Ji v Ding - [2023] NZHC 2730

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-001468

[2023] NZHC 2730

BETWEEN
WENJUN (RENEE) JI

Plaintiff

AND

ZHAOHAI DING

Defendant

Hearing: 26 September 2023

Appearances:

G Kohler KC for the Plaintiff

No appearance for the Defendant

Date of Judgment:

29 September 2023

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 29 September 2023 at 12 midday.
Pursuant to Rule 11.5 of the High Court Rules.

…………………..
Registrar/Deputy Registrar

Solicitors:
Connell & Connell, Auckland K3 Legal, Auckland

Counsel:
Shortland Street Chambers, Auckland

JI v DING [2023] NZHC 2730 [29 September 2023]

Introduction

[1] The plaintiff, Ms Ji, and Annecy Holdings Limited (Annecy), were parties to an agreement for sale and purchase of a property at 389 Dominion Road, Mt Eden (the property), dated 30 April 2022 (the contract). Annecy was the vendor and Ms Ji was the purchaser.

[2] The purchase price was $2.9 million. Ms Ji paid a deposit of $1.3m, and on 1 June 2022, an instalment of purchase price of $1 million. The balance of $600,000 was due on the settlement date of 28 October 2022.

[3] On 28 October 2022, Annecy’s solicitor sent an email to Ms Ji’s solicitor, which stated:

Unfortunately our company does not have sufficient funds to discharge the mortgage at the moment, thus not in a position to settle today. We understand that the finance company will sell the property by tender in the upcoming weeks. If the property can be sold at a reasonable price, we might be able to repay part of the deposit back to the purchaser. At the same time, we will try our best to raise fund to repay the purchaser.

[4] Annecy was unable to settle the contract, because Annecy was unable to discharge a mortgage registered over the property in favour of a financier, Loan Investment Trustees Limited (the mortgage). Consequently, Annecy defaulted in performance of its obligations under the contract.

[5] Ms Ji served a settlement notice, which was not satisfied, and then cancelled the contract. The property has since been sold by the mortgagee. Annecy has not refunded the deposit and instalment of price.

[6] On Ms Ji’s application, Annecy was put into liquidation on 21 April 2023. The liquidator’s initial report (the liquidator’s report) confirms that there will be no distribution to Ms Ji as a creditor of Annecy. Ms Ji is the only party to lodge an unsecured creditor’s claim.

[7] The defendant, Zhaohai Ding (Mr Ding) was at all material times the sole director of Annecy. In this proceeding, Ms Ji seeks an order under s 301 of the Companies Act 1993 (the Act) requiring Mr Ding to pay $2.3 million plus interest to

Ms Ji in her capacity as a creditor of Annecy, on the grounds that Mr Ding breached his duties under ss 135 and 136 of the Act. Ms Ji has applied for summary judgment.

Procedure

[8] Mr Ding was personally served…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 2730
Decision Date: 29 September 2023

CaseChat Overview and Summary

The court case of Ji v Ding involves Wenjun (Renee) Ji, the plaintiff, and Zhaohai Ding, the defendant. Ji filed a claim against Ding, who was the sole director of Annecy Holdings Limited, a company that defaulted on a property sale agreement. Ji seeks an order under the Companies Act 1993 for Ding to pay Ji $2.3 million plus interest, as Ji believes Ding breached his duties under sections 135 and 136 of the Act. The court was required to determine whether Ding's actions constituted a breach of the statutory duties and whether Ji was entitled to summary judgment. The court found that Ding's actions in allowing Annecy to receive funds from Ji without applying them to the mortgage debt created a substantial risk of serious loss to creditors, breaching section 135. Additionally, Ding failed to ensure that Annecy could meet its obligations under the contract, breaching section 136. Consequently, the court granted Ji's application for summary judgment.

The court reasoned that Ding's decision to not use the funds from Ji to discharge the mortgage placed Annecy in a precarious financial position, ultimately leading to its liquidation. The court considered the evidence presented by Ji, which included the liquidator's report indicating that Annecy had no assets to distribute to creditors. The court held that Ji had provided sufficient evidence to establish Ding's breaches of sections 135 and 136 of the Companies Act 1993. As such, the court ruled in favour of Ji, ordering Ding to repay the $2.3 million plus interest, and awarding costs to Ji. This decision underscores the importance of directors ensuring their companies can meet financial obligations to avoid potential personal liability.

Orders