Hua v Zhang

[2025] NZHC 2197

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-000777

[2025] NZHC 2197

UNDER

the Law of Contract

BETWEEN

YU HUA and NA LI

Plaintiffs

AND

JINGJING ZHANG

Defendant

Hearing:	24 March 2025
Appearances:	M J Wallace and K L Maclean for the Plaintiffs D B Hickson for the Defendant
Judgment:	6 August 2025

JUDGMENT OF VAN BOHEMEN J

This judgment was delivered by me on 6 August 2025 at 2:30 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar Date……………………………..

Counsel/Solicitors:

M J Wallace, Christchurch

D’Arcy Thomson Law, Christchurch PCW Law Limited, Auckland

HUA v ZHANG [2025] NZHC 2197 [6 August 2025]

Table of Contents

Key documentary evidence  [8]

The DTL Agreement  [9]

The IOU Receipt  [13]

The WeChat calls  [14]

The evolution of the plaintiffs’ claim  [22]

Initial statement of claim  [23]

Amended statement of claim  [27]

Mr Hua’s evidence in chief  [35]

Mr Hua’s evidence in cross-examination  [43]

The evidence for Ms Zhang  [48]

Establishment of tea house and incorporation of company  [50]

The November 2017 Loan  [58]

The December 2017 Loan  [59]

The January 2018 Loan / the February 2018 Loan and the second March 2018 loan       [60]

The first March 2018 Loan  [61]

The May 2018 Loan  [62]

Meeting at Sylvia Park McDonald’s  [65]

The Further Loan  [67]

Other evidence from Ms Zhang  [68]

Evidence in cross-examination  [73]

Other relevant evidence  [89]

Ms Wen’s evidence  [90]

Evidence of Ms Wang  [99]

Submissions for the plaintiffs  [101]

Submissions for Ms Zhang  [106]

Analysis  [111]

The purpose of the DTL Agreement  [112]
The transfers between 28 June and 6 September 2017  [114]

The transfers between 1 November 2017 and 24 November 2018  [119]

Does Ms Zhang owe a debt to Mr Hua?  [150]

Has there been a total failure of consideration?  [144]
Does Ms Zhang owe an obligation to repay any loans to Mr Hua?                 [150]

Result  [151]

Costs  [152]

[1]    The plaintiffs, Yu Hua (known as Kevin) and his wife, Na Li (known as Linda), and the defendant, Jingjing Zhang (known as Cathy), are in dispute over monies transferred by Mr Hua to Ms Zhang.1 What is not in dispute is that monies totalling

¥3,165,000 (approximately NZD 704,000 at the time the claim was made), were transferred by Mr Hua to Ms Zhang, albeit via intermediaries. What is in dispute are the purposes of the transfers and whether there was an obligation to repay them.

[2]    A number of factors made it difficult to arrive at a clear understanding of what the parties intended and what happened with respect to the monies. They include the following:

(a)There was only one formal agreement between Mr Hua and Ms Zhang; that is an agreement headed “Agreement on Rights and Obligations of Dishuitang Trading Limited”,  dated  6  July  2017  and  signed  by  Ms Zhang, Mr Hua and Ms Jie Wen (known as Elsa) (the DTL Agreement).

(b)In its own terms, the DTL Agreement was incomplete.

(c)Much of the parties’ conduct was governed by oral understandings that may or may not have been intended to have been legally binding.

(d)The monies were advanced in China through the bank accounts of intermediaries.

(e)Apart from WeChat messages, there was little documentary evidence of what occurred with the monies in China or with the company the monies were intended to fund, and Mr Hua disputed the authenticity of many of the WeChat messages.

1      In this judgment, I have adopted the English naming convention, even though in China the parties’ names are Hua Yu, Li Na and Zhang Jingjing respectively.

(f)Translations of some  of  the  WeChat  messages  were  altered  by Ms Zhang’s husband because attributions of some messages had been lost when they were downloaded for transcription.

(g)The documentation of the shareholding of the company incorporated in China did not reflect what Ms Zhang says was the reality of what had been agreed with Mr Hua.

(h)Many propositions advanced by Ms Zhang in her evidence, including in her written brief of evidence filed before the hearing, were not put to Mr Hua when he gave evidence. As a consequence, the Court had only Ms Zhang’s account of what or why something had happened.

[3]    Compounding these difficulties is that some of the plaintiffs’ evidence of why the monies were advanced, what happened with the monies and whether repayment of the monies was agreed did not make sense and was clearly false.  One example is  Mr Hua’s insistence the company funded by the large proportion of the advances was only to operate in New Zealand and to sell New Zealand speciality products to tourists in New Zealand. Mr Hua made this claim despite all the funds advanced being transmitted to bank accounts in China. Another is Mr Hua’s claim that he was not aware the company that was established and operated a tea house in China, Shaoyuan Trading Ltd (STL) (or Baoji City Shaoyuan Trading Ltd (BCSTL)), was the same company as envisaged in the DTL Agreement, albeit with a different name.

[4]    On the other hand, there were aspects of Ms Zhang’s evidence that were difficult to understand or accept. In addition, Ms Zhang acknowledged she had not provided a number of documents likely to have been relevant, probative and of considerable assistance to the Court. In particular, Ms Zhang acknowledged she had not provided:

(a)the accounting records of STL in China because, she said, the amount at issue in the proceeding would not cover the translation costs;

(b)reports about the company, including reports referred to in her brief of evidence;

(c)documents illustrating the trading history of STL;

(d)the financial statements of STL; or

(e)bank statements verifying the ¥2,200,000 that Ms Zhang says Mr Hua invested in the company by bank transfers to her mother and mother-in-law had been used for the purposes of the company.

[5]    Nor did Ms Zhang provide the original draft of the DTL Agreement as referred to in WeChat messages. In addition, some of the documents that Ms Zhang provided, such as a contract for a Hitachi air conditioner for the tea house, were unsigned and used terminology that was not consistent with the legal nature of the undertakings. For example, the party to the air conditioner contract was said to be Shaoyuan Tea House and not the company operating the tea house.

[6]    Even so, by the end of the hearing, Mr Wallace, counsel for the plaintiffs, responsibly acknowledged the evidence had established a different factual scenario from that advanced by the plaintiffs and in his opening submissions, and that I was unlikely to find that the parties to the DTL Agreement had agreed that the company was to operate in New Zealand. However, Mr Wallace continued to maintain that the plaintiffs had a right to recover some, if not all, of the funds advanced, although not for the reasons initially pleaded.

[7]    Because of these various issues, I have considered it necessary to set out reasonably fully the positions of the two principal protagonists, Mr Hua and Ms Zhang, as it emerged from their written briefs of evidence and from cross-examination, because it is the credibility and consistency of their evidence that has largely determined the outcome of this proceeding.

Key documentary evidence

[8]    Before discussing the evidence of Mr Hua and Ms Zhang, it is useful to set out the terms of the DTL Agreement; an IOU receipt prepared by Mr Hua and signed by Jun Shen (known as Sam) on 27 November 2017; and two WeChat calls involving the parties on 8 April 2019.

The DTL Agreement

[9]    The following summary is based on an English translation of the original agreement, which was written in Chinese.

[10]   The DTL Agreement was headed “Agreement on Rights and Obligations of Dishuitang Trading Limited” and envisaged the establishment of a company called Dishuitang Trading Limited (DTL). It had the following preamble:

This agreement on the rights and obligations of Dishuitang Trading Limited (hereinafter called the Company) is executed by and between Zhang Jingjing, Hua Yu and Wen Jie through friendly consultations with each other pursuant to relevant laws and regulations of the government.

[11]The DTL Agreement included the following provisions:

(a)The Company was to be initiated by Ms Zhang and “invested jointly” by three parties—Ms Zhang, Mr Hua and Ms Wen.

(b)Ms Zhang was to take the lead while the other two investors would be duly consulted in dealing with: business strategy, investment plan, major expenditure, appointment or removal of human resources, adjustment of equities, change of shareholders, and profit distribution.

(c)The equity ratios were to be: Ms Zhang 30 per cent, Mr Hua 35 per cent, Ms Wen 20 per cent, “with 15 per cent remaining equities”.

(d)The remaining equities were to be “shared and invested” as follows: Ms Zhang 35 per cent, Mr Hua 40 per cent, Ms Wen 25 per cent.

(e)The total share capital was RMB 1.2 million,2 which was to be invested in accordance with the following table set out in the agreement:

Name	Ratio	Sub- scription	Ration     of remaining equities	Amount to subscribe the remaining equities	Actual amount of investment
Zhang Jingjing	30%	36	35%	6.3	42.3
Hua Yu	35%	42	40%	7.2	49.2
Wen Jie	20%	24	25%	4.5	28.5
Remaining equities	15%	18	0%	0	0
Total	100%	120	18	120

(f)Clause 4 provided:

4.Investment by shareholders:

1)Zhang Jingjing should invest RMB 423,000.00 while the actual amount invested is 100,000.00, leaving RMB 323,000 short;

2)Wen Jei should invest RMB 285,000.00 while her actual  amount  invested  is  100,000,   leaving  RMB 185,000.00 short;

3)The total of the above shortages is RMB 508,000.00 which shall be borrowed by the Company  from  Hua Yu, so the actual amount invested by Hua Yu is: RMB  492,000,000.00  +  RMB  508,000.00   = RMB 1,000,000.00

4)The loan of Hua Yu  to  the  Company,  namely  RMB 508,000.00, shall be repaid within one year from start of business of the Company

2      RMB means renminbi, also referred to as yuan.

(g)The shareholders would be entitled to Company dividends and liable for Company losses “appropriate” to their respective equity ratios.

(h)Ms Zhang was to “take the lead and consult the other two investors while attending to any pending issues”.

[12]   Importantly, the DTL Agreement did not state the country in which the company was to be established or the business the company was to undertake.

The IOU Receipt

[13]   The IOU Receipt was  handwritten in Chinese by Mr Hua and signed by     Mr Shen. Based on an English translation, which was not disputed, it stated:

IOU Receipt

I the undersigned do hereby  acknowledge  receipt  of  RMB  600,000.00  (six hundred thousand RMB yuan) borrowed from Hua Yu today, which money shall be repaid either by acquiring 33.3% equities of NZC Vision Ltd., or repaid directly in Chinese RMB or New Zealand dollar, at Hua Yu’s sole discretion after he has obtained the New Zealand Permanent Residency.

Borrower: Sam Shen (signed) Dated 27 November, 2017

The WeChat calls

[14]   The WeChat calls were made on 8 April 2019, after the breakdown of the relationship between the plaintiffs, on the one side, and Ms Zhang, Ms Wen  and    Mr Shen, on the other side. Ms Zhang said Mr Hua recorded both calls without telling her, Ms Wen or Mr Shen. The following is based on the English translations of the calls.

[15]   The first call was an audio call between Mr Hua and Ms Zhang on the afternoon of 8 April 2019. Relevant extracts include:

Mr Hua:I am running out of money. Can you please put some money together and give it to me?

Ms Zhang:You should wait a bit longer, because I have been subsidising the shop and am running out of money too. After that, Sam had some issues in his family at that time, so he took all the money away from the company. …

…

… Everybody can sit down and discuss this together, because this is related to everybody, not just me. I did not take the money. … This is a joint investment by everybody.  You put a lot of pressure on me, you see. I suggested we should gather everybody together to have a discussion. You refused and insisted that it was all on me …

Mr Hua:         I am telling you, the main issue is between you and me.

…

Right now we do not have to sit down together in person. You can just give me something that I can tide over this difficult time.

Ms Zhang: If everybody does not sit down all together, how would you know how much has been invested back in China? Initially, more than 3,000,000 was invested. Later on, I subsidised more money. I invested all the extra money after the initial investment.

Mr Hua:The amount I transferred to you was over 3,000,000. 600,000 of that was with Sam, right?

Ms Zhang: That’s right. Now  the  figure  is  almost  3,300,000  or  3,400,000, do you know?

Mr Hua:3,300,000 / 3,400,000? If that were the case, you would have invested …

Ms Zhang:       I also invested just under 1,000,000.

Mr Hua:You invested 600,000 or 800,000. You would not have invested 1,000,000.

Ms Zhang:Right.  More has to be invested soon.  More money has to be put in. That will all come from me? I have been putting money in. I was not here last year. During the second half of last year, I told you that Sam and I had some family issues. We took the company’s money. That was also what I told you.

Mr Hua:How are you going to manage then? You keep putting money in.

Ms Zhang:How do you think we can manage?  Shall we close it down  then? If it is closed down, everybody’s money will be down the drain. Business in China has to be conducted bit-by-bit, gradually. Nothing big can be achieved all at once.

…

I suggest everybody sit down and figure out the maths. Everybody will then have an idea, who owes you money, who

does not owe you money, right? After the calculation, you will know. You are chasing me for money others owe you. What can I do?

…

I also mentioned this to Jie WEN.

Mr Hua:She said she had no money. She has two houses. Everybody says they do not have money.

MsZhang:       You never mentioned you needed it, alright? You can’t … That was all investment.

Mr Hua:Is there no loan? Put your hand on your conscience and tell me.

Ms Zhang:       I asked you to sign it at the time. Why did you not?

Mr Hua:         I … Oh my god, I am not going into those details with you. Ms Zhang:  Wasn’t it me that asked you to sign all those?

Mr Hua:The wording in it. There was something tricky in that. I don’t want to argue with you.

Ms Zhang:I also invested more than 1,000,000 in it.   Let’s  calculate   based on the percentage of shares. After the calculation, however much it is, we will decide a timeframe. OK? Let’s see what time frame we decide on, we will give you the money. I think you should also talk to Jie WEN about this, shouldn’t you?

…

Mr Hua:         In other words, you don’t have any money at the moment.

Is that right?

Ms Zhang: That is right. I also borrowed money. You know how much I spent last year. Last year I spent more than 1,000,000 on importing only.  There were also shipment fees involved.   On top of that, I also invested more than 1,000,000 over there.

…

…

Mr Hua:Who makes the decisions? It has always been you making the decisions, alright?

Ms Zhang:If I could make the decisions, I would not have ended up in   this situation.

Mr Hua:Oh my god. Who told me those were all loans? Did you not say that?

Ms Zhang:Who said to me these were all your investment?   Was  that a joke with me? Who said it?

Mr Hua:         Did you tell me in Sylvia Park that …

Ms Zhang:It wasn’t like you did not want it?  You  said “this is for you,  an investment for you guys.  You  do  it  at  your  pace.”  Who said all those words? Who have been saying that for the past two or three years?

Mr Hua:         Enough. Let’s not argue about that. …

[16]   The conversation ended with Mr Hua and Ms Zhang agreeing to have a video conference call involving themselves and Ms Wen at 7 pm that evening. In the event, the video conference call involved Mr Hua and his wife, Ms Li, Ms Zhang, Ms Wen and Mr Shen. Relevant extracts include:

Mr Hua:         The issue now is, when will the 600,000 to Sam be repaid?

Mr Shen:What 600,000? You need to make this very clear. At that time, you insisted on getting involved. Now you change your mind and want to pull out. How come you still have the courage to mention the 600,000? Kevin, what have I (Sam) done wrong that makes you want to beat me up and threaten me? …

…

Mr Hua:         You will not admit the loan of 600,000 I lent to you, will you?

Mr Shen:        (I) did not, not admit. What was the agreement at that time?

Mr Hua:When will you return that money? I am asking when you will return that money?

Mr Shen:… At that time, we didn’t ask you to invest any money. It was you who were imploring me to let you invest. You said we would discuss this after you sorted out your immigration status. Now, halfway through, you want to renege on the agreement. …

…

Mr Hua:Every single word and sentence in Sam’s IOU that I wrote was based on [Cathy’s] instruction. What will happen now?

…

Ms Zhang:You  did not want to write anything at that time.  I asked you  to write something up. Is that right?

Mr Hua:The thing is, you guys should make it simpler. Just be straight forward. Would you acknowledge the 600,000, Sam?

Mr Shen:        Not saying that it is not acknowledged. All right? Mr Hua: When will it be paid back then?

Mr Shen:        It is not a matter of when it is paid back.

…

Mr Hua:When is it going to be paid back? I urgently need the money now.

MsZhang:       It can not be like we will have to do whatever you say. It is not up to you to dictate what happens, is it?

…

Mr Hua:         When will you return the 1,000,000 lent to you[, Elsa]?

MsWen:        When did I borrow money from you? I did not borrow money from you, Kevin.

Mr Hua:         Ok. Very good…

…

Mr Hua:         What happens to the 3,000,000 altogether to you[, Cathy]?

What do you want to do?

Ms Zhang:2,400,000 is the fund you invested in BCSTL.  That was the fund every one of us invested together. 600,000 for the shares of NZC Vision you bought. It is to be sorted out, once you are granted your immigration status.

Ms Li:            That is enough. …

…

MsLi:            We would like to have a peaceful conversation about this. Cathy, did you take any money? Did the money not all go into the hands of your family members?

…

MsLi:            … You guys have squeezed us dry. … We intended to make friends with you and trusted you very much. We handed over a lot of money to you without asking you to write an IOU.    I really believed in you very much.

Mr Shen:        That was an investment, not a loan.

Ms Zhang:       That was not a loan, but an investment. I reiterate that.

[17]After further exchanges, the discussion reverted to the IOU Receipt:

Mr Shen:You read it out. What does it say. … That sum was an investment, wasn’t it?

…

Mr Hua:Every word and sentence of this IOU note was written by me under Cathy’s instructions. Are you saying you did not set out to lure me into this? You did not mislead me?

…

Ms Zhang: If I did not ask you to write this, would you be able to clear things up now?

MsLi:            With or without this, every single transfer we did was to your family members. Why would we give money to your family members without any reason?

[18]   After further exchanges, there was the following exchange between Ms Li and Ms Zhang:

MsLi:            Cathy said in front of Kevin that this money was all regarded as a loan.

Ms Zhang:       You signed the agreement first. Then this changed into a loan.

[19]   After further exchanges, Ms Li asked Ms Wen whether she wanted to say anything. Ms Wen then made two lengthy interventions, which included the following:

MsWen:        … I think you also remember at the beginning, in 2017, when we were at your place. We  had a meal and chatted together.  I said Cathy and I wanted to run a teahouse in Baoji and at the same time engage in education. … Kevin said you guys would like to get involved so three parties could do business together. Kevin said he would invest. … At that time we discussed how much share each party should have. Kevin is the major shareholder. He said at that time Cathy was to be given the shares. Cathy said that was inappropriate and said would put money in. Later Kevin said “the two of you will contribute 100,000 each and the rest will be covered by me”. We said “that is over 1,000,000. You will cover it  all?” Kevin said “that is ok. I will cover it to keep you two happy”. Kevin’s original words were “to keep you guys happy, you do not need to write anything up. I said “that will not do. We are investing according to how many shares we hold. There has to be an agreement.” Therefore we have this agreement about investment now. At that time, everybody’s shares were

written on it. Besides, it was drafted by Kevin in person. Cathy signed it. I think Kevin will still have this in his hands. After that, last year, in March 2018… Kevin also had a fall-out with me. He then said, he would pay 100,000 and buy my shares and kick me out. There is WeChat records for all this. What he meant, was that he would buy my shares so the company would have nothing to do with me. The company would have him and Cathy as shareholders. He would be the major shareholder. … Then Cathy was given the shares without having to invest money. This is what he said at the time.

[20]   Ms Li made it clear she did not accept Ms Wen’s account and asked Mr Shen to comment. His remarks included the following:

Mr Shen:        … I did not end up getting involved because I knew you,

Kevin, wanted to invest. …

[21]   The conversation ended without agreement and with the participants accepting that court action was likely to follow.

The evolution of the plaintiffs’ claim

[22]   It is instructive to set out the evolution of the plaintiff’s claim ain the pleadings and evidence.

Initial statement of claim

[23]In their initial statement of claim dated 18 May 2022, the plaintiffs alleged:

(a)In July 2017, Mr Hua entered into the DTL Agreement, which was partly written and partly oral, and which stated the amounts to be invested and the shares to be received by the parties.

(b)In accordance with the  DTL Agreement, between 28 June 2017 and  6 September 2017, Mr Hua, via Shufen Yu (Mr Hua’s mother) and Chunmei Fan, advanced ¥1,000,000 to Ms Zhang via  Yuling  Wei  (Ms Zhang’s mother) and Cailin Yang (Ms Zhang’s mother-in-law).

(c)Ms Zhang did not establish DTL and has not repaid monies advanced.

(d)Between 1 November 2017 and  24  November  2018,  Mr  Hua,  in 13 transactions  involving  various  intermediaries,   advanced   to   Ms Zhang, a total of ¥2,165,000 by way of personal loans to enable Ms Zhang to lend money to Mr Shen and Ms Wen, when they were facing financial difficulties, and to Ms Zhang, when she was also facing financial difficulties.

(e)At a meeting in August 2018 at a McDonald’s at Sylvia Park, Ms Zhang promised to repay the loans within 24 months but had not done so.

[24]   The initial statement of claim was silent on the purpose for which DTL was to be established.

[25]Schedules to the initial statement of claim listed:

(a)four advances from Shufen Yu and one advance from Chunmei Fan, totalling ¥1,000,000, to the  bank  accounts  of  Yuling  Wei  and Cailan Yang, over the period 28 June 2017 to 6 September 2017; and

(b)13 transfers, including six transfers of ¥300,000, said to be for personal loans totalling ¥2,165,000 from the accounts of Shufen Yu, Mr Hua, Chunmei Fan and  Rudong  Xu  to  the  accounts  of  Cailan  Yang;  Ms Zhang’s friend, Jing Yang; and Ms Zhang’s cousin, Jing Tang over the period 1 November 2017 to 24 November 2018.

[26]   The initial statement of claim pleaded two causes of action and sought remedies as follows:

(a)first cause of action: breach of the DTL Agreement, for which the plaintiffs sought judgment in the sum of ¥1,000,000, plus interest and costs; and

(b)second cause of action: breach of oral agreement between Mr Hua and Ms Zhang, for which the plaintiffs sought judgment in the sum of

¥2,165,000, plus interest and costs.

Amended statement of claim

[27]   In their amended statement of claim dated 3 April 2024, the plaintiffs allege that, following a meeting in June 2017 where a proposed business venture selling New Zealand specialities to consumers was discussed (the Venture), the plaintiffs, Ms Zhang and Ms Wen agreed to enter into an investment agreement; that is, the DTL Agreement. Under the investment agreement, Ms Zhang would incorporate DTL in New Zealand to undertake the Venture. Ms Zhang would also manage the operations of DTL in consultation with the plaintiffs and Ms Wen.

[28]Consistently with the DTL Agreement, the plaintiffs further allege that:

(a)in consideration of investing ¥492,000 in DTL, Mr Hua would receive a 35 per cent shareholding in DTL;

(b)in consideration of investing ¥423,000 in DTL, Ms Zhang would receive a 30 per cent shareholding;

(c)in consideration of investing ¥285,000 in DTL, Ms Wen would receive a 20 per cent shareholding;

(d)Mr Hua would loan ¥508,000 to DTL (the Company Loan) which the company would use to fund ¥323,000 of Ms Zhang’s investment and

¥185,000 of Ms Wen’s investment; and

(e)the Company Loan would be repaid within one year from DTL commencing the venture.

[29]   The plaintiffs further allege that, between 28 June and 6 September 2017, they advanced  Mr  Hua’s  investment  of  ¥492,000  in  DTL plus  the  Company  Loan of

¥508,000 to the bank accounts of Yuling Wei and Cailan Yang. The plaintiffs allege they and Ms Zhang intended Ms Zhang to advance these payments to DTL once it had been incorporated. The plaintiffs also allege Ms Zhang failed to incorporate DTL in New Zealand and, due to that failure, Mr Hua’s investment of ¥492,000 and the

Company Loan of ¥508,000 were not paid to the company and Mr Hua did not receive his 35 per cent of the shares in DTL.

[30]   In the amended statement of claim, the plaintiffs allege there were six loans totalling ¥3,100,000 (the Personal Loans) which were comprised as follows:

(a)the October 2017 Loan, under which ¥600,000  was  advanced  in  two tranches of ¥300,000 to Ms Zhang, via the bank account of  Cailin Yang, to assist Mr Shen, with his financial difficulties, and which was to be repaid with interest “at market rates” by 1 August 2018;3

(b)the December 2017 Loan, under which  ¥50,000  was  advanced  to Ms Zhang, via the bank account of Cailan Yang, to assist Ms Zhang with her financial difficulties, and which was to be repaid with interest “at market rates” by 1 August 2018;

(c)the January 2018 Loan, under which a further ¥300,000 was advanced to Ms Zhang, via the bank account of Cailan Yang, to assist Ms Zhang with her financial difficulties, and which was to be repaid with interest “at market rates” by 1 August 2018;

(d)the February 2018 Loan, under which ¥600,000  was  advanced  in two tranches of ¥300,000 to Ms Zhang, via the bank account of  Cailan Yang, and was to be made available by Ms Zhang to Ms Wen, to assist Ms Wen with her financial difficulties, and which was to be repaid with interest “at market rates” by 1 August 2018;

(e)the March 2018 Loans, under which:

(i)¥150,000 was advanced to Ms Zhang, of which ¥50,000 was to assist with Ms Zhang with her financial difficulties and

¥100,000 was to assist Ms Wen with her financial difficulties,

3      Although labelled the October 2017 loan, the two advances of ¥300,000 allegedly made under this loan were made on 1 and 15 November 2017.

with the loan being advanced in the amounts of ¥20,000 and

¥130,000 to the bank accounts of Cailin Yang and Jing Yang respectively; and

(ii)¥300,000 was advanced to Ms Zhang, via the bank account of Cailan Yang, to assist Ms Zhang and Ms Wen with their financial difficulties,

with  the  loans  to  be  repaid  with  interest  “at  market  rates”  by    1 August 2018; and

(f)the May 2018 Loan, under which ¥100,000 was advanced to Ms Zhang in three tranches of ¥70,000, ¥7,000 and ¥23,000, via the bank account of Jing Yang, to assist Ms Zhang with her financial difficulties, with the loan to be repaid with interest at “market rates” by June 2018.

[31]   The plaintiffs also allege that Mr Hua met with Ms Zhang at the Sylvia Park McDonald’s on 2 August 2018. At this meeting, Mr Hua and Ms Zhang agreed to terminate the investment, and Ms Zhang acknowledged her liability to repay

¥3,100,000 comprising Mr Hua’s investment in DTL of ¥492,000, the Company Loan of ¥508,000 and the Personal Loans of ¥2,100,000. Ms Zhang promised to repay the amount with interest “within two years”; that is, by 1 August 2020.

[32]   The plaintiffs further allege, at a meeting on 24 November 2018, Mr Hua and Ms Zhang entered into a verbal agreement under which the plaintiffs loaned a further

¥65,000 to Ms Zhang (the Further Loan) to assist with her financial difficulties, which sum was advanced via the bank account of Jing Tang, with the Further Loan to be repaid with interest at “market rates” “as soon as possible” or upon demand.

[33]   The plaintiffs said that on 26 November 2019, they sent a letter of demand to Ms Zhang seeking repayment of ¥3,165,000, comprising Mr Hua’s investment in DTL of ¥492,000, the Company Loan of ¥508,000, the Personal Loans of ¥2,100,000 and the Further Loan of ¥65,000 and that no payment has been made.

[34]   In the amended statement of claim, the plaintiffs plead three causes of action and seek remedies as follows:

(a)first cause of action: debt for non-payment of the sum of ¥3,165,000 as demanded, for which they seek judgment in the sum of ¥3,165,000, plus interest and costs;

(b)second alternative cause of action: indebitatus assumpsit, because there has been a total failure of the consideration for the ¥1,000,000 paid by the plaintiffs under the Investment Agreement, for which they seek judgment in the sum of ¥1,000,000, plus interest and costs; and

(c)third cause of action: breach of contract, being a failure by Ms Zhang to repay the Personal Loans and the Further Loan, for which the plaintiffs seek judgment in the sum of ¥2,165,000, plus interest and costs.

Mr Hua’s evidence in chief

[35]   In his evidence in chief,4 Mr Hua said the amount of ¥508,000, which was described as a company loan in the two statements of claim, was a loan by him to  Ms Zhang to fund the balances of the investments of Ms Zhang and Ms Wen in DTL. He said that, although the funds were advanced by his mother from her bank accounts, the funds were money realised by Mr Hua and Ms Li from the sale of their assets in China before they moved to New Zealand, and which was held by his mother, as is not uncommon in China.

[36]   In his brief of evidence, Mr Hua said he agreed at a meeting with Ms Zhang in her home in October 2017 that he and Ms Li would advance ¥600,000 to Ms Zhang to enable Ms Zhang to assist Mr Shen who was in financial difficulties. In that account, Mr Hua made no reference to the IOU Receipt. However, in response to questions from Mr Wallace, Mr Hua explained that he had written the IOU Receipt at a meeting with Ms Zhang and that Mr Shen had not been present. He said Ms Zhang had asked

4      Mr Hua’s brief of evidence was written in English and Mr Hua chose to give his evidence in English.

him to write the IOU Receipt on the pretext Ms Zhang did not want to write it herself. He also said Ms Zhang had told him to write the borrower’s name, Sam Shen. However, he also said he was surprised, when Ms Zhang returned the IOU Receipt to him a few days later, to see Ms Zhang had not signed it and that it was instead signed by someone he did not know. Mr Hua also said, after he had written the IOU Receipt, he had asked Ms Zhang a number of questions, including why the IOU Receipt had anything to do with his residency application. His account of her answer was to the effect that, by the date of the expected repayment of 1 August 2018, Mr Hua would have graduated for one full year from the  business  course  he  completed  in  August 2017, so his residency application would be likely to succeed.

[37]   Mr Hua said when he met with Ms Zhang in December 2017—when he agreed to the December 2017 Loan—Ms Zhang told him she had used the ¥508,000 and   Mr Hua’s investment of ¥492,000 to buy raw materials for another New Zealand company, called Hua Xin Electrical, in which Ms Zhang was involved.

[38]   Mr Hua also said that when he met with Ms Zhang in January 2018—when he agreed to the January 2018 Loan—Ms Zhang told him she was still using the funds he had advanced to purchase raw materials and equipment for Hua Xin Electrical and the funds could not be recovered immediately because of the poor business performance of that company. Even so, he agreed that he and Ms Li would advance a further

¥300,000 to Ms Zhang.

[39]   Mr Hua went on to say that, when he and Ms Li agreed three weeks later to advance the February 2018 Loan of ¥600,000 to assist Ms Wen with financial difficulties she was facing because of her personal circumstances, he was assured by Ms Zhang that she was still progressing the venture in accordance with the investment agreement.

[40]   Mr Hua also said that, at a meeting with Ms Zhang on 5 May 2018—when he agreed to the May 2018 Loan—Ms Zhang told him that, as a result of opening a number of New Zealand-based businesses, she had huge expenses, was struggling financially and was struggling even to afford food. Even so, Mr Hua said he and Ms Li

agreed to lend a further ¥100,000 to Ms Zhang and believed that DTL would still be progressed, and the funds loaned would be repaid.

[41]   Mr  Hua  said  that,  at  the  meeting  at  the  Sylvia  Park  McDonald’s  on     2 August 2018, which he described as “the termination meeting”, Ms Zhang told him she had misappropriated the funds intended to be used to incorporate DTL and progress the venture and had invested them in other New Zealand companies. He also said Ms Zhang confirmed she would repay the entire ¥3,100,000 advanced to that point and that it was up  to Mr Hua and Ms Li  whether the loans were repaid in  New Zealand dollars or Chinese yuan.   He said because he and Ms Li believed     Ms Zhang was acting in good faith when she promised to repay the ¥3,100,000, they agreed to make the Further Loan of ¥65,000.

[42]   Mr Hua said it was only at a virtual meeting he and Ms Li had with Ms Zhang on 8 April 2019 that Ms Zhang said she had no intention of repaying the loans.

Mr Hua’s evidence in cross-examination

[43]   When being cross-examined by Mr Hickson, counsel for Ms Zhang, Mr Hua walked back from his evidence that the company loan of ¥508,000 was a loan by him to Ms Zhang. Rather, he emphasised the alleged undertaking by Ms Zhang at the meeting at the Sylvia Park McDonald’s to pay back that amount, his investment in DTL and all of the alleged loans made to that date.

[44]   Mr Hua said he did not accept the evidence to be given by Ms Zhang that the business venture she, Ms Wen and he were considering when they signed the DTL Agreement was to open a tea house in Baoji City in China and that he knew all along that the business would operate in China and not in New Zealand. Mr Hua also disputed the authenticity of WeChat messages produced by Ms Zhang supporting that position, including a message said to be from Mr Hua, saying it would be better to increase the budget than to cut costs when dealing with a higher than anticipated cost for fitting out the tea house.

[45]   Mr Hua also denied that the IOU Receipt evidenced a loan to Mr Shen rather than to Ms Zhang. Mr Hua also denied accepting the IOU and said the money had

always been held by Ms Zhang and not by Mr Shen. Mr Hua also denied having any interest in investing in NZC Vision or in working for that company, even though he signed an employment agreement with NZC Vision on 27 November 2017, the date recorded on the IOU Receipt.

[46]   Mr Hua also denied that transfers of  ¥300,000  made on 30 January 2018,   22 and 23 February 2018, and 21 March 2018 were made pursuant to an agreement with Ms Zhang under which Mr Hua would increase his investment in the company by a further ¥1,200,000 to help fund set up costs in China that needed to be paid. He also denied that the transfers of ¥20,000 and ¥130,000 made on 12 and 13 March 2018 were made to buy clothes, shoes and cosmetics for the tea house staff and to pay the salary and bonus of Jing Yang, who was an employee of the tea house.

[47]   Mr Hua also denied that the transfers of ¥70,000, ¥7,000 and ¥23,000 made on 5 May 2018 had been made by Mr Hua without Ms Zhang’s knowledge, that Mr Hua had declined Ms Zhang’s offer to repay the money after she learned of the transfers and that, as a result, it had been agreed that the money should be regarded as a bonus for all Ms Zhang’s work for the tea house. Mr Hua also denied that the advance of

¥65,000 made in November 2018 had been to pay for the rental of the tea house.

The evidence for Ms Zhang

[48]   In her evidence in chief,5 Ms Zhang said she was the director and 50 per cent shareholder of two companies: NZC Vision Ltd and Hua Xin Ltd. The other director and shareholder of the companies was her husband, Xiaobo He. She explained that Hua Xin manufactures flyscreen doors which are sold by NZC Vision.

[49]   Ms Zhang said she was introduced to Mr Hua by Ms Wen, who at that time was working for Hua Xin. She said that, in early 2017, she and Ms Wen discussed the possibility of establishing a tea shop in Baoji City in China, where Ms Zhang had lived before immigrating to New Zealand and Mr Hua had expressed an interest of joining in the new venture.

5      Ms Zhang’s brief of evidence was written in Chinese and was translated into English. Ms Zhang also chose to give her oral evidence in Chinese, with her answers interpreted into English, even though it was apparent she had some competence in understanding and speaking English.

Establishment of tea house and incorporation of company

[50]   Ms Zhang said they agreed to incorporate a company in China, which would sell New Zealand teas, wine and other New Zealand products. She said they also planned to use the tea house to host English language courses and scouting-type activities for children.

[51]   Ms Zhang said Mr Hua offered to finance the entire project but that she and Ms Wen did not consider that appropriate and wanted to invest in the company too. She notes that after Mr Hua had arranged for the first transfer of ¥200,000 to her mother’s bank account in June 2017, before the DTL Agreement had been signed, her mother had asked that no further funds relating to the project be transferred to her account. That was because her mother was a senior Government official in China and the deposit of large sums of money into her account could arouse Government suspicion. Consequently, the remaining transfers of the money to be held on behalf of the company had been made to the account of Cailan Yang, her mother-in-law.

[52]   Ms Zhang said Mr Hua had prepared the draft of the DTL Agreement and had tentatively named the proposed company Dishuitang Trading Company  Limited. She noted that, in WeChat messages exchanged with Ms Wen after the agreement had been signed, they had continued to discuss the name of the tea house and of the Company. Although they had settled on Dishuitang, Ms Zhang was concerned that a name ending on “tang” was too common. In any event, Ms Zhang said that she later learned that the name was already used by another company. She discussed this with Mr Hua by phone and he agreed with her suggestion of Shaoyuan Trading instead.

[53]   Ms Zhang said she found a good location for the tea shop during a trip to China in 2017 and that, on 12 January 2018, her mother signed a lease on behalf of the company to be incorporated, with the lease period commencing on 1 March 2018 and ending on 15 May 2023. Ms Zhang provided a copy and a translation of the lease between Baoji Jialong Real Estate Development Co Ltd (Party A) and Yuling Wei (Party B). The lease stated that Party B leased the property “for the purpose of (storefront name) Dishuitang”.

[54]   Ms Zhang said the tea house had opened for business on 23 June 2018, as was recorded in a WeChat message from Ms Wen on 19 June 2018.

[55]   Ms Zhang said that neither Mr Hua nor Ms Wen wanted their names recorded on Chinese Government documents, which was why, when she incorporated the company on 15 March 2018, the shareholding was recorded as comprising: her mother, Yuling Wei,  at 40 per cent; herself at 30 per cent; and her husband, Xiaobo He, at   30 per cent. Ms Zhang said that, for reasons not disclosed to her, Mr Hua refused to have his name or the names of any family member in any official document for Shaoyuan Trading. She also said it would have been difficult for Mr Hua and Ms Wen to sign any documents personally because they were not in China at the time. However, she said it was always understood the actual shareholders were Mr Hua, Ms Wen and herself.

[56]   Ms Zhang noted that a Business Licence dated 15 March 2018 gave permission to operate the company from 11 March 2018 to 10 May 2038. The translation of the business licence stated that the holder of the licence was Baoji City Shaoyuan Trading Limited. The address of the business on the licence was the same as the address on the lease signed by Ms Zhang’s mother.

[57]   Ms Zhang referred to various WeChat messages between herself and Ms Wen and Mr Hua, which discussed preferences regarding equipment to be installed in the tea house, such as fridges and freezers, and how they should deal with an increase in fit out costs for the tea house.

The November 2017 Loan

[58]   Ms Zhang said the ¥600,000 Mr Hua advanced in November 2017 was to enable Mr Hua to invest in NZC Vision  at a time when Mr Hua did not have      New Zealand residency and could not hold shares in a New Zealand company. Accordingly, it was agreed Mr Hua would loan ¥600,000 to Mr Shen, who then held 40 per cent of the shares in NZ Vision, and that, when Mr Hua obtained residency, he could either receive 33 per cent of the shares in NZC Vision or repayment of the advance, as recorded in the “loan note”, as Ms Zhang described the IOU Receipt.

Ms Zhang also said that, even before Mr Shen had signed the loan note, Mr Hua made two transfers of ¥300,000 to Cailan Yang “for her to hold on behalf of Sam”.

The December 2017 Loan

[59]   Ms Zhang said the transfer of ¥50,000 to Cailan Yang in December 2017 was made by Mr Hua, at his own initiative, after Ms Zhang had mentioned to him that her mother was unwell. Mr Hua had refused Ms Zhang’s offer to return the money after she became aware of it so it was agreed the money would be used for the company to be incorporated in China.

The January 2018 Loan / the February 2018 Loan and the second March 2018 loan

[60]   Ms Zhang said none of the transfers of ¥300,000 made in January, February and March 2018 was made because she was facing financial difficulties. She noted that the balance of her bank account, held jointly with her husband, stood at over NZD 51,000 in late January 2018. Ms Zhang said the four transfers of ¥300,000 were made to fulfil Mr Hua’s undertaking to contribute a further ¥1,200,000 to the company to be established in China after the project budget for renovating the leased premises in China had exceeded expectations. Ms Zhang referred to WeChat messages exchanged with Ms Wen at the time, in which they discussed how to deal with the projected increased costs, and a message from Mr Hua in which he said it would be better to increase the budget. Ms Zhang said Mr Hua had been willing to contribute another ¥1,000,000 to the project but agreed to increase that amount to ¥1,200,000 after she told him that she had left rental out of the budget. Ms Zhang referred to a WeChat message said to be from Mr Hua which supported this account.

The first March 2018 Loan

[61]   Ms Zhang said the transfers of ¥20,000 and ¥130,000 on 12 and 13 March 2018 respectively to the bank accounts of  Cailin Yang  and  Jing Yang  were  made  on  Mr Hua’s initiative and that, when she asked him what the money was for, he had told her the ¥130,000 was a salary and bonus for Jing Yang and the ¥20,000 was for shoes, clothes and cosmetics for the female staff in China to motivate them to work hard for the business.

The May 2018 Loan

[62]   Ms Zhang denied meeting with Mr Hua on 2 May 2018 because she was in China at the time, as was evident from stamps in her passport. She agreed she had met with Mr Hua in a park, at his request, but said that was in September or October 2018. She also said the only money issue she recalls discussing with Mr Hua at that meeting was the ¥65,000 rental that STL owed at the time.

[63]   Ms Zhang said she was not having any financial difficulties at that time.    She referred to copies of bank statements of the joint account of herself and her husband, which showed a credit balance of more than NZD 51,000 on 5 May 2018 and a credit balance of more than NZD 40,000 in September / October 2018.

[64]   Ms Zhang said the three transfers totalling ¥100,000 on 5 May 2018 had been made by Mr Hua on his own initiative after she had mentioned on the telephone that her family in China required financial assistance. Ms Zhang said Mr Hua had offered to send ¥100,000 for her family but that, when she found he had followed through on the offer, she had phoned him and said she would pay it back. She said Mr Hua had refused to accept repayment and they had agreed she could use the money, which she said was equivalent to NZD 20,000, as salary and as a bonus for her work for the company. However, Ms Zhang said she later repaid this money.

Meeting at Sylvia Park McDonald’s

[65]   Ms Zhang  agreed she  met  with Mr Hua  at  the Sylvia Park  McDonald’s   in August 2018 but denied there was any discussion of her alleged failure to set up the company in accordance with the DTL Agreement or of repayment of any personal loans. She said there were no personal loans to repay, and she had incorporated a company in China as agreed. Ms Zhang said the purpose of the meeting had been to discuss a legal dispute in China with the contractor who had undertaken the fit out of the tea house. She also said she made a cash payment of NZD 10,000 in part payment of the ¥100,000 transfer Mr Hua made in May that year.

[66]   Ms Zhang denied agreeing to terminate the DTL Agreement and said she could not have done so without Ms Wen’s agreement. She also denied agreeing to accept

liability for Mr Hua’s investment in STL or for the loan Mr Hua made to the company to pay for most of her investment and Ms Wen’s investment in the company. She said she had no reason to accept any such liability and Mr Hua’s investment was precisely that, an investment in the company, and not a loan.

The Further Loan

[67]   Ms Zhang denied meeting with Mr Hua on 24 November 2018. She had flown to China on 22 November 2018 and had entered China on 23 November 2018, as her passport confirmed. She said there had been no verbal agreement with Mr Hua to borrow ¥65,000 and the transfer of that amount on 24 November 2018 to Jing Tang, who was an employee at the tea house, was to meet the rental owing, as discussed at the meeting in the park, which occurred approximately a month earlier.

Other evidence from Ms Zhang

[68]   In her evidence-in-chief, Ms Zhang also referred to issues that had arisen at NZC Vision, where Mr Hua had been employed, and, in that regard, to a breakdown in Mr Hua’s relationship with Mr Shen, whom Mr Hua wanted to pay back the

¥600,000 he had paid for Mr Shen’s shares in NZC Vision. Ms Zhang said that, as a compromise, she and Mr Shen had offered to sell Mr Hua 100 per cent of the shares in NZC Vision. She said Mr Hua had agreed but asked that she hold the shares on his behalf because he still did not have New Zealand residency. However, the proposed agreement did not proceed after Mr Hua refused to prepare or sign any new agreement.

[69]   Ms Zhang said Mr Hua had left NZC Vision and moved to Christchurch in early 2019 and that, before he left, her husband had given Mr Hua NZD 10,000, in repayment of the balance owed for the money Mr Hua transferred in May 2018.

[70]   Ms Zhang said, in or about early 2019, Mr Hua had ceased funding or taking any further part in the tea shop business. She had no option but to fund the business herself. She estimated that she had put more than ¥500,000 or about NZD 118,000 into keeping the tea shop going.

[71]   Ms Zhang said the tea shop operated at a loss during the COVID-19 pandemic, that she had been unsuccessful in finding someone to take over the lease and so they had closed the tea shop when the lease expired in May 2023. However, shortly afterwards, a regular customer, Chao Yan, took over the lease under a collaboration agreement with Ms Zhang.

[72]   Under the collaboration agreement, which was in the agreed bundle together with an English translation, Mr Yan holds 85 per cent of the shares of STL and is responsible for all future debts and operating costs and Ms Zhang has 15 per cent of the shares and has sole liability for all debts of STL incurred before the share transfer. Ms Zhang also said that, in July 2023, Mr Yan amended the business licence for STL, following which the company’s records showed that Mr Yan held 15 per cent of the shares and Chaoyang Xue held 85 per cent. However, Ms Zhang said this is not a reflection of the true shareholding which is as stated in the collaboration agreement.

Evidence in cross-examination

[73]   In response to questions from Mr Wallace, Ms Zhang confirmed that in January 2018, she, Mr Hua and Ms Wen agreed orally to increase the share capital from ¥1.2 million to ¥2.4 million to meet the increased fit-out costs but that, when the company was incorporated in March 2018, they agreed to register the company as having share capital of ¥5 million to make the  company appear  more  grandiose.  Ms Zhang said this change was only nominal and that the actual capital did not change. She denied that this was deception and said it was commonplace in China for the official record not to accord with reality.

[74]   Ms Zhang also agreed an affidavit she had filed earlier in the proceeding about the recovery of WeChat data from her phone had been incorrect in stating that she had undertaken the data recovery personally. In fact, the data recovery had been undertaken by her husband, as she had stated in a subsequent affidavit. Ms Zhang also agreed she had deleted what she considered to be irrelevant WeChat messages and her husband had edited others to include the names of the senders, where they were not displayed. Ms Zhang said they had done so because the software recovery programme used by her husband did not include names in the photo files of senders of messages.

[75]   Ms Zhang was questioned at length about her responses to Mr Hua’s question, “Is there no loan? Put your hand on your conscience and tell me”, in the first WeChat call of 8 April 2019. Ms Zhang said, first, that it was too long ago and she could not remember to what she was referring when she had said, “I asked you to sign it at the time. Why did you not?”. She also said it would be difficult to explain a single incident without explaining “the whole lot”. Then, she thought it might have been a reference to the IOU receipt. When Court resumed the following day, Ms Zhang said her friendship with Mr Hua had been ruined because she had asked him to sign an agreement “of sorts” and he would not sign it. She then said there had been many agreements that Mr Hua had refused to sign, and she could not remember exactly which agreement she had been referring to. She then referred to the idea of Mr Hua acquiring 100 per cent of the shares in NZC Vision and said she had asked him to prepare an agreement to record that she would hold the shares on trust for him, but he had refused to prepare the document and, instead, had returned the IOU Receipt to her.

[76]   Ms Zhang denied the exchange with Mr Hua had been about loans and said it had been about the allocation of shareholding because of the changes he had wanted to make. When asked what changes, Ms Zhang said there had been a sequence of changes: that the DTL Agreement had stated how many shares Mr Hua would get and how much money he would contribute and how much he would be repaid by the company; at a second round, it had been agreed orally with Mr Hua that, because she and Ms Wen were doing the work, and because her mother was to be the company’s legal representative, Mr Hua would give Ms Zhang performance shares; at a third round, Mr Hua had said if Ms Zhang could get Ms Wen out of the company, she could retain her shares and have some of Ms Wen’s shares and have an annual salary of NZD 80,000; and at a fourth round, after Mr Hua had refused to lend money to Ms Wen, it had been agreed that Ms Wen’s shareholding would be reduced from 20 per cent to five per cent. She said she had asked Mr Hua to record all of these arrangements in writing, but he had never made it happen. She did not accept that she had any responsibility to prepare such an agreement.

[77]   Ms Zhang said she refused the offer of a salary and more shares because she did not think it fair to collect a cent from the job because she was on her performance shares. She also said that Ms Wen’s shareholding had been reduced at about the time

the DTL Agreement had been concluded because Mr Hua had not wanted to lend money to Ms Wen. She said further that she had wanted the DTL Agreement to be “re-entered” to record the change in Ms Wen’s shareholding and to record the holding of her performance shares, but Mr Hua had disagreed. She said his response had been along the lines of:

I have fronted all the money, you’ve got all the money, is there anything that you can’t trust me on?

[78]   Ms Zhang said that, as at  8  April  2019,  the  shareholding  in  STL  was:  Mr Hua: 50 per cent; Ms Zhang: 30 per cent; Ms Wen: five per cent, with 15 per cent still not allocated. Ms Zhang also said that, as at 8 April 2019, she did not have sufficient funds to pay Mr Hua all the money he had invested if that had been agreed. She also confirmed that, in the first WeChat conversation on that date, when she had referred to spending more than one million on importing goods, she had been referring to importing goods for her electrical businesses in New Zealand.

[79]   Contrary to Mr Hua’s evidence, Ms Zhang said she did not agree to terminate the investment agreement at the meeting at the Sylvia Park McDonald’s and did not accept any personal liability for the funds Mr Hua had paid.

[80]   Ms Zhang agreed that, as admitted in her statement of defence to the plaintiffs’ amended statement of claim, that no shares in DTL / STL had been issued or transferred to Mr Hua. She also said that was because Mr Hua had wanted to conceal his shareholding from the Chinese Government because his parents held senior positions in that government and that this was not out of the ordinary in China. However, she said she had held and still holds those shares on trust for Mr Hua. In response to the Court’s request for clarification. Ms Zhang said her belief was that the three of them, Mr Hua, Ms Zhang and Ms Wen, still held 15 per cent of the shares. However, she said she did not know in what proportions.

[81]   Ms Zhang agreed that, in 2018, she held all 1,000 shares in NZC Vision but said, despite that, in 2017 Mr Shen had acquired 40 per cent of the shares, which she held on trust for him. Ms Zhang said she believed there was a document supporting this arrangement, which Mr Hua would have sighted, when he prepared the

IOU Receipt. However, Ms Zhang was unable to provide any specific information about the existence of such a document. Nor was she able to explain why Mr Hua could not hold the shares in NZC Vision himself, given there is no legal requirement that only New Zealand residents may hold shares in New Zealand companies.

[82]   Ms Zhang confirmed that, in September 2020, she had transferred all the shares in NZC Vision to Mr Shen’s father, Limin Shen. She said she had done so because, by then Mr Shen was responsible for all sales made by NZC Vision. She denied doing so to prevent a claim by Mr Hua for 33 per cent of the shares and said, if asked, Limin Shen would have transferred the shares to Mr Hua because that was what had been agreed.

[83]   Ms Zhang agreed she was present when Mr Hua prepared the IOU Receipt, that he had written the document with her agreement, and she had taken it away to be signed. She denied, however, that the document was to be signed by her as the promisor and said that, even though she was the sole shareholder, Mr Hua knew she held 40 per cent of the shares on trust for Mr Shen, which was why Mr Shen was referred to in the document. Nevertheless, Ms Zhang accepted that, when Mr Hua gave the document to Ms Zhang, the words “Sam Shen” had not been written on it. She also agreed that, because she owned all the shares in NZC Vision, it would have been natural for her to have signed the IOU Receipt.

[84]   With regard to the registration of the shareholding of STL in China, Ms Zhang said she, her mother and her husband had held the shares on trust for Ms Wen, Mr Hua and Ms Zhang. She said she thought her husband had held Ms Wen’s shares on trust but was not entirely sure. She said this was recorded in a document that should be accessible through the Chinese companies register. However, Ms Zhang went on to say that the three shareholders on the register held 100 per cent of the shares on trust and there was no clear understanding of who was holding shares on trust for whom. She said that had not been discussed.

[85]   Ms Zhang  said  Ms  Wen’s shareholding  in  STL  had  been  reduced  to  five per cent and Mr Hua’s shareholding had increased to 50 per cent in February or March 2018, when there had been a number of disagreements. She agreed it would

have been before 15 March 2018, when STL was incorporated in China. Ms Zhang gave confusing and contradictory evidence as to whether the 15 per cent of the “remaining equities” were ever issued.

[86]   Ms Zhang said the first ¥1,000,000, paid into the accounts of her mother and mother-in-law, represented Mr Hua’s initial capital and the loan of ¥508,000, and had been used for rent, air conditioning and renovation, refurbishment “and what not”. Ms Zhang also agreed that, leaving aside transfers she says were for other purposes, Mr Hua had transferred ¥2,200,000 by late March 2018. However, although the company had opened a bank account in about March / April 2018, Ms Zhang said the money would not have been paid into that account. She also said the money had been spent even before the business started because they had to buy furniture and electronic appliances, pay rental, and pay for Ms Zhang’s travel.

[87]   Although Ms Zhang had said in her evidence in chief that the tea house had operated at a loss during the COVID-19 pandemic, in cross-examination, she said it had not made a profit in the first 18 months of operation or subsequently. She also said, despite closing the tea house in May 2023, it was now operating again but was not a financial success.

[88]   Ms Zhang acknowledged she had not obtained Mr Hua’s consent before transferring 85 per cent of the shareholding in STL to the new owners. Despite her evidence in chief, in which Ms Zhang said the owner of the 85 per cent shareholding was a former customer, in cross-examination she said she had not met either of the persons now recorded as owning the shares in the company.

Other relevant evidence

[89]   As Mr Wallace acknowledged in closing submissions, Ms Li played no part in the negotiation or implementation of the DTL Agreement. Nor did Ms Li take part in the discussions that led to the alleged loans. Accordingly, Ms Li’s evidence added little to that of her husband. The same applies to the evidence of Mr Hua’s mother, Shufen Yu, who transferred funds to China in accordance with Mr Hua’s directions. However, Ms Yu’s evidence usefully confirmed that the money she transferred was

that of Mr Hua and Ms Li and that it was common in China for parents to hold their children’s money.

Ms Wen’s evidence

[90]   In her written brief of evidence filed in advance of the hearing, Ms Wen said Ms Zhang, for whom she was working at the time at Hua Xin, had approached her about taking part in a business venture involving the establishment of a tea shop in Baoji City which would sell quality New Zealand products. Ms Wen said she had met Mr Hua at a business course in Auckland and had introduced him to Ms Zhang, who had subsequently employed Mr Hua and Ms Li.

[91]   Ms Wen said that, after she had mentioned the Baoji City tea shop venture to Mr Hua, he had asked to be involved, and she and Ms Zhang had agreed he could join them. Ms Wen said Mr Hua had wanted  to  fund  the whole venture,  but  she and Ms Zhang had thought it appropriate they should also contribute and that their arrangement should be documented, which led to the DTL Agreement. She described the essential elements of the agreement, under which she would get 20 per cent of the shares but contribute only ¥100,000. Ms Wen said Ms Zhang was to manage the day-to-day operations of the company, she was to deal with all marketing, and Mr Hua was to handle finance and budgets.

[92]   Ms Wen denied she was in any financial difficulty in February 2018 or that Mr Hua had advanced ¥600,000 to Ms Zhang to help her or that she had received any money from Ms Zhang at that time.  She was also not in financial difficulty in  March 2018 and received no financial assistance from Ms Zhang then either.

[93]   Ms Wen said she had made it clear to Ms Zhang and Mr Hua she was not prepared to invest any more money to make up the budget shortfall that became apparent in early 2018, but that Mr Hua had been prepared to make up the shortfall and had made further contributions to the business. Mr Hua had also wanted to buy out her shares, but Ms Zhang had  said  she  needed  Ms Wen  for  the  marketing. Her relationship with Mr Hua soured after a falling out between their children, and Mr Hua had wanted her to repay the money he had loaned the company for her shareholding, but she had refused because the debt was the company’s and not hers.

[94]   Ms Wen said the fact her name and Mr Hua’s name did not appear in the Government record as shareholders of the company had been deliberate. She said neither she nor Mr Hua had time to be engaged in the lengthy bureaucratic process that would have involved.  That  was  why  Ms  Zhang,  Ms Zhang’s  mother  and  Ms Zhang’s husband had been listed as shareholders, even though the true shareholders were Mr Hua, Ms Zhang and herself.

[95]   Ms Wen said she was not involved in any discussions in August 2018 to terminate the DTL Agreement, as she would have expected to have been if there had been such a discussion.  She was aware that the relationship between Mr Hua and  Ms Zhang had worsened in early 2019 and referred to the second WeChat conversation in which she had said the money Mr Hua had invested in STL was not a loan. She also said she was aware Ms Zhang had continued to put money into STL to keep the tea shop going. However, it had never become a success, so Ms Zhang had given the shares to the parents of one of her friends on Baoji City. Ms Wen said she supported this because it spared her, Ms Zhang and Mr Hua from potential future liabilities.

[96]   Ms Wen’s brief of evidence was admitted by consent, subject to corrections made by Mr Hickson. The corrections did not include reference to any subsequent change in Ms Wen’s shareholding in STL. However, in cross-examination, Ms Wen agreed there had been a reduction in her shareholding at the time Mr Hua had wanted her to leave the company, but Ms Zhang had insisted she stay. Ms Wen said she had forgotten that reduction—from 20 per cent to five per cent—when she had prepared her brief but had advised Mr Hickson of this matter on the evening of 24 March 2025, the day the hearing commenced, when she found a record of that development when checking her records in preparing to give evidence.

[97]   Ms Wen said the agreement to reduce her shareholding had been oral and she was not aware of what happened with the 15 per cent of the shares she had surrendered. However, she was aware of the discussion to increase the capital of the company from

¥1.2 million to ¥2.4 million, which all three shareholders had agreed, but not of any discussion to increase the capital to ¥5 million. She said she had not contributed any money to STL beyond her initial investment of ¥100,000, which she remembered paying but could not say to which account.

[98]   In response to questions from the Court, Ms Wen said her work for STL had involved posting articles about the tea shop, educating VIP customers of the tea shop, including by WeChat group, negotiating with suppliers of New Zealand goods and posting goods to VIP customers in China.

Evidence of Ms Wang

[99]   Ms Wang, a partner at a law firm in Wuxi, China, gave evidence by video conference. She said China’s equivalent of New Zealand’s companies legislation, entitled “Provisions of Supreme People’s Court on Several Issues Concerning the Application of the Company Law of the People’s Republic of China (III) (Amended in 2020)” (the China Company Law), implicitly recognises two kinds of shareholders: actual investors whose names do not appear in Government records but who enjoy the usual rights of a shareholder; and nominal investors, whose names appear on the company’s share register even if they have not invested in the company. Ms Wang refers to art 24 of the China Company Law, which empowers a court to determine the validity of contractual arrangements between an actual investor and a nominal investor. Ms Wang also refers to art 25, under which an actual investor may protect their rights if a nominal investor transfers, pledges or disposes of shares registered in the name of the nominal investor.

[100]   Ms  Wang  subsequently  provided  an  unverified  translation   of   the   China Company Law.

Submissions for the plaintiffs

[101]   In his closing submissions, Mr Wallace  said the evidence established that   Mr Hua paid ¥1,000,000 for the establishment of DTL, as pleaded in the amended statement of claim, and he never received any consideration for his payment. That is, he was never issued shares in the company, he had no contractual relationship with those who said they held his shares on trust and those persons had since caused or allowed those shares to be transferred to a stranger who owes Mr Hua no obligations, whether on trust or otherwise. Accordingly, the shareholding was now far beyond  Mr Hua’s reach. Mr Wallace also noted that STL had never adopted, ratified or otherwise agreed to the loan of ¥508,000 that Mr Hua advanced for the benefit of

Ms Zhang and Ms Wen, and there was no evidence to verify that the ¥2,200,000 transferred to the bank accounts of Ms Zhang’s mother and mother-in-law were used for the purposes of the company. Accordingly, he submitted that Ms Zhang must compensate the plaintiffs for  that  total  failure  of  consideration.  In  that  regard, Mr Wallace referenced Ellice v Stallard, in which Fitzgerald J had discussed the principles of restitution and, in that regard, the action of indebitatus assumpsit.6

[102]   Mr Wallace also submitted, without reference to authority, that the evidential burden of proving consideration had passed to Ms Zhang once it was established that Mr Hua had paid the money to acquire the shareholding. He submitted further that Ms Zhang had failed to prove that Mr Hua did get the shareholding in a company that owned the business that was contemplated.

[103]   Mr Wallace drew attention to various procedural and evidential issues that arose in the course of the hearing. These included: the evidence of the change in Ms Wen’s shareholding in STL from 20 per cent to five per cent came only after the hearing commenced and was not put to Mr Hua, even though Mr Hickson became aware of this evidence when Mr Hua was being cross-examined; Mr Hua was not given a full opportunity to explain the importance of context with regard to the WeChat messages and Ms Zhang’s husband had altered some of those messages; Ms Zhang had refused to disclose the full review of contributions to the tea house business that she said she had undertaken, and Ms Zhang had failed to discover almost any documents about the STL’s operation in China.

[104]   Mr Wallace also noted there was no documentary evidence to establish that Mr Shen was a shareholder in NZC Vision let alone a satisfactory explanation of why the shares were later transferred to Mr Shen’s father, and then back to Ms Zhang and half then transferred to Ms Zhang’s husband. Mr Wallace submitted that it was improbable that the IOU Receipt was intended to be signed by Mr Shen and that, as Ms Zhang acknowledged, it would have been more appropriate if it had been signed by Ms Zhang.  That said, Mr Wallace  acknowledged it was also incongruous that  Mr Hua would have loaned ¥600,000 to Ms Zhang for on-lending to Mr Shen without

6      Ellice v Stallard [2019] NZHC 1739.

obtaining an IOU from Mr Shen. He also noted that the payments for the NZC shares were made before the IOU Receipt was signed by Mr Shen.

[105]   Mr Wallace submitted that Ms Zhang’s refusal to accept that loans were being discussed, when Mr Hua asked, “Is there no loan?” in the first WeChat  call on         8 April 2019 was not credible. He further submitted that the evidence was consistent with Ms Zhang either having always agreed that the monies advanced by Mr Hua were loans or later acknowledging that she was obliged to repay them.

Submissions for Ms Zhang

[106]   Mr Hickson submitted that the evidence showed, with one exception—the advance of ¥100,000 which Ms Zhang had repaid—there had not been any personal loans and Ms Zhang owed the plaintiffs nothing.

[107]   Mr Hickson said the plaintiffs’ claims as pleaded and as varied in their briefs of evidence was not supported by the evidence that emerged at the hearing, particularly from the cross-examination of Ms Zhang. That evidence showed Mr Hua had initially transferred ¥1 million to pay for his investment of ¥492,000 and his loan to the company of ¥508,000 and had then made further payments totalling ¥1.2 million as part of the agreement to increase the capital of the company to ¥2.4 million.

[108]   Mr Hickson said Ms Zhang’s evidence,  which  was  supported  by  that  of Ms Wen, established that the money was advanced to establish a company in China to operate a tea house in Baoji City, that the company had been established and had operated, albeit unsuccessfully. He said the loose and informal arrangements by which the shareholding had been held on trust were apparently acceptable in China, even if they would not have met legal requirements in New Zealand. He accepted the arrangements by which Mr Shen was said to have held shares in NZC Vision could not be a valid trust arrangement but demonstrated how the parties conducted their business affairs. However, he submitted, that as shown by the evidence of Ms Wang, Chinese law enables a distinction to be drawn between actual investors, who are not named in government records, and nominal investors.

[109]   Mr Hickson submitted that Mr Hua’s evidence was false and confusing and not credible and that the evidence of Ms Zhang demonstrated that, with the exception of the advance of ¥100,000, the other transfers by Mr Hua had been either in support of the arrangements he had made to acquire shares on NZC Vision, or in his further contribution to the capital of STL or payments made for specific purposes relating to the operation of STL.

[110]   Mr Hickson submitted that it was clear that Ms Zhang owed no debt to the plaintiffs and that there had been no failure of consideration or any obligation to repay personal loans.

Analysis

[111]   The pleadings, the evidence and the submissions of counsel give rise to the following questions:

(a)What was the purpose of the DTL Agreement and the nature of the enterprise it was to enable?

(b)What was the nature of the transfers totalling ¥1,000,000 that Mr Hua caused to be made between 28 June 2017 and 6 September 2017?

(c)What was the nature of  the transfers  totalling ¥2,165,000,000 that  Mr Hua  caused  to  be   made   between   1   November   2017   and 24 November 2018?

(d)Does Ms Zhang owe a debt to Mr Hua?

(e)Has there been any failure of consideration such that some form of restitution should be ordered, whether by way of the doctrine of indebitatus assumpsit or otherwise?

(f)Does Ms Zhang owe an obligation to repay any loans to Mr Hua?

The purpose of the DTL Agreement

[112]   While not stated in the DTL Agreement, it is plain the purpose of the agreement was to record the means by which the three parties, Ms Zhang, Mr Hua and Ms Wen, would invest in a company to be incorporated in China for the purpose of establishing and operating a tea house or tea shop in Baoji City in China. It is also plain, that notwithstanding the change of the name of the company and tea house from Dishuitang Trading Limited to Shaoyuan Trading Limited, the DTL Agreement was implemented, the company incorporated and the tea house established.

[113]   It would have been straightforward to draw those conclusions if Ms Zhang had provided documents showing the actual operation of the tea house, including accounts, financial statements and reports, as she should have been counselled to discover. However, the evidence of Ms Zhang and Ms Wen, the WeChat messages and the WeChat calls all support these conclusions. By contrast, Mr Hua’s claim that the purpose of the DTL Agreement was to establish a company in New Zealand to sell good to tourists in New Zealand is plainly false.

The transfers between 28 June and 6 September 2017

[114]   It  is similarly plain that  the transfers totalling ¥1,000,000 made between    28 June and 6 September 2017 were made in fulfilment of Mr Hua’s undertaking in the DTL Agreement to contribute ¥492,000, by way of his contribution to the capital of the company, and ¥508,000 by way of a loan to the company to be formed.

[115]   I see no purpose in engaging with the legal complexities of a shareholder making a loan to a company yet to be formed in fulfilment of the capital undertakings of the other two shareholders. The shareholders are not legally trained and they did not have legal advice. Their intentions, however, were evident. Mr Hua was to be the primary contributor of capital; Ms Zhang was to establish and ensure the operation of the company; and Ms Wen  was to undertake marketing activities.  Ms Zhang and  Ms Wen were not required to pay the full amounts of their capital contributions because they were contributing to the company in other ways. Mr Hua, who wanted to be the major investor, was happy to make an advance to cover their contributions based on an undertaking that he would be repaid by the company after a year of

operations—presumably in the expectation that the company would be able to make the repayment by that time.

[116]   However that advance is analysed, the parties did not agree it was a loan to Ms Zhang and Ms Wen or that Ms Zhang had any obligation to repay Mr Hua for the amount of her unpaid capital contribution, let alone that of Ms Wen. The repayment obligation was on the company. Regardless of whether or not STL ever endorsed or acknowledged the loan, if Mr Hua wanted to enforce that obligation, he could have taken steps to do so after the company had been formed and had completed its     first year of operations. As the major shareholder, indeed the majority shareholder following the reduction of Ms Wen’s capital, Mr Hua would have been well placed to have done so, albeit that such action would appropriately be taken in China, where the company had been incorporated.

[117]   I recognise the above analysis does not take into account the reality that     Mr Hua was not registered as a shareholder on the STL business licence or other company records. However, for the reasons set out below, I am satisfied that Mr Hua knew and understood that he was not registered as a shareholder and could have taken steps to enforce his rights had he elected to do so. However, even if I am wrong about those matters, that does not convert the advance to the company into an obligation of Ms Zhang to repay Mr Hua. Nor does the fact the company has effectively gone out of business impose a repayment obligation on Ms Zhang.

[118]   For completeness, I accept the funds transferred to accounts in China were used in the establishment of STL and the tea house and not to meet expenses Ms Zhang’s New Zealand companies had incurred, as alleged by Mr Hua. That conclusion would also have been more easily reached if Ms Zhang had provided relevant bank records. However, Mr Hua’s evidence is illogical, and he provides no evidence to support his allegations.

The transfers between 1 November 2017 and 24 November 2018

[119]For reasons that will become apparent, I deal last with the two transfers of

¥300,000 made in November 2017, which relate to the shares in NZC Vision.

[120]   Before dealing with the specific transfers, I acknowledge there is some evidence to support Mr Hua’s case that some of these transfers were loans; namely, the exchange he had with Ms Zhang in the first WeChat conversation on 8 April 2019 where she does not deny his assertion that there were loans and refers to Mr Hua’s unwillingness to sign one or more documents that Ms Zhang said she asked him to sign. However, the exchange was vague and fell short of establishing that any specific transfer was a loan. While Ms Zhang’s responses on these matters in cross- examination were evasive and unsatisfactory, I am not satisfied that provides sufficient basis for drawing any adverse inference that there were loans that Ms Zhang was unwilling to acknowledge. Accordingly, the following analysis is based principally on the evidence of the specific transfers.

Transfer of ¥50,000 in December 2017

[121]   I am satisfied the transfer of ¥50,000 in December 2017 was a voluntary payment by Mr Hua to Ms Zhang after Ms Zhang had mentioned her mother was unwell. I am also satisfied that, with Mr Hua’s agreement, the money was used in the establishment of STL after Ms Zhang offered to repay the money but Mr Hua refused. Again, that conclusion would have been more easily reached if Ms Zhang had provided relevant bank records. However, I consider Ms Zhang’s evidence on this, as on most matters, to be considerably more reliable than that of Mr Hua.

[122]   Accordingly, this transfer was, in effect, a voluntary contribution to the operating expenses of the company and not a loan to Ms Zhang.

Four transfers of ¥300,000 in January, February and March 2018

[123]   I am satisfied the four transfers of ¥300,000 made in January, February and March 2018 were made to fulfil Mr Hua’s undertaking to contribute a further

¥1,200,000 to STL after the project budget for renovating the leased premises in China had exceeded expectations and not because Ms Zhang or Ms Wen were facing financial difficulties. That conclusion is supported by the WeChat exchanges between Ms Zhang, Ms Wen and Mr Hua. In that regard, I am satisfied the WeChat messages are reliable, despite the attributions  inserted  by  Ms  Zhang’s  husband,  and  that  Mr Hua’s attempt to disavow his involvement in the exchanges was not credible.

[124]   Accordingly, these transfers were further advances of capital by Mr Hua to the company and not loans to Ms Zhang.

Transfers of ¥20,000 and ¥130,000 in March 2018

[125]   I am satisfied  the  transfers  of  ¥20,000  and  ¥130,000  made  on  12  and  13 March 2018 were voluntary payments by Mr Hua to enable the women staff of the tea house to buy shoes, clothes and cosmetics, and as salary and bonus to Jing Yang, an employee of the tea house and to whom the latter payment was made directly. I am satisfied that Ms Zhang’s explanation of these transfers is more credible than Mr Hua’s claim that payments comprising ¥20,000 and ¥130,000 and sent to the accounts of two different intermediaries were loans of ¥50,000 and ¥100,000 to Ms Zhang and Ms Wen. Ms Zhang’s evidence is also supported by the evidence of Ms Wen.

[126]   Accordingly, these transfers were, in effect, further voluntary contributions by Mr Hua to the operating expenses of the company and not loans to Ms Zhang.

Transfers totalling ¥100,000 on 5 May 2018

[127]   As Mr Wallace effectively  accepted,  to  the  extent  the  transfers  made  on 5 May 2018 were a loan and not further voluntary contributions to the capital or operating expenses of the company, that loan has been repaid, albeit without interest, through the two payments of NZD 10,000 made to Mr Hua by Ms Zhang and her husband. The evidence of Ms  Zhang  was that  those payments were accepted by  Mr Hua.

Accordingly, there is no continuing liability in respect of those transfers.

Transfer of ¥65,000 in November 2018

[128]   I am satisfied the transfer of ¥65,000 made on 24 November 2018 to the account of Jing Tang was a payment by Mr Hua to meet the rent owing on the tea house and not a loan to Ms Zhang. Again, this conclusion would have been more easily reached if Ms Zhang had produced the company’s bank records. However,  Ms Zhang’s account in relation to this transfer is more credible than that of Mr Hua. Indeed, if Mr Hua’s account of events up to that point were to be accepted, it strains

credulity to accept he and his wife would have agreed to make the Further Loan of

¥65,000 if Ms Zhang had failed to repay the earlier loans by 1 August 2018 and had been given a two-year extension to make those repayments, as Mr Hua alleged.

[129]   Accordingly, this transfer was, in effect, a further voluntary contribution to the operating expenses of the company and not a loan to Ms Zhang.

The two transfers of ¥300,000 in November 2017

[130]   It is clear these transfers related to Mr Hua’s wish to obtain a shareholding in NZC Vision and not to any financial difficulties being experienced by Mr Shen, as Mr Hua alleged in his amended statement of claim. In cross-examination and in the submissions of Mr Wallace, Mr Hua’s story effectively changed. The Court was invited to accept that the transfer was to Ms Zhang, who was the sole legal shareholder in NZC Vision at the time, and that the IOU Receipt, which Mr Hua acknowledged preparing, was intended to be signed by Ms Zhang and not Mr Shen. However, the IOU was signed by Mr Shen, and it is clear from the two WeChat conference calls on 8 April 2019 that Mr Hua considered that the repayment obligation lay with Mr Shen and not Ms Zhang, even  if  he  ascribed  responsibility  for  the  drafting  of  the  IOU Receipt to Ms Zhang.

[131]   Wherever the repayment obligation properly lay, it is not at all clear to the Court why the transfers were made to the account of Ms Zhang’s mother-in-law in China if they related to Mr Hua’s purchase of shares in New Zealand from Mr Shen. Nor is it clear if these funds were used to fund the tea house in China, although some of Mr Shen’s comments in the second WeChat call on 8 April 2019 suggest they may have been. Nor is it clear why Mr Hua’s receipt of legal ownership of the shares was made contingent on Mr Hua obtaining residency in New Zealand. Mr Hua said he had asked Ms Zhang how his residency was relevant to the IOU Receipt but the answer he says she gave, linking his residency to the anniversary of his graduation from a business course, made little sense. However, Ms Zhang’s explanations of the convoluted arrangements she says were agreed for 40 per cent of the  shares  of  NZC Vision to be held on trust for Mr Shen also made little sense.

[132]   The Court is left in the situation that it does not know what to make of these transfers. There is no doubt the transfers were made and have not been repaid. On the basis of the IOU Receipt and the WeChat calls on 8 April 2019, I am satisfied the money advanced was intended to be repaid or the shares in NZC Vision were to be transferred to Mr Hua at his election, once he had obtained New Zealand residency. Whether or not that condition was necessary or appropriate, it has been satisfied.   Mr Hua’s residency was approved on 1 May 2023.

[133]   However, Mr Hua’s claim for repayment of the ¥600,000, as set out in the amended statement of claim, is not based on the IOU Receipt, which was not pleaded, but on an alleged loan to Ms Zhang and premised on an alleged wish to assist Mr Shen in his purported financial difficulties. The evidence does not support that premise or that Mr Shen was in financial difficulty.   Nor is it clear whether the loan was to     Mr Shen, as Mr Hua seemed to accept in the WeChat  calls of 8 April 2019, or to   Ms Zhang, as he now alleges.

[134]   The short point is that I am not satisfied with the evidence of either of the  two main protagonists about what was intended when Mr Hua transferred the funds to Ms Zhang’s mother-in-law and signed the IOU Receipt.

[135]   In these circumstances, I am unable to be satisfied, on the balance of probabilities, that the loan was made to Ms Zhang or that Ms Zhang accepted any responsibility to repay the loan. Accordingly, I make no finding on the two transfers of ¥300,000 made in November 2017.

[136]   I note that, based on the IOU Receipt, it would appear to be open to Mr Hua to seek repayment of the sums advanced from Mr Shen, who is not a party to this proceeding and who did not give evidence, and to join Ms Zhang in any such proceeding if he considered that appropriate. Such action, however, is outside the scope of this proceeding.

Does Ms Zhang owe a debt to Mr Hua?

[137]Based on the above findings:

(a)I am satisfied that Ms Zhang does not owe a debt to Mr Hua with respect to:

(i)the ¥1,000,000 that Mr Hua transferred to Ms Zhang between 28 June and 6 September 2017; and

(ii)¥1,565,000 of the ¥2,165,000 that  Mr  Hua  transferred  to  Ms Zhang between 1 November 2017 and 24 November 2018; and

(b)I am not satisfied that Ms Zhang owes a debt to Mr Hua with respect to the transfer of ¥600,000 to Ms Zhang in November 2017.

[138]   However, that is not the end of the matter. Mr Hua alleges that Ms Zhang owes a debt to him for ¥3,100,000 based on an alleged promise to pay him that sum when he and Ms Zhang met at the Sylvia Park McDonald’s in August 2018.

[139]   There are a number of difficulties with that allegation.   The first is that     Ms Zhang denies making any such promise and, as already noted, I have found     Ms Zhang’s evidence generally to be more reliable than that of Mr Hua. Also, if there had been such a promise, it is surprising the only reference to it in the WeChat calls of 8 April 2019 was made by Ms Li, who was not present when it was allegedly made.

[140]   Secondly, even if there had been some sort of assurance Mr Hua would get some of his money back, I consider it highly unlikely it would have extended to all of the money advanced as capital / operating expenses of the company.

[141]   Thirdly, even if such an assurance had been made, it was unsupported by any consideration and there is no evidence Mr Hua relied on the assurance to his detriment, such that Ms Zhang would be estopped from denying the assurance.

[142]   In summary, I am not satisfied that any such promise or assurance was made or that, if made, it would have been legally enforceable. Accordingly, based on the pleadings in this proceeding, I am not satisfied that Ms Zhang owes any debt to     Mr Hua let alone to Ms Li.

Has there been a total failure of consideration?

[143]   Leaving aside the point that this contention as advanced by Mr Wallace in closing submissions does not square with the plaintiffs’ pleadings, this assertion is premised on the proposition that Mr Hua did not get what he bargained for when he signed the DTL Agreement. That is, in return for his investment of funds, Mr Hua would get shares in DTL / STL and he did not get any such shares.

[144]   I consider that mischaracterises the nature of the bargain in the DTL Agreement.  The DTL Agreement was not an  agreement for the transfer  of shares.  It was an investment agreement under which the three parties agreed on the amounts they would contribute by way of capital and, in Mr Hua’s case, by way of a loan to the company, and the shares each would get. The evidence establishes that each of the three parties contributed the amounts they contracted for, the company was incorporated, and the tea house was established.

[145]   The evidence also establishes that shares were issued but not in the names or in the percentages stated in the DTL Agreement. It does not establish, however, that Mr Hua did not know his name would not be recorded as a shareholder. To the contrary, the evidence of Ms Zhang and Ms Wen was that this arrangement was done with Mr Hua’s knowledge and agreement. While that was not put to Mr Hua, that was probably because he steadfastly denied any knowledge or involvement with STL or the tea house. Moreover, given there is no suggestion by Ms Zhang or Mr Hua in the WeChat messages or in the WeChat calls of 8 April 2019 that Mr Hua was not a shareholder in STL, I am satisfied that it  was  accepted  and  understood  by  all three shareholders that Mr Hua was and remained the largest and, after Ms Wen’s shareholding was reduced, the majority shareholder in the company, notwithstanding what was recorded in the formal records.

[146]   I reach these findings without making any findings as to the lawfulness of these arrangements under Chinese law. I accept that the translations of the articles of the Chinese Company Law referenced by Ms Wang appear to support the proposition that Chinese law permits the registration of nominal shareholders and enables actual shareholders to protect their rights. However, whether or not such arrangements are

lawful in China, the evidence establishes that Mr Hua suffered no loss from the fact he was not recorded as a shareholder up to the point he claimed to have terminated the DTL Agreement. There is no evidence that any dividends were paid or that registered shareholders received any benefits that Mr Hua did not receive. There is also no evidence that Mr Hua asked for or was denied proof of legal title to the shares. So, at least up to the point Mr Hua ceased to take any interest in the company in China; that is, up to the 8 April 2019 WeChat calls, there is nothing to show that Mr Hua suffered any loss or damage from the fact the shares were not registered in his name.

[147]   However, the arrangements Ms Zhang made to transfer 85 per cent of the shares in STL to Mr Yan under the Collaboration Agreement might be viewed, that transfer is not part of Mr Hua’s case because it happened after he claimed to have terminated the DTL Agreement. Whether Mr Hua has any remedies in relation to that transfer would need to be the subject of another proceeding which, again, would more appropriately be brought in China.

[148]   In any event, I am not persuaded Mr Hua did not get what he bargained for. That is so whether the burden of proof lay with Mr Hua, which I consider to be so, or with Ms Zhang, as Mr Wallace contended. Even less am I persuaded that there was a total failure of consideration such that some form of restitution should be ordered, whether by way of indebitatus assumpsit or otherwise. In that regard I note that the observations of Fitzgerald J in Ellice v Stallard, and of Lord Atkin in United Australia Ltd v Barclays Bank Ltd to which Fitzgerald J referred, weigh against recognising a continuing separate right of recovery based on the doctrine of indebitatus assumpsit.7

Does Ms Zhang owe an obligation to repay any loans to Mr Hua?

[149]   I have already answered this question in my consideration of the specific transfers. Leaving aside the possibility of Mr Hua seeking recovery of the ¥600,000 advanced to Ms Zhang’s mother-in-law in November 2017 in relation to the shares of NZC Vision based on the IOU Receipt, which is outside the scope of this proceeding,

7      Ellice v Stallard, above n 6 at [32]–[44]; United Australia Ltd v Barclays Bank Ltd [1941] A.C. 3 (HL) at 26–29.

I am satisfied that Ms Zhang is not liable to Mr Hua for the repayment of any loan in respect of the monies he transferred to her.

Result

[150]For all the above reasons, I dismiss the plaintiffs’ claims.

Costs

[151]   As the successful party, Ms Zhang is entitled to costs, which I consider should be set on a 2B basis.

[152]   In the course of the hearing, I said I would be minded to increase the award of costs against Mr Hua if I found against him and I considered he had been lying to the Court.

[153]   As set out above, I am satisfied that Mr Hua was not honest with the Court. However, while I do not condone Mr Hua’s efforts to refashion the facts to suit the narrative he chose to advance, I now appreciate he was the victim of his own enthusiasm and his subsequent disappointment when he found his efforts to impress Ms Zhang and to be the leading investor in the tea house venture came to nothing.

[154]   As also set out above, it is also the case that Ms Zhang failed to discover many relevant documents. This added considerably to the length of the hearing and the scale of the Court’s task in deciding the proceeding.

[155]   In these circumstances, I am less persuaded of the case for increased costs and hope the parties may be able to agree costs without further intervention by the Court.

[156]   However, if the parties are unable to agree costs, counsel may file memoranda of no more than five pages as follows:

(a)Any memorandum by counsel for Ms Zhang is to be filed by 27 August

2025.

(b)Any memorandum by counsel for the plaintiffs is to be filed by

17 September 2025.

[157]I will then determine costs on the papers.

G J van Bohemen J