HUA WU (also known as DANNY WU) AND JINXING LIU YUHUA LIU YONG LIU (also known as JACKIE LIU) TIMBER KING LIMITED WENGUI LIU (also known as RINGO LIU) NANNAN GENG Sixth
[2024] NZHC 2903
•7 October 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-447
[2024] NZHC 2903
BETWEEN HUA WU (also known as DANNY WU) Plaintiff AND
JINXING LIU
First Defendant
YUHUA LIU
Second DefendantYONG LIU (also known as JACKIE LIU) Third Defendant
TIMBER KING LIMITED
Fourth Defendant
WENGUI LIU (also known as RINGO LIU) Fifth Defendant
NANNAN GENG
Sixth Defendant
Hearing: 20, 23-27 September 2024 Appearances:
M Lennard and D Tan for Plaintiff
A Grant and D Archibald for First and Third Defendants A Choi for Second Defendant
No appearance for Fourth to Sixth Defendants
Judgment:
7 October 2024
JUDGMENT OF LANG J
This judgment was delivered by Justice Lang
On 7 October 2024 at 11.00 am Pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:…………………………
WU v LIU [2024] NZHC 2903 [7 October 2024]
[1] In this proceeding the plaintiff, Mr Hua (Danny) Wu, seeks to recover the value of dispositions that he made in 2018 to the first defendant, Mr Jinxing Liu (Jinxing).1 The dispositions in question comprise the transfer of a property in Māngere and a payment in the sum of $600,000. Mr Wu says he made those dispositions after being threatened and blackmailed by Jinxing and his son, Mr Yong (Jackie) Liu.
Background
[2] In 2018, Mr Wu was employed as the general manager of the fourth defendant, Timber King Ltd (Timber King). Timber King sold building and construction materials under the trade name Three Brothers Building Centre. Jackie was one of the two shareholders and directors of Timber King. His cousin Mr Wengui (Ringo) Liu was the other shareholder and director.
[3] In February 2018, Jackie confronted Mr Liu about alleged irregularities that he had discovered in Timber King’s accounting and payment systems. A short time later Mr Wu arranged for the sum of $400,000 to be paid to Timber King.
[4] Over the next four months Jinxing, Jackie and Mr Wu were involved in negotiations seeking to resolve outstanding issues between them. These were conducted in part by solicitors instructed to act on their behalf. This process ultimately resulted in Jinxing, Mr Wu and Mr Wu’s wife, Ms Xuan (Crystal) Wang, signing a term loan agreement and Deed of Full and Final Settlement on 4 July 2018 (the Deed).
[5] The Deed required Mr Wu to pay Jinxing the sum of NZD 1,200,000 in two instalments. The first, to the value of $600,000, was to be paid by 27 July 2018. It was to be accomplished through the transfer to Jinxing of a property owned by Mr Wu and situated at 1/185 Buckland Road, Māngere (the Māngere property). The Māngere property had been part of a subdivision undertaken by Mr Wu with three associates. The second instalment in the sum of $600,000 was to be paid on or before 29 November 2018. Crystal guaranteed Mr Wu’s obligations under the Deed.
1 To avoid confusion I will refer to persons who share the surname Liu by their first names.
[6] Crystal subsequently sold a property that she owned. She arranged for the sum of $600,000 from the sale proceeds to be paid to Jinxing on 7 November 2018. On 28 November 2018, Mr Wu transferred the Māngere property to Jinxing after titles issued for the new sections in the subdivision. This satisfied the obligations imposed on Mr Wu and Crystal under the Deed.
[7] In December 2018, Jinxing agreed to sell the Māngere property to his brother, Mr Qingyuan Liu (Qingyuan), for the sum of $475,000. Qingyuan and his wife lived in China but were planning to emigrate to New Zealand once they obtained residency visas. Qingyuan then began making payments in reduction of the purchase price to bank accounts in New Zealand nominated by Jinxing. By April 2019 he and his wife had still not heard whether their applications for residency visas had been granted. By this stage Qingyuan had arranged for the balance of the purchase price to be paid into bank accounts operated in New Zealand by his daughter, Ms Yuhua Liu (Yuhua). Yuhua was born in China but has been living in New Zealand since she was 16 years of age.
[8] Jackie then assisted in the preparation of an agreement for sale and purchase under which Jinxing sold the Māngere property to Yuhua for the sum of $475,000. Yuhua arranged for her lawyers to pay the balance of the purchase price to Jinxing on 24 May 2019 and the property was then registered in Yuhua’s name.
[9] In March 2022, Mr Wu issued this proceeding in which he initially sought to recover the payments totalling $400,000 that he had made to Timber King in March 2018. He also sought recovery of the value of the dispositions that he made to Jinxing in November 2018 under the Deed.
[10] Shortly before the commencement of the trial Mr Wu abandoned his claims relating to the payment of $400,000 to Timber King in March 2018. This resulted in the abandonment of all claims against the third to sixth defendants. As a result, Mr Wu now advances claims against only Jinxing and Yuhua.
[11] At the commencement of the trial Mr Lennard advised me on Mr Wu’s behalf that his client objected to much of the evidence to be given by the witnesses for the
defendants. This related largely to the events underpinning the allegation that Mr Wu had misappropriated funds belonging to Timber King. Mr Lennard submitted that the evidence was irrelevant to Mr Wu’s remaining claims, and it would needlessly prolong the trial.
[12] As it transpires, I am satisfied the evidence was relevant to the issue of Mr Wu’s credibility. The briefs of evidence were also taken as read so they did not prolong the trial at all. The evidence is therefore admissible.
The central arguments
[13] Mr Wu contends that Jackie’s allegations that he had stolen money from Timber King were false. In his brief of evidence, he describes the circumstances in which Jackie made the allegations as follows:
47.In late February/early March 2018, following the 28 February conversation which I have set out above, I was blackmailed and threatened by Jinxing and Jackie (“the blackmail”). Fundamentally, they believed or claimed, as above, that I had committed various sorts of fraud against Timber King, totalling about $400,000. They threatened to go to the Police, to Inland Revenue and to Immigration New Zealand and report me if I did not comply with their demands.
48.There were various threats and intimidation made:
48.1Jinxing and Jackie called my parents in China and advised them that I was in ‘trouble’ in New Zealand and had done something illegal. I cannot remember exactly when the call from Jinxing occurred, but it was between February to September 2018. They said that if I didn’t pay money to Timber King, I would be in trouble. They didn’t disclose what the ‘illegal’ activities were. My mother was hospitalised for the stress from this.
48.2They told me that they would ‘find’ my parents. Jinxing told me that he had a network of ‘debt collectors’ (Mafia-type people) in China that he could call on ready to collect debts as part of his loan-shark business.
48.2.1As I have said, from 2014 or 2015, when Jinxing first arrived in New Zealand, he openly shared with many people, including me, that he was engaged in the loan- sharking business in China.
48.2.2Loan-sharking or ‘Gao li dai’, as referred to in Chinese, is a notoriously aggressive and exploitative
line of work, often associated with ruthless and unscrupulous tactics to achieve desired outcomes.
48.3They spread false rumours about me and defamed me, saying that I was a liar and had stolen Timber King and their property and money. This destroyed my reputation in Chinese business circles in New Zealand. A person who heard the rumours approached me in a restaurant and physically attacked me because that person (his name is [redacted]) felt indignant in respect of the false rumours Jinxing and Jackie spread about me.
49.They first demanded that I pay $400,000 immediately in two lots of
$200,000 (“the $400,000”).
[14] Mr Wu says that the threats by Jackie and Jinxing prompted him to arrange for the two payments of $200,000 to be made to Timber King in March 2018. However, this did not resolve matters. Rather, the threats and intimidation by Jinxing and Jackie escalated. This led to further negotiations that ultimately resulted in the parties signing the Deed together with an agreement for the sale and purchase of the Māngere property and a term loan agreement for the remaining balance of $600,000.
[15] Jinxing and Jackie dispute Mr Wu’s version of events. Jackie describes the irregularities that he found in Timber King’s accounting and payment systems in February and March 2018. He says that Mr Wu made the two payments totalling
$400,000 to rectify these.
[16] Jackie and Jinxing say that the dispositions subsequently embodied in the Deed had no connection with the issues arising out of Mr Wu’s employment with Timber King. They flow from the fact that, in 2008, Jinxing had advanced the sum of RMB (Renminbi) 6,000,000 to Mr Wu. This was equivalent to NZD 1,200,000. Mr Wu was required to repay this sum within two months but failed to do so. Jinxing subsequently met Mr Wu when he came to New Zealand to visit his son Jackie in 2015. He says that Mr Wu agreed to repay the loan by working hard at Timber King. Jinxing contends that the dispositions contained in the Deed reflect the manner in which Mr Wu ultimately agreed to repay the loan he obtained in 2008.
Mr Wu’s claims
[17] Mr Wu’s statement of claim contains three causes of action. These are based in conversion, the alleged existence of a constructive trust and unjust enrichment. It is possible to determine the first two causes of action summarily because they cannot be established on the evidence. Mr Lennard acknowledged on Mr Wu’s behalf that this was so in his closing submissions.
Conversion
[18] The essence of the tort of conversion is that the defendant has dealt with property or assets of the plaintiff in a manner that is inconsistent with the rights of the owner of the property.2 In the present case, however, Jinxing did not deal with the Māngere property until after Mr Wu transferred it into his name as required by the Deed. Thereafter, he was free to deal with it as he wished. Similarly, Crystal arranged for the sum of $600,000 to be paid to Jinxing from the proceeds of sale of her property. Thereafter Jinxing was free to deal with those funds as he saw fit. This is sufficient to prevent the claim in conversion from succeeding.
[19] Mr Grant also points out on Jinxing’s behalf that no cause of action will lie in conversion for transfers of land.3 That is obviously a further barrier to this aspect of the cause of action based on conversion.
Constructive trust
[20] Under this cause of action Mr Wu contends that Jinxing and Yuhua acquired the Māngere property in circumstances where it was subject to a constructive trust in his favour. This arose from the fact that he had met the costs of the subdivision. As Mr Lennard acknowledges, however, a claim based on constructive trust would require Mr Wu to establish that he had a reasonable expectation that he would retain an interest in the Māngere property after he transferred it to Jinxing.4 He cannot establish that element because there is no evidence to support it. Mr Wu lost any expectation that
2 Kuwait Airways Corporation v Iraqi Airways Co (No 3) [2002] UKHL 19, [2002] 3 All ER 209 at [39].
3 West v Official Assignee HC Whanganui CIV-2004-403-38, 20 February 2006 at [39].
4 Lankow v Rose [1995] 1 NZLR 277 (CA).
he would retain an interest in the Māngere property as soon as he transferred it to Jinxing.
[21] It follows that it is only necessary to deal with the cause of action based on unjust enrichment.
Unjust enrichment
The law
[22] As the authors of Goff and Jones on Unjust Enrichment point out, most mature legal systems have found it necessary to provide, outside of the law of contract or wrongs (torts), for the restoration of benefits on the ground of unjust enrichment.5 They refer to the following statement of principle by Deane J in Pavey & Matthews Pty Ltd v Paul:6
[Unjust enrichment is a] unifying legal concept, which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of the defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognise such an obligation in a new or developing category of case.
[23] The most recent exposition of the law relating to unjust enrichment in New Zealand is to be found in the judgment of the Court of Appeal in Pollock v Pollock.7 In that case, the Court rejected a submission by counsel for the appellant that it was possible to identify a single principle or test that brought together all the divergent examples of unjust enrichment. The principle or test suggested by the appellant was “whether the circumstances in which assets or money are received is such that it is unjust for the recipient to assert legal ownership against the moral entitlement of the claimant”.8
[24]In rejecting this proposition, the Court observed:
5 Charles Mitchell, Paul Mitchell and Stephen Watterson (eds) Goff and Jones: The Law of Unjust Enrichment (10th ed, Sweet & Maxwell, London, 2023) at [1-06].
6 At [1-06], citing Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 (HCA) at 256–257.
7 Pollock v Pollock [2022] NZCA 331.
8 At [83].
[81] Unjust enrichment refers to an event whereby a defendant is unjustly enriched at the plaintiff’s expense, the response to which is restitution of the enrichment to the plaintiff.9 Butler notes that liability for unjust enrichment does not depend on the commission of a wrong, nor is it concerned with the quality of the defendant’s conscience or his conduct. Rather the right to restitution is triggered by the receipt of an enrichment in circumstances that put it within one of the unjust categories. As Goff & Jones: The Law of Unjust Enrichment explains:10
… unjust enrichment is not an abstract moral principle to which the courts refer when deciding cases; it is an organising concept that groups decided cases on the basis that they share a set of common features, namely that in all of them the defendant has been enriched by the receipt of a benefit gained at the claimant’s expense in circumstances that the law deems to be unjust.
(Footnote omitted.)
[82] The authors of Goff & Jones suggest that the reasons why the courts have held a defendant’s enrichment to be unjust vary from one set of cases to another, and for this reason the law of unjust enrichment more closely resembles the law of torts (recognising a variety of reasons why a defendant must compensate a claimant for harm) than it does the law of contract (embodying a single principle that expectations engendered by binding promises must be fulfilled).11
[25] In the present case Mr Lennard relies on a body of cases in which it has been recognised that unjust enrichment will be established where the defendant has acquired property by placing illegitimate or improper pressure on the owner to part with it.
[26] On Jinxing’s behalf Mr Grant submits that the statement of claim does not properly identify and plead the elements required to establish unjust enrichment by means of duress. There is force to this argument because the allegations contained in the current version of the statement of claim can properly be described as sparse. However, I am satisfied they make it clear that Mr Wu alleges the dispositions contained in the Deed were procured by blackmail on the part of Jinxing and Jackie. Blackmail is a criminal offence and an obvious example of duress.
[27] The blackmail is said to have included demands that Mr Wu transfer two properties to Jinxing. This was later amended to a demand that he transfer the Māngere
9 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington 2009) at [42.2.2].
10 Charles Mitchell, Paul Mitchell and Stephen Watterson Goff & Jones: The Law of Unjust Enrichment (9th ed, Sweet & Maxwell, London, 2016) at [1-08].
11 At [1-08].
property to Jinxing together with a cash payment in the sum of $600,000. The blackmail is also alleged to have involved threats that Jinxing and Jackie would have Mr Wu’s family in China hurt if he did not comply with their demands. The statement of claim also alleges that Jinxing and Jackie spread rumours in his community to the effect that Mr Wu was a liar and had stolen their money.
Factual issues
[28] The cause of action based in unjust enrichment requires me to determine the following factual issues:
(a)Did Jinxing loan the sum of RMB 6,000,000 (NZD 1,200,000) to Mr Wu in 2008?
(b)If not, why did Mr Wu make the dispositions required by the Deed?
(c)Did Mr Wu make those dispositions under duress?
(d)Did Mr Wu nevertheless affirm the Deed?
(e)Did Yuhuan provide dishonest assistance to Jinxing when she acquired the Māngere property?
Did Jinxing loan the sum of RMB 6,000,000 (NZD 1,200,000) to Mr Wu in 2008?
[29] I deal with this issue first because, if I find in Jinxing’s favour, it provides a complete answer to Mr Wu’s claim based on unjust enrichment.
Jinxing’s version of events
[30] Jinxing said that in 2008 he was involved in several businesses, one of which was lending money to others for business purposes. He said he usually lent money at a monthly interest rate of two per cent when the loan was to be for periods of four months or longer. For periods less than four months, the interest rate was generally three per cent or higher. For short term lending, he deducted interest in advance. This meant that the amount advanced was reduced by the pre-paid interest on the loan.
[31] Jinxing said that in some cases he engaged the services of a broker, or “middleman”, who would negotiate the interest rate to be charged to the borrower. The middleman would also guarantee the repayment of the loan and charge the borrower a fee for his services.
[32] Jinxing says that in about February 2008, he was approached by a middleman called Rong Chen. Rong Chen was well known to him and had successfully negotiated several loans for him in the past. Jinxing said that Rong Chen told him he knew of a person named Hua Wu who needed to borrow RMB 6,000,000. Rong Chen said that Hua Wu “was his friend, young and promising”. He told Jinxing this person was a permanent resident in New Zealand but frequently travelled between China and New Zealand conducting business in the steel industry in Tinjian.
[33] At that time, Jinxing’s children were living in New Zealand and had spoken highly of the honesty of people in this country. Jinxing said he also trusted Rong Chen because he had successfully arranged and guaranteed several loans for him in the past. He therefore agreed to make the loan to Mr Wu. He said he had some money that would not be available until May 2008, so he asked Rong Chen to check whether Mr Wu was prepared to wait until then for the loan. A few days later, Rong Chen told Jinxing that Mr Wu could wait and that the advance could be made when funds were available.
[34] Jinxing says that at the end of May 2008 he told Rong Chen the money was available and asked whether Mr Wu still required it. Rong Chen replied in the affirmative and provided Jinxing with several account numbers to enable Jinxing to deposit the funds to Mr Wu’s bank accounts in New Zealand. Jinxing said that whilst he was on a business trip to Zhejiang he went to a bank and transferred the money to Mr Wu’s bank accounts in accordance with Rong Chen’s instructions. He deducted two months’ interest from the amount that he deposited. He says that Mr Wu was then required to repay the sum of RMB 6,000,000 in two months’ time.
[35] Jinxing said that in June 2008 he went to Rong Chen’s office and collected an IOU document that Mr Wu had signed when he received the loan. This was missing Rong Chen’s signature, which was required because he was guaranteeing the loan.
Jinxing says that he called Rong Chen and told him that a verbal guarantee would be sufficient. Subsequently, however, Mr Wu failed to repay the loan and Rong Chen eventually stopped taking his calls. Jinxing says that he never pursued either Rong Chen or Mr Wu to recover the debt. He says that the loan was a moderate amount given the sums he was lending at the time, and it did not greatly concern him that the debt had not been repaid.
[36] Jinxing said that he travelled regularly to New Zealand to visit his son Jackie and his grandchildren. He met Mr Wu in early 2015 during one of these trips. By this stage Jackie had hired Mr Wu as the general manager of the Three Brothers Building Centre. Jinxing said he subsequently realised that Mr Wu was the person to whom he had loaned money in 2008. He described what happened as follows:
30.After that first meeting, Danny [Mr Wu] often invited me for coffee, fishing, or meals. Once, on another trip to New Zealand in about May or June 2015, I invited Danny to a burger shop near Jackie’s company for a burger, and during the chat, I asked him his full name and hometown. He said he was from Tianjin and his Chinese name was Hua Wu.
31.This name, from that city, immediately meant something to me. As I say above, I sometimes do not get repaid loans and, although there had been a dozen of such non-paying borrowers over the years, I remember most of the names and details. This in particular stood out because the reference to Tianjin meant it was likely a Rong Chen loan, as a lot of the clients he introduced me to were from that region.
32.I also recall Danny telling me his name and origin caused me immediately to associate him with my memory of making a loan to someone with a connection to New Zealand – where my children live. I realized I had someone in front of me with the same name as one of my non-repaying borrower clients, who was from Tianjin like that non-paying borrower, and who matched what Rong Chen had told me about that borrower going between China and New Zealand.
33.Having realized this, I brought up the loan at that meeting. I recall Danny also being surprised. It appeared that he had not realized that I was the person he had taken a loan from in 2008. Nonetheless, he did not deny it, and confirmed he was the “Hua Wu” from Tianjin who took the loan while living between New Zealand and China.
34.Having admitted this, Danny then told me that he was young and naïve back then, thinking he could make money by lending the money on to someone else at a higher interest rate. He said he lent the money to a friend at 6% monthly interest, but the friend fled and disappeared, so he had no means to repay me. I still do not know if this story that Danny told me was true.
35.Danny begged me not to make it public, as it would ruin him. In the Chinese business circle, reputation is crucial as much business is done by “handshakes” and based on trust. If people knew he was a defaulter, he wouldn’t survive in the business community.
36.I had long written off this loan as bad debt, so I wasn’t in a hurry. Instead, I felt a sense of recovery. Danny promised to work hard and repay the debt. Considering his good management of Jackie’s company and Jackie’s praise of his capabilities, I agreed to keep it private but demanded he work diligently for Jackie’s company, and earn money to pay back the debt.
…
39.In late September 2015, Danny contacted me and invited me to visit Tianjin. He had told me earlier in the year that he planned to “go home” to Tianjin later in the year. I recall being in China and thought it would be a good chance to do some business in Tianjin and see Danny at the same time.
40.I went a few days later, and met Danny at the lobby of the Binjiang International Hotel in Tianjin. I recall it being at this place because the street is quite European outside. I had the 2008 IOU with me, but it had faded due to poor storage. At that meeting, I asked Danny if he would generate and give me a new IOU.
41.Danny agreed and we went to a nearby print shop to create a new IOU. He took out his ID and filled out the IOU content, signed it, and put his fingerprint. I remember that he said it was a new ID. Afterward, Danny treated me to a burger at KFC.
[37] To provide support for Jinxing’s evidence Jackie has produced a document that he says is an email sent to Mr Wu in 2016. The email attaches a certificate confirming that in 2010 Mr Wu was earning the equivalent of NZD 400,000 per year whilst working as a vice general manager of an engineering company in Tianjin. Jinxing and Jackie say that this suggests it is likely that in 2008 Mr Wu was involved in international trade even though he was spending considerable periods of time in New Zealand.
Mr Wu’s response
[38] Mr Wu denies he received any loan from Jinxing in 2008. He says that in 2008 he did not know either Jinxing or any person called Rong Chen. At that time, he was living in Palmerston North and studying at Massey University for a Postgraduate Diploma in Business Studies. Mr Wu has produced a diploma showing that he graduated with that qualification in November 2008. He has also described and
produced a photograph of the flat where he was living in 2008. In addition, he called one of his flatmates to give evidence. His flatmate confirmed that he was not aware Mr Wu was involved in international business transactions whilst he was studying as a student. Mr Wu said he would have had no need for a short-term loan of an amount equivalent to NZD 1,200,000 in 2008.
[39] Mr Wu also denied that he was engaged in business in China or New Zealand in 2008. Rather, and in keeping with his status as a student at that time, he undertook part-time employment at a take-away shop and supermarket. He produced a Google Earth photograph of the takeaway shop where he worked at that time. He denied having worked for the engineering company in Tianjin in 2010. He said that the document produced by Jackie showing that he earned the equivalent of NZD 400,000 per annum during that year was a forgery.
Analysis
[40] I accept Mr Wu’s evidence on this issue. He was clearly living in Palmerston North and studying at Massey University during 2008. This is demonstrated by the fact that in March 2008 he contacted Air New Zealand to advise that his baggage had been lost whilst on a journey from China to New Zealand. He said he had been visiting his family in China to celebrate the Chinese New Year. Mr Wu asked that his baggage be forwarded to the address where he was living in Palmerston North at that time. He and his flatmate both confirm that in 2008 they were living at the flat shown in the Google Earth photograph and named in the email to Air New Zealand.
[41] Further, it seems inconceivable that at a time when he was a full time student Mr Wu would require a short term loan in the sum of approximately NZD 1,200,000. Even allowing for relevant cultural factors, it also seems improbable that Jinxing would have made a loan of such a large sum of money to a young person in another country whom he had never met and/or that he would do so solely on Rong Chen’s recommendation. Rong Chen has not given evidence and there is no evidence to explain how he came to meet Mr Wu. Nor is there evidence to explain how Mr Wu came to sign and return the IOU to Rong Chen. There is also no contemporaneous evidence to confirm either that Jinxing deposited the funds into Mr Wu’s bank
accounts in New Zealand or that Mr Wu received them. In addition, it is difficult to believe that Jinxing would have taken no steps to recover the debt from either Mr Wu or Rong Chen once Mr Wu failed to repay it in July 2008.
[42] Further, it stretches credibility to suggest that, wholly by coincidence, Jinxing should discover that Mr Wu was working for his son Jackie when he visited New Zealand seven years later in 2015. The prospect of Jinxing coincidentally meeting and recognising one of his defaulting debtors in such a random way so long after he made the loan is so inherently unlikely as to be incredible.
[43] Events that occurred in March 2018 are also of considerable significance. As I discuss shortly, Mr Wu consulted the law firm Tompkins Wake after the alleged irregularities at Timber King came to light. If he intended the dispositions in the Deed to constitute repayment of the loan he had obtained from Jinxing in 2008, I have no doubt he would have informed his lawyers of this when he first consulted them on 28 March 2018. However, he did not do so. Rather, he told them that he was making those dispositions to resolve issues relating to his employment. He made no mention of any loan from Jinxing.
[44] It is also noteworthy that, on the day after Mr Wu first contacted Tompkins Wake, that firm received an email from another law firm, Domain Law. This advised that Domain Law had been instructed by Jackie. Domain Law then provided Tompkins Wake with a set of loan documents in which Jackie was named as the lender. Jackie had obviously not told his lawyers that the loan arrangement reflected the repayment of an earlier advance by his father to Mr Wu in 2008. It was not until 14 June 2018 that Domain Law advised that Jinxing was to be the lender and not Jackie. Jackie has not explained why he did not tell his lawyers at the outset that Jinxing had made the loan to Mr Wu in 2008.
[45] It appears that Mr Wu’s wife Crystal was also of the view that the dispositions in the Deed related to the issues that had arisen with Timber King and not to any loan by Jinxing. In a WeChat message that she sent to Jinxing on 4 November 2018, Crystal said:
To be blunt and perhaps a bit harsh, the money from those customers had already been itemized and handed over to the company. Moreover, you said that you would not pursue it further and would handle it yourselves. All we needed to do was help verify the accounts, and whether you could get it back or not, it didn’t matter. But now, you’re constantly asking customers for payments. Isn’t the $600,000 we gave, plus the house in the South District, enough? You keep asking for an amount from one customer now and asking for an amount for another one then. But aren’t 600,000 we paid and the house in South Auckland enough?
[46] This message makes it clear that Crystal believed that the dispositions in the Deed related to the dispute with Timber King and not to any loan owing to Jinxing.
[47] I acknowledge that Mr Wu is effectively accusing Jackie and Jinxing of fraud when he says they are lying about the loan allegedly made by Jinxing in 2008. Such a serious allegation must obviously be proved to a high standard. Taken as a whole, however, the evidence satisfies me beyond reasonable doubt that Jinxing did not make any loan to Mr Wu in 2008. It also follows that Mr Wu did not make the dispositions under the Deed as a means of repaying such a loan. And, as I discuss later in this judgment,12 I do not accept that Mr Wu signed an IOU in 2008.
Why did Mr Wu make the dispositions under the Deed?
[48] On 28 March 2018, Mr Wu telephoned Mr Ka Lok (Carlo) Wan, who at that time was working as a solicitor for Tompkins Wake. Mr Wan said that Mr Wu told him his employer may have discovered that he had potentially stolen money from the company he worked for. Mr Wu told him the employer’s solicitor may be in touch to provide Mr Wan with further details of the claim. Mr Wan then referred Mr Wu to his colleague, Ms Karina McLuskie, who specialised in employment issues.
[49] On 29 March 2018 Mr Wan received an email from Mr Monigatti, a solicitor with the law firm Domain Law. Mr Monigatti advised that he had received instructions to prepare loan documents to record the terms of a loan Jackie had already made to Mr Wu. Mr Wan described the conversation he and Ms McLuskie had with Mr Wu later the same day as follows:
8.Karina [McLuskie] and I talked to Mr Wu later that day. Karina led the call as she was the employment law expert. I was only there in
12 At [72].
case Mr Wu needed any English assistance or translation. I can’t recall the specifics of the conversation but from reviewing the documents, in particular Karina’s letter to Mr Wu of Tuesday 3 April 2018, it seems to reflect the conversation, in particular, Mr Wu said that the Domain Law email should be about resolution of an employment issue with his employer, Timber King Limited (“Timber King”).
8.1He said that the issues with Timber King related to him on- selling the company’s products to other entities which he in turn made money on.
8.2He advised us that he believed that the total amount of money that he received was in the vicinity of $400,000.
8.3He instructed that he had repaid $400,000 and that he had agreed to settle the dispute on the basis of that payment plus the transfer of a property at Lot 1, 185 Bucklands Road (once the subdivision was completed – Tompkins Wake was acting already in relation to that subdivision) and the transfer of his property at 3/17 Remuera Road.
8.4He advised us that by transferring these properties to the company it would be full and final settlement of the employment matter.
8.5Karina advised him that this matter may have criminal liability and recommended him to speak with a criminal lawyer.
[50] On 3 April 2018, Ms McLuskie responded to the email received from Domain Law on 29 March as follows:
Could you please advise what your instructions are in relation to the transfer of these properties by my client. My instructions are that the transfer of the properties is to settle fully and finally an employment relationship problem and that this agreement between the parties would need to be signed off in a Record of Settlement with all the usual terms including confidentiality and so forth. Please confirm.
[51]Domain Law then replied:
Our instructions are that there is no employment relationship problem. We are instructed that there is money owed from your client to our client and that this needs to be reflected in formal lending documents.
We do not have instructions in respect of the transfer of properties at this time. As per the documents, our client will be holding a mortgage over multiple properties owned by the borrowers, and the noted mortgagee rights would apply.
Our client advises that he requires the lending documents to be executed as soon as possible. Please confirm when your client will execute these.
[52] Ms McLuskie’s evidence about the advice she gave Mr Wu regarding the settlement proposal was as follows:
10. It is not unusual for employees who have engaged in potential criminal conduct against their employer to want to resolve matters with their employer, but as pointed out to Mr Wu, there was no ability to contract out of a statutory offence. Furthermore, signing such an agreement could be an admission as to liability. I did wonder whether the “settlement” was the result of any blackmail or other illegal pressure on Mr Wu. This was specifically raised with Mr Wu in an email to him on 20 April 2018. In this email three options were put to Mr Wu. An excerpt of the email is detailed below:
You have advised us that any possible claim by your employer for your actions would be in the vicinity of
$400,000, which you have repaid in full on the basis that you consider that amount to be fairly owing to your employer. You have indicated that the $400,000 was not paid in full and final settlement and that you simply volunteered payment of this amount, for which you received an invoice that did not match the description of the true nature of the payment.
Your employer is now asking for a sum far in excess of that amount in the form of a loan. In the event that your employer has advised you that it requires you to now pay $1.6m under the guise of a loan in exchange for not taking the matter to the police (or other law enforcement agency), this is deemed to be blackmail and is a criminal offence of which you could lay a complaint with the police. This is something for you to consider. However, obviously any complaint made to the police may result in an investigation (by the police or other law enforcement agency), in which your actions, depending on the precise nature of your actions which we have not been instructed by you to substantively consider in terms of any potential civil or criminal liability, may come under scrutiny.
Alternatively, you may elect to simply do nothing on the basis that you consider that your employer has been repaid in full. If your employer subsequently lays a complaint to the police (or other law enforcement agency) and charges are laid for which you were found guilty, the fact that you have already made a reparation payment (which you say is made in full satisfaction of amounts owing) would be a mitigating factor in any sentence that was imposed on you. Again, we have not been instructed to ascertain your potential criminal liability (if any), so cannot comment on what potential charges could be laid and whether you would be able to successfully defend those charges.
The remaining option is for me to correspond with your employer’s lawyer to ascertain whether we can settle the matter on a full and final basis meaning that your employer would agree not to take any further action against you. You have indicated that you would be prepared to settle on the
basis of transferring title in two properties to your employer. As discussed, if it is correct that you have already repaid your employer in full, then we do not understand the basis for you now transferring title in two properties to your employer. If the option of reaching full and final settlement is preferable to you, you should give careful thought to what you would be willing to settle for on the basis of what is properly owed to your employer.”
[53] This narrative demonstrates that Ms McLuskie and Mr Wan were concerned that Mr Wu remained vulnerable to subsequent action by Timber King and/or the police if he went ahead with the proposal. Ms McLuskie set out her concerns in her email to Mr Wu on 20 April 2018, together with the options that were open to him. Notwithstanding this advice, and subsequent advice to the same effect by a litigation lawyer at Tompkins Wake, Mr Wu insisted on proceeding with the settlement arrangement.
[54] However, the nature of the arrangement changed considerably between March and June 2018. As I have already noted, when Mr Wu first consulted Tompkins Wake he told them he intended to transfer to Jackie both the Māngere property and another property situated at 3/17 Remuera Road. By the time the Deed was signed three months later, however, Jackie was no longer a party to the arrangement. Rather, the Deed involved dispositions by Mr Wu to Jinxing. The term loan agreement was also between Jinxing and Mr Wu. These changes reflect ongoing discussions between Mr Wu, Crystal and Jinxing that occurred between March and June 2018.
[55] Jinxing became involved in WeChat message communications with Mr Wu in March 2018. These occurred regularly during the following eight months. In addition, Mr Wu secretly recorded the conversations that occurred on three occasions when he, and on one occasion he and Crystal, met with Mr Wu to discuss the outstanding issues.
[56] It seems that the proposal in its final form was agreed during, or soon after, a meeting between Jinxing, Crystal and Mr Wu on 24 May 2018. Earlier, on 22 May 2018, Mr Wu had sent Jinxing a message asking whether he was at home. Jinxing responded “What’s the matter?”. Mr Wu then sent a message stating “I want to discuss transferring the house to you to settle the matter. My lawyer has contacted your lawyer”. Jinxing then sent a message stating “Is your lawyer ready?” Mr Wu replied
by saying “They have contacted your lawyer’. Mr Wu then met Jinxing at his house at 5 pm.
[57] It seems that something must have been agreed at the meeting on 22 May 2018. On the 24 May Jinxing sent a message asking Mr Wu “Can it be done tomorrow?” Mr Wu responded by saying the lawyer was working on it. He also asked whether Jinxing was home. He went on to explain “I want to discuss the specific amount with you as it relates to my taxes”. He also said “There are also some customer accounts”. It was then agreed that Mr Wu, Crystal and Jinxing would meet at a café at 5.30 pm. Following that meeting, at 9.06 pm, Jinxing sent a message to Mr Wu stating “Give me a definite answer before 9 AM tomorrow”.
[58]At that point the following WeChat message exchange occurred:
Danny – [2018-05-24 21:08:15]
We’ll discuss it, uncle.
Danny – [2018-05-24 21:08:35]
We also need to discuss how and when to give the money.
Jinxing – [2018-05-24 21:12:06]
I don’t have time to wait.
Danny – [2018-05-24 21:13:30]
Uncle, this is a big matter. We need to get together and discuss it with you.
Danny – [2018-05-24 21:13:49]
When are you going back to China?
Jinxing – [2018-05-24 21:14:20]
27th
Danny – [2018-05-24 21:15:06]
Let’s discuss and confirm with you tomorrow afternoon, okay?
[59] Mr Wu and Jinxing then arranged to meet at a café at 2 pm on 24 May 2018. Mr Wu covertly recorded the conversation that occurred during this meeting. The recording has been translated and transcribed. During the discussion Mr Wu and
Crystal suggested that any agreement be recorded in a contract, presumably with Timber King. Jinxing said that this was not tenable in law. The discussion that appears to have led to the proposal subsequently incorporated in the Deed was as follows:
Crystal
What can we do by then? I am not saying we don’t trust you, not saying we don’t trust you… We are very grateful to you, but in case a few years later, you go after us again, you go after us again a few years later, how are we able to withstand it?
Jinxing
It’s impossible that will happen, we just…I already told you what I should tell you, if that’s what you think, it isn’t necessary then. So, let’s leave it, the more we talk, the harder it is to make it clear.
Mr Wu
No, please don’t, well, what you mean is? We are not clear of what on earth the reason is.
Jinxing
It’s untenable by law.
Crystal
Why is it untenable by law?
Jinxing
According to the law, it is untenable. It can’t stand. By doing so, it is untenable by law. The law does not allow us to do this.
…
Mr Wu
It isn’t in the same contract, it is a separate one or…
Jinxing
It isn’t allowed. I’ve already asked.
Crystal
What does it mean by untenable by law?
Jinxing
From the aspect of the law, this is also what the lawyer believes.
Crystal
What about that we sign something, what about that we write it down? … You won’t pursue us, won’t pursue us anymore, that will be okay for you, right?
Jinxing
I dismiss you in the name of the company, that is okay, but after the dismissal is completed, this matter will be left as it is, this matter will be over … or you do something malicious to our company again.
Crystal
I understand what you mean, we can write it down, aren’t you saying, irrespective of the company matter, all of this can be included first, if we do anything harmful to your business, or,… or did something harmful to you, you can still pursue us for responsibilities, write it in there okay? This is also an assurance. If you…
Jinxing
We can’t do this.
Crystal
Can we do it through the lawyer?
Jinxing
We can’t do it through the lawyer as well, it isn’t right to say that we haven’t thought about it, we also want to bring this matter to an end. It’s fine for the company to dismiss a staff, but once the process of dismissal is over, we won’t bother about it anymore, this matter is over.
…
Jinxing
Don’t mess it around, don’t mess these things around or do something against us maliciously.
Crystal
Oh, I understand what you mean, we can write these things down, well, irrespective whether it is the company matter, all of it can be written down, well, if we do something to harm your business or …you, you can still pursue us for responsibilities, we can write all of it down, well, in future, we…
…
Crystal
What about doing it through the lawyer, is that okay?
Jinxing
We can’t do it even if we go through a lawyer. It isn’t true that we haven’t thought about it. We have also thought about it, to be honest.
Crystal (inaudible) Jinxing
You are begging us to let you go, and the sort of things, right? Then, let’s do this, just forget it, … This is untenable by law. If it signed in such a manner, in case you decided to become against it, you will turn against it by then.
Crystal
We won’t turn against it, well.
Jinxing
Right, by then you will say, you will say by then we are using it to blackmail you, and sort of things.
Mr Wu
What you mean is you are concerned, how to put it, to get someone to blackmail me, or the sort of things. I don’t mean to do that.
Jinxing
Well, but it isn’t necessary for us as we are the ones who are justified.
…
Jinxing
We are very careful, and unwilling to break any law. We won’t think of doing anything that does not comply with the law, don’t you understand that?
…
Mr Wu
The first thing is, please consider, write something down with, that is to say, you won’t pursue us anymore, okay? Think about it, okay? The second thing is, well, I also…
…
Mr Wu
We are talking about this thing now.
Jinxing
We are unable to talk about it, this is something we are unable to do, let me tell you, we can’t write this.
Crystal
Can’t you write one in the name of the company?
Jinxing What? Crystal
Get the company to write one, isn’t that okay?
Jinxing
No, can’t do it, can’t do it.
Crystal
Just write a letter of dismissal from the company, …
Jinxing
Do you understand what I mean? We can’t. The company can only issue a letter of dismissal, the letter of dismissal only, nothing else can be included in it.
Crystal
The company can write a letter, I can dismiss you, but I won’t pursue you for responsibilities, … There is no… Can’t it be done in that way?
…
Crystal
There is one more thing, even if you write the company in it, you are now checking those clients, those clients will then, turn around to look for us, the clients will also ask us to…
Jinxing
We won’t do that, I have already given you, what we promised to you, this will be brought to an end, and the clients are also over with it, do you understand?
Mr Wu
There are still clients calling us on phone today and are pursuing the accounts.
…
Crystal
To get all of it sorted out from China, how can it be sorted out?
Mr Wu
We don’t have money! We still have to sell the house, do you know that?
Crystal
Right, we can only pay you when we sell the house, we don’t have money if we don’t sell the house.
Jinxing
That I can’t help you, you also, well, this …
Crystal
We don’t have money in China, … The parents used to be employees, they only have one house.
Mr Wu
Really don’t have it, they are quite old, do you know, already 60 to 70 years old. They aren’t able to carry on their life, do you know? Let me put it this way, do you know?
Crystal
It isn’t possible for me to sell the parents’ house to repay the money, they need to look after the children, and it’s very hard for them. They are old, and even have no place to live. What’s the point for me to be alive, I’d rather die.
Mr Wu
After all, you can’t push us, really.
Jinxing
Who is pushing you? What are you talking about? You, this one?
Crystal
So, we also discussed it at home, just have some leniency on us, do us a favour, help us.
Jinxing
No that this is what your wife says, as a respect to you wife, well, give us the house and pay 600,000.
Crystal
We can’t afford 600,000.
Jinxing
There are no more $100,000, $100,000 is already included in it. If you make your firm decision, that’ll be okay.
Crystal
You said 100,000 is already included in 500,000.
Mr Wu
We don’t have it.
Jinxing
Just do it according to this, you make the firm decision, and that will do. If you made the firm decision, that will be OK.
Mr Wu
We don’t have 600,000, we really don’t have it. I even don’t know where to get the 500,000. We just top us 100,000 for you. Sell the house, but even if the house is sold, it will be 300,000 or 400,000, actually won’t be much different.
[60] As will already be obvious, issues of credibility loom large in determining what happened during the period leading up to this meeting and thereafter. The WeChat messages and Mr Wu’s covert recordings of the three meetings obviously provide the most reliable contemporary guide to this. However, they do not completely explain what happened.
[61] Mr Grant’s closing address consisted largely of an attack on Mr Wu’s honesty and credibility. He referred me to a large number of issues that he said detracted from Mr Wu’s credibility. Mr Lennard candidly acknowledged in response that Mr Wu has not helped his own cause. When he gave evidence, he denied having stolen money from Timber King even though he had acknowledged doing so when he first consulted Tompkins Wake in March 2018. He had also immediately repaid Timber King the sum of $400,000 after Jackie confronted him about the irregularities he had discovered.
[62] Mr Wu also denied having used the name Danny Liu in emails that he sent whilst working at a company called Akarana Timbers when that was plainly the case. Similarly, when his lawyers at Tompkins Wake asked him whether he had been blackmailed he was adamant that this was not the case. Yet in this proceeding that is precisely what he alleges. His claim has also evolved and changed in nature over time in response to information provided by the defendants. In addition, he made efforts to contact the defendants’ witnesses after the present proceeding was issued.
[63] Mr Wu’s dealings with another company called Jincheng Trading Ltd also call his integrity and honesty into question. That company was incorporated in 2016 by Mr Yang Peng for the purpose of undertaking entrepreneurial activities that would assist Mr Peng’s application for residency status in New Zealand. Mr Peng says he employed Mr Wu and Crystal to generate revenue for the company and thereby demonstrate that the company was operational. This would enable Mr Peng to satisfy the requirements necessary to obtain New Zealand residency as an entrepreneur. Mr Wu received payments of commission for his efforts in generating revenue for the company. However, it appears that he also frequently used the company’s bank accounts for purposes that were unrelated to its own activities. When his employment with Jincheng ended in April 2018, Mr Wu paid the balance remaining in the company’s bank account to his own account.
[64] These factors, and many other inconsistencies in his actions and evidence, persuade me that Mr Wu’s credibility has been compromised to the extent that it would be unwise to accept anything he said in evidence unless it was supported by independent evidence. However, much the same can be said about Jinxing and Jackie. They have been prepared to invent a fictitious story about the loan Jinxing allegedly made to Mr Wu in 2008. I am satisfied Jinxing created and had Mr Wu sign a false IOU document to support this story. This obviously calls into question their honesty and credibility as well.
[65] Once the fictitious loan from Jinxing is put to one side, the question remains as to why Mr Wu made, and Crystal guaranteed, the dispositions under the Deed. The dispositions had a monetary value of more than a million dollars. As a matter of logic and common-sense Mr Wu and Crystal must have had good reason to make them. The absence of any other rational reason leads me to conclude that Mr Wu and Crystal made the dispositions under the Deed because of pressure placed on them by both Jackie and Jinxing.
[66] The discussions and negotiations captured by the WeChat messages and the audio recordings establish beyond question that Mr Wu and Crystal made the dispositions under the Deed to resolve issues flowing from the dispute that had initially arisen between Mr Wu, Jackie and Timber King. Mr Wu had repaid the sum of
$400,000 but Jackie and Jinxing were obviously not satisfied this was adequate recompense. They wanted more. Jinxing effectively took over the negotiations from Jackie and ultimately received the dispositions under the Deed even though he had no interest in Timber King and no right to recover any money that Mr Wu may have stolen from it.
[67] Further, as the discussion on 24 May 2018 shows, Jinxing was well aware of the need to keep the sums that Mr Wu had already reimbursed to Timber King separate from any agreement relating to further dispositions. This is also consistent with an earlier message exchange between Jackie and Mr Wu on 3 April 2018, in which Jackie set out his views on the issue as follows:
Our communication isn’t legally binding. And if lots of the stuff isn’t sorted out properly, it will have lots of problems later.
…
Your lawyer says it is an employment issue. You are the employee and I am the employer. Do you think it makes sense for you to make compensation of two properties to me?
…
That’ll be overturned any minute in the future.
[68] I accept Mr Grant’s submission that neither Jinxing nor Jackie can be shown to have made any overt threats against Mr Wu and Crystal during the negotiations. Indeed, the discussion that occurred on 24 May 2018 shows that Jinxing was concerned Mr Wu may later attempt to claim that Jinxing had blackmailed him into making the dispositions they were discussing. Jinxing also stated on several occasions that he would not do anything illegal. However, the WeChat messages and the recorded conversations demonstrate that Jinxing consistently spoke to Mr Wu and Crystal in a curt, abrupt and dismissive manner. It is obvious that he was dealing with them from a position of dominance, and that they were desperate to come to an agreement with him.
[69] It is not possible to ascertain with any certainty what Jackie and Jinxing told Mr Wu and Crystal they would do if their demands were not met. I am not prepared to find that the pressure involved threats of physical violence against either Mr Wu or
his family in China. Mr Wu’s father did not say that he was threatened with violence when he was telephoned in China by a person likely to be Jinxing or Jackie. I consider Mr Wu and Crystal embellished their evidence to include allegations of that type. It is also inconsistent with the fact that both Mr Wu and Crystal were prepared to visit Jinxing at his home alone at night after the threats were allegedly made.
[70] The pressure that Jackie and Jinxing exerted must nevertheless have been very significant to cause Mr Wu and Crystal to part with assets of such great value. In all likelihood it involved, at the least, threats to report the thefts from Timber King to the police or the immigration authorities. Jinxing and Jackie may not have spread rumours about the thefts themselves, but any investigation by the police or immigration authorities would obviously have carried significant reputational and criminal risk for Mr Wu.
[71] Initially Jinxing and Jackie must have decided that Jackie was to be the beneficiary of any further dispositions. This explains Jackie’s instructions to Domain Law that he was to be the lender in the first set of loan documents prepared by that firm. However, by 14 June 2018 Jinxing was the person to whom Mr Wu was to make the dispositions that were ultimately recorded in the Deed. By this stage Jinxing had obviously decided to provide an explanation for these by inventing the fictitious loan to Mr Wu in 2008.
[72] I am satisfied that Mr Wu signed the IOU on or about 1 June 2018 and not in 2015 as Jinxing claims. Mr Wu says that Jinxing told him to bring his Chinese identification card to a meeting on 31 May 2018. When Mr Wu failed to do so, Jinxing required him to send him a message attaching a photograph of his Chinese identification card. The WeChat messages confirm Mr Wu complied with this requirement. Mr Wu says that he and Crystal were then forced to go to Jinxing’s house on 1 June 2018. It was at this time that he was forced to sign a false IOU document. The English translation of this document reads as follows:
Today 1st June 2008, I Wu Hua, for business purposes, borrow RMB6,000,000.00 from Jinxing Liu. Words alone are no proof, therefore, in witness whereof, the parties hereto have set this IOU.
Lender: Jinxing Liu Chinese ID number
Borrower: Wu Hua Chinese ID number: [redacted]
Signed and fingerprinted by borrower: Wu Hua
[73] I do not accept much of the evidence given by Mr Wu and Crystal about the circumstances in which Mr Wu signed the IOU. However, it is telling that Jinxing instructed Mr Wu to send him a photocopy of his Chinese identification card on 31 May 2018. The number of the card is written in handwriting on the IOU. Domain Law advised Tompkins Wake that Jinxing was now to be the lender in the loan documents just two weeks later. I consider it likely that Jinxing arranged for Mr Wu to complete the IOU on or about 1 June 2018 to provide documentary support for his claim that he had entered into a loan arrangement with Mr Wu in 2008.
[74] It follows that I am satisfied that Mr Wu and Crystal entered into the Deed as a result of the threats made by Jackie and Jinxing after they discovered that Mr Wu had stolen money from Timber King.
Did Mr Wu make the dispositions under duress?
The law
[75] The authors of Goff and Jones make the following observations about duress in this context:13
Broad principle of duress If a claimant confers a benefit on a defendant under duress then a claim will lie in unjust enrichment to recover it, whether the benefit is money, services or goods. The essential idea underlying the doctrine of duress is that the defendant made an illegitimate threat or exercised illegitimate pressure over the claimant and the threat or pressure had a causal effect on the claimant’s decision to transfer the benefit.14 It has also been suggested that, at least in relation to threats to the claimant’s economic well- being, the threat must be such as to leave the claimant with no practical alternative other than to submit to it.15 …
13 Above n 4, at [10-01].
14 Andrew Burrows The Law of Restitution (3rd ed, Oxford University Press, New York, 2011) at 255; Hugh G Beale (ed) Chitty on Contracts (34th ed, Sweet & Maxwell, London, 2021) at [10- 003].
15 Hugh G Beale (ed) Chitty on Contracts (34th ed, Sweet & Maxwell, London, 2021), at [10-012]; Capital Structures plc v Time & Tide Construction Ltd [2006] EWHC 591 (TCC) at [16], although a certain equivocation can be seen in the fact that, in the same paragraph, the absence of practical alternative is listed as one factor to consider in assessing illegitimacy of pressure. For criticism of absence of practical alternative as a separate requirement see Andrew Burrows The Law of Restitution (3rd ed, Oxford University Press, New York, 2011) at 270-272.
[76] To similar effect, in Pharmacy Care Systems Ltd v Attorney-General the Court of Appeal summarised the elements of duress as follows:16
Firstly, there must be a threat or pressure. Secondly, that threat or pressure must be improper. Thirdly, the victim’s will must have been overborne by the improper pressure so that his or her free will and judgment have been displaced. Fourthly, the threat or pressure must actually induce the victim’s manifestation of assent. Fifthly, the threat or pressure must be sufficiently grave to justify the assent by the victim, in the sense that it left the victim no reasonable alternative. Sixthly, duress renders the resulting agreement voidable at the instance of the victim. This may be addressed either by raising duress as a defence to an action, or affirmatively, by applying timeously to a court for avoidance of the agreement. Seventhly, the victim may be precluded from avoiding the agreement by affirmation.
[77] In the present case, and for the reasons I have already given, I am satisfied that Mr Wu and Crystal entered into the Deed because of the pressure applied by Jackie and Jinxing. The pressure was plainly improper because the threats amounted to blackmail, which is a criminal offence. Further, Jackie and Jinxing had no legal right to use Mr Wu’s actions in stealing from Timber King as a means by which to obtain a pecuniary benefit for themselves. Any compensation for the thefts was payable to Timber King and not to either Jackie or Jinxing. The value of the assets that Mr Wu and Crystal agreed to transfer to Jinxing under the Deed demonstrates the seriousness with which they viewed the pressure that was being applied by him and Jackie.
[78] It follows that I am satisfied Mr Wu and Crystal entered into the Deed under duress as that concept is understood in the authorities. However, this meant that the Deed was voidable and not void.17 To date they have never, formally at least, declared that they consider the Deed to be void or applied for avoidance of it as the Court of Appeal suggested was necessary in the passage cited above from Pharmacy Care. The statement of claim does not contain any pleadings that address this issue. The Deed therefore remains on foot and binding on both Mr Wu and Crystal. Ordinarily this would preclude a claim based on unjust enrichment.
[79] However, I accept it can be argued that by issuing the present proceeding in March 2022 Mr Wu made it clear that he considered the Deed to be void. This may
16 Pharmacy Care Systems Ltd v Attorney-General CA198/03, 16 August 2004 at [98].
17 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [12.3.5].
be sufficient to prevent his claim being dismissed on a technical basis. It is not the end of the inquiry, however, because the delay that occurred between November 2018 and March 2022 brings into play principles relating to affirmation of the Deed.
Did Mr Wu and Crystal affirm the Deed?
[80] The authors of Burrows, Finn and Todd on the Law of Contract in New Zealand point out that the right to avoid a contract for economic duress can be lost if the threatened party affirms the contract.18 They provide as one example the judgment of the Court of Appeal in Haines v Carter.19 In that case the parties to a failed relationship reached agreement about the division of their personal assets following a mediation. One of the parties, Mr Haines, subsequently took steps to implement aspects of the agreement that suited him but failed to make certain payments as required by it. He then claimed the agreement was voidable on the basis that he had entered into it under duress. The Court of Appeal upheld the decision of the trial Judge that the steps Mr Haines had taken to implement the agreement meant he was to be treated as having affirmed its terms.20
[81] In Pharmacy Care Systems, the plaintiff alleged it had been induced to enter into a deed settling a dispute with a public health authority because of improper threats made by the health authority that it would institute criminal proceedings against the plaintiff’s director if the plaintiff did not sign the agreement.21 The plaintiff was held to have affirmed the deed of settlement because it took no timeous steps to avoid it. Similarly, in McIntyre v Nemesis DBK Ltd, an issue arose as to whether the trustees of a family trust were acting under duress when they agreed to variations of the terms of a joint venture to subdivide and develop property.22 It was held that this was not the case. The Court also held that steps taken by the trustees to implement the variations amounted to affirmation of the agreements. The failure of the trustees to take steps to avoid the agreements over a four year period pointed inevitably to this conclusion.
18 At [12.3.6].
19 Haines v Carter [2001] 2 NZLR 167 (CA).
20 At [118].
21 Above n 16, at [92].
22 McIntyre v Nemesis DBK Ltd [2009] NZCA 329, [2010] 1 NZLR 463.
[82] In the present case, Mr Wu’s conduct demonstrates that he intended to make the dispositions under the Deed even though they had been induced by blackmail. This is evidenced by the fact that he adamantly denied he had been blackmailed when that possibility was put to him by his own lawyers. He and Crystal then took steps to implement the provisions of the Deed by complying with their obligations under it. In the messages that Crystal sent to Jinxing on 4 November 2018,23 Crystal also effectively confirmed that she intended to continue with the dispositions to be made under the Deed.
[83] In Haines v Carter, the Court of Appeal emphasised that the act of a threatened party will not be regarded as affirmation in a duress case where it is done while that party is still under the influence of pressure from the threatening party.24 This principle applies in the present case because I accept that Mr Wu and Crystal complied with their obligations under the Deed in November 2018 because Jinxing was continuing to apply pressure on them to do so at that time. This is exemplified by a WeChat exchange that occurred between Jinxing and Mr Wu on 1 August 2018. After referring to the apparent lack of progress with the subdivision of the Māngere property the following exchange occurred:
Mr Wu
We’ll repay the remaining 600,000 as soon as possible.
Jinxing
Pay what is due according to the contract tomorrow. Don’t make me unhappy. I don’t want to hear your explanations.
Mr Wu
It’s not that we won’t pay, uncle. Please bear with us for these few weeks. We’re really struggling, truly.
We’ll find a way to repay the remaining 600,000 sooner. It’s not about making you unhappy.
We really have no money. My reputation outside is also tarnished, and it’s hard to find a job. I haven’t contacted those people before. Please understand. We’ll repay the remaining 600,000 sooner, and then we’ll be clear, uncle.
23 Set out above at [45].
24 Haines v Carter, above n 19, at [116], citing North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705, [1978] 3 All ER 1170.
Didn’t you say before that repaying the 600,000 early could waive some of it? We’ll find a way to repay it sooner.
Jinxing
You haven’t repaid it yet. What’s the use of saying it? When can you repay the 600,000?
Mr Wu
Definitely earlier than the end of November.
Jinxing How early? Mr Wu
Probably September or October.
Jinxing
You like to brag. Talk when you’ve done it.
Mr Wu
Definitely earlier than the end of November.
[84]Similarly, on 4 November 2018 Crystal sent the following messages to Jinxing:
Crystal – [2018-11-04 10:13:55]
If this goes on forever, I’d rather you handle it however you want.
Crystal – [2018-11-04 10:20:36]
Uncle, I may not speak nicely, but I am straightforward. Please don’t take it to heart.
Crystal – [2018-11-04 10:21:49]
I’m considering the two children and four elderly people, so I want to resolve this matter as soon as possible.
It is just because of thinking for the sake of the two young kids and the four elderly that I want to resolve this matter as soon as possible.
[85] In submitting that Mr Wu and Crystal had affirmed the Deed, Mr Grant referred me to the decision of the English Court of Appeal in Oliver Dean Morley t/a Morley
Estates v Royal Bank of Scotland plc.25 In that case the appellant contended he had entered into a compromise agreement with a bank as a result of coercion exerted by the bank. He said the agreement was therefore voidable for economic duress. The trial Judge held that the bank had acted in good faith and that, although it had threatened to appoint receivers to sell a portfolio of properties owned by the appellant, this was not a threat to do an unlawful act. The trial Judge also held that the appellant had affirmed the agreement because he had taken no steps to set it aside for over five years. The Court of Appeal for England held that this was significant not only because it demonstrated the appellant’s affirmation of the agreement but also because it negated any finding of coercion.26
[86] Mr Wu and Crystal did not take any steps to avoid the Deed during the period between November 2018 and March 2022. There was no WeChat contact between Jinxing and Mr Wu during the period between November 2018 and June 2019. On 5 June 2019 Mr Wu and Jinxing met at a restaurant near Jinxing’s place of work. Mr Wu then attempted to arrange meetings with Jinxing on four further occasions in the following days before Jinxing blocked him from sending further WeChat messages. There is no suggestion in any of the messages that passed between Mr Wu and Jinxing during this period that Mr Wu was seeking to set aside or avoid the Deed. From June 2019 there was no further contact at all between Mr Wu and Jinxing.
[87] Mr Wu says he did not bring a claim earlier because of “an amalgam of complex circumstances that unfolded over time”. He said that over time his circumstances changed significantly. The threats and intimidation by Jinxing and Jackie lost their potency. He also began to question Jinxing’s alleged power and influence as a loan shark in China. However, he lacked the funds to bring the present proceeding until he sought further legal advice in 2022.
[88] The authorities demonstrate that a party who seeks to avoid a contract entered into under duress must act in a “timeous” manner.27 I consider the delay of more than three years that occurred in the present case means that Mr Wu’s attempt to avoid the
25 Morley (t/a Morley Estates) v Royal Bank of Scotland plc [2021] EWCA Civ 338.
26 At [55].
27 See the passage cited at [76] from Pharmacy Care.
Deed in this proceeding cannot be regarded as timeous. Nor do I consider he has offered an adequate explanation for the delay that has occurred.
[89] The lack of any attempt by Mr Wu to avoid the Deed between November 2018 and March 2022 does not detract from my conclusion that Mr Wu and Crystal entered into the Deed under duress in 2018. However, it does confirm my conclusion that Mr Wu was content to be bound by its terms during that period. I therefore consider the lack of any action by Mr Wu for such a lengthy period amounted to affirmation by him that he intended to remain bound by the terms of the Deed. It follows that it would not have been possible for Mr Wu to seek to avoid the Deed even if he had included such a pleading within his statement of claim.
[90]Mr Wu’s claim against Jinxing must accordingly be dismissed.
The claim against Yuhua
[91] The fact that I have found that Mr Wu’s claim against Jinxing cannot succeed means that the claim based on providing dishonest assistance to him cannot succeed against Yuhua. In case I am wrong in my earlier conclusions, however, I propose to briefly consider whether that claim could have succeeded in any event.
The law
[92] The test for dishonesty in this context comprises subjective and objective components:28
(a)the defendant’s actual state of mind (the subjective component); and
(b)whether the conduct of the defendant with that state of mind would be regarded as dishonest when compared to normally acceptable standards of honest conduct (the objective component).
28 Sandman v McKay [2019] NZSC 41 at [77] per Glazebrook, O’Regan, Ellen France and Arnold JJ.
[93] The subjective component requires consideration of the actual knowledge held by the defendant but can also include wilful blindness on the defendant’s part:29
[78] A defendant is dishonest if he or she has actual knowledge that the transaction is one in which the defendant cannot honestly participate. Wilful blindness, which equates in equity with actual knowledge, also suffices. This arises where a defendant strongly suspects a breach of trust but makes a deliberate decision not to inquire in case the inquiry results in actual knowledge. It is “necessary that the strength of the suspicion … makes it dishonest to decide not to make inquiry”.
[94]When assessing the subjective component, relevant factors include:30
(a)All the circumstances known to the defendant at the time. This requires either actual knowledge of such circumstances, or wilful blindness of them.
(b)The personal attributes of the defendant such as experience and intelligence.
(c)The reasons the defendant acted as it did. Courts have accepted that considering a party’s motives may assist in assessing its state of mind at the relevant time.31
[95] The objective component means that a defendant does not have to consciously appreciate that the conduct in question would be regarded as dishonest by the standards of ordinary decent people. The fact that the conduct would be regarded as such by ordinary decent people is sufficient. It is irrelevant that the defendant might subjectively regard his or her conduct as being honest.32
29 Sandman v McKay (footnotes omitted).
30 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC) at 391.
31 Attorney General of Zambia v Meer Care & Desai [2007] EWHC 1540 (Ch); and Simetra Global Assets Ltd v Ikon Finance Ltd [2019] EWCA 1413 at [48]. See also Diver v Loktronic Industries Ltd [2012] NZCA 131, [2012] 2 NZLR 388 at [97]–[98]. This case was centered on the tort of inducement of breach of contract. The Court applied the approach to assessing a party’s state of mind espoused in Westpac New Zealand Ltd v MAP & Associates Ltd [2011] NZSC 89, [2011] 3 NZLR 751.
32 Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 All ER 333 at [10]–[19]; applied in Westpac New Zealand Ltd v MAP and Associates Ltd, above at [26]–[27].
[96] Applying these principles to the present case, it would be necessary for Mr Wu to show that Yuhua either knew or was wilfully blind as to the fact that Jinxing acquired the Māngere property by placing illegitimate or improper pressure on the previous owner.
This case
[97] The negotiations to purchase the Māngere property were undertaken between Jinxing and Yuhua’s father, Qingyuan. Yuhua played no part in their discussions. In cross-examination Qingyuan said he did not ask Jinxing any questions about the circumstances in which he had acquired the property. Nor did he make any independent enquiries as to its likely value. He was content to buy the property because it fell within a price range that he could afford.
[98] The decision to transfer the property to Yuhua was not made until April 2019. It appears that Yuhua played no part in that decision. It was made entirely by her parents. Yuhua did not deal with Jinxing regarding the price to be paid for the property. Nor did she query the price because it had already been agreed between her father and Jinxing. She had no real interest in the price in any event because her parents paid it in full. Yuhua also confirmed that she never spoke to Jinxing about the circumstances in which he had come to own the property.
[99] Given that background, it is evident that Yuhua had no knowledge of the circumstances in which Jinxing had acquired the Māngere property from the previous owner. She was simply content to go along with her parents’ decision that it should be transferred into her name. In all probability she holds it as constructive trustee for her parents to await the day when they can emigrate to New Zealand. That being the case, there is no evidential basis on which I could conclude that Yuhua’s state of mind would be regarded as dishonest when compared to normally acceptable standards of honest conduct.
[100] The claim against Yuhua would therefore have failed even if Mr Wu had succeeded in establishing his claim against Jinxing.
Result
[101]Mr Wu’s claims against Jinxing and Yuhua are dismissed.
Costs
[102] Jinxing and Yuhua are the successful parties and would ordinarily each be entitled to an award of costs on a category 2B basis together with disbursements as fixed by the Registrar. The issue of Jackie’s costs may also need to be addressed, although Mr Grant has acted for both Jinxing and Jackie throughout. The remaining defendants have taken no steps to defend the proceeding so Mr Wu will not be required to pay costs to them.
[103] If the parties cannot reach agreement regarding costs they may file concise memoranda within 21 days of the date of this judgment and I will determine costs on the papers.
Lang J
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