Jiang v Huang
[2017] NZHC 2340
•26 September 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-3074 [2017] NZHC 2340
BETWEEN RUI JIANG
Plaintiff
AND
HUIFEN HUANG Defendant
Hearing: 28 May to 2 June and 6 to 8 June 2017 Counsel:
RS Pidgeon for plaintiff
AR Gilchrist for defendantJudgment:
26 September 2017
JUDGMENT OF FITZGERALD J
This judgment was delivered by me on 26 September 2017 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Grant Sidnam, Auckland
Friedlander & Co, Auckland (P Friedlander)
Contents
Introduction ..........................................................................................................[1] Factual background/overview .............................................................................[6] The issues ............................................................................................................[21] Observations on the evidence ............................................................................[22]
Plaintiff ’s claim
Introduction ......................................................................................................[25]
Is the trust position altered by the 2010 Agreement?.......................................[33] The 2010 Agreement.........................................................................................[38] Is the 2010 Agreement valid? ...........................................................................[39] Was the 2010 Agreement implemented? ...........................................................[50] The parties’ respective financial contributions to the Property .......................[70] Sale of the Property..........................................................................................[73]
Defendant’s counterclaim - $200,000 loan
Introduction ......................................................................................................[79]
Defendant’s counterclaim - loan of RMB 3.1 million......................................[95] Result on joint statement of issues .................................................................. [110] Costs .................................................................................................................. [112]
Introduction
[1] This proceeding concerns the parties’ respective interests in a property located in Swayne Road, Cambridge (“Property”). There is no doubt the Property was purchased in 2006 with the intention that both parties would own it equally. Each party made (relatively) equal contributions to the purchase price, with the balance being funded by an interest only mortgage from ASB. The parties intended to each contribute equally to mortgage interest payments and other outgoings in respect of the Property, and look to sell it at a profit at a later point in time (after a change to the applicable District Plan). And, although the Property was registered in only the defendant’s name on settlement of the purchase, it is agreed that, at least for the initial period of ownership, the defendant held a 50 per cent interest in the Property on trust for the plaintiff.
[2] Despite the common intention that each party would make equal
contributions to the Property’s outgoings (including mortgage interest), by June
2008, the plaintiff was unable to continue to fund his share of the mortgage interest payments. In addition, during 2008 and 2009, the defendant made significant repayments of principal under the mortgage. These matters meant that by 2010, the parties’ respective contributions to the Property were significantly unequal. They met in July 2010 to discuss the position. They recorded certain matters in a document, setting out a process by which, in effect, either party could buy out the other’s interest in the Property. For convenience, I will refer to this document as the “2010 Agreement”.
[3] The plaintiff says the 2010 Agreement was never implemented, such that he retains an interest in the Property. The plaintiff seeks a range of relief in this regard, including declaratory relief and an order pursuant to s 339 of the Property Law Act
2007 that the Property be sold.
[4] The defendant says that the 2010 Agreement was fully implemented by her purchasing the plaintiff’s interest in the Property. As a result, the defendant says she has been the sole legal and beneficial owner of the Property since August 2010.
[5] The defendant has also advanced a number of counterclaims. These relate to several loans the defendant says she made to the plaintiff and which are said to remain outstanding, together with a claim for what is said to be the defendant’s loss on sale of the Property (on the basis it was “sold” to the defendant as a result of the
2010 Agreement). The counterclaims total, very broadly, NZ$1.1 million (excluding interest).
Factual background/overview
[6] In this section of my judgment, I provide an overview of the factual background and chronology to the present dispute. A more detailed examination of the facts in relation to each of the issues for determination is provided later in this judgment.
[7] The parties first met in around 2006, through mutual acquaintances. It was agreed they would look to enter into a property venture together.
[8] To that end, in 2006, the plaintiff searched for a property for the parties to invest in. Ultimately, in September 2006, the plaintiff (or nominee) entered into a sale and purchase agreement for the Property for a price of $2.5 million.
[9] It is not in dispute that prior to settlement of the purchase of the Property, the parties verbally agreed that each of them would have a 50 per cent interest in the Property, on the basis they would each share revenue and costs equally.
[10] The purchase of the Property was funded by the following: (a) A contribution by the plaintiff of $419,317.19;
(b) A contribution by the defendant of $400,000; and
[11] It is not in dispute that at settlement, the Property was registered in the name of the defendant only. It is also not disputed that, at least at this point in time, the defendant held a 50 per cent interest in the Property on trust for the plaintiff. I address the nature of this trust further below.
[12] The defendant accepts that she took a very passive role in relation to the Property. She resided overseas (in China and London) for most of the relevant time. The management of the Property was accordingly left to the plaintiff, who resides in New Zealand.
[13] The Property was initially rented out at $400 per week. It seems the plaintiff’s ex-wife attended to most of the day-to-day matters arising in respect of the Property, including liaising with the rental agent; receiving (via the rental agent) the rent; paying the rates and other outgoings etc. These included legal fees in relation to a High Court caveat proceeding brought by the owners of a neighbouring property. The defendant gave evidence that she did not know the Property was being rented (though I query how she thought the Property’s outgoings and expenses were being funded, absent such income). It is not disputed that other than two small payments, no rental income was paid to the defendant before September 2010. It is also not in dispute that, taking into account the mortgage interest payments, the venture was running at a loss (i.e. the rental income was insufficient to fully cover the interest payments and other expenses and outgoings).
[14] While the plaintiff initially paid his contribution to the mortgage interest payments, he ceased to make such contributions by around mid-2008 due to his then financial position. There is a dispute in relation to the quantum of the plaintiff’s contributions to the mortgage and other outgoings (i.e. in addition to his original contribution of approximately $419,000). The plaintiff’s position is that he contributed approximately $74,000. The defendant’s position is that the plaintiff contributed approximately $174,000. The difference (of $100,000) reflects a dispute as to whether two lump sum payments by the plaintiff to the defendant of $50,000 each (in June 2008 and September 2009) were “top up” payments by him of mortgage interest, or whether they were part-repayment of a separate loan from the
defendant of $200,000 (which had been advanced in 2007). This loan is the basis of
one of the defendant’s counterclaims (see further below at [79] to [94]).
[15] The defendant says that in late 2008, an ASB loan manager telephoned her while she was in London, stating that the Property was over-valued and that some of the principal amount owing under the mortgage needed to be paid down. The plaintiff disputes that this telephone call actually occurred. But what is not in dispute is that in late 2008 and early 2009, the defendant made three separate payments reducing the principal of the ASB loan (by $800,000, $210,000 and a further $210,000 in November 2008, March 2009 and April 2009 respectively). There is some dispute as to whether the defendant told the plaintiff of these payments at the time, though I am satisfied that, at least by the 2010 Agreement, the plaintiff knew that the defendant had made some principal repayments (but not necessarily how much).
[16] By mid-2010, the defendant was frustrated at the “imbalance” in the parties’ respective contributions to the Property. They met to discuss matters, and documented their discussions in the 2010 Agreement. The nature, terms and effect of the agreement are addressed in more detail below. In short, however, the defendant says the 2010 Agreement records the parties’ agreement that if the Property was not able to be sold quickly to a third party, it would be “sold” to either the plaintiff or defendant. The defendant further says that, as a result of the 2010
Agreement, she did purchase the Property (or perhaps more accurately, buy out the plaintiff’s share in the Property), reflected in particular by the fact that, as of September 2010, all rental income was redirected to her.
[17] I address in more detail below events which occurred after the
2010 Agreement. However, while rental income was paid to the defendant as of September 2010, rates and other (minor) outgoings in relation to the Property continued to be paid by the plaintiff’s ex-wife, at least until 2012.
[18] The defendant also alleges that in January 2012, she loaned the plaintiff the sum of RMB 3.1 million (approximately NZ$650,000) in cash, which she handed over to him at a meeting held in China. The plaintiff disputes that he received the
cash from the defendant. This alleged loan also forms one of the defendant’s
counterclaims and I address it in detail below (at [95] to [109]).
[19] There were also various “IOUs” or “receipts” issued in subsequent years, which are relied on by each party as supporting their claim or discrediting the other party’s claim, as the case may be. The plaintiff in particular contends that some of the amounts referred to in these IOUs or receipts relate to dealings between the parties in relation to a separate investment in a company named “LJ Holdings Ltd”, which was involved the development of a property in Whangaparaoa. Disputes arose between the parties in relation to that venture also, and High Court proceedings were issued. However, those proceedings were settled in December 2015 shortly before the substantive trial was to commence.
[20] Events which precipitated the commencement of these proceedings were steps said to be taken by the defendant in late 2015 to sell the Property. On
18 December 2015, the plaintiff applied for and was granted an interim injunction preventing a sale of the Property. This order was ultimately made by consent, as the defendant said she had no intention to sell the Property at that time in any event.
The issues
[21] Counsel helpfully agreed and filed a statement of issues in relation to the plaintiff’s claim and the defendant’s counterclaims. The agreed issues for determination are as follows:
Plaintiffs claim
1.What interest (if any) does the plaintiff presently have in the Swayne Road property? How might the parties access their shares if they still exist? (E.g. damages, mode and timing of sale).
2. What is the effect of the agreement of 29 June 2010 (Bundle
23–25)? Was it implemented? And, if so, in what way?
3. What are the parties’ respective contributions to the Swayne
Road property?
Defendant’s first counterclaim
4. Was the admitted loan of $200,000.00 repaid in whole or part?
5. What (if any) was the agreed interest rate?
6.Did the plaintiff make demand for repayment of the loan? If so, when?
7. Is any unpaid portion of the loan statute barred under the
Limitation Act 1950?
Second counterclaim
8.Was an advance of RMB 3.1M (approximately NZ$650,000.00) made? And, if so, what were the terms of the advance as to both repayment and interest?
9. Has demand been made for repayment?
Third counterclaim
10.If the defendant is correct that there was a sale of plaintiff’s interest in the property to her in August 2010, has the defendant suffered a recoverable loss? And, if so, how much?
Fourth counterclaim
11.Does the receipt of 23 April 2015 (Bundle 125/126) acknowledge an obligation by the plaintiff to the defendant in respect of the first, second and third counterclaims?
Observations on the evidence
[22] Before addressing the parties’ claims, I make some broad observations as to the evidence given in this trial, relating to both the plaintiff’s claim and defendant’s counterclaims.
[23] Unfortunately, I did not find either the plaintiff or the defendant to be particularly reliable or credible witnesses. At times, their evidence was confused, internally inconsistent and in parts, simply not credible. Findings in relation to credibility were hampered by the fact that the evidence was being given through a translator. Nevertheless, I formed the clear impression at the time each of the plaintiff and defendant gave evidence that some aspects of their oral evidence was
formulated in order to respond to particular questions being put to them in cross- examination.
[24] Because of this, I have placed more reliance on the contemporaneous documentary evidence. Unfortunately, this was limited, and also in parts confusing and inconsistent. Nevertheless, evidence that I consider reliable and credible, together with the documentary evidence, has enabled me to reach clear conclusions in relation to the plaintiff’s claim and the defendant’s counterclaims.
Plaintiff ’s claim
Introduction
[25] As is evident from the above introduction, the essence of the plaintiff’s claim is that he retains a beneficial interest in the Property, proportionate to his contribution to the purchase of the Property and his subsequent (albeit more minor) contributions over the following years.
[26] Two alternative bases were advanced by the plaintiff for this interest in the
Property:
(a) first, by way of a trust (pleaded in the statement of claim as a constructive and/or resulting trust); and
(b)second, by a contractual arrangement between the parties that they would own the Property equally.
[27] Turning to the contractual claim, the plaintiff pleads the following:1
6.Plaintiff and the Defendant orally agreed that they were each to be joint equal (50%) owners of the Property and would contribute equally to the purchase price of the Property, mortgage repayments (including interest) and outgoings (the "First Agreement").
7.The First Agreement was not complete in all the terms relating to the purchase of the Property, the servicing of the loan, management of the tenancy situated at the Property.
1 Statement of claim, dated 16 December 2015.
…
28.There was a sufficient oral agreement such as would have been enforceable but for the lack of written form. The plaintiff contributed to the acquisition and paid outgoings of the property in such a way that clearly amounts to a step in the performance of a contractual obligation.
29.When viewed independently of the oral contract the actions of parties were, on the probabilities, done on the footing that a contract relating to the land and any profits derived therein was in existence.
[28] The plaintiff seeks specific performance of the pleaded contractual arrangements.
[29] I do not consider that a contract came into force between the plaintiff and the defendant in relation to their original purchase of the Property. As the above extracts from the plaintiff’s statement of claim make clear, it is difficult to discern the precise terms and content of any such contract. Nor am I satisfied that the parties intended to enter into contractual relations at that time in any event.
[30] Rather, I consider that the more straightforward and appropriate analysis is that it was the parties’ common intention that the defendant would hold the plaintiff’s fractional share in the Property on a resulting trust for him (that “fractional share” representing the plaintiff ’s contributions to the Property). On the assumption that both would contribute equally, it was not disputed by the defendant that, at least initially, she held a 50 per cent share of the Property on trust for the plaintiff.
[31] A resulting trust is the orthodox response when a party has contributed to the purchase price of property which is then registered in the sole name of one only of the persons making the financial contributions. As the authors of Equity and Trusts in New Zealand explain:2
Where A (the transferor) pays for property and transfers it into the name of B (the transferee), who has given no valuable consideration, B holds the property for A on a resulting trust. This is because equity presumes, in the
2 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thompson Reuters, New Zealand, 2009) at [12.3.1]. See also the observations of Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL) at 708. See also the Court of Appeal’s recent decision in Chang v Lee [2017] NZCA 308 at [18]-[21], where these principles were adopted and applied in a case not dissimilar to the present one.
absence of a contrary intention, that A, who paid for the property, intended to retain beneficial ownership. Similarly, if B has made a partial contribution to the purchase of property put into his or her sole name, B holds A’s fractional share in the property on a resulting trust for A. Again, it is presumed that A, who contributed to part of the purchase money, intends to retain ownership in the property to the extent of that contribution. This has been the case for centuries.
[Emphasis added]
[32] A resulting trust in this case gives effect to the undoubted common intention of the parties as to their interests in the Property. Similarly, there is no doubt that in advancing funds to enable settlement of the Property’s purchase, the plaintiff intended to retain the beneficial ownership of those funds. The defendant has raised no evidence to rebut the presumption of a resulting trust (i.e. that the money paid was intended to be a gift or a loan).
Is the trust position altered by the 2010 Agreement?
[33] The second key issue on the plaintiff’s claim is whether plaintiff ’s beneficial interest in the Property came to an end, or was transferred or sold to the defendant, as a result of the 2010 Agreement? Before addressing the terms of the 2010
Agreement, it is appropriate to address in a little more detail the context in which that agreement was entered into.
[34] As already noted, by 2010, the parties’ respective contributions to the Property had altered significantly from the intended 50/50 approach. The plaintiff does not dispute that by approximately mid-2008, he could no longer afford to make his 50 per cent contribution to the interest payments on the ASB mortgage. Similarly, and as also noted above, it is not in dispute that the defendant made substantial repayments of principal of the ASB mortgage.
[35] The defendant was cross-examined at some length in relation to her evidence as to why she made the loan principal repayments, namely the alleged telephone call from ASB requiring her to do so. While I have some doubt as to the details and credibility of aspects of the defendant’s evidence in this regard, it is equally not clear to me why the defendant would have voluntarily made such substantial repayments. Further, there is no doubt that the defendant did make the principal repayments. Ultimately this benefits the plaintiff. As Mr Kemp, the defendant’s expert
accountant noted, it reduces the amount of interest payable on the ASB mortgage. Further, the significant reduction in principal increases the equity in the Property available for distribution to the parties in the event of a sale.
[36] Mr Pidgeon submits that making the principal payments was a “breach” of the parties’ understanding that the loan was to be an interest only loan. However, even if so, it is not clear where this takes the plaintiff’s case. Ultimately, those payments were made. And as noted above, they benefit the plaintiff as well as the defendant.
[37] Joint expert evidence demonstrates that, by the time of the 2010 Agreement, the plaintiff had contributed approximately $618,000 (including his initial contribution to the purchase price), whereas the defendant had contributed approximately $1,744,000 (including her initial contribution to the purchase price).3
The plaintiff accepted in cross-examination that the defendant was a “bit annoyed” about the disparity, and that this was the context in which the 2010 Agreement was entered into.
The 2010 Agreement
[38] Given the importance of this document, I sent out its content in full below:4
Shareholder Agreement
1. Each of the two parties Huifen Huang and Rui Jiang made the contributions of four hundred thousand New Zealand dollars respectively in 2006, forming a total amount of eight hundred thousand New Zealand dollars. A further loan of one million and seven hundred thousand New Zealand dollars was borrowed from the ASB Bank, that came to a total amount of two million and five hundred thousand New Zealand dollars, and purchased [Translator’s Notes: Blank Space]
2. Each of the two parties Huifen Huang and Rui Jiang is responsible to bear 50%
of the loan interest (i.e. eight hundred and fifty thousand New Zealand dollars)
3 The experts also agreed that by 31 March 2017, the respective contributions to the Property were
$624,734 (plaintiff) and $1,963,670 (defendant). These figures include, however, the two
$50,000 payments by the plaintiff to the defendant, which the plaintiff says were not contributions by him to mortgage interest, but were part-repayment of a separate loan from the defendant.
4 This is a translated version from the original (Chinese) text.
of the loan amount of one million and seven hundred thousand New Zealand dollars borrowed from the ASB Bank, and each of the two parties holds 50% shares.
3. Through the consultations between the two parties, Huifen Huang and Rui Jiang agree to have [Translator’s Notes: Blank Space] sold for a price of over one million and three hundred thousand New Zealand dollars. In the event that it is unable to be sold in about two weeks, both parties agree that it shall be sold at a price of one million and two hundred thousand New Zealand dollars to either Huifen Huang or Rui Jiang, and the proceeds of the sale of the section shall be prioritized for the repayment of the bank loan. The deal shall be concluded in one week.
4. Prior to/Up to the point of time the section is sold, the amount of payments to the loan principal and the interest advanced by Huifen Huang shall be borne by both parties. Rui Jiang shall be responsible for half of the amount of payments to the bank loan principal and the interest.
5. In the event that Rui Jiang does not have the capability to make the payment, half of the payments to the loan principal and the interest advanced by Huifen Huang shall be turned into the investment for the development of the retirement apartment project at 40a Scott Road, Stanmore Bay by LJ Holdings Ltd. The shares that Huifen Huang holds shall be adjusted accordingly pursuant to the amount of investment she makes for the retirement apartment project.
6. The two parties agree that the principal plus the interest of the funds that Huifen Huang contributed to LJ Holding Ltd for the development of the retirement apartment project shall be transferred to Huifen Huang within two months.
7. The payments made for the loan principal and interest of the loan borrowed from the bank shall be based on the bank slips/statements/documents.
8. This agreement is entered into between the two parties through consultations and acceptance and it is hereby referred to as proof.
Signature of the parties: Rui Jiang Huifen Huang
29/07/2010
Is the 2010 Agreement valid?
[39] Mr Pidgeon submits that the 2010 Agreement is not a valid and enforceable contract between the parties. However, he, quite rightly in my view, acknowledges that this is not the plaintiff’s strongest argument (and that the point pressed more firmly on behalf of the plaintiff is that the 2010 Agreement was never actually implemented).
[40] I am satisfied that the 2010 Agreement is a valid and binding agreement between the parties, on its terms. I consider that the parties clearly intended to enter into legal relations as a result of their discussions, and that the terms of the
2010 Agreement are sufficiently certain to be enforceable.5
[41] I turn now to consider the content of the 2010 Agreement.
[42] Clauses 1 and 2 record the essence of the parties’ arrangements when they first purchased the Property in 2006, and in particular, the intended “50/50” share of ownership, revenue and costs.6
[43] Clause 3 records the parties’ intention that they try to sell the Property to a third party for a price of over $1.3 million in a period of two weeks. Mr Pidgeon submits that this was a condition precedent to the 2010 Agreement coming into force. I disagree. This is because cl 3 goes on to expressly contemplate what would occur if the that did not occur, namely that the Property would be sold at a price of
$1.2 million to either the defendant or the plaintiff (with the proceeds of the sale being prioritised for the repayment of the ASB loan).
[44] Clause 3 is somewhat curiously worded, given that, at the time the
2010 Agreement was entered into, each party already owned a beneficial share of the Property. However, I interpret this aspect of the 2010 Agreement to reflect the parties’ intention that if the Property could not be sold within about two weeks to a third party (for a price of at least $1.3 million), then either party would be entitled to buy out the party’s interest, on the basis of a nominal price for the whole Property of
$1.2 million. The curious wording of cl 3 likely reflects that it was not formally drafted by a solicitor, and that it is a translation from the original Chinese text.
[45] Notably, cl 3 does not address the scenario in which both the plaintiff and
defendant wished to purchase the other’s interest in the Property. This perhaps
5 In this context, I note that there are blank spaces where the details of the Property were to be inserted into the 2010 Agreement. However, it is not in dispute that at the time of the
2010 Agreement, the parties intended their agreement to relate to the Property.
6 Albeit framed as a “shareholders agreement” and referring to each to each party holding “50% shares”. There is no evidence or suggestion that the parties incorporated a company through which they purchased the Property.
reflects the realisation at the time that, given his then financial position, it was relatively unlikely the plaintiff would be able to purchase the defendant’s interest in the Property.
[46] Importantly, cl 3 concludes by stating that “the deal shall be concluded in one week”. This contemplates that further steps were to be taken in order to conclude the “sale” to either the plaintiff or defendant. In other words, a sale to either the plaintiff or defendant did not occur “automatically” upon the Property not being sold for at least $1.3 million to a third party within about two weeks of the agreement being entered into.
[47] Clauses 4 and 5 recognise that the defendant had made significantly more contributions to the Property than the plaintiff by the time of the 2010 Agreement. The clauses reflect the parties’ original intention that they were each to contribute equally to the purchase and outgoings of the Property. I interpret these clauses as recording that if, by the time the Property was sold (to either a third party, or either the plaintiff or defendant), the plaintiff was unable to pay the defendant a sufficient sum to “re-equalise” their respective contributions, then the additional loan principal and interest which had been paid by the defendant was to be recognised through adjustments to the parties’ investment in the Whangaparaoa property through LJ Holdings Ltd.
[48] Clause 6 records further details relating to the LJ Holdings Ltd investment.
[49] Finally, cl 7 provides that the defendant would demonstrate the amounts she has paid by way of principal and interest under the ASB loan with bank statements or other similar documents.
Was the 2010 Agreement implemented?
[50] I have carefully considered all of the evidence as to what occurred after entry into the 2010 Agreement. In short, I am not satisfied that the 2010 Agreement was implemented. I say this for the six reasons.
[51] First, the defendant says that nothing in fact needed to take place to implement her purchase of the Property pursuant to the 2010 Agreement:
(a) She says she did not pay, or need to pay, the plaintiff $600,000 at this time (being 50 per cent of the nominal $1.2 million “purchase price”), as her “purchase” of the Property at that time resulted in a loss. This is said to be on the basis that the original ASB loan was $1.7 million, with the result that a purchase price of $1.2 million gave rise to a
$500,000 loss. The defendant says the plaintiff’s share of this “loss” is $250,000 (and is in fact the subject of one of the defendant’s counterclaims).
(b)Further, the defendant says that given that the Property was already registered in her name, no steps needed to be taken to re-register it into her name. The same is said in relation to the ASB loan, which was also already in the defendant’s name.
(c) Mr Gilchrist also points to the words “shall be sold” in cl 3 of the
2010 Agreement, which he submits are inconsistent with either party simply having an option to purchase the other’s interest in the Property.
[52] I do not accept this aspect of the defendant’s argument. The 2010 Agreement contemplated that if the Property was not sold on the open market for a price of at least $1.3 million, then it was to be sold to either the plaintiff or the defendant. This required, in my view, at least some form of communication between the parties, in terms of one notifying the other of their intention to buy the other’s interest, and then steps being taken to implement the sale and resolve the resulting financial position in accordance with cl 3 to 7 of the agreement. In this context, cl 3 provides that “the deal shall be concluded in one week”. As noted, this is inconsistent with a sale to the defendant occurring “automatically” upon the Property not selling to a third party for a least $1.3 million.
[53] In response to questions put to her in cross-examination, the defendant said she telephoned the plaintiff shortly after entry into the 2010 Agreement, to communicate her intention to purchase his share in the Property.
[54] I did not find this aspect of the defendant’s evidence credible. She was unclear as to the details of any such telephone call, including whether she was in England or China at the time. Further, and more notably, this evidence did not form part of her original brief of evidence or her oral evidence-in-chief. If this communication had occurred, it would have been an important aspect of the alleged steps taken by her pursuant to the 2010 Agreement, and accordingly would have been a key aspect of her evidence-in-chief. I formed the clear impression at the time the defendant gave evidence that she formulated this aspect of her evidence.
[55] Second, the defendant gave evidence that, shortly after entering into the 2010
Agreement, she asked two real estate agents, a Ms Francis Li and a Ms Amy Xiong (both Barfoot & Thompson agents) to look for potential buyers for the Property. I also do not consider this aspect of the defendant’s evidence to be credible.
[56] Both Ms Li and Ms Xiong gave evidence at the trial. Ms Li said she first met the defendant in around 2005 at a mutual friend’s house. She gave evidence that “a few years ago” she had taken the defendant to visit her colleague Ms Xiong, to discuss the potential sale of the Property. She confirmed that she had introduced the defendant to Ms Xiong as Ms Xiong was a specialist in rural properties (which Ms Li was not). Ms Li said the event stuck in her mind because it was the first and only time she has been asked to sell a property in Cambridge. Ms Li said that the meeting was held at Ms Xiong’s house.
[57] Ms Xiong was very clear in her recollection that she had met the defendant (together with Ms Li) in her new house, which she had moved into in 2012. Ms Xiong was cross-examined about these dates (including that an earlier brief prepared by her had said that the meeting could have possibly taken place in 2014 or
2015). Nevertheless, Ms Xiong was very clear that the meeting could not have taken place in 2010, because at that time, she was living in her old house, and her clear recollection was that she had met with the defendant (and Ms Li) in her new house.
[58] I have no reason to doubt Ms Xiong’s evidence that the meeting was held in her new house, which must have been some time after 2012. I found her evidence on this point credible and reliable.
[59] I accordingly do not accept that the defendant engaged with Ms Li and
Ms Xiong in 2010 as part of steps taken by her to implement the 2010 Agreement.
[60] Third, there is no evidence that there was any engagement between the parties subsequent to the 2010 Agreement in relation to the amounts of principal and interest that the defendant had paid in the intervening years, as contemplated by cl 7. Nor was any evidence advanced before me of any steps being taken as contemplated by cl 5 and 6 of the 2010 Agreement, in terms of adjustments being made to the parties’ respective investments in the Whangaparaoa property through LJ Holdings Ltd.
[61] Fourth, that nothing actually happened or changed after the 2010 Agreement is consistent with the defendant’s extremely “hands off” and intermittent engagement in relation to the Property. The defendant gave evidence that she had no knowledge or understanding that the Property was being rented from 2008. As noted earlier, it is not clear how she thought its various outgoings were being paid. Further, it was apparent from the defendant’s evidence that she had no real knowledge or understanding of the various payments to be made in relation the Property. For example, from June 2011 (when the plaintiff’s ex-wife stopped paying the rates), the rates in relation to the Property were seriously in arrears (and significant penalties were being charged as result). This is contrary to the defendant’s evidence that she
had in fact paid the rates on the Property from August 2010.7
[62] Fifth, the (limited) documentary evidence subsequent to the 2010 Agreement is, in my view, inconsistent with the defendant having purchased the Property as a
result of the 2010 Agreement:
7 The situation was serious enough that by May 2015, Waipa District Council threatened legal action in relation to the unpaid rates.
(a) In a text message exchange between the parties in December 2011, the defendant stated:
Rui, how are you getting on with the things you are dealing with? I think it is quite a simple thing. Have to trouble you for help. Both sides will suffer if it is left for the bank for auction. Is it that you do not trust me?! No formal process was made when you borrowed two hundred thousand from me. I was the one that was serving the loan for the section in Cambridge, and it has been two years, did I say anything about it? Do you understand! It won’t matter anymore if it is left to the bank for auction!
[Emphasis added]
The references to “both sides will suffer if it is left to the Bank for auction” and “it won’t matter anymore if it is left to the Bank for auction!” are inconsistent with the plaintiff having no remaining interest in the Property. Had the defendant been the sole owner of the Property by that time, there would be no reason why “both sides” might suffer if mortgagee action were to be taken.
(b)A receipt from 2012, prepared by the plaintiff, records that the plaintiff and the defendant each “hold 50 per cent of the shares” in the Property.8 There is no contemporaneous evidence of the defendant challenging this statement.
(c) In a text messages in May 2012, the plaintiff stated:
I thought about it for the whole night, we’d better have a clear cut between you and I. You get hold of both the sections, and get cash compensation to me, this is the best solution! If you do not agree with this, we then return to what was agreed before, for the sections to be transferred to you, but with the added conditions that I would impose, any price of sale must be subject to my acceptance, both sides get the respective principal back and interest shall be divided in accordance with the shares held.
[Emphasis added]
In response, the defendant stated:
8 It goes on to state “… of which [the defendant] advanced a loan of NZ$650,000 to [the plaintiff]”.
Isn’t it better for the profit to be paid to you by the time that the two sections are sold. And we can still be friends!
[Emphasis added]
Again, these communications are inconsistent with the Property already having been sold to the defendant some two years earlier.
[63] Sixth, the evidence demonstrated that the plaintiff’s ex-wife continued to manage the Property after 2010, and indeed until at least 2015. There is no evidence that from August 2010, the defendant took any steps to manage the Property herself. I have already referred above to the rates, which until July 2011, continued to be paid by the plaintiff ’s ex-wife. After that point, they were significantly in arrears. Nor did the defendant take any steps in relation to renting the Property or engagement with the Property manager, Ms Antsis. Ms Antsis gave evidence at the hearing and confirmed that until 2015, her dealings continued to be with the plaintiff’s ex-wife, i.e. just as before the 2010 Agreement.
[64] It is correct that, as of September 2010, rental payments from the Property were re-directed to the defendant. The defendant submits that this is consistent with the defendant being the sole owner of the Property from that date.
[65] Both the plaintiff and his ex-wife gave evidence in relation to this. Both said that the re-direction of the rent had nothing to do with the 2010 Agreement, but rather was in recognition of the continuing imbalance in the parties’ contributions. Meng Jiang, the plaintiff’s ex-wife, gave evidence that she didn’t know about the
2010 Agreement until these proceedings were commenced in 2015. I note, however, that that itself is not determinative. Mrs Jiang gave evidence that the instruction to redirect the rental to the defendant came from the plaintiff. He obviously knew of the 2010 Agreement. For whatever reason, he did not share this information with Mrs Jiang at the time.
[66] While the re-direction of the rental is consistent with the defendant being the sole owner of the Property from that time, it is also consistent with the plaintiff retaining an interest in the Property, but steps being taken to redress, at least in some way, the continuing imbalance in contributions.
[67] Ultimately, and given all of the matters discussed at [50] to [66] above, I am not satisfied that the 2010 Agreement was ever implemented.
[68] I accordingly conclude that the plaintiff retains an interest in the Property. However, as Mr Gilchrist submits, and which was not seriously challenged by the plaintiff, the plaintiff’s present share ought to reflect the parties’ respective contributions to the Property. Given the parties’ original intention that they would share equally in the Property was premised on each of them making equal contributions, equity will be done if the parties’ respective shares in the Property also reflect their respective contributions. Absent such a “re-balance”, the plaintiff would receive a significant windfall at the expense of the defendant.
[69] Mr Pidgeon submits that I should also recognise the plaintiff’s non-financial contributions to the Property, in terms of general maintenance and upkeep. However, there was no detailed evidence of what precisely was done in this regard, nor any basis upon which any such contributions could be valued in any event. And on any view, any such contributions were minor. I accordingly put them to one side.
The parties’ respective financial contributions to the Property
[70] Mr Matthew Kemp, a chartered accountant, gave expert evidence for the defendant. His evidence covered a range of scenarios, including the financial position if the 2010 Agreement was valid and implemented, and also where it was not valid and/or not implemented.
[71] Mr Kemp gave evidence based on the scenario of the Property being realised as at 31 March 2017 with a market value of $3.5 million.9 After paying the outstanding ASB loan at that time (of $270,770), and unpaid rates (of $12,437), the net sale proceeds would be $3,216,863. Based on the experts’ agreement as to the plaintiff and defendant’s respective contributions as at 31 March 2017, Mr Kemp concluded that the defendant would be entitled to $2,593,033 of the net sales
proceeds, and the plaintiff $623,829.10
9 Its rating valuation at the time of the hearing was $3.53 million.
10 As noted at fn 3 above, the experts’ calculations include the two $50,000 payments made by the
plaintiff to the defendant in 2008 and 2009.
[72] As noted, the experts agreed on the parties’ respective financial contributions to the Property as at 31 March 2017. The position can no doubt be readily updated to reflect the position as at the date of this judgment. The defendant will obviously need to provide the plaintiff and/or his advisors sufficient evidence to support contributions by her since 31 March 2017.
Sale of the Property
[73] I consider the appropriate outcome is that the Property is the subject of an order for sale pursuant to s 339(1) of the Property Law Act 2007, with the sale proceeds (net of costs of sale, including legal fees) being distributed to the plaintiff and the defendant in accordance with their respective contributions to the Property. I observe that this is the same outcome considered appropriate by the Court of Appeal in Chang v Lee in order for equity to be done in similar circumstances.11
[74] In reaching this conclusion, I have considered the specific factors I must take into account pursuant to s 342 of the Property Law Act when considering whether to make an order pursuant to s 339(1). In particular, given the Property was originally purchased as an investment vehicle (with the intention of selling it once there had been a change to the District Plan), I do not consider there is any particular hardship to either party which would otherwise make an order for sale inappropriate. In particular, the Property is not a family home in which either party resides. There is no evidence that either party has any particular “attachment” to it. Indeed, neither could evidently remember its address, which was left blank in the 2010 Agreement.
[75] However, during the course of the hearing, the Mr Gilchrist submitted that if the Court were to order a sale of the Property, it would be appropriate for the defendant first to have an opportunity to buy out the plaintiff’s share. Mr Pidgeon acknowledged in his closing submissions that this was appropriate.12 This would of course need to be based on valuation evidence acceptable to both parties.
[76] Accordingly the order for sale of the Property will be subject to the defendant having an opportunity to make an offer to purchase the plaintiff ’s share in the
11 Chang v Lee [2017] NZCA 308 at [30].
12 A similar opportunity was given to the respondent in Chang v Lee at [30].
Property. I do not propose to make any further orders or directions on the parties’ engagement in this regard. Plainly if the defendant is willing to offer market value (supported by appropriate valuation evidence), the plaintiff will have no reason to reject the offer. It will also remove any risk to the plaintiff that the Property later sells for something less than the defendant’s offer. Accordingly, the order for sale will only take effect as of 31 January 2017, to give the parties time to explore and potentially agree the defendant’s purchase of the plaintiff’s share in the Property.
[77] Given the particular form and details of orders for sale of the Property were not canvassed at the hearing, I have set out in the Schedule to this judgment the text of the orders I propose to make. The parties are to confer and file a joint memorandum, or separate memoranda, on the proposed orders within 15 working days of this judgment. I would have expected that, with good co-operation between experienced counsel, agreement will be able to be reached on their final form.
[78] As to the parties’ respective contributions as at the date of this judgment, I am equally confident that the parties can reach agreement on this matter, given it should be a relatively simple exercise of updating the position from 31 March 2017. If, however, the parties are unable to agree, memoranda (and any supporting affidavit evidence; for example, attaching bank statements evidencing further mortgage payments made by the defendant) may be filed within 20 working days of this judgment. Absent a request for a hearing, I will then determine that matter on the papers.
Defendant’s counterclaim - $200,000 loan
Introduction
[79] It is not in dispute that on 2 August 2007, the defendant transferred
NZ$200,000 to the plaintiff.
[80] There was some dispute as to whether this advance was a loan, or was advanced by the defendant to the plaintiff to fund costs of investigating possible joint ventures between the parties in China. Mr Gilchrist in his closing submission correctly records the plaintiff’s changing position in this regard. The short point is,
however, that in his statement of defence to the defendant’s counterclaim, the plaintiff accepts that NZ$200,000 was loaned to him on 2 August 2007. The real dispute is how much, if any, of this loan has already been repaid by the plaintiff and whether the defendant is now time-barred (by the Limitation Act 1950) from recovering any balance.
[81] The plaintiff says he has partially repaid this loan. There is no dispute that the plaintiff paid the defendant $50,000 on 14 February 2008 and 22 September 2009 respectively. The defendant says, however, that these payments were contributions by the plaintiff to his late interest payments on the ASB loan in respect of the Property, and therefore the entire $200,000 loan remains outstanding. In support of this, the defendant says that at the time the $50,000 payments were made, the plaintiff was in considerable arrears in paying his share of the interest on the ASB loan. Mr Gilchrist further submits that in a text dated 2 December 2011, the
$200,000 loan was referred to by the defendant with a “clear implication that it was still outstanding”. Mr Gilchrist notes that the plaintiff did not respond to this text message, and in particular, did not deny that the full loan remained outstanding.
[82] Having reviewed the evidence, including the defendant’s bank account records, I am satisfied that the two payments of $50,000 were repayments by the plaintiff in relation to the $200,000 loan, and were not “catch up” payments in respect of the plaintiff’s unpaid share of interest on the ASB loan.
[83] First, the two payments are round-numbered sums. There was no evidence before me that they represented what the plaintiff might have then owed to the defendant in respect of unpaid interest on the ASB loan. And, if they were intended to cover his unpaid share of interest on the ASB loan, it might be thought that a more precise sum, reflecting the actual unpaid portion, would have been calculated (presumably by the plaintiff’s ex-wife, who handled all the interest payments) and paid.
[84] Second, the payments are referenced in the defendant’s ASB bank statements as “pay back from Fen”13 (in relation to the payment made on 14 February 2008) and
13 “Fen” is a reference to the defendant.
“from RJ” (in relation to the payment made on 22 September 2009). The reference to “pay back from Fen” is in my view more consistent with a payment “back to” the defendant of moneys advanced by her, than a payment by the plaintiff of his unpaid share of interest on the ASB loan. Further, the plaintiff’s payments of interest on the ASB loan had, in a number of cases, included a reference to “int” and the plaintiff’s
initials.14 Notably, the payment made on 12 February 2008 and referenced as “int”
was only two days before the $50,000 payment referenced as “pay back from Fen”.
[85] Third, at least at the time of the February 2008 payment, the plaintiff was up to date with his payment of half the interest on the ASB loan.15 There was accordingly no need at that time for a lump sum payment of $50,000 of arrears.16
[86] On the basis the plaintiff has repaid $100,000 of the $200,000 loan, the remaining issue is whether, as the plaintiff submits, the defendant’s claim in relation to the outstanding balance of $100,000 is time-barred.
[87] The loan was not subject to any written terms, but was simply a loan repayable on demand. Mr Pidgeon submits that when a loan is repayable on demand, time starts to run not when demand is made, but when the loan is originally advanced. Mr Pidgeon submits that this position was settled by the High Court of
Australia in Young v Queensland Trustees Ltd.17 Mr Pidgeon goes on to submit that,
pursuant to s 25(4) of the Limitation Act 1950, the only later time at which the cause of action could have accrued is 22 September 2009, being the last date on which the plaintiff made a part-payment in relation to the loan.
[88] Mr Gilchrist acknowledges that if a contract of loan is silent about
repayment, the lender’s right to repayment normally arises at the time the money is advanced, and time for limitation purposes therefore commences to run as soon as
14 This was the case in relation to payments made on 23 January 2008; 12 February 2008; 3 March
2008; and 31 March 2008.
15 Mr Kemp, the defendant’s expert witness, gave evidence consistent with the plaintiff ’s position
in this regard, namely that the plaintiff ceased to make his regular interest contributions in or about June 2008.
16 Given my finding that the two $50,000 payments were repayment of the loan and not “catch up” payments of interest on the ASB loan, these payments will need to be “backed out” of the experts’ joint statement on the parties’ respective contributions to the Property as at 31 March
2017.
17 Young v Queensland Trustees Ltd (1956) 99 CLR 560.
the funds are advanced. He also accepts that the same applies when the obligation to pay is expressed simply as being “on demand”.18 However, Mr Gilchrist submits that if there is evidence beyond the simple words “on demand” being used, demonstrating that the parties intended that there should be a demand before the obligation to repay arose, then the “on demand simpliciter rule” will not apply.19
[89] As noted, the loan contract between the parties was oral. Nevertheless, Mr Gilchrist submits that the parties agreed that it would be repayable only once repayment had been demanded. In this context, the defendant gave evidence that:
The terms of the $200,000 loan were agreed orally over the phone. There was no fixed date for repayment of the $200,000 loan. It was expected that it would be repayable when I demanded repayment. Jiang Rui suggested
10 per cent interest per annum of the $200,000 loan, and I agreed.
I was happy to give Jiang Rui the money because he paid $419,317.19 towards the purchase of the Property just a month earlier. I trusted him at the time.
In around March and August 2011, I demanded repayment of the
$200,000 loan by text message. I do not have copies of those text
messages.
[Emphasis added]
[90] In his evidence in reply, the plaintiff did not dispute the defendant’s categorisation of when the money would be repayable (namely only once the defendant had demanded repayment). Rather his evidence was confined to challenging that he had agreed to pay interest at the time the loan was entered into.
[91] The plaintiff did, however, dispute that the defendant made demand for repayment of the loan in March and August 2011. He says that the defendant made repeated verbal requests at the end of 2007 and the beginning of 2008 that he repay the loan.
[92] I prefer the plaintiff ’s evidence as to the timing of the demands for repayment. This is because it is consistent with my finding that the lump sum payments in 2008 and 2009 were paid by the plaintiff in repayment of the loan. The
defendant has not produced any contemporaneous evidence of the demands said to
18 Referring to DFC New Zealand Ltd v McKenzie [1993] 2 NZLR 576 (HC) at 582.
19 DFC New Zealand Ltd v McKenzie at 584.
have been made in March and August 2011. Further, the defendant points to a text message from her to the plaintiff on 2 December 2011 in which she stated “no formal process was made when you borrowed 200,000 from me”. There is no reference in that text to the demands said to have been made earlier that year, nor did it contain a further demand that the loan be repaid, which might have been expected if the loan remained fully outstanding at that point in time.
[93] I am accordingly not satisfied that the defendant made demand for the remaining balance of the loan within six years of her counterclaim being filed (being
1 April 2016). Rather, time began to run on this aspect of the defendant’s counterclaim on 22 September 2009, being the last part-payment by the plaintiff. The claim for the balance of the loan was accordingly time-barred as of
22 September 2015.
[94] Given my finding, it is not necessary to address the defendant’s claim to
interest on the unpaid balance of the loan.
Defendant’s counterclaim - loan of RMB 3.1 million
[95] The defendant alleges that on or about 11 January 2012, in Shenzhen, China, she loaned the plaintiff RMB 3.1 million (said by her to equate to approximately NZ$650,000) in cash. The defendant says that she handed the cash to the plaintiff in two carry bags in a car park near a petrol station, on the way to a dinner with a number of friends. No documentary record was made of any such alleged loan at the time it was advanced.
[96] The plaintiff denies that the loan was made to him by the defendant, in the manner suggested by the defendant or otherwise. While he accepts that he met the defendant, with others, for dinner in China, he describes her evidence on this loan as being an “outright lie”. The central issue on this aspect of the defendant’s counterclaim is accordingly whether the loan was made at all.
[97] In her brief of evidence, the defendant says that there had been previous discussions about this loan and an arrangement made that she would give the money to the plaintiff in China. She says there was a discussion about an interest rate of
10 or 11 per cent, but the parties settled on 10 per cent. She says that it was agreed that repayment would be made upon demand.
[98] In support of this aspect of her counterclaim, the defendant filed a statement by a Mr Yifeng Li, who was present at the car park meeting at which the defendant says the money was handed over to the plaintiff. Ultimately, Mr Li was not present to give evidence in Court in accordance with his statement. I ruled that his (hearsay) statement was prima facie admissible, in a Ruling dated 1 June 2017. As I expressly noted in that Ruling however, admissibility is a different question from what weight, if any, I ascribe to Mr Li’s statement.
[99] The statement which I ruled admissible is at page 156 of the common bundle of documents. There is no dispute that the original Chinese script of the statement was written by Mr Li. However, the statement is not in the form of a formal brief of evidence taken before a lawyer in this (or any other) jurisdiction.
[100] In his statement, Mr Li says the following:
As far as I know and recall in respect of what happened on the day (I can’t remember the exact date) when I was together with Huifen Huang [the defendant] and Rui Jiang [the plaintiff], I saw that Huifen Huang opened the boot of the car, took out two bags and gave them to Rui Jiang. I did not know what was in the bags! Later, I was told it was Ah Fen [the defendant] who repaid the money to Rui Jiang. But I did not know the relationship of their cooperation!
[101] Mr Li’s statement that he saw the defendant pass two bags to the plaintiff is consistent with the defendant’s evidence. The plaintiff says that she only passed him one light overnight bag.
[102] I am not prepared to ascribe any real weight to Mr Li’s statement. The defendant gave evidence that Mr Li wrote this statement in around February 2016. That is some four years after the event. There is no other evidence concerning the circumstances in which Mr Li came to provide this statement.
[103] It is self-evident that these matters are intensely factual. There is no doubt that counsel for the plaintiff would have wished to cross-examine Mr Li closely on
his recollection of what he saw, some four years earlier in relation to a bag or bags being removed from the boot of the defendant’s car and being handed to the plaintiff. Mr Gilchrist submits that this is not an issue that Mr Li would be likely to have been confused or mistaken about. I am not so sure. As noted, the statement was prepared some four years after the event in question. There is no indication of how close Mr Li was to the defendant’s car at the time, or what lighting was available. Moreover Mr Li acknowledges in his statement that he did not know what was in the bags (or bag) in any event.
[104] Mr Pidgeon made much in his submissions (and cross-examination of the defendant) of how heavy the bags of cash would have been, and that it would have been difficult for the defendant (who he described as being “slight”), to carry the bags and lift them in and out of her car. A bundle of RMB cash (equating to some NZ$20,000) was even produced in Court for me to assess its weight. I do not, however, take these matters into account. Even if the bags were quite heavy, I do not consider that this, in and of itself, means it is unlikely the defendant transported the bags and handed them over to the plaintiff.
[105] In support of her claim, the defendant points to a receipt, or an “IOU” document, dated 28 March 2012 (just over two months after the loan was said to have been advanced) which refers to a loan to the plaintiff of, inter alia, $650,000.20
However, the difficulty with the defendant’s reliance on this document is that it refers to NZ$650,000 being advanced in relation to the Cambridge Property. In her evidence, the defendant says that the RMB 3.1 million was advanced to enable the plaintiff to explore investment opportunities in China.
[106] The defendant also points to a 2015 “receipt” for an amount of $1,275,000
which she said is made up of the alleged $650,000 loan (together with other amounts said to be owing by the plaintiff). The difficulty with this argument is that the 2015
20 As noted, the defendant says this was the NZ dollar equivalent of RMB 3.1 million at January
2012. There was no independent expert evidence called to support this. The plaintiff accepted that the NZ dollar equivalent might have been around this amount, though Mr Pidgeon put to the defendant in cross-examination that the correct conversion rate would be around NZ$605,000, to which the defendant responded “I don’t really know, I guess it wo uld be around there”. Absent any evidence in relation to the correct exchange rate at the time, I cannot form any concluded view on what the NZ dollar equivalent of RMB 3.1 million would have been in January 2012.
receipt states on its face that the plaintiff owes $1,275,000 to the defendant which had been borrowed on 10 April 2008 for “LJ company to purchase 40A Stcoce Road, Stanmore Bay”. The receipt is accordingly also inconsistent with the defendant’s position:
(a) First, it refers to the full amount of $1,275,000 being advanced to the plaintiff on 10 April 2008, rather than part of it being advanced in January 2012;
(b)Second, the receipt says it was for the purpose of LJ Holding Ltd purchasing the Whangaparaoa property, whereas, as noted, the defendant’s evidence was that the purported loan of RMB 3.1 million was advanced to enable the plaintiff to make investments in Mainland China.
[107] The defendant also acknowledged in cross-examination that she had also relied on the 2015 receipt to support a separate claim brought by her in the LJ Holdings proceedings (which subsequently settled).
[108] Finally, I consider it inherently unlikely that the defendant would have loaned such a significant sum to the plaintiff in January 2012, with no documentary record or security, in circumstances where she was already aware that the plaintiff was in significant financial difficulties at that time.
[109] Ultimately, the only evidence which supports this aspect of the defendant’s counterclaim is that of the defendant herself, through her brief of evidence and oral evidence given at the hearing.21 As noted earlier, I did not find the defendant to be a particularly reliable or credible witness. Further, her evidence in respect of this loan
was at times confused and contradictory, including as to the alleged source of the
21 The defendant also relied on evidence of a friend (Mr Kent Liu) and her brother (Mr Zhicheng
Huang), who said they heard the plaintiff and defendant discussing loans of $200,000 and
$650,000. I do not consider this evidence advances the defendant’s case, as it does not directly relate to or confirm the making of the RMB3.1 million loan in China in January 2012. Further, Mr Huang’s evidence is more directed to the circumstances in which the 2015 “receipt” came to be signed, and does not directly assist in establishing what that receipt related to. As noted, I rely on the face of the receipt itself, which confirms it was a loan advanced in 2008 in relation to the LJ Holding investment.
cash which she says she handed to the plaintiff at their meeting in China.22 On a matter of this significance, and absent any other contemporaneous corroborating evidence, I am not satisfied on the balance of probabilities that the loan was actually made.
Result on joint statement of issues
[110] In light of the above my findings in relation to each of the agreed statement of issues are as follow:
(a) What interest (if any) does the plaintiff presently have in the Swayne Road Property? How might the parties access their share if they still exist? The defendant presently holds the plaintiff’s share of the property on trust for him. The plaintiff ’s share is represented by his proportionate contribution to the Property versus the defendant’s proportionate contribution, as at the date of this judgment.
(b)What is the effect of the agreement of 29 June 2010? Was it implemented? And, if so, in what way? The 2010 Agreement was a legally binding agreement between the parties. However, its terms were never implemented by the defendant purchasing the plaintiff’s share in the Property at that time.
(c) What are parties’ respective contributions to the Swayne Road Property? The parties’ respective contributions are as set out paragraph 4 of the Joint Statement of Experts dated 31 May 2017 (to be adjusted to reflect my findings in respect of the part repayment of the $200,000 loan). The respective contributions are to be updated as at the date of this judgment.
(d)Was the admitted loan of $200,000 repaid in whole or part? The plaintiff has repaid $100,000 of the $200,000 loan.
22 In her brief of evidence, she said that the cash was sourced from the sale of two of her investment properties in China. She says it is not unusual for deposits from such sales to be paid in cash. However, in cross-examination, she said RMB 2 million was from the sale of investment properties and RMB 1 million was rental income from other properties.
(e) Did the defendant make demand for repayment of the loan? If so, when? Yes. Demands were made in late 2007 and early 2008.
(f) Is any unpaid portion of loan statute-barred under the Limitation Act
1950? Yes. Any claim in respect of the unpaid portion of the loan was statute-barred as at 22 September 2015.
(g)What (if any) was the agreed interest rate? In light of (f) above, this issue does not need to be determined.
(h)Was an advance of RMB 3.1 million (approximately NZ$650,000) made? And, if so, what the terms of the advance as to both repayment and interest? The advance of RMB 3.1 million was not made.
(i) Has demand been made for repayment? Given the answer to
(h) above, this issue does not need to be determined.
(j)If the defendant is correct that there was a sale of the plaintiff ’s interest in the Property to her in August 2010, has the defendant suffered a recoverable loss? And, if so, how much? Given the answer to (b) above, this issue does not need to be determined.
(k)Does the receipt of 23 April 2015 acknowledge an obligation by the plaintiff to the defendant in respect of the first, second and third counterclaims? In light of my findings at (b) (f) and (h) above, this issue does not require determination. For completeness, however, I record that I am not satisfied that the receipt relates to the first, second and third counterclaims. Rather, it relates to a loan from the defendant to the plaintiff in respect of LJ Holdings Ltd, as recorded on the face of the document.
[111] I accordingly make the following orders and declarations:
(a) I declare that the defendant holds a share of the value of the Property on trust for the plaintiff. The plaintiff ’s share reflects his financial contributions to the Property, proportionate to the defendant’s
financial contributions to the Property, as at the date of this judgment. The plaintiff’s equitable interest is to be secured by a notice of charge against the Property’s title.
(b)As at 31 March 2017, the parties’ respective financial contributions to the Property are as set out in paragraph 4 of the Joint Statement of Experts dated 31 March 2017 (adjusted to remove $100,000 from the plaintiff’s financial contribution, reflecting my finding at [110](d) above).
(c) If the parties are unable to agree on the parties’ respective financial contributions as at the date of this judgment, memoranda are to be filed in accordance with [78] above.
(d)Draft orders in relation to the sale of the Property are set out in the Schedule to this judgment. The parties are to file a joint memorandum, or separate memoranda, on the draft orders in accordance with [77] above, upon which final orders will be made.
(e) The remaining claims are dismissed.
Costs
[112] The parties are encouraged to seek to agree costs. My preliminary (and non- binding) view is that, as the plaintiff has largely been successful on his claim (and in opposing the defendant’s counterclaims), the plaintiff is entitled to costs on a 2B basis.
[113] If the parties are unable to agree costs within 15 working days of the date of this judgment, they may each file costs memoranda within that timeframe, not to
exceed five pages in length. I will then proceed to determine costs on the papers.
S Fitzgerald J
SCHEDULE
DRAFT ORDERS ON SALE
1.Absent a binding and documented agreement between the parties for the defendant to buy out the defendant’s share in the Property being entered into by 31 January 2018, the Property is to be sold on the open market to a third party.
2.The Property is to be listed with a local real estate agent (“Agent”) and sold in the manner recommended by the Agent. If the parties are unable to agree on the Agent to be engaged to sell the Property, the Agent is to be appointed by the Court upon memoranda being filed by the parties on or before
16 February 2018.
3.If the Property is to be sold by way of auction, the reserve price is to be agreed by the parties or failing agreement, set by the Agent.
4.The proceeds of sale of the Property, net of sales costs (including legal fees) are to be distributed to the parties in accordance with their respective financial contributions to the Property as at the date of this judgment.
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