Chen v He
[2015] NZHC 1593
•8 July 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-005671 [2015] NZHC 1593
BETWEEN ZHIXIONG CHEN
Plaintiff
AND
YAO WEI HE Defendant
Hearing: 3 and 4 February 2015 Appearances:
Neil Campbell QC for the Plaintiff
Paul Sills for the DefendantJudgment:
8 July 2015
RESERVED JUDGMENT OF MOORE J
This judgment was delivered by me on 8 July 2015 at 3:30pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
CHEN v HE [2015] NZHC 1593 [8 July 2015]
Introduction
[1] On 16 August 2010 Yao Wei He (“Mr He”) signed an acknowledgement of debt (“the document”). In this document he acknowledged he had borrowed
$300,000 from Zhixiong Chen (“Mr Chen”).
[2] Mr Chen sues on this document. He has demanded payment of the full amount together with interest from Mr He and he claims Mr He has defaulted.
[3] Mr He says this was not a personal loan. He says he received the $300,000 as an advance to be held on trust for a joint venture company which Mr He and Mr Chen’s son, Youngzhou (“Chen Jnr”), had recently formed. Mr He claims that Mr Chen agreed the advance could be “rolled over” and treated as one repayable by the joint venture company if, within six months, Mr Chen was satisfied the venture was profitable. Otherwise the advance was to be repaid within six months.
[4] Mr Chen denies such an arrangement ever existed. He says there was no joint venture. He says the document speaks for itself. The loan was a personal one and Mr He owes him $300,000 plus interest.
Background
[5] Mr Chen is a wealthy man who immigrated to New Zealand from China with his family in 2004. He now lives and works in Guangzhou, China.
[6] In about 2006, while in New Zealand, Mr Chen and Mr He met and became friends. Mr He’s financial circumstances were, and remain, a good deal more modest than Mr Chen’s. From about mid-2009, Mr He had been trading on his own, exporting New Zealand-made dairy and health products to Hong Kong and China. He had identified a niche market in Hong Kong and China where consumers were prepared to pay a premium for products manufactured and packaged in New Zealand.
[7] Mr He’s business involved purchasing these products from retail shelves at retail prices. He then freighted them to customers in Hong Kong and China. A gross
profit margin of between 6 and 9 per cent could be achieved after freight costs were deducted.
[8] It is common ground that the $300,000 was advanced to Mr He by Mr Chen in three tranches.
[9] The first was on 15 June 2010. That advance was, in fact, $120,000 of which
$20,000 was described by Mr Chen as “a gift”.1 On this first advance Mr He wrote out an acknowledgement of debt in the form of an IOU for $100,000.
[10] On 18 June 2010, three days after the first advance, the new company, New Zealand Products International Limited (“NZPIL”), was incorporated. The directors and (directly or through associated persons) its shareholders were Mr He and Chen Jnr. A few days after NZPIL was incorporated the new company opened bank accounts. Mr He and Chen Jnr were authorised to operate these accounts. Mr Chen had no such authority.
[11] The second advance of $100,000 was made on 16 August 2010. As with the first advance, Mr He prepared a written note in Chinese script in the presence of Mr Chen and the manager of the Rosedale branch of the ASB. The document which recorded the first advance was discarded. At the time Mr He prepared the
acknowledgement of debt, the final tranche of $100,000 was yet to be paid.2 Despite
this and in anticipation it would occur, Mr He recorded his indebtedness to Mr Chen in the sum of $300,000. Mr He hand wrote the note in Chinese script. An official English translation is set out below:
“I, HE Yao Wei, hereby borrow three hundred thousand New Zealand dollars in total from CHEN Zhixiong. The annual interest rate is 6 percent, which only applies to the sum of two hundred thousand New Zealand dollars of the whole amount of the loan. The remaining amount of one hundred thousand dollars is free of interest. The whole amount of the loan must be paid off within half a year.
The borrower: HE Yao Wai
16 August 2010”
1 From the evidence the “gift” appears to have been reimbursement by Mr Chen of expenses
incurred on his behalf by Mr He.
2 The final tranche of $100,000 was paid on 20 August 2010.
[12] The final advance was made four days later on 20 August 2010. It appears no separate document records this, presumably because the 16 August 2010 acknowledgement covered the full amount of $300,000.
[13] Each advance was made by Mr Chen lodging the funds in Mr He’s personal
account with the ASB.
[14] The terms of the written acknowledgement required the loan to be repaid by
16 February 2011 which was six months after the document was signed. Mr He did not repay any of the loan by that date.
Mr Chen’s case
[15] Mr Chen’s claim is simple. He says the loan was personal and its terms are
plainly recorded in the document.
[16] By way of background Mr Chen said that between June 2008 and May 2010 he made six loans to Mr He totalling nearly $150,000. Two of these loans were paid to Mr He in China and the balance was paid into Mr He’s personal account with the ASB.
[17] Mr Chen said that he also gave Mr He cash to buy a van for transporting stock and $30,000 to pay school fees arrears for one of Mr He’s children. Mr Chen described these payments as private loans which Mr He promised to repay but never did.
[18] It was against this background that Mr Chen said discussions were entered into between the two men and Chen Jnr to form a company to help Chen Jnr enter the market.
[19] Mr Chen was insistent that there was no joint venture between the three men. The extent of the arrangement was that Mr He and Chen Jnr would together form a new company. Mr He would bring into the new business his existing stock and would show Chen Jnr “the ropes”. Mr Chen said that part of the arrangement was
that he would lend money to the company to fund its operations but that there was no agreement as to how much would be loaned or for how long.
[20] Mr Chen says that entirely independent of these arrangements, Mr He approached him in June 2010 asking to borrow more money. According to Mr Chen, Mr He said he was having serious cash flow problems with his export business and that he had to borrow against his home to keep the business afloat. He asked to borrow $300,000.
[21] Despite his reservations, principally to do with the other loans still unpaid, Mr Chen says he agreed to lend the money. But he was not prepared to advance it in one lump sum. Furthermore, unlike the previous personal loans, Mr Chen required the advance to be recorded in writing.
[22] Mr Chen claims the loan was to Mr He personally. It was quite separate from Mr Chen’s advances to NZPIL which started in September 2010 and were made directly into NZPIL’s bank account or via Chen Jnr’s family trust. He says that had the advance been to NZPIL, rather than Mr He personally, the document would have recorded this.
[23] Furthermore, Mr Chen says that if the advances had been for the purpose of funding a joint venture he would not have required Mr He to pay interest or incorporated tiered terms for its repayment. Had he intended to advance funds to NZPIL he would have done so directly to the company’s bank accounts or through Chen Jnr who had access to NZPIL’s accounts as did on subsequent occasions.
[24] Mr Chen said that in the two years after NZPIL’s incorporation he personally loaned nearly $7 million to the company. Every advance to the company was made from his bank accounts into the company’s bank accounts or through Chen Jnr or his family trust. He said that from time to time NZPIL repaid the loans but when it was short of funds he advanced more cash. He said that as at March 2012 NZPIL owed him $670,000.
[25] In early 2012 the parties fell out and Mr Chen instructed his lawyer to send Mr He a letter of demand. Mr He’s solicitors responded by advising the loan was not personal but was, instead, for the purpose of funding NZPIL’s operations. In any event, Mr He’s solicitors claimed that Mr He believed the loan had, in fact, been repaid in February 2011 from funds withdrawn from NZPIL.
Mr He’s case
[26] Mr He explained how his relationship with Mr Chen operated in the early stages of their friendship. Because Mr Chen was out of New Zealand for much of the time Mr He assisted him in various ways such as looking after his house, arranging repairs on his cars and organising recreational excursions, etc. Mr He described himself as Mr Chen’s “runner boy”, undertaking errands and often, in the first instance, paying for expenses incurred on Mr Chen’s behalf which would later be reimbursed by Mr Chen.
[27] According to Mr He, in about early June 2010, Mr Chen invited him to a lunch meeting. Mr He said Mr Chen was interested in undertaking a commercial joint venture with Mr He in relation to the export business. Mr Chen said he wanted Chen Jnr to be involved because he was concerned his son needed some direction and focus. Mr Chen said he would fund the joint venture to the tune of several hundred thousand dollars and indicated he would advance more if the joint venture proved profitable.
[28] Mr He said he was reluctant to get involved in a joint venture but did suggest to Mr Chen he would consider selling up to 40 per cent of his company and have Chen Jnr work with him.
[29] A further meeting followed at which Mr Chen and Chen Jnr were present. Mr Chen suggested that instead of acquiring shares in Mr He’s company a new company should be formed to undertake the joint venture on a 50/50 basis.
[30] Mr He said he was initially reluctant but was persuaded to accept this proposal because Mr Chen could invest millions of dollars into the joint venture; he would contribute $300,000 in three advances of $100,000 each and would assess
Mr He’s ability to manage the volume of the business. Mr Chen would charge interest at 6 per cent on $200,000 of the advance only if he was not satisfied and pulled out. Mr He was to apply the $300,000 to the joint venture for the purchase of local product. Mr He was to invest approximately $80,000 worth of product he already had in Hong Kong and China.
[31] According to Mr He, Mr Chen said if he was not satisfied with Mr He’s
ability to manage the business he would:
“… pull out and require [Mr He] to personally repay the $300,000 advance and the accrued interest…”
[32] According to Mr He the arrangement was that Mr He would be given six months in which to satisfy Mr Chen. If Mr Chen was satisfied with Mr He’s performance Mr Chen would “roll over” the $300,000 as his shareholder’s advance to the joint venture and generously fund the business in the future.
[33] As part of this arrangement Mr Chen would nominate Chen Jnr to undertake the joint venture on an equal shareholding basis with Mr He. Mr Chen, through his son and the bank manager, would control the financial operations. Mr Chen would fund the business’s purchases as required. Mr He was to source and purchase the products and arrange for their freight to and sale in Hong Kong and China.
[34] Mr He says he considered Mr Chen’s proposal and decided to accept it because he recognised that with his limited funds the business was unable to flourish. He said he had reservations about being required to repay the $300,000 advance but felt that for a number of reasons he would be able to survive commercially if Mr Chen required the $300,000 to be repaid.
[35] In his defence Mr He particularises the terms of the joint venture as follows:
(a) the parties would commence a new company to undertake the joint venture, with each party having an equal say and a 50 per cent shareholding;
(b)Mr Chen would fund millions into the parties’ joint venture export business so long as Mr He could satisfy Mr Chen that the business was profitable with that funding;
(c) Mr Chen would advance an initial $300,000 because Mr Chen wanted
to assess Mr He’s credibility;
(d)Mr He was to apply the $300,000 as advanced by Mr Chen into the joint venture through the new company towards purchases of products to be exported through the new company;
(e) if Mr Chen was dissatisfied with his assessment of Mr He’s commercial ability Mr Chen could withdraw from the arrangement and require Mr He to personally repay the $300,000 together with interest on $200,000;
(f) Mr He had six months within which to convince Mr Chen of his ability to perform;
(g)if Mr Chen was satisfied with the performance of Mr He, Mr Chen would rollover the $300,000 as his shareholder’s advance to the joint venture through the new company and would fund it to millions of dollars.
[36] Mr He accepts he received the $300,000 but claims he did so only on the basis as described above.
[37] By about mid-September 2010 Mr He had applied all of $300,000 advanced
by Mr Chen towards the purchase of product for export in NZPIL’s name.
[38] In September 2010 Mr Chen advanced $50,000 directly to NZPIL.
[39] Mr He says the $300,000 “had remained with NZPIL as Mr Chen’s entities’
shareholder’s advance until Mr Chen and/or his entities withdrew it”.
Legal principles
[40] The issue for determination in this case is whether the document correctly reflects the contractual arrangement existing between the parties. In other words was the $300,000 advance a personal loan to Mr He on the terms and conditions set out in the document (which is Mr Chen’s case) or did Mr He receive the sum of
$300,000 on trust for NZPIL subject to the terms described more fully above. Whether the document correctly reflects the contractual relationship between the parties requires a factual examination and the application of the facts found to the relevant legal principles which are well known and are not in dispute.
[41] The traditional approach to contractual interpretation placed a strong emphasis on the written terms of the document. This, combined with the effect of the parole evidence rule, led to an approach where the actual intentions of the parties and the context in which the agreement was made were often entirely secondary to the technical arguments around the meaning of the words.3 This formulation has now been overtaken by an approach which places the central focus on determining the objective meaning of the contract in light of its factual matrix.4 Under this approach the Court may have regard to a wide range of material, including the surrounding facts, the prior conduct of the parties and, in certain limited circumstances, the parties’ prior negotiations. The Court also has a greater freedom to imply terms where it can be shown that these terms give effect to the relationship the parties intended.5 Whereas the former approach focused on identifying the objective meaning of the document, properly constructed, modern interpretation aims to identify the intended relationship between the parties as shown by the evidence.
What did the parties intend?
[42] The wording of the document is plain. Its meaning appears to be clear and unambiguous. On its face it describes a personal agreement between Mr Chen and
3 See for example Benjamin Developments Limited v Rob Jones (Pacific) Limited [1994] 3 NZLR
189 (CA).
4 See particularly Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1
WLR 896 (HL) at 912-913 and Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] NZLR 444.
5 Attorney-General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988 at [27].
Mr He under which Mr Chen would lend Mr He NZ$300,000. The terms include interest at 6 per cent for $200,000 of the total amount with the balance free of interest. The term is six months from 16 August 2010.
[43] The question for me is whether, notwithstanding the clear words of the written document, the extrinsic evidence or matrix of fact is such that I should accept Mr He’s claim that the agreement incorporated quite different terms such that its effect was materially different from the plain meaning.
[44] I turn now to examine the factual matrix and the interpretation which the defence urges.
[45] First, Mr Sills, for Mr He, submits that the evidence is consistent with the document being more in the nature of a receipt of funds rather than an IOU. He points to the context of its creation; that the document was handwritten by Mr He in front of Mr Chen and the bank manager, in ASB Bank’s offices. It was written quickly by Mr He without a lawyer and without negotiations or careful consideration. He submits further support for this proposition can be found in the evidence of Mr Chen when he initially referred to the document in evidence as a “receipt” before correcting himself and describing it as an “IOU”.
[46] He submits that the fact that other funds were advanced without a written receipt does not necessarily support Mr Chen’s claim that the purpose of the document was to record a debt. He says it is equally plausible that the purpose of the document was to record Mr He’s receipt of monies in circumstances where he was bound to use the funds for the joint venture even though he received them personally.
[47] However, in my view the context paints a different picture; one which is a good deal more consistent with Mr Chen’s claim. The fact this advance appears to be the only one recorded in writing is significant. The personal loans which preceded it were not reduced to writing, did not provide for interest and did not stipulate a repayment date. Neither did later advances to NZPIL. That this advance reflects a departure from past and future practice reflects Mr Chen’s concerns about Mr He’s indebtedness to him and the need to formalise future personal loans in
writing. Furthermore, if this had, in fact, been an advance to NZPIL, Mr Chen would have been unlikely to charge interest given his subsequent practice when advancing funds to NZPIL.
[48] Secondly Mr Sills submits that the contemporaneous documents do not support the claim that the pre-June 2010 advances to Mr He were personal loans.
[49] However, an examination of the ASB customer transaction inquiries tends to contradict this submission. Advances of substantial sums totalling nearly $90,000 in June 2008, September 2009 and January 2010 refer to transfers to Mr He. While some may have been to reimburse Mr He for expenses he incurred on Mr Chen’s behalf they are of a quantity and nature considerably greater than the sort of reimbursement described by Mr He, namely looking after the house, car repairs and recreational excursions.
[50] Mr Sills also relies upon a reconciliation statement dated 22 June 2010, completed by Mr He and Chen Jnr, which tracks the first $100,000 advance of
15 June 2010. This, Mr Sills submits, shows that, of the original $100,000 advanced, Mr He transferred $50,000 into NZPIL’s account. It shows the purchase price for goods which Mr He held on behalf of NZPIL and it stipulates the need for Mr He to transfer further sums into NZPIL’s account to fully account for the $100,000 advance. The document acknowledges Mr He’s contribution to NZPIL of the goods he held in his own name in mainland China.
[51] However, as Mr Campbell QC, for Mr Chen submits, this handwritten document does not refer to the $100,000 advance and it was not authored by Mr Chen. Indeed, Mr He never claimed the reconciliation statement was provided to Mr Chen as part of the alleged process of “ensuring” that the next tranche would be advanced. I agree with Mr Campbell that the more likely purpose of the document was to record cash purchases so that the appropriate entries could be made in NZPIL’s financial records.
[52] Next, Mr Sills submits that because the loan document is dated 16 August
2010 it cannot purport to record the terms of the oral agreement reached between the
parties two months earlier. He criticises the plaintiff for not having pleaded the terms of the oral contract other than as recorded in the document. He submits there is no evidence as to how the terms were negotiated, including when, where and in what circumstances. He submits it is inconceivable Mr Chen would have lent
$300,000 personally to Mr He shortly after discussing the incorporation of a joint venture which had Chen Jnr as a director and shareholder. He submits logic and commonsense dictates the two events must be linked.
[53] However, this submission ignores the evidence given by Mr Chen that, immediately following the first $120,000 advance on 15 June 2010, Mr He wrote out an acknowledgement of debt in the form of a IOU for $100,000. There was no suggestion from Mr He that this acknowledgement of debt was negotiated on terms different from those which applied to the later document which related to the
$300,000.
[54] Mr Sills next submits that an examination of the general ledger extract and, more particularly, the shareholder accounts and Mr Chen’s account support Mr He’s claim that the funds advanced to him were for the benefit of NZPIL. More particularly Chen Jnr’s shareholder account shows that the funds in NZPIL’s bank account were treated as funds belonging to NZPIL the source of which was the
$100,000 advanced by Mr Chen through Mr He which was then paid into the company accounts or used for the purchase of products.
[55] I agree with Mr Campbell that it is difficult to understand the relevance of Chen Jnr’s current account to the matters in issue. The funds in NZPIL’s bank account were being treated as funds belonging to NZPIL because they were NZPIL’s funds. That Mr He, on receiving the first tranche of the loan from Mr Chen, advanced funds to NZPIL is as consistent with Mr Chen’s case as it is with Mr He’s.
[56] Mr Sills next submits that an examination of Mr He’s shareholder account
reveals significant points in support of his defence which he lists.
[57] However, it is not disputed that funds advanced by Mr Chen to Mr He were applied by Mr He to the business of NZPIL. This fact does not support Mr He’s
claim that the $300,000 was to be advanced to NZPIL for the purchase of products and that Mr He had six months within which to convince Mr Chen of his ability to perform commercially and, significantly, that if Mr Chen was satisfied with Mr He’s performance the $300,000 would be rolled over as Mr Chen’s shareholder advance to the joint venture through the new company.
[58] Mr Sills also refers to Mr Chen’s account in the general ledger extract and makes a number of submissions based on an analysis of Mr Chen’s current account and NZPIL’s bank statements and financial reports. He submits there is an apparent difference of $283,734 and that this difference “is for funds introduced by Mr Chen via Mr He”.
[59] However, in response, Mr Campbell submits that this supposed difference bears only a passing resemblance to the $300,000 that Mr Chen advanced to Mr He and that, furthermore, the analysis is one which required proper evidence from an expert such as a forensic accountant, that the claim should have been put to Mr Chen but was not and, furthermore, that the submission relies on documents which Mr He, himself, dismissed as inaccurate. I agree.
[60] Next Mr Sills submits that it was Mr Chen who was controlling the joint venture; it was he who was providing all the funding to NZPIL and that the NZPIL “00” cheque account bank statements recorded advances to and from NZPIL on the part of Mr Chen or related parties. He submits that by the time the accountants carried out a reconciliation of the general ledger they showed all funds as having been introduced by Mr Chen personally which, Mr Sills submits, is consistent with Mr He’s evidence that Mr Chen was in fact the person controlling the Chen family interests and NZPIL.
[61] Apart from the obvious, that Mr Chen was neither a director or shareholder of NZPIL nor did he have authority to operate any of the company’s bank accounts, this submission ignores the evidence that from September 2010 Mr Chen was the person lending funds to NZPIL. I agree with Mr Campbell that the mere fact Mr Chen was advancing funds and being repaid when NZPIL was in a position to do so does not necessarily mean that Mr Chen was controlling the joint venture.
[62] Mr Sills submits that the subsequent conduct is consistent with Mr He’s version of events. In particular, he relies on the evidence that shortly after receiving the first tranche of $100,000 from Mr Chen, Mr He purchased products and shipped it on behalf of NZPIL. All the income derived from products purchased with the
$300,000 was receipted into NZPIL and when Chen Jnr became involved in NZPIL’s
business Mr He ceased operating his own business.
[63] I accept Mr Campbell’s submission that even if the source of the funds used by NZPIL to purchase product came from advances made by Mr Chen to Mr He this is a neutral factor. Mr Chen’s evidence was that Mr He told him he needed the money for personal reasons but this would not have prevented Mr He using the funds for NZPIL’s purposes if he chose to do so.
[64] But there are further factors which, in my view, materially operate against implying the oral terms which Mr He claims were agreed.
[65] The first is the correspondence between Mr He’s solicitor and Mr Chen’s solicitor. On 30 March 2012 Mr Chen’s solicitors wrote to Mr He demanding repayment of the $300,000 plus interest. This letter set out the three advances and confirmed that the loan was a private one given to Mr He personally by Mr Chen. Mr He’s solicitors responded and in evidence Mr He accepted his solicitors’ reply accurately reflected his instructions. On behalf of Mr He they said their client had instructed them the loan was not a personal one although expressed as such. They stated that the loan was to fund the export operations of NZPIL in which Chen Jnr was a shareholder with Mr He. The letter went on to record that Chen Jnr had previously informed Mr He that he had withdrawn funds from NZPIL to repay advances from himself and Mr Chen as injected by them to fund the company’s operations. The solicitors stated that Mr He was under the impression that the loan had been repaid and provided a detailed explanation for that view running to several pages.
[66] Despite this detail the letter makes no reference whatsoever to Mr He’s claim
the loan was to be rolled over subject to Mr He’s commercial performance. Yet this
assertion is central to Mr He’s defence. If Mr He’s claim is to be believed it is a
most surprising omission.
[67] The letter is significant for other reasons.
(a) There is no reference to Mr He’s present claim that he and Mr Chen were part of a joint venture. Indeed, the letter claims that the joint venture was between Chen Jnr and Mr He and that Mr Chen had agreed to fund the joint venture. This version is consistent with Mr Chen’s evidence as well as other aspects of the extrinsic evidence discussed above.
(b) The letter refers to the loan being due for repayment in February
2011. If, as Mr He asserts, the loan had been rolled over by Mr Chen there would have been no fixed date for repayment. The acknowledgement that the loan was due for repayment “… back in February 2011 …” supports Mr Chen’s account that the term of the loan was fixed for six months as reflected in the plain words of the document.
[68] In my view it is significant that when first challenged and given the opportunity to explain the terms of the agreement with Mr Chen, Mr He, through his lawyers, did not refer to the other terms which he now claims were central to his agreement with Mr Chen.
[69] A further relevant consideration which supports Mr Chen’s account is that if, as Mr He asserts, it was agreed that the $300,000 would be used to buy product on behalf of NZPIL why were the second and third tranches not paid directly to NZPIL? It was Mr He’s evidence that the first advance of $100,000 was paid to him personally because at that time NZPIL had not been incorporated. However, this fails to explain why, after NZPIL was incorporated on 18 June 2010, the second and third tranches paid two months later in August 2010 were not paid directly to NZPIL.
[70] Mr He sought to explain this by reference to cash handling fees, an explanation which he had not previously given. In any event, this explanation is implausible because there would have been no reason for Mr He to transfer $50,000 into NZPIL’s account and then make cash withdrawals against that amount. More significantly, Mr Chen made several substantial payments into NZPIL after the third payment on 20 August 2010. If Mr He’s explanation is accepted it fails to account for why a different mechanism was adopted after the third payment. However, he did not stop subsequent payments by Mr Chen which were made directly to NZPIL.
[71] Furthermore, the draft general ledger supports Mr Chen’s position. Had there
been a rollover of the loan, NZPIL’s accounts would have reflected that NZPIL owed
$300,000 to Mr Chen. Additionally, by taking on the loan, NZPIL would have provided a benefit of $300,000 to Mr He which would have been reflected in NZPIL’s financial records. That part of the general ledger which shows the transactions between Mr He and NZPIL does not have an entry for $300,000.
[72] Finally, it is significant that the document is the only written record of an agreement between Mr Chen and Mr He involving the advance of funds. The evidence discloses there were cash advances made to Mr He personally before June
2010 and to NZPIL after August 2010 which were not memorialised. These facts add to the overwhelming body of evidence which tends to prove that the document reflects a separate and personal arrangement between the parties. The express terms of the written agreement also support this inference.
Conclusion
[73] I am comfortably satisfied that the terms of the agreement between Mr Chen and Mr He are fully contained in the document and that the plain and unambiguous words used set out the agreed terms, namely that Mr Chen agreed to lend Mr He the sum of $300,000 and:
(a) Mr He would pay interest on $200,000 of the loan at the rate of 6 per cent per annum;
(b)the remaining amount of the loan of $100,000 would be free of interest;
(c) the whole of the loan would be paid off within half a year of
16 August 2010 (namely, 16 February 2011).
[74] It necessarily follows I reject Mr He’s claim there were oral terms agreed that the sum of $300,000 was received by Mr He on trust for NZPIL; that if Mr Chen was dissatisfied with his assessment of Mr He’s ability in executing the business Mr Chen could withdraw and require Mr He to personally repay the $300,000 advance and the accrued interest on the $200,000 or that Mr He had six months within which to convince Mr Chen of his ability to perform and that if Mr Chen was so satisfied he would rollover the $300,000 as his shareholder’s advance to NZPIL.
Result
[75] (a) Judgment is entered in favour of the plaintiff in the sum of $300,000.
(b) Interest is to be paid on $200,000 at 6 per cent per annum from
16 August 2011.
(c) Interest is to be paid on $100,000 at the applicable rate under the
Judicature Act 1908 from 16 February 2011.
Costs
[76] Costs are awarded in favour of the plaintiff on a 2B basis with disbursements as fixed by the Registrar.
Moore J
Solicitors:
Mr Campbell QC, Auckland
Mr Sills, Auckland