Ordered to pay $1.9 million shortfall on a mortgagee sale of her failed Auckland property development, Jian Tan was also ordered to pay $111,900 as an occupation rent for the period taken to evict her from the Massey property. The High Court ruled out her negligence claim against a real estate agent marketing the property; in a mortgagee sale, real estate agents are acting on behalf of the unpaid creditor, not the defaulting owner.
Ms Tan’s five unit development on Massey’s Don Buck Road collapsed into a welter of claims and counter claims when her company Golden Touch Investment and Trade Co Ltd defaulted in late 2023 on a $3.8 million loan.
The loan was advanced by Jianzhong Zhu. Ms Tan guaranteed repayment.
The High Court was told Ms Zhu’s loan was used to refinance existing lending at a time when the project was already in difficulty. By the time repayment of Ms Zhu’s loan was due, the development was still not complete. No code compliance certificate had been issued.
Following a later High Court hearing, Associate Judge Cogswell said Ms Tan did little more than raise vague and unsubstantiated allegations about the mortgagee sale process.
At heart of Ms Tan’s allegations was a complaint that Ms Zhu was party to a fraud, intended to get control of her Don Buck property at a cheap price.
Ms Tan alleged purchaser at the mortgagee sale, Cypress Investment Holding Ltd, was a front for Ms Zhu. She claimed Cypress Investment was controlled by Ms Zhu’s spouse. She had private investigators attempt to track down who was running Cypress; to no avail.
Legal costs mounted with multiple unsuccessful attempts by Ms Tan to block any mortgagee sale.
Ms Tan claimed Ms Zhu wrongly dismissed attempts to refinance. The deal she offered would have seen part-payment to Ms Zhu, with her then first ranking mortgage reduced to a second-ranking security for the unpaid balance.
Ms Zhu was not obliged to enter into arrangements that increased the risk of further losses, Judge Cogswell said. Golden Touch was in breach of its loan; Ms Zhu was entitled to enforce her mortgage, he said.
Ms Tan claimed Ms Zhu did not properly advertise the property when selling. She also claimed damages for negligence from Harcourts Three Kings.
Photographs included in an information pack provided to potential bidders did not show the current state of the property to best advantage, she said. They were taken at an earlier point in construction.
The court was told Ms Tan had refused access during the marketing period. There was no opportunity to get better photographs.
Even if inadequate photographs were a defect in marketing the property, it was a defect caused by Ms Tan, Judge Cogswell said. In any event, they correctly illustrated that the project was incomplete at time of sale, he said.
After purchasing at mortgagee sale, Cypress discovered the property was occupied and tenanted.
It was awarded mesne profits totalling $111,900 against both Golden Touch and Ms Tan for the seven month period from date of the mortgagee sale to the date of the court hearing. Akin to the law of trespass, these damages are compensation for the wrongful occupation of property owned by someone else.
Both Golden Touch and Ms Tan were ordered to surrender possession.
Ms Tan’s claims against Harcourts Three Kings were dismissed.
Real estate agents acting on a mortgagee sale owe legal duties to their client, the secured creditor enforcing its security. A defaulting debtor is not the client.
Any claims for losses arising from poor marketing of a property in a mortgagee sale are made against the secured creditor forcing the sale, not the real estate company acting as agent for the creditor.
Golden Touch Investment and Trade Company Ltd v. Zhu – High Court (5.06.25)
25.138