The High Court dismissed as a sham a supposed lease between a Christchurch dairy owner and his former wife intended to frustrate forced sale of his property following failed earthquake litigation.
After protracted litigation against his insurers, Mr Xiaoming was ordered to pay some $550,500 legal costs. With interest for late payment added, he now owes $672,700. Failure to pay led to a court-ordered sale of his Addington property on Selwyn Street; a corner dairy with accommodation attached.
The property was passed in at auction. As highest bidder, IBuy Ltd subsequently purchased for $512,000. Terms of sale stated buyers took subject any existing tenancies. During the sale process, Mr Xiaoming claimed the property was leased. He refused to provide a copy of the lease. He refused to allow access for real estate agents.
When told to vacate, Mr Xiaoming produced a hand-written document stating the property was leased to his former wife. In turn, she had sub-leased the property to him, he claimed. He refused to leave.
IBuy Property claimed the lease was a sham. It sought a High Court order to have Mr Xiaoming give up possession.
His former wife told the court she had lent Mr Xiaoming $300,000 to fund his eventually unsuccessful insurance claim. The lease was security for this loan, she said.
Associate judge Paulsen ruled the lease a sham. There was no evidence of any loan. There was no evidence of a loan amount, terms or interest rate. There was no evidence of any repayments supposedly sourced from rent payable on a lease.
By comparison, the lease was a detailed written document with all signatures witnessed. The lease did not appear to be security for any supposed loan, Judge Paulsen said. The lease was for twenty five years and not limited to the term of any loan. And unusually for a commercial lease, there were no rights to terminate.
The lease was a sham, Judge Paulsen ruled. IBuy Property owns the property. Mr Xiaoming was ordered to vacate Selwyn Street; he had no rights to continued occupation.
IBuy Property Ltd v. Xiaoming – High Court (11.10.23)
23.177