the value of Mr Wang's shares Mr Li is in no position to make theelection required by Fitzgerald J.[20] Mr Grove says 110 Formosa has no interest in selling the Formosa propertybecause Ms Wen wants to develop the Formosa property and that has always been herintention. Mr Li's caveat is stopping that development. After the hearing, Mr Grovefiled an undertaking by Ms Wen that she will not, as Director of 110 Formosa, enterinto any agreement for the sale and purchase of the Formosa property without givingMr Li's counsel and solicitors 10 clear working days' notice of the company'sintention to do so. Mr Grove says that the undertaking ensures that Mr Li would haveadequate opportunity to apply for an injunction to stop the sale if the Court of Appealhas not issued its decision on Mr Li's appeal.[21] Mr Grove says that while 110 Formosa intends to raise finance against theFormosa property for urgent repairs that need to be made to the waste water systemand also for development more generally, there is more than adequate value in theFormosa property for 110 Formosa to meet any order that the Court of Appeal mightmake. He refers to the valuation given by Mr Li's expert at the hearing beforeFitzgerald J which valued the Formosa property at $51 million and argues that anyentitlement that Mr Li might be held to have in the Formosa property would not exceed12 per cent of that sum based on Mr Li's $4.8 million making up 12 per cent of thepurchase price of $40 million. Mr Grove says that Mr Li's claims to have insufficientinformation about the financial position of 110 Formosa are belied by the fact thatMr Li has made no inquiry about the financial position of 110 Formosa since anexchange of correspondence between counsel in July 2018 prior to 110 Formosa'ssecond application to discharge the caveat.[22] Mr Grove says the situation now is very different from that which wasconsidered by Andrew AJ in September last year. Then, the Associate Judgeproceeded on the assumption that Mr Li had a reasonably arguable claim to a 32 percent interest in the land and was concerned not to complicate any relief that FitzgeraldJ might award to Mr Li. Now, after full consideration of Mr Li's claim, Fitzgerald Jhas found there is no basis for the claim.[23] Mr Grove also says that Mr Wang holds 19.75 per cent of the shares in 110Formosa and that those shares remain frozen in accordance with an undertaking madeby Mr Wang to the Court in June 2018 and noted by Fitzgerald J in her judgment.9However, Mr Grove also says that the caveat can be sustained only on the basis thatMr Li has a caveatable interest in the Formosa property and not on the basis that it isnecessary to secure any monetary awards that the Court might make in Mr Li's favouragainst 110 Formosa or Mr Wang.[24] There are significant differences between the facts in the present case and thosein Polini v Gray, NZ Insulators and Stafford. In Polini v Gray, the plaintiffs wishedto appeal a decision refusing their claim to share in funds in a deceased's estate. Theplaintiffs were concerned that unless the decision under appeal was stayed thedefendant would distribute the funds to others and the funds would be unavailable ifthe appeal was upheld. The Court held that a stay was necessary to preserve the fundsuntil the appeal had been decided.[25] In NZ Insulators, the Court accepted that the appellants would suffersignificant financial losses as a consequence of the injunction ordered by the HighCourt requiring the appellants to stop manufacturing their product. There too, the lossthat would be suffered by the appellant flowed directly from the execution of thejudgment under appeal.9 At [270].[26] In Stafford, the Accident Compensation Corporation had entered intoagreements with third parties for the sale and purchase of land surplus to itsrequirements. Mr Stafford registered a caveat against the land on behalf of Māoriwhose interests were represented by the Wakatū Incorporation which was engaged inTreaty settlement negotiations with the Crown. Mr Stafford's purpose in registeringthe caveat was to try to ensure the land was available for transfer to the WakatūIncorporation in the settlement process. In his judgment of 22 February 2018, CollinsJ held that Mr Stafford had no caveatable interest in the land.10 It was that decisionthat Collins J stayed pending the determination of Mr Stafford's appeal. As in Poliniv Gray and in NZ Insulators, in Stafford, Mr Stafford would likely have lost any valuein the appeal if Collins J's first judgment had not been stayed. The land was alreadyunder contract and would have been sold, unless the purchaser exercised an option tocancel. And it was the land itself rather than the value in the land that Mr Staffordsought to protect.[27] In this case, execution of Fitzgerald J's judgment would have no automaticconsequences for Mr Li. The Formosa property is not up for sale and 110 Formosasays it will not be taking any steps to sell the Formosa property. The director of 110Formosa has also given the undertaking referred to above. While Mr Connor arguesthat, regardless of Ms Wen's undertaking, 110 Formosa has the ability and theinclination to destroy or diminish Mr Li's asserted claim in the land by other meansregardless of Ms Wen's undertaking, I do not consider the Court can act on the basisof such speculation. I accept that Mr Li has cause to be distrustful of Mr Wang becauseof his appropriation of Mr Li's money and because Fitzgerald J found that Mr Wangwas not truthful in the evidence he gave either before her or in the earlier caveat-related proceedings.11 However, I must base my decision on a firmer footing,particularly now that Mr Li has had a full hearing of his claim. In that regard, referenceto the pleadings is helpful.[28] In his third amended statement of claim dated 5 July 2018 Mr Li seeks ordersthat 110 Formosa be required to buy out his claimed 32 per cent interest for the sumof $8.96 million if the Court upholds his claims against 110 Formosa based on10 Accident Corporation v Stafford [2018] NZHC 218, [2018] 2 NZLR 861.11 Li v 110 Formosa (NZ) Ltd [2018] NZHC 3418 at [180].constructive trust, breach of fiduciary duty and knowing assistance, resulting trust, andmoney had and received under Mr Li's first, second, third, and seventh causes ofaction.12 In other words, Mr Li seeks satisfaction by way of financial compensationrather than through endorsement of a continuing interest in the property.[29] Mr Li claims relief based on an asserted interest in the Formosa property itselfonly under the first cause of action in which Mr Li says 110 Formosa holds theFormosa property on constructive trust for Mr Li. While the relief sought in the othercauses of action includes compensation for the claimed value of the asserted 32 percent interest in the Formosa property, the causes of action themselves are not based ona claim to a current interest in the Formosa property. In the second cause of action forbreach of fiduciary duty the amended statement of claim says, in terms, that Mr Li hasbeen deprived of a 32 per cent interest in the Formosa property. In the third cause ofaction, the asserted resulting trust is in respect of Mr Li's contribution of $4.8 millionand not in relation to the Formosa property. In the seventh cause of action, for moneyhad and received, Mr Li seeks judgment for $4.8 million plus interest and costs.[30] In summary, the claimed interest in the Formosa property secured by the caveatrelates only to the first cause of action. It follows that removal of the caveat will notrender the whole of Mr Li's appeal nugatory because the relief sought under the othercauses of action on which Mr Li also seeks to appeal Fitzgerald J's decision is notcontingent on Mr Li having a continuing interest in the Formosa property itself.Moreover, with respect to the first cause of action, Mr Li seeks financial compensationrather than endorsement of a continuing interest in the Formosa property. It followsthat with respect to that cause of action, Mr Li's relief, if he succeeds on appeal, is notcontingent on securing an interest in the Formosa property. Furthermore, as Mr Grovesays, the caveat can secure only a caveatable interest and cannot be used as a generalsecurity for judgment. That is so even where there is the level of distrust between theparties asserted by Mr Connor.12 Fitzgerald J records that Mr Li's claims against 110 Formosa under Mr Li's fifth and sixth causesof action were not seriously pursued in argument and, in any event could not have succeeded; Liv 110 Formosa (NZ) Ltd [2018] NZHC 3418 at [26]-[30].[31] In all the circumstances, therefore, I find that the discharge of the caveat willnot render Mr Li's appeal nugatory. It follows that I find that this factor weighs againststaying the execution of Fitzgerald J's judgment.The bona fides of Mr Li as to the prosecution of the appeal[32] Mr Grove invites me to infer that Mr Li's bona fides are questionable becauseMr Li delayed applying for a stay of the judgment, has not made the election directedby Fitzgerald J and has yet to file his appeal or to provide the Court with a draft noticeof appeal.[33] I see no basis for drawing that inference. Fitzgerald J's judgment was releasedjust before the Christmas break during which time does not run under the definition of"working day" in r 1.3 of the High Court Rules. Mr Li is entitled to conduct himselfin accordance with those Rules. Mr Connor has also said Mr Li is content for an orderfor a stay to be contingent upon Mr Li filing his appeal by 8 February 2019.[34] Mr Grove refers me to correspondence exhibited to an affidavit sworn on 27August 2018 by Mr Graham Chin, the General Manager of operations of 110 Formosa,in the context of 110 Formosa's attempt to have the caveat discharged last year. MrGrove says the correspondence demonstrates that Mr Li is maintaining the caveat topursue ulterior advantages. I accept that the correspondence, including relatedcorrespondence from 110 Formosa, shows that there has been deep mistrust betweenMr Li and 110 Formosa and that each side has engaged robustly with the other. But Ido not accept that the correspondence demonstrates Mr Li's lack of bona fides. Nordo I accept that the correspondence demonstrates lack of bona fides on the part of 110Formosa as Mr Connor also invited me to infer.[35] Accordingly, I find the bona fides of both parties to be a neutral factor, neitherweighing in favour of or against a stay of execution of Fitzgerald J's judgment.Would 110 Formosa be injuriously affected by a stay?[36] In an affidavit sworn on 27 August 2018, Mr Chin said urgent work was thenrequired, at a cost of $3 million, to repair the waste water treatment system but wasprevented by an inability to raise finance because of Mr Li's caveat. As a consequence,110 Formosa was required to bring three sewage removal trucks to the Formosaproperty each day at a cost of $7,000. In an affidavit sworn on 30 January 2019, MrChin said the damage arising from Mr Li's caveat continues although the demand onthe waste water system has reduced because the height of the summer season haspassed. Mr Chin produced a bank record which he said shows that Ms Wen hascontributed in excess of $1.8 million to fund the operations of the Golf Course and tofund 110 Formosa's defence to Mr Li's proceeding.[37] Mr Li does not challenge that evidence and Mr Li has given an undertaking toagree to the Formosa property being used as security for a loan of $3 million to beapplied to maintenance and capital expenditure in connection with the Formosaproperty on the understanding that the caveat would remain in place pending theoutcome of his appeal.[38] Notwithstanding Mr Li's undertaking, I accept that 110 Formosa will beinjuriously affected by a stay if the consequence is that the caveat remains in place.Whether or not the undertaking offered by Mr Li would be adequate to enable 110Formosa to raise funds to undertake the remedial works to the waste water treatmentplant, the caveat would continue to prevent 110 Formosa from undertaking itsproposed development of the property. Accordingly, this factor weighs against a stayof execution.The effect on third parties[39] Mr Groves argues that a stay would have a significant effect on Ms Wen, 110Formosa's principal shareholder, who is unable to obtain finance to progress thedevelopment of the Formosa property which was the purpose of its purchase.Mr Groves says Ms Wen is propping up 110 Formosa with her own money because ofthe company's inability to raise its own finance. He also says that when Ms Wenbought into 110 Formosa she had no knowledge that Mr Wang had appropriatedMr Li's money to fund the purchase of the property.[40] Mr Li does not deny that the maintenance of the caveat has consequences forMs Wen or that Ms Wen was unaware of how the initial purchase of the Formosaproperty had been financed but Mr Connor suggests that the latter is the consequenceof inadequate due diligence on Ms Wen's part. Mr Connor also says that, in any event,110 Formosa is fixed with knowledge of the financing arrangements because Mr Wangwas sole director at the time.[41] Regardless of whether or not Ms Wen undertook adequate due diligence, Iaccept that a stay of Fitzgerald J's judgment, coupled with maintenance of the caveat,would have significant adverse consequences for Ms Wen. Accordingly, this factoralso weighs against a stay of execution.The novelty and importance of questions involved[42] Mr Groves says there are no questions of novelty or importance at issue.Mr Connor does not contest that and I consider this factor to be neutral.The public interest in the proceeding[43] Mr Groves says there is no public interest in the proceeding. Mr Connor doesnot contest that and this factor is also neutral.The balance of convenience[44] Mr Groves says the balance of convenience lies in maintaining the status quoin light of the judgment of Fitzgerald J, which is for the caveat to be removed and forthe development of the Formosa property to proceed as all parties had intended. MrConnor says that the balance of convenience lies strongly in preserving Mr Li'sposition while the appeal proceeds which means leaving the caveat in place.[45] This factor is finely balanced. On the one hand, I accept that the maintenanceof the caveat is having a significant adverse effect on 110 Formosa and Ms Wen whoare unable to proceed with the intended development. To continue that situation whileMr Li pursues a right of appeal on a point on which Fitzgerald J's finding wasunequivocal – that Mr Li had no ownership interest in the Formosa property itself – isa serious imposition. That imposition is acute if 110 Formosa is unable to undertakethe necessary remedial works to the waste water treatment system.[46] On the other hand, Mr Li's money was used to contribute to the purchase of aproperty by a vehicle in which he had no interest. He has been deprived of the use ofhis money and deprived of his opportunity to acquire, at least indirectly through acorporate structure, a 32 per cent interest in the property.13 Mr Li insists he has aninterest in the property itself which he wishes to pursue on appeal and maintains thereis a serious risk he will be unable to recover the full extent of his losses if the caveatis lifted because of arrangements 110 Formosa may put in place and in circumstanceswhere 110 Formosa has not been forthcoming in disclosing its true financial position.[47] I accept there are serious concerns on both sides and those concerns areexacerbated by the deep distrust between Mr Li and 110 Formosa and its shareholders,especially Mr Wang. As far as Mr Li is concerned, however, this is not a situationwhere Mr Li has nothing and risks losing everything if the caveat is lifted. Fitzgerald Jhas found in Mr Li's favour on two counts in his claims against Mr Wang. Nor is it asituation where, if the Court does not intervene by staying Fitzgerald J's judgment, itwill be sanctioning Mr Wang's wrong-doing as Mr Connor argues. Subject to theelection Mr Li must make, he has secured an interest in Mr Wang's shares in proportionto the Mr Li's contribution of $4.8 million or a right to damages in the sum of $4.8million. If Mr Li puts those remedies in issue by appealing the whole of Fitzgerald J'sjudgment, as Mr Connor says he intends to do, that is a choice made by Mr Li and theconsequences for that choice cannot be held against 110 Formosa.14[48] While I have acknowledged that Mr Li has reasons to be distrustful, I considerhis lack of engagement with 110 Formosa and with Mr Wang after the release of thejudgment to be unhelpful. It also indicates that the appeal may be being pursued asmuch for leverage as for endorsement of Mr Li's asserted ownership interest in theproperty. I find unconvincing Mr Connor's assertion that Mr Li has a right to expect110 Formosa to make good on the deficiencies in information identified by AndrewAJ in September last year without Mr Li taking any steps following Fitzgerald J's13 I note that while Mr Connor said that Mr Li was ready, willing and able to contribute theoutstanding balance of his share of the purchase price, Mr Groves and Mr Holmes said there wasno evidence of that before Fitzgerald J.14 If Mr Li had decided to appeal only those aspects of Fitzgerald J's decision that relate to his claimto an ownership interest in the property, I would have held that the balance of convenience laywith not staying the judgment and with discharging the caveat since Mr Li would have alreadysignificantly secured his position, even if not to the extent he wishes.judgment, particularly with respect to obtaining information that Mr Li says isnecessary for him to make the election required by Fitzgerald J. Saying that there isno point in asking because Mr Li could not believe anything he was told by 110Formosa is not a credible or useful basis for seeking the intervention of the Court.[49] For these reasons, I consider the balance of convenience weighs against a stayof execution of Fitzgerald J's judgment and in favour of discharging the caveat.[50] Overall, therefore, when weighing all of the factors identified by the Court ofAppeal in Keung v GBR Investment Ltd, the balance is in favour of dismissing theapplication for a stay of execution of Fitzgerald J's judgment.The apparent strength of the appeal[51] As noted above, in Keung v GBR Investment Ltd the Court of Appeal said thatthe apparent strength of the appeal has been treated as an additional factor to the listof factors to be weighed in the balance.15 However, in New Zealand Insulators16 theCourt cited with approval a statement by Buckley LJ in Minnesota Mining &Manufacturing Co v Johnson & Johnson when he said:17 when there appears to be a genuinely arguable case, the odds in favour ofone party or the other should not, in my opinion, weigh much, if at all, in thescales. The Court should not at this stage embark upon a prematuredetermination of the appeal.[52] Acknowledging that caution, I am hesitant to undertake an assessment of themerits of the appeal. However, Mr Connor emphasises this factor and I need to ensurethat any factor that may be favourable to Mr Li is not excluded from consideration.[53] Mr Connor says Fitzgerald J was seriously in error in holding that theexpectation of Mr Li in relation to the acquisition of the Formosa property was not inobtaining an ownership interest in the property itself but in obtaining an interest orshareholding in the corporate vehicle that was to purchase the Formosa property.Mr Connor says Fitzgerald J failed to give any weight to the introductory provisions15 Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].16 New Zealand Insulators v ABB Ltd (2006) 18 PRNZ 459 at [21];17 Minnesota Mining & Manufacturing Co v Johnson & Johnson [1976] RPC 671 (CA) at 678.of the Cooperation Agreement signed on 29 August 2014 in which Mr Li, Mr Wangand another party set out the basis on which they would acquire the Formosa property.Mr Connor submits that those provisions of the Cooperation Agreement, particularlythe preamble and clause 1, show that it was the intention of the parties to acquire theland itself. Against that background, the company referred to in the following clausesof the Cooperation Agreement should be regarded as the agent for the parties.[54] On that basis, Mr Connor says it would have been open to the Judge to haveheld that the intention was that the company would hold the land for and on accountof the parties to the Cooperation Agreement and to have looked through the companyin circumstances where Mr Wang and 110 Formosa had used the company structure todeprive Mr Li of his expectation of a share in the Formosa property. When asked foran authority to support that interpretation, Mr Connor referred to the judgment of LordSumption JSC in Prest v Petrodel Resources Ltd.18[55] Mr Groves and Mr Holmes say that this argument advanced by Mr Connor,who did not represent Mr Li in the substantive proceeding, was not argued at thehearing before Fitzgerald J and the Judge makes no reference to that argument in herdescription of Mr Li's causes of action or in her consideration of those causes of action.[56] It is open to Mr Li to advance that argument on appeal when the Court ofAppeal might hear more considered argument than was possible before me. For thatreason, I do not offer a firm view on the merits of the argument. It seems doubtful tome, however, that either Mr Wang or 110 Formosa can be said to have used a corporatestructure to evade an obligation they owed to Mr Li in the sense contemplated by LordSumption when he posited the limited principle under which a court may pierce thecorporate veil in order to deprive a company or its controller of the advantage theywould otherwise have obtained by the company's separate legal personality.19[57] As recorded at [13] and [189] – [190] of Fitzgerald J's judgment, the argumentbefore the Court was on the basis of the principles in Lankow v Rose and theobservations of the Court of Appeal in Fortext Group (in rec and in liq) v McIntosh18 Prest v Petrodel Resources Ltd [2013] UKSC 34, [2013] 2 AC 415.19 At [35].where it was recognised that a constructive trust in property may arise where certainconditions apply, including an expectation, that is reasonable in all the circumstances,of an interest in the property.20 That was the context in which Fitzgerald J held thatMr Li had no expectation of an interest in the Formosa property because his interestwas in securing shares in the corporate vehicle that was to acquire the property.[58] Mr Groves submits that Fitzgerald J's findings on this argument are conclusiveand reflect reality; that is, as is common in real estate developments, the intention ofthe parties was to form a special purpose vehicle to acquire and manage the property.That intention is reflected in the Cooperation Agreement which records the rights andinterests of the parties in the corporate structure described in the agreement,notwithstanding the language used in the opening provisions. Mr Grove says thoseopening provisions set out the broad intention of the parties but that they are subjectto the implementation arrangements in the balance of the agreement.[59] I agree that the preamble and clause 1 of the Cooperation Agreement are largelyaspirational and that the substance of the agreement is in the later provisions dealingwith the corporate structure. In that respect, therefore, there appears to be a strongfoundation for Fitzgerald J's finding that Mr Li's interest was in securing shares in thecorporate vehicle that was to acquire the Formosa property rather than in securing aninterest in the Formosa property itself. I consider that Mr Li may have difficultypersuading the Court of Appeal to reach a different conclusion.[60] Mr Connor also referred to the observations by Christiansen AJ when hedismissed 110 Formosa's first application to vary the orders made by Lang J anddischarge the caveat. In his decision, the Associate Judge held that on conventionaltrust and tracing principles the facts before him established a reasonably arguable casefor a trust in Mr Li's favour over the Formosa property and therefore to a caveatableinterest in the land. Christiansen AJ also said that prima facie, Mr Li is entitled inequity to trace his contribution into the property now owned by 110 Formosa.2120 Lankow v Rose [1995] 1 NZLR 277 (CA) at 294; Fortext Group (in rec and in liq) v McIntosh[1998] 3 NZLR 171 at 174-178.21 Li v 110 Formosa (NZ) Ltd [2017] NZHC 174 at [48]-[50].[61] However, since those observations were made there has been a substantivehearing before Fitzgerald J during which all the arguments that Mr Li's counsel choseto advance were given full consideration. It is not apparent from Fitzgerald J'sdecision that any argument was advanced based on the proposition that Mr Li'scontribution of $4.8 million could be "traced" into 110 Formosa's property. Suchdiscussion of tracing as there is in the judgment concerns the tracing of money intovarious bank accounts.22 It is difficult to assess, therefore, the prospects of Mr Lisucceeding at appeal on an argument based on tracing principles, at least with respectto Mr Li's asserted caveatable interest in the property.[62] Mr Connor argues that Fitzgerald J erred in not finding that 110 Formosa werefixed with knowledge of Mr Wang's appropriation of Mr Li's money given thatMr Wang was the company's sole director at the time it purchased the property. It isnot apparent, however, how such knowledge is relevant under the first cause of actionwhich is the only cause of action in which Mr Li alleges a continuing interest in theland. That cause of action, regarding a constructive trust, turned on Mr Li'sexpectations, not on the knowledge of 110 Formosa.[63] Accordingly, I am not persuaded that the merits of Mr Li's case, particularlywith respect to the first cause of action, are of such obvious strength as to affect thebalance when assessing the competing rights of 110 Formosa and Mr Li.Result[64] For the above reasons, I conclude that in balancing the competing rights of 110Formosa, as the successful party before Fitzgerald J, and Mr Li, as the intendedappellant, the balance lies in favour of dismissing the application for a stay of theexecution of Fitzgerald J's judgment. In particular, I am not persuaded that a stay ofexecution would render Mr Li's appeal nugatory.[65] Both parties accept that Mr Li has no caveatable interest in the Formosaproperty if execution of the judgment of Fitzgerald J is not stayed. It follows that Ishould grant the application by 110 Formosa to vary or revoke the orders made by22 At [159] and Schedule A,Lang J on 26 July 2016. In the circumstances, I consider revocation of the orders anddischarge of the caveat to be the appropriate course. However, the revocation anddischarge will take effect 20 working days from the date of this judgment to give Mr Lithe opportunity to appeal this decision to the Court of Appeal if he so wishes.[66] In reaching this decision, I have taken into account the undertaking by Ms Wennot to enter into any agreement for the sale and purchase of the Formosa propertywithout first giving Mr Li's counsel and solicitors 10 clear working days' notice of thecompany's intention to do so. The Court expects that undertaking and the undertakingby Mr Wang not to deal with his shares in 110 Formosa pending further order of theCourt to be honoured. I grant leave to Mr Li to apply in the event they are not.Costs[67] As 110 Formosa has been successful on both applications, it is entitled to costson a 2B basis as fixed by the Registrar.Orders[68] With effect from 7 March 2019:(a) The orders made by Lang J on 26 July 2016 concerning Caveat10209375.1 registered against Certificate of Title 748626 are revoked;(b) Caveat 10209375.1 is discharged.______________________G J van Bohemen J