Jin v Luo
[2025] NZCA 415
•20 August 2025 at 11.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA571/2023 |
| BETWEEN | QIAN JIN |
| AND | LIN LUO |
| Hearing: | 24 July 2024 (further submissions received 2 August 2024) |
Court: | Mallon, Jagose and Campbell JJ |
Counsel: | M T Davies and T Y Yao for Appellants |
Judgment: | 20 August 2025 at 11.00 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe cross-appeal is allowed in respect of Ms Luo’s counterclaim for the Xia advances. We otherwise dismiss the cross-appeal.
CMs Luo is to pay disbursements of $1,350 to Mr Jin.
____________________________________________________________________
REASONS OF THE COURT
(Given by Campbell J)
Table of Contents
| Para No | |
| Introduction | [1] |
| Background | [7] |
| The property purchases and other events | [15] |
| Peachgrove Road | [19] |
| Nicks Way | [24] |
| Chamberlain Road | [27] |
| Robinson Avenue | [32] |
| Declaration of trust in August 2012 | [38] |
| Seddon Road | [42] |
| Radnor Street | [46] |
| Victoria Street | [51] |
| Knox Street | [55] |
| Co-operation agreement and Mr Huang | [61] |
| The claims and counterclaims at trial | [67] |
| W&L’s causes of action | [68] |
| Mr Jin’s cause of action | [72] |
| Ms Luo’s counterclaims | [74] |
| The High Court judgment | [77] |
| W&L’s first cause of action: properties held for W&L on resulting or constructive trust | [78] |
| W&L’s second and third causes of action: breach of directors’ duties | [80] |
| W&L’s alternative causes of action | [84] |
| Mr Jin’s cause of action against KPIL for a share of Knox Street | [85] |
| Ms Luo’s counterclaim for repayment of various advances | [88] |
| Ms Luo’s counterclaim for Mr Jin’s breach of a partnership or joint venture agreement | [97] |
| Decisions relevant to Ms Luo’s current account | [101] |
| Issues | [102] |
| Does W&L have a beneficial interest in Nicks Way, Robinson Avenue, Seddon Road, Radnor Street and Victoria Street by way of constructive or resulting trusts? | [105] |
| Nicks Way | [108] |
| Robinson Avenue | [128] |
| Seddon Road | [132] |
| Radnor Street | [135] |
| Victoria Street | [140] |
| Affirmative defences | [143] |
| Conclusion | [148] |
| Does KPIL hold a share of Knox Street on resulting trust for Mr Jin? | [149] |
| The Judge’s decision | [149] |
| Mr Jin’s appeal | [152] |
| Did Ms Luo breach her duties as a director of W&L? | [157] |
| W&L’s claims and the Judge’s findings | [157] |
| Ms Luo’s cross-appeal | [162] |
| Is Mr Jin liable to repay the St Lukes advances, Wang advances and Farnworth advances to W&L and Ms Luo? | [172] |
| St Lukes advances | [173] |
| Wang advances | [186] |
| Farnworth advances | [194] |
| Is Mr Jin liable to repay the Xia advances to W&L and Ms Luo? | [201] |
| Did Mr Jin breach the agreement with Ms Luo in relation to Chamberlain Road? | [208] |
| Has Ms Luo been adequately compensated for her work in managing Peachgrove Road? | [219] |
| Was the $220,000 payment made by Mr Wu towards Peachgrove Road made on Ms Luo’s behalf? | [223] |
| Costs | [229] |
| Result | [230] |
Introduction
In early 2011, Qian Jin and Lin Luo entered into a business relationship to develop properties. They agreed to carry on their business through a company, W&L Ltd (W&L), in which they would be equal shareholders.
Mr Jin and Ms Luo were advised to enter into a shareholders’ agreement or adopt a company constitution. They declined to do so. They barely documented their business relationship. They preferred to rely on informal understandings.
From 2011 to 2013, Ms Luo arranged the purchase of eight properties. Two of the properties were registered in W&L’s name. The other six were registered either in Ms Luo’s name or in the name of a company associated with her.
Mr Jin considered that all eight properties were purchased using and leveraging the assets of W&L and that W&L or he had an interest in them all. Ms Luo disagreed, except with respect to the two properties registered in W&L’s name. The dispute spurred a first round of litigation between the parties in August 2015. That litigation settled in October 2019 on terms that included Mr Jin being granted leave to commence a derivative action on behalf of W&L.
Mr Jin then promptly began the current proceeding. It consists primarily of derivative claims on behalf of W&L to establish interests in five of the six disputed properties and alleges that Ms Luo breached her duties as a director of W&L. The proceeding also includes one personal claim by Mr Jin against a company associated with Ms Luo for a resulting trust over the other disputed property. Ms Luo responded to Mr Jin’s claims with four counterclaims.
Harland J heard the claims and counterclaims at a trial split over August 2021 and March 2022 (with a lengthy COVID‑19 interruption). The Judge delivered an interim judgment on liability in August 2023.[1] Mr Jin and W&L were largely successful, but they appeal some parts of the judgment on which they failed. Ms Luo, and two respondent companies associated with her, cross‑appeal.
Background
[1]Jin v Luo [2023] NZHC 2417 [judgment under appeal].
We largely adopt the description of the background events in the High Court judgment.
Both Mr Jin and Ms Luo are originally from China. Mr Jin first came to New Zealand in 2001 but has continued to travel back to China for considerable periods of time. Ms Luo came to New Zealand in 2003. She obtained an accounting degree from Massey University in 2007.
Ms Luo met David Lee in 2004. They moved to Hamilton in 2007. They married and had three children but separated in 2018. Mr Lee was involved in many of the decisions about the property investments made by the parties.
In 2005, Mr Jin’s father, Shanmei Jin (Mr Jin Snr), came to New Zealand. He met Mr Lee. They decided to undertake a joint venture investing in and developing properties. They used a company, Create and Holdings Ltd (C&H), and other third parties to hold the properties.
Between 2006 and 2008, Mr Jin lived with Mr Lee. During this time, Mr Jin began learning about property investment from Mr Lee, who was his mentor.
Mr Lee and Mr Jin Snr’s business was affected by the 2008 global financial crisis. C&H was placed in liquidation on 5 November 2010. Other properties they had purchased as part of their business (but which were owned by others) were sold. Mr Jin contended that the proceeds of sale of those properties, amounting to $217,900, were invested into his and Ms Luo’s property investment business.
In early 2011, Mr Lee and Ms Luo noticed that a property at 44 Peachgrove Road, Hamilton (Peachgrove Road) was for sale. It comprised a building with 24 one‑bedroom apartments. The asking price was $1,950,000. Mr Lee and Ms Luo did not have enough funds to buy the property. Mr Lee therefore approached Mr Jin. Mr Jin was interested in becoming involved in the investment.
Mr Jin and Ms Luo then reached an agreement that they would jointly invest in Peachgrove Road and other properties, using W&L as a vehicle. Their agreement was undocumented. They agreed that they would be equal shareholders in W&L. The Judge said the plan was that Mr Jin would contribute money, while Ms Luo would do the work necessary to advance the business (or arrange for the work to be done).[2] Both, however, were free to undertake their own property investments.
The property purchases and other events
[2]At [10].
W&L was incorporated on 21 March 2011. At the time, Mr Jin and Ms Luo needed bank funding for the purchase of Peachgrove Road. Because Mr Jin was not a New Zealand resident at the time, Ms Luo was appointed the sole director and shareholder of W&L. It took some time for Mr Jin to be formally recognised as a shareholder in W&L, which was a source of frustration for him.
In 2011, W&L purchased Peachgrove Road and a property on Chamberlain Road, Massey, Auckland (Chamberlain Road). It is common ground in this proceeding that those two properties are owned by W&L and form part of Mr Jin and Ms Luo’s joint property investment business.
Between 2011 and 2013, Ms Luo or interests associated with her purchased six other properties which are in dispute in this proceeding. Ms Luo purchased three, one of which she has since sold. Two were purchased by the third respondent, JJ Quality Properties Ltd (JJQPL), one of which JJQPL has since sold. Ms Luo is the sole director and shareholder of JJQPL. The other disputed property was purchased by the second respondent, Knox Property Investment Ltd (KPIL). Ms Luo is an equal shareholder in KPIL with Chuan Jiang, who is the sole director.
We now provide a summary of the various property purchases, interspersed with reference to other relevant events. In so doing, we note some of the Judge’s factual findings, but address later the Judge’s decisions on the claims and counterclaims. We also provide more detail on the property purchases when we examine, later in the judgment, the issues that arise on the appeal and the cross‑appeal.
Peachgrove Road
W&L’s purchase of Peachgrove Road was effected in three transactions. The first was a purchase by Yingquan Wang (a friend of Mr Lee) from the vendor for $1,920,000 and the second a purchase by Ms Luo from Mr Wang for $2,156,521.80. Both those purchases settled on 1 July 2011. The third transaction was a purchase by W&L from Ms Luo at the same price as the second transaction. W&L’s purchase settled on 1 August 2011.
Ms Luo said the second purchase was in her name because she had personally been offered a bank loan. However, the Judge said it was not explained why it was necessary for the initial purchase to be in the name of Mr Wang or why Ms Luo and W&L paid more for the property than Mr Wang.[3]
[3]At [73].
There was a dispute as to how much of W&L’s purchase of Peachgrove Road was funded by Mr Jin. It was common ground that he paid $184,212.50 towards the deposit for the property. Mr Jin contended that he contributed a further $217,900 towards the purchase, which he said was the “legacy amount” due to him from his father and Mr Lee’s property investment business (conducted through C&H).[4] Ms Luo disputed that Mr Jin had made any further contribution towards the purchase.
[4]At [74].
Resolution of that dispute centred on whether a payment of $220,000 by a third party, Henry Wu, towards the purchase was made on behalf of Ms Luo or largely (to the extent of $217,900) on behalf of Mr Jin. The Judge considered there was no independent evidence on this point and declined to find that Mr Wu’s payment was a credit on behalf of either Mr Jin or Ms Luo.[5] Ms Luo says, on her cross‑appeal, that the Judge should have found the $220,000 payment to have been a contribution made on her behalf.
[5]At [80].
There was also a dispute as to what non‑financial contributions Ms Luo had made to Peachgrove Road. The Judge accepted that Ms Luo had managed the property from mid‑2013 but also found that she had been adequately compensated (by way of salary) for that task over the period 2012–2016.[6] Ms Luo says the Judge erred in finding that she had been adequately compensated for this work.
Nicks Way
[6]At [81].
In September 2011, Ms Luo purchased a section on Nicks Way, Hamilton (Nicks Way) from Mr Jin’s former wife for $240,000. Ms Luo arranged for a house to be built on the section at a cost of $440,101.60. It became the home of Ms Luo, Mr Lee and their children. Ms Luo remains the registered owner of Nicks Way. Since the separation of Ms Luo and Mr Lee in 2018, Mr Lee has continued to live there.
Ms Luo raised two loans from the Bank of New Zealand (BNZ) to purchase the land and to then fund the construction of the house. The Judge found that W&L made several contributions to Nicks Way. Primarily, these were in the form of payments made by W&L, totalling about $534,000, to repay Ms Luo’s BNZ loans.[7]
[7]At [214]–[217].
W&L’s financial contributions towards the purchase and development of Nicks Way were the primary basis for Mr Jin’s claim, on behalf of W&L, that W&L had a beneficial interest in Nicks Way by way of a constructive trust.
Chamberlain Road
W&L purchased Chamberlain Road on 15 November 2011 for $1,950,000. As noted, it was common ground that W&L had an interest in this property. But there was a dispute about the role played by Mr Jin’s cousin‑in‑law, Jianming Huang, in funding the purchase of the property.
Ms Luo’s position was that she and Mr Jin had agreed that Mr Jin would provide cash and she would attend to the borrowing and arrange for the development work on Chamberlain Road. By contrast, Mr Jin said that he eventually agreed with Ms Luo that Mr Huang would provide the necessary equity to settle the purchase of the property on the basis that Mr Huang and W&L would each own a 50 per cent share in it. Ms Luo said she knew Mr Jin had dealings with Mr Huang but was not aware of the details and, at the time, she knew nothing of any agreement between Mr Jin and Mr Huang as to Mr Huang having an ownership interest in the property.
Mr Huang’s role in Chamberlain Road was the subject of a separate High Court proceeding commenced in September 2015 by Mr Huang and Mr Jin against Ms Luo and W&L. We will return to this.
There was also a dispute about how much work each of Ms Luo and Mr Jin did on the development of Chamberlain Road. Ms Luo said she did extensive work and Mr Jin virtually nothing. Mr Jin said he did considerable work on the project.
These disputes about Ms Luo’s knowledge of Mr Huang’s role and about the work done on the project by Ms Luo and Mr Jin were relevant to the claims against Ms Luo for breach of her director’s duties and to one of Ms Luo’s counterclaims.
Robinson Avenue
Mr Jin said that in late 2011 or early 2012 Mr Lee contacted him and said Ms Luo planned to use W&L to invest in three sections on Robinson Avenue, Rotorua (Robinson Avenue). Mr Jin said he agreed to W&L doing so. Ms Luo, by contrast, said that although Mr Jin was asked if he wanted to invest in the sections, he declined.
On 28 February 2012, Ms Luo signed agreements to purchase Robinson Avenue. Settlement occurred in March 2012 (for two sections) and May 2012 (for the remaining section), with the titles to the sections being transferred to Ms Luo. Ms Luo arranged for houses to be built on the sections. She subsequently sold the properties.
When selling one of the properties, Ms Luo advised her lawyer, George Guo, that she was selling the property on trust for W&L and the sale proceeds should be paid into its bank account. She forwarded her correspondence with Mr Guo to Mr Jin.
In September 2012, Ms Luo told the Inland Revenue Department (IRD) that she held Robinson Avenue on behalf of W&L. At trial, she explained that this was because she did not want to be classified by the IRD as an investor.
In June 2013, Ms Luo provided a document to Mr Jin that was referred to as the “Bookkeeping Record”. This document recorded a loan that was secured over one of the Robinson Avenue properties as at 24 April 2013. It also recorded expenses incurred in relation to all three properties and the proceeds of sale of two of the properties.
Mr Jin said Ms Luo’s correspondence with Mr Guo and the IRD, and the Bookkeeping Record, supported his claim that Ms Luo held Robinson Avenue, and then its sale proceeds, on a constructive trust for W&L.
Declaration of trust in August 2012
On 10 August 2012, Mr Jin and Ms Luo signed a document entitled “Declaration of Trust and Deed of Transfer of Company Shares” (Declaration of Trust). The Declaration of Trust’s background provisions recorded that Ms Luo had been registered as the holder of all the shares in W&L on its incorporation but had agreed to hold 50 per cent of the shares on trust for Mr Jin. In the Declaration’s operative provisions, Ms Luo agreed that on its execution she would transfer 50 per cent of her shares to Mr Jin. As noted earlier, in this proceeding it was not in dispute that Mr Jin was always beneficially entitled to 50 per cent of the shares in W&L.
The parties said that other provisions of the Declaration of Trust had a bearing on the disputes that arose in this proceeding. Its background provisions recorded that:
Subsequently when the Company purchased the properties situated at 44 Peachgrove Road, Hamilton and 8 Chamberlain Road, Massey, Auckland, [Mr Jin] transferred an approximate sum of $818,749 being half of the funds contribution for the purchases.
The background provisions did not refer to W&L having purchased Nicks Way or Robinson Avenue. Ms Luo relied on this in resisting Mr Jin’s claims that she held those properties on trust for W&L.
The operative provisions of the Declaration of Trust included:
(a)a confirmation by Ms Luo that W&L had no debts or liabilities other than those described in its annual report for the year ended 31 March 2012. The confirmation referred, by way of example, to “The Westpac and BNZ mortgages”; and
(b)an acknowledgement by Mr Jin that he had received the annual report and had inspected other company records and was satisfied with the same.
W&L’s annual report for the year ended 31 March 2012 recorded two bank loans as “term liabilities”. One was to Westpac for $1,475,500 and the other to the BNZ for $1,000,000. The annual report’s schedule of fixed assets listed Peachgrove Road and Chamberlain Road but there was no mention of Nicks Way or Robinson Avenue. Again, Ms Luo relied on this in resisting Mr Jin’s claim that she held those properties on a constructive trust for W&L.
Seddon Road
In early 2013, Ms Luo became aware that a property on Seddon Road, Hamilton (Seddon Road) was for sale. Mr Jin said he, Ms Luo and Mr Lee viewed the property and agreed to purchase it through W&L by using Peachgrove Road and Nicks Way to raise a loan to cover the full purchase price. Ms Luo accepted that she may have told Mr Jin that she was interested in purchasing the property but said Mr Jin contributed nothing to it.
On 16 February 2013, Ms Luo entered into an agreement to purchase Seddon Road. W&L paid the deposit of $30,000. On 9 April 2013, Ms Luo obtained two loans from the BNZ. One was for $610,000 to purchase Seddon Road. The other was for $90,000 to assist W&L with its cashflow. Both loans were secured by mortgages over Seddon Road and Nicks Way and an unlimited guarantee from W&L.
The Bookkeeping Record that Ms Luo sent to Mr Jin included the balances for both loans secured over Seddon Road. On 16 October 2013, Ms Luo forwarded an email to Mr Jin from the property manager of Seddon Road regarding the rental assessment for the three houses on the site of Seddon Road. She forwarded another email to him containing the valuation report for Seddon Road.
Mr Jin claimed that W&L had made financial contributions to the purchase of Seddon Road and that the documents that Ms Luo sent to him confirmed that the parties intended that it be a property held by or on behalf of W&L.
Radnor Street
In mid‑2013, Ms Luo became aware of a property on Radnor Street, Hamilton (Radnor Street) for sale by tender. It was bare land with a building consent in place and two unit titles. Mr Jin said he and Mr Lee visited the property and discussed using W&L to purchase it.
On 21 May 2013, Ms Luo signed an agreement to purchase Radnor Street in her own name for $250,000. She paid the deposit, but Mr Jin contended that the funds for the deposit were sourced from the sale of one of the Robinson Avenue properties. When Ms Luo sent Mr Jin the Bookkeeping Record a few weeks later, it recorded the payment of the deposit as an expense.
Ms Luo nominated her mother, Yanqui Wang, to take title to Radnor Street on settlement in September 2013. After settlement, Ms Luo emailed information about the property to Mr Jin. W&L subsequently paid for the costs of developing Radnor Street.
In September 2015, Radnor Street was transferred to JJQPL. JJQPL subsequently sold the property.
Mr Jin claimed that Radnor Street had been held on a constructive trust for W&L and that JJQPL held the sale proceeds on trust for W&L.
Victoria Street
In 2013, Ms Luo became aware that a property on Victoria Street, Hamilton (Victoria Street) was for sale. Ms Luo said she met with Mr Jin to discuss the possibility of investing in the property and that she, Mr Lee, Mr Jin and his mother inspected it. Mr Jin said Ms Luo suggested that W&L purchase it. But he did not want to provide any further capital until Ms Luo had updated the share register for W&L (Ms Luo still not having transferred half her shares to Mr Jin). Mr Jin also said he was unsure about W&L’s financial status at the time, but he did not object to W&L making the investment. Ms Luo said her understanding after the visit was that Mr Jin was not interested in becoming involved.
W&L entered into an agreement to purchase the property for $2,550,000 on 16 September 2013. A deposit of $200,000 was paid. W&L subsequently, in May 2014, nominated JJQPL to complete the purchase.
On 30 May 2014, Ms Luo obtained a loan of $1,650,000 from the ANZ for JJQPL. JJQPL used the loan to fund the purchase of Victoria Street. The loan was secured by a mortgage over the property. W&L provided an unlimited guarantee to the ANZ in respect of the loan.
Mr Jin claimed, primarily on the basis of the financial contributions that W&L had made to the purchase of Victoria Street, that JJQPL held the property on a constructive trust for W&L.
Knox Street
In mid‑2013, Ms Luo became aware that a property on Knox Street, Hamilton (Knox Street) was on the market. She said she spoke with Mr Jin about buying the property together. Mr Jin said that Mr Lee rang him and talked to him about this property and that he, Mr Lee and Ms Luo inspected the property and agreed to attend the auction and pay up to $700,000 for it. Mr Jin said they discussed arranging bank finance for the balance of the purchase price using W&L’s other assets as security.
Ms Luo signed an agreement to purchase Knox Street on 13 June 2013. W&L was named as purchaser. The price was $700,000 and the deposit $70,000.
Mr Jin paid $50,000 towards the deposit, Ms Luo $20,000. There was a dispute as to whether Mr Jin’s payment was on his own behalf (as he contended) or on Ms Luo’s behalf (as she contended). We return to this dispute later in the judgment.[8]
[8]See below at [152]–[156].
W&L was unable to raise the necessary finance to complete the purchase. A settlement notice was issued. Ms Luo approached a friend, Mr Jiang, for funding. He agreed to pay the balance required to settle in return for a 50 per cent share in the property.
KPIL was incorporated in July 2013 with Ms Luo and Mr Jiang as joint shareholders. W&L nominated KPIL as purchaser of Knox Street. KPIL then settled the purchase of the property.
Mr Jin claimed that KPIL held Knox Street on a resulting trust for him (not W&L) in proportion to the $50,000 that he says he contributed to the purchase price.
Co-operation agreement and Mr Huang
In early February 2014, Chamberlain Road needed further funding to advance the development. Ms Luo and Mr Jin met, with others, to discuss this. Ms Luo said that at this meeting Mr Jin told her for the first time that Mr Huang had provided funding for the development in the expectation of having a 50 per cent interest in it.
A few days later, on 6 February 2014, Ms Luo and Mr Jin met again. At that meeting, a document, in Mandarin, which the parties referred to as the “Cooperation Agreement”, was presented to Ms Luo. The Cooperation Agreement recorded that Mr Huang and W&L each owned 50 per cent of Chamberlain Road. Ms Luo said that after negotiating all day she signed the Agreement as she and Mr Lee were not in a good financial position and she understood that Mr Huang would continue to fund the development costs for Chamberlain Road.
Mr Jin gave a different account of the reason for the Cooperation Agreement. He said that he and Mr Huang were surprised to hear that W&L was having difficulty in funding Chamberlain Road, that Ms Luo and Mr Lee wanted he and Mr Huang to provide further funding, but that he and Mr Huang refused to do so without a written record of the Chamberlain Road joint venture in the form of the Cooperation Agreement. Mr Jin also said that he discovered that Ms Luo had been obtaining bank loans in her own name that were guaranteed by W&L and supported by a mortgage over Chamberlain Road. At about this time, the relationship between Ms Luo and Mr Jin deteriorated.
Further disputes about Chamberlain Road surfaced later in 2014. Mr Huang and Mr Jin lodged a caveat over the property. The caveat was withdrawn on the basis of undertakings given by Ms Luo.
Between April and August 2015, the first stage of the development of Chamberlain Road was completed and 16 sections were sold. W&L received net sale proceeds of $5,064,693.64.
Disputes over Chamberlain Road continued. On 1 September 2015, Mr Huang and Mr Jin commenced a proceeding in the High Court in relation to the property against Ms Luo, Mr Lee and W&L. In May 2016, Mr Jin discontinued his claim in that proceeding. Mr Huang continued as sole plaintiff. The proceeding settled in July 2017, with orders made by consent. The parties agreed that Mr Huang’s contributions totalled $1,692,679. We understand that W&L made payments to Mr Huang that reflected his contributions.
The claims and counterclaims at trial
At trial, W&L advanced eight causes of action and Mr Jin one. The defendants raised affirmative defences and pursued several counterclaims.
W&L’s causes of action
W&L’s first cause of action was against Ms Luo and JJQPL. W&L sought declarations that Ms Luo or JJQPL held five of the disputed properties (Nicks Way, Robinson Avenue, Seddon Road, Radnor Street and Victoria Street) or their sale proceeds on constructive and/or resulting trusts for W&L. W&L also sought an order under s 339 of the Property Law Act 2007 that the three unsold properties (Nicks Way, Seddon Road and Victoria Street) be sold and the proceeds of sale be applied in satisfaction of W&L’s interests in those properties.
Ms Luo and JJQPL denied that any of the five properties were held on trust for W&L. They also said, by way of affirmative defences, that any such claim for trusts should be declined on the basis of laches or a lack of clean hands.
W&L’s second and third causes of action were against Ms Luo, alleging she had breached her duties as a director of W&L in ss 131 and 133 of the Companies Act 1993 as well as the obligation to keep accounting records under s 194. W&L also alleged that Ms Luo had breached the fiduciary duties she owed W&L as its director. W&L sought declarations of breach, an order for the taking of accounts regarding the calculation of Mr Jin’s and Ms Luo’s respective current accounts with W&L, an order that Ms Luo compensate W&L for any losses caused by her breaches of duties and an order that Ms Luo account to W&L for any profit made as a result of her breaches.
The balance of W&L’s causes of action were alternatives to the first cause of action. On the view we have taken of the appeal and the cross‑appeal, it is not necessary to refer to any of them.
Mr Jin’s cause of action
Mr Jin’s sole cause of action was against KPIL. Mr Jin sought a declaration that KPIL held Knox Street on a resulting trust for him in proportion to his contribution towards its purchase price and an order that KPIL execute instruments to update the legal title to the property to reflect his beneficial interest.
KPIL denied that there was any resulting trust. KPIL also raised laches and a lack of clean hands as affirmative defences.
Ms Luo’s counterclaims
The defendants pursued several counterclaims, only two of which arise on this appeal and need be mentioned. Those two counterclaims were by Ms Luo.
First, Ms Luo alleged that she and W&L made various advances to Mr Jin and his mother (Zhenxiao Xia), at Mr Jin’s direction, and that Mr Jin was liable to repay these advances. Ms Luo said those advances either had to be taken into account “on any calculation [of] the parties’ entitlements” or were debts due by Mr Jin to Ms Luo or W&L. Ms Luo sought money judgments for the advances.
Secondly, Ms Luo alleged that she and Mr Jin were in a partnership or joint venture relationship. She alleged that Mr Jin breached the terms of the partnership or joint venture agreement and breached the fiduciary obligations that arose from the partnership or joint venture relationship. She claimed Mr Jin’s breach was in failing to provide the necessary funds to develop Chamberlain Road and instead entering into an arrangement with Mr Huang, without her knowledge, under which Mr Huang would obtain an ownership interest in that development. Ms Luo sought an enquiry into the loss suffered by her as a result of Mr Jin’s alleged breach and an order that accounts be taken of the joint venture or partnership.
The High Court judgment
It will suffice at this point to briefly set out those of Harland J’s findings that are the subject of the appeal or the cross‑appeal. We address the Judge’s reasons in more detail later in this judgment, when determining the issues that arise on the appeal and the cross‑appeal.
W&L’s first cause of action: properties held for W&L on resulting or constructive trust
The Judge found that W&L had a beneficial interest under a resulting or constructive trust in each of the five disputed properties claimed by W&L (Nicks Way, Robinson Avenue, Seddon Road, Radnor Street and Victoria Street), though determination of the extent of W&L’s beneficial interests had to await the taking of accounts.[9] The Judge rejected the defence of laches, finding that Mr Jin had acted reasonably in bringing the derivative claim on behalf of W&L when he did.[10] The Judge also rejected the clean hands defence, finding that neither Mr Jin nor Ms Luo was fully upfront with the other.[11] As to the taking of accounts, the Judge directed the parties to file memoranda setting out the further directions they sought.[12]
[9]At [228]–[229] (Nicks Way), [243]–[245] (Robinson Avenue), [261]–[262] (Seddon Road), [277]–[278] (Radnor Street), [291]–[293] (Victoria Street) and [486] (generally).
[10]At [314]–[315].
[11]At [318]–[321].
[12]At [488]. We were not told whether the parties had advanced that process pending the outcome of the appeal and the cross-appeal.
Ms Luo and JJQPL challenge, on their cross‑appeal, the finding that W&L has a beneficial interest in any of the disputed properties under resulting or constructive trusts. They say there was no express or implied agreement between the parties that W&L would have an interest in any of these properties. They say that to the extent the purchase and development of these properties may have been financed by funds originating from W&L, the withdrawal of those funds should be characterised as Ms Luo’s drawings on her current account. They emphasise that W&L was at all times solvent and say that Ms Luo was entitled to draw on her current account. Their notice of cross‑appeal did not challenge the Judge’s rejection of their affirmative defences, though they raised defences of estoppel and a lack of clean hands in their written submissions.
W&L’s second and third causes of action: breach of directors’ duties
The Judge found that Ms Luo had breached the pleaded Companies Act duties. She had breached the duties in ss 131 (to act in good faith and in what she believed to be the best interests of W&L) and 133 (to exercise powers for a proper purpose) by using W&L’s funds for the benefit of herself, JJQPL and KPIL, by causing W&L to provide guarantees of her personal loans and by doing all this without proper documentation.[13] She, being the sole director of the company, had also breached the duty in s 194 to keep accounting records that correctly recorded the transactions of W&L.[14]
[13]At [354]–[362].
[14]At [366]–[376].
The Judge also found that Ms Luo had breached her fiduciary duties to W&L. The Judge said Ms Luo breached her fiduciary duty to act in good faith and in W&L’s interests because she had caused W&L to transfer money, borrow money and guarantee loans for the benefit of herself, JJQPL and KPIL.[15] The Judge said Ms Luo breached her fiduciary duty not to profit personally from her position and not to allow conflicts of interest to arise.[16]
[15]At [378].
[16]At [379]. This finding appears to have been based on the same facts that grounded the finding of breach by Ms Luo of her fiduciary duty of good faith.
The Judge said that declarations were “able to be made” in respect of those findings of breach.[17] However, the Judge did not make any such declarations.[18] The Judge said that determination of whether any further orders could or should be made (for the taking of accounts, that Ms Luo compensate W&L for any losses caused by her breaches and/or that Ms Luo account to W&L for any profit made as a result of her breaches) would need to await the taking of accounts.[19]
[17]At [380].
[18]The Judge made declarations of trust (on W&L’s first cause of action) but did not make any other declarations: at [486].
[19]At [380].
Ms Luo’s cross‑appeal challenges the Judge’s findings that she breached her statutory and fiduciary duties as a director.
W&L’s alternative causes of action
Given her finding that W&L had a beneficial interest under a resulting or constructive trust in the five disputed properties claimed by W&L, the Judge did not have to determine any of W&L’s alternative causes of action.[20]
Mr Jin’s cause of action against KPIL for a share of Knox Street
[20]At [485(b)].
Mr Jin alleged that KPIL held a share of Knox Street on resulting trust for him on the basis that he contributed $50,000 to the purchase price of the property. The Judge said that without Mr Jin’s payment, the property could not have been purchased and there was therefore a presumption in favour of Mr Jin that his payment was made with the intention that he would hold a beneficial interest in Knox Street.[21] However, the Judge held this presumption was rebutted because she found Ms Luo’s explanation for the payment — that it was simply the repayment of money Mr Jin already owed her — to be the more credible. It followed that Mr Jin did not have an interest in Knox Street by way of a resulting trust.[22]
[21]At [299].
[22]At [302]–[308].
Given that finding, it was not necessary for the Judge to consider KPIL’s affirmative defences of laches and a lack of clean hands. However, the Judge dealt with laches and clean hands without differentiating between the first and fifth causes of action (W&L’s and Mr Jin’s respective claims for constructive or resulting trusts). As noted, the Judge rejected both defences.[23]
[23]At [315] (laches) and [318]–[321] (clean hands).
Mr Jin appeals the Judge’s finding. He says the Judge erred in finding that the presumption in his favour had been rebutted. The respondents did not file any notice seeking to support the finding on an alternative ground, but their written submissions raised defences of estoppel and a lack of clean hands.
Ms Luo’s counterclaim for repayment of various advances
Ms Luo’s counterclaim for repayment of various advances split those advances into several categories. The Judge adopted those categories in her judgment. We need address only four of them.
The first category comprised advances allegedly made by Ms Luo or W&L to Mr Jin to cover repayments of a loan secured by a mortgage over a property owned by Mr Jin in St Lukes, Auckland (St Lukes advances). The Judge found that the St Lukes advances to Mr Jin totalling $41,546.69 “[were] able to be recovered”.[24] The Judge did not say which of Ms Luo or W&L had made those advances (or, if both, in what amount), nor which of them could recover the advances from Mr Jin.
[24]At [395].
The second category concerned advances totalling $61,500 to Tian Hong Wang, a business partner of Mr Jin’s father (Wang advances). The Judge was satisfied that the Wang advances were made at Mr Jin’s direction and that either Ms Luo or W&L could recover them from Mr Jin.[25] The Judge said that “[w]hether the debts are owed to W&L or Ms Luo will need to await the final accounting exercise”.[26]
[25]At [407] and [409].
[26]At [409].
The third category consisted of advances to Mr Jin totalling $236,993.10 in relation to a property on Farnworth Avenue, Rotorua (Farnworth advances). The advances were allegedly made by W&L ($161,578.94) and Ms Luo ($75,414.16).[27] The Judge found that Mr Jin was indebted to W&L and Ms Luo for the Farnworth advances, and that judgment should be entered in favour of W&L and Ms Luo.[28] The Judge added:[29]
In respect of W&L, this can be taken into account in the final accounting between the parties and it may be that the debt owed to Ms Luo personally by Mr Jin can be taken into account as part of this process as well.
[27]At [420].
[28]At [438].
[29]At [438].
At the end of the judgment, the Judge said that the quantum of the successful counterclaims “will also need to be crystalised by the taking of accounts”.[30]
[30]At [487].
Mr Jin appeals against the Judge’s findings with respect to the St Lukes advances, Wang advances and Farnworth advances. He says, for various reasons, that he is not liable to repay any of these advances.
A fourth category was advances allegedly made to Ms Xia, Mr Jin’s mother (the Xia advances). These totalled $12,770.02, with $8,685.05 being advanced by W&L and $4,085.97 by Ms Luo.[31] The Judge held that these advances did not benefit Mr Jin. Rather, they benefited Ms Xia. Ms Luo’s counterclaim in respect of the Xia advances therefore failed.[32]
[31]At [444].
[32]At [450].
Ms Luo cross‑appeals against the Judge’s dismissal of her claim for repayment of the advances to Ms Xia. She says these advances were made at Mr Jin’s request and so he is liable to repay them. Accordingly, they should form part of the taking of accounts.
As an aside, we observe that Ms Luo brought this counterclaim (in respect of all four categories) partly on behalf of W&L. To that extent, it was a derivative claim. We are unsure whether Ms Luo obtained leave to bring such a derivative claim. However, Mr Jin does not appear to have taken any issue with this in the High Court and he did not raise any issue with it in this Court. It is therefore unnecessary for us to consider it further.
Ms Luo’s counterclaim for Mr Jin’s breach of a partnership or joint venture agreement
On this counterclaim the Judge considered the main issue was whether Mr Huang became involved in Chamberlain Road (with the expectation of being a partner in that venture) without Ms Luo’s knowledge.[33] The Judge was satisfied that, while Ms Luo was aware that Mr Jin had dealings with Mr Huang, she knew nothing of any ownership structure for Chamberlain Road other than sharing equally in it with Mr Jin.[34]
[33]At [458].
[34]At [476].
The Judge held there was a partnership agreement between Mr Jin and Ms Luo. She found that Mr Jin breached that agreement by involving Mr Huang as a co‑owner of Chamberlain Road without Ms Luo’s knowledge. The effect of the breach was to reduce Ms Luo’s share in that property from 50 per cent to 25 per cent.[35] The Judge said the quantum of this counterclaim would need to await the taking of accounts.[36] The Judge did not make any finding in respect of the claim that Mr Jin had also breached a fiduciary duty.[37]
[35]At [478].
[36]At [478] and [487].
[37]At [478].
Mr Jin appeals against this decision. He challenges the finding that he breached the terms of his agreement with Ms Luo.[38] In particular, he says the Judge erred in finding that Ms Luo did not know of Mr Huang’s expectation of an ownership interest in Chamberlain Road until early February 2014.
[38]Mr Jin’s written submissions said there was also a challenge to the Judge’s finding of a partnership agreement. However, at the hearing the focus was on the terms of the agreement (rather than its character) and whether any terms were breached.
Ms Luo does not, on her cross‑appeal, seek to persuade us that the Judge should also have found that Mr Jin breached a fiduciary duty.
Decisions relevant to Ms Luo’s current account
The Judge made two decisions that are relevant to the state of Ms Luo’s current account with W&L. Both were noted in our narrative of events. First, the Judge decided that Ms Luo had been adequately compensated for her work in managing Peachgrove Road.[39] Secondly, the Judge declined to find that the $220,000 payment made by Mr Wu towards the purchase of Peachgrove Road was made on Ms Luo’s behalf and should be credited to her.[40] These decisions will affect the taking of accounts that the Judge contemplated would follow her interim judgment on liability. Ms Luo challenges both decisions on her cross‑appeal.
Issues
[39]At [81].
[40]At [80].
The parties were essentially agreed on the issues arising on the appeal and the cross‑appeal. We will address them in the following order:
(a)Does W&L have a beneficial interest in Nicks Way, Robinson Avenue, Seddon Road, Radnor Street and Victoria Street by way of constructive or resulting trusts?
(b)Does KPIL hold a share of Knox Street on resulting trust for Mr Jin?
(c)Did Ms Luo breach her duties as a director of W&L?
(d)Is Mr Jin liable to repay the St Lukes advances, Wang advances and Farnworth advances to W&L and Ms Luo?
(e)Is Mr Jin liable to repay the Xia advances to W&L and Ms Luo?
(f)Did Mr Jin breach the agreement with Ms Luo in relation to Chamberlain Road?
(g)Has Ms Luo been adequately compensated for her work in managing Peachgrove Road?
(h)Was the $220,000 payment by Mr Wu towards Peachgrove Road made on Ms Luo’s behalf?
Mr Jin said that an additional issue was whether the Judge should have drawn an adverse inference against Ms Luo as a result of her not calling Mr Lee as a witness. We do not consider this is a separate issue. Rather, it is something we address as we determine the above issues, to the extent it is relevant.
The burden is on the party challenging the Judge’s decision on an issue to show that the Judge erred, in accordance with the standard outlined by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar.[41]
Does W&L have a beneficial interest in Nicks Way, Robinson Avenue, Seddon Road, Radnor Street and Victoria Street by way of constructive or resulting trusts?
[41]Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4]–[5], [13] and [16].
In assessing W&L’s claims for constructive or resulting trusts over the disputed properties, the Judge began by identifying the relevant legal principles.[42] For constructive trusts, she said the essential elements had been set out by Tipping J in Lankow v Rose:[43]
1. Contributions, direct or indirect, to the property in question.
2. The expectation of an interest therein.
3. That such expectation is a reasonable one.
4. That the defendant should reasonably expect to yield the claimant an interest.
If the claimant can demonstrate each of these four points equity will regard as unconscionable the defendant’s denial of the claimant’s interest and will impose a constructive trust accordingly.
[42]Judgment under appeal, above n 1, at [193]–[200].
[43]Lankow v Rose [1995] 1 NZLR 277 (CA) at 294.
As to resulting trusts, the Judge said:[44]
[197] In Chang v Lee, the Court of Appeal set out the rationale behind resulting trusts:
[20] The rationale for a resulting trust is that, absent evidence to the contrary, the law presumes a person intends to retain the beneficial ownership of funds which he or she advances towards the purchase price of a property. The legal owner holds title to the property subject to the payer’s equitable interest. In this way a trust results to the payer to the extent of his or her contribution. Evidence which might contradict or rebut the presumption is traditionally of an intention to gift or of consideration in the nature of satisfaction of independent indebtedness …
[198] In other words, where a person has contributed to the purchase price of a property, they are presumed to have done so with the intention of holding a beneficial interest in the property. This presumption can be rebutted if the evidence indicates the contribution was intended to be a gift or a loan, but in the absence of such evidence, the presumption will hold. The weight of the presumption, and therefore the evidence required to rebut it, will depend on the facts of the case.
[44]Citing Chang v Lee [2017] NZCA 308, [2017] NZAR 1223; and Crampton-Smith v Crampton-Smith [2011] NZCA 308, [2012] 1 NZLR 5 at [37] and [41] (footnotes omitted).
In this Court, no party took any issue with these statements of principle. The disputes were about the underlying facts and how the principles applied to them. We are content to apply the principles without further elucidation.[45]
Nicks Way
[45]As the Judge noted, the principles in Lankow v Rose, above n 43, although developed in a relationship property context, were used by this Court in a commercial context in Li v 110 Formosa (NZ) Ltd [2020] NZCA 492 at [136]: judgment under appeal, above n 1, at [194], n 7.
Ms Luo is the registered owner of Nicks Way. She purchased it from Mr Jin’s then wife, Linhui Zheng, in September 2011, when it was bare land. At that time Ms Luo was pregnant with her first child. She engaged an architect to design a house, which was subsequently built on the property. From February 2012, Ms Luo, Mr Lee and their family lived there. Since their separation, Mr Lee has remained living there.
Ms Luo’s position was that she purchased the property as an intended home for her family and that it was her separate property. Mr Jin contended, by contrast, that Nicks Way was held on trust for W&L.
The Judge acknowledged that Ms Luo had personally raised two loans from the BNZ to purchase the land and to then fund the construction of the house.[46] But she said the evidence established that W&L made several contributions to Nicks Way. Primarily, those contributions were in the form of payments made by W&L, totalling about $534,000, to repay Ms Luo’s BNZ loans.[47]
[46]Judgment under appeal, above n 1, at [213].
[47]At [214]–[217].
Mr Kohler KC, for Ms Luo, submitted to the Judge that Ms Luo did not expect W&L would have an interest in Nicks Way and her understanding should carry great weight as she was the sole director of W&L. The Judge considered, however, that Ms Luo’s personal view should not be given any significant weight, given the “obvious conflict of interest involved”.[48] The Judge said the evidence of W&L’s financial contributions to Nicks Way gave rise to an inference that W&L had an expectation of an interest in Nicks Way. The Judge rejected Ms Luo’s argument that those contributions could be reflected in W&L’s accounts as drawings on Ms Luo’s current account, as there were no resolutions to support their characterisation as drawings.[49]
[48]At [219].
[49]At [219].
The Judge noted some matters that might suggest it was unreasonable for W&L to expect to have an interest in Nicks Way. Ms Luo had designed the house that was built on the property without the involvement of Mr Jin. The house was designed as, and became, Ms Luo and Mr Lee’s family home.[50] But the Judge said this did not mean that W&L could not have an interest in the property because “[a] property can be held on trust for a company and also be used day‑to‑day as a family home for one of the shareholders of that company”.[51]
[50]At [223].
[51]At [224].
The Judge also acknowledged that the Declaration of Trust did not mention Nicks Way in W&L’s accounts. She considered this was not determinative, however, as Mr Jin did not seek independent advice before signing the Declaration and Ms Luo was frequently intermingling funds between entities without respect for their separate legal personality.[52]
[52]At [226].
The Judge concluded that although Nicks Way was a family home for Ms Luo after purchasing it in 2011, W&L’s financial contributions towards the property “gave rise to a reasonable expectation and Ms Luo should reasonably be expected to yield an interest in the property to W&L” by way of constructive trust.[53] She said that if she had not been satisfied of a constructive trust, she would have been satisfied that a resulting trust in favour of W&L had been established.[54]
[53]At [227].
[54]At [227]–[228].
For the respondents, Mr Kohler’s written submissions in relation to the Judge’s findings of constructive or resulting trusts (in respect of all properties claimed by W&L) consisted primarily of several broad submissions under six headings. Mr Kohler said that “[t]he main points above relate to all 5 properties generally”. He then made a submission specific to Nicks Way.
We begin with Mr Kohler’s broad submissions or “main points”. These do not directly engage with the Judge’s reasons for finding a constructive trust over Nicks Way (or with her reasons for finding a constructive or resulting trust over the other properties). The submissions therefore do not clearly explain how the Judge is said to have erred. Nonetheless, we discern three points from the broad submissions that might conceivably show error.
First, Mr Kohler submitted that the parties did not agree that every property that Ms Luo or Mr Jin owned or acquired would by default become a property of their partnership or a property in which W&L had a beneficial interest. For a property to become a W&L project, Mr Jin and Ms Luo had to agree to that. A property did not become a W&L property simply because funds were borrowed from W&L or because W&L provided collateral as security for a loan.
We accept that, generally speaking, for a property to become one in which W&L had a beneficial interest, Mr Jin and Ms Luo had to agree to that. But that general position does not exclude the possibility of a constructive (or resulting) trust arising from the particular circumstances relating to a property, even in the absence of agreement. This is because constructive trusts are not dependent (or necessarily dependent) on the parties’ intentions or agreement.[55]
[55]Commonwealth Reserves I v Chodar [2001] 2 NZLR 374 (HC) at [36]. See also Chris Kelly and others Garrow and Kelly Law of Trusts and Trustees (8th ed, LexisNexis, Wellington, 2022) at [15.1], citing Lynton Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2020) at [8-002].
Secondly, Mr Kohler repeated the submission made in the High Court that in determining W&L’s intention (or expectation), the relevant intention was largely Ms Luo’s, given that she was the sole director of the company. He said that Ms Luo did not intend W&L to have an interest in any of the disputed properties in which it claims an interest.
Mr Kohler’s submission raised an issue of attribution (though he did not put it in those terms). In determining whether W&L had an expectation of an interest in Nicks Way (or any claimed property), should Ms Luo’s expectations be attributed to W&L? The parties did not make any submissions on the legal principles governing that issue. In the absence of submissions, we prefer not to make any definitive statement of principle. It suffices to say that we find (for reasons we explain in a moment) that the financial contributions towards Nicks Way were made by W&L rather than by Ms Luo using her drawings from W&L. We also find that Ms Luo breached her duties to W&L by using its funds in that way. In those circumstances, Ms Luo’s expectations should not be attributed to W&L. To attribute Ms Luo’s expectations to W&L would be to allow her to take advantage of her own wrong and would mean that W&L (or any principal in W&L’s position) could never vindicate its rights. General agency law principles support our approach.[56]
[56]Peter Watts and FMB Reynolds Bowstead & Reynolds on Agency (23rd ed, Sweet & Maxwell, London, 2024) at [8-208(4)] and [8-214].
The Judge took a similar approach, saying Ms Luo’s personal views should not be given any significant weight because of “the obvious conflict of interest involved”. We would put it more firmly: in the circumstances, Ms Luo’s personal views (or expectations) on this matter should not be attributed to W&L at all.
Thirdly, Mr Kohler emphasised that at all times W&L was solvent. He said that if money was borrowed or advanced from W&L and then used for personal purposes by either Ms Luo or Mr Jin, that should be regarded as a matter of drawings and current accounts. He said that Ms Luo’s belief was that if her current account with W&L was in credit, she was entitled to take money out when she wished. Mr Kohler said that, as a matter of law, when a shareholder’s current account is in debit the debt is one payable on the company’s demand.[57] He submitted that the converse is also true: if a shareholder’s current account with a company is in credit, the shareholder can obtain payment on demand.
[57]Citing Mizeen Painters Ltd (In Liq) v Tapusoa [2015] NZHC 826, [2016] NZAR 423 at [24]–[25].
It is not necessary for us to decide whether a shareholder current account in credit is payable on demand. The difficulty for the respondents is that we were not taken to any material showing that the financial contributions towards Nicks Way sourced from W&L were regarded or treated by Ms Luo (who at all times was responsible for keeping W&L’s accounting records) as drawings against her current account. For example, W&L’s financial statements for the years ended 31 March 2012, 31 March 2013 and 31 March 2014 do not show any drawings by Ms Luo on her current account. It is not open to Ms Luo to say retrospectively that the contributions made by W&L should be regarded as drawings on her current account. To allow Ms Luo to do so would mean she could, using the benefit of hindsight, decide to treat W&L’s contributions either as her drawings (if there was a gain in the value of the property which she wished to enjoy) or as an investment by W&L (if there was a loss in the value of the property which she wished to foist on W&L). We find, therefore, that the financial contributions towards Nicks Way sourced from W&L were contributions made by W&L.
We turn now to the submission that Mr Kohler made specific to Nicks Way. He said the preponderance of the evidence pointed against there being an expectation of W&L having an interest in Nicks Way. We consider the evidence Mr Kohler relied on can be grouped into two categories.
The first category relates to the nature of the property and its purchase and use. Mr Kohler said the property is residential, it was purchased by Ms Luo under a standard agreement for sale and purchase, and Ms Luo engaged an architect and a builder to construct a home on the property which then became the family home. These are matters that might be relevant if the Judge’s finding was that the parties had agreed to invest in and develop Nicks Way. Ms Luo might then say that it was improbable that the parties would reach such an agreement in relation to a property that was to be her family home (in contrast to, say, a commercial property). But the matters are irrelevant to the Judge’s finding of a constructive trust, as that finding was not based on the parties’ agreement. Rather, it was based on W&L’s substantial financial contributions towards Nicks Way.
The second category of evidence concerns how the property was treated by Mr Jin and Ms Luo. Mr Kohler said that Mr Jin did not protest Ms Luo’s occupation of Nicks Way, the property was not recorded in W&L’s financial statements and the property was omitted from the Declaration of Trust. There is nothing in the first point, as Ms Luo’s occupation was not inconsistent with the property being held on trust for W&L. As to the second point, Ms Luo, not Mr Jin, was responsible for W&L’s accounting records and arranged for the preparation of its financial statements. As to the Declaration of Trust, the primary purpose of this document was to record Ms Luo’s agreement that she held 50 per cent of the shares in W&L on trust for Mr Jin and that she agreed to transfer those shares to him. The Declaration did not purport to exhaustively record all the properties in which W&L had invested.
For all these reasons, we see no error in the Judge’s finding that W&L has a beneficial interest in Nicks Way by way of a constructive trust.
Robinson Avenue
Robinson Avenue consisted of three separate properties. We can deal with them collectively, and briefly.
Ms Luo was the registered owner of Robinson Avenue. She subsequently sold the three properties. The issue is whether W&L has a beneficial interest in the sale proceeds by way of a constructive trust.
The Judge found there was a constructive trust, for two main reasons. First, Ms Luo had authored several documents, some of which she provided to Mr Jin, that were consistent with an intention that W&L had an interest in Robinson Avenue: the letter to her lawyer, Mr Guo, her correspondence with the IRD and the Bookkeeping Record. Some of the documents stated that she held the properties on behalf of, or on trust for, W&L.[58] Secondly, there was sufficient evidence to establish it was more probable than not that W&L made contributions to the properties.[59]
[58]Judgment under appeal, above n 1, at [113]–[115] and [241].
[59]At [243].
Mr Kohler did not make any specific submissions about the Judge’s findings with respect to Robinson Avenue. His only submissions were those that we have described, when dealing with Nicks Way, as the broad submissions. What we have said there about the broad submissions applies also to Robinson Avenue. They do not persuade us that there was any error in the Judge’s finding.
Seddon Road
Ms Luo signed an agreement to purchase Seddon Road, in her name, in February 2013. W&L paid the deposit of $30,000. The BNZ lent $610,000 to Ms Luo so that she could settle the purchase. As security for the loan, mortgages were granted to the BNZ over Nicks Way (in which we have found W&L had a beneficial interest) and Seddon Road. W&L also provided an unlimited guarantee of Ms Luo’s obligations under the loan.
Unsurprisingly in these circumstances, the Judge was satisfied that W&L had made financial contributions to Seddon Road.[60] In addition, the Judge referred to documents that Ms Luo had sent to Mr Jin after purchasing the property that were consistent with W&L having an interest in Seddon Road: the Bookkeeping Record, a rental assessment for the property from the property manager and an email containing the valuation report for the property. The Judge rejected as not credible Ms Luo’s claim that she sent these documents for the purpose of soliciting an investment from Mr Jin. The Judge considered that if Ms Luo had purchased Seddon Road with the intention that it would be her own property, there would have been no reason for this information to be shared with Mr Jin.[61] The Judge concluded that there was a constructive trust over the property in favour of W&L.[62]
[60]At [261].
[61]At [257]. See also [129(b) and (d)].
[62]At [262].
Mr Davies emphasised the evidence of Emily Huang (Mr Huang’s daughter) and her husband, Mr Ji, of a lunch in mid‑2012 at which it was said Ms Luo acknowledged Mr Huang’s interest in Chamberlain Road. We consider this evidence did not advance matters for Mr Jin. Ms Huang and Mr Ji each relied on what Mr Lee (not Ms Luo) said at the lunch. Further, their evidence was that Mr Lee thanked Mr Huang for his continued investment in the property. The reference to “investment” was equivocal, given that it was not in dispute that Mr Huang had in April 2012 lent $222,388 to W&L for the development of Chamberlain Road.
Mr Davies also referred us to the manner in which Ms Luo had recorded, in W&L’s accounts, payments that Mr Huang had made to W&L. She recorded the April 2012 payment of $222,388 as a “term loan” whereas later payments in November 2012 were recorded as credits to the shareholders’ current account. Given the shareholders were Ms Luo and Mr Jin (not Mr Huang) this difference in treatment does not support Mr Jin’s case.
We do not accept that any adverse inference arose from Ms Luo not calling Mr Lee as a witness on this issue. First, as we have already said, we do not consider that Mr Lee was necessarily in Ms Luo’s camp. Secondly, each party was making competing contentions on the issue. Mr Jin said, as part of his claim that Ms Luo breached her director’s duties, that Ms Luo knew of Mr Huang’s ownership interest in Chamberlain Road. Ms Luo said, as part of her claim that Mr Jin had breached his agreement with her, that Mr Huang had, without her knowledge, become involved in Chamberlain Road expecting to be a partner. In these circumstances it was just as natural for Mr Jin as for Ms Luo to call Mr Lee. His absence should therefore not give rise to an adverse inference against Ms Luo (or Mr Jin) on this issue.
Accordingly, we see no error in this part of the judgment.
Has Ms Luo been adequately compensated for her work in managing Peachgrove Road?
The Judge accepted that Ms Luo had managed Peachgrove Road from mid‑2013 but also found that she had been adequately compensated, by way of salaries over the period 2012–2016, for that task. Ms Luo says the Judge erred in making this finding because the salaries were for a limited period only and were not in fact paid to or received by Ms Luo.
Salaries were credited to Ms Luo’s current account with W&L in the years ending 31 March 2012 ($33,344), 31 March 2013 ($33,196, plus wages of $33,000), 31 March 2015 ($108,000) and 31 March 2016 ($97,000). We are not aware of any challenge by Mr Jin to the validity of these credits and there was no decision by the Judge invalidating them. That means that Ms Luo is, to the extent that her current account remains in credit, entitled to draw upon those credits (subject to any solvency considerations). She has therefore been compensated to the extent of those salaries and wages. Whether or not she has yet drawn on the credits is irrelevant.
Mr Kohler also submitted that Ms Luo had continued to manage Peachgrove Road and the other properties since 2016. He said that Ms Luo should be compensated for this ongoing work. But Ms Luo has never made a claim for such compensation. She did not credit any salary or wages to her current account after the 2016 financial year. She did not ask Mr Jin to agree to such a credit. And her pleadings did not include any claim for compensation for her work on Peachgrove Road or any other property. The Judge was therefore presented with a dispute about compensation in which Ms Luo’s only claim was that represented by the amounts she had credited to her current account in the period 2012–2016. We see no basis on which we can, for the first time, consider a broader claim for compensation by Ms Luo.
We therefore see no error in the Judge’s decision on this point.
Was the $220,000 payment by Mr Wu towards Peachgrove Road made on Ms Luo’s behalf?
At trial there was a dispute as to the extent of the financial contributions made by each of Mr Jin and Ms Luo to the purchase of Peachgrove Road. In particular, there was a dispute about whether a payment of $220,000 made by a third party, Mr Wu, towards the purchase was made on behalf of Ms Luo or was made largely (to the extent of $217,900) on behalf of Mr Jin.
As we noted earlier, the Judge considered there was no independent evidence on this point and declined to find that Mr Wu’s payment was a credit on behalf of either Mr Jin or Ms Luo.[114] Mr Jin did not appeal this aspect of the judgment, but Ms Luo did on her cross‑appeal. She says the Judge should have found that Mr Wu’s $220,000 payment was a contribution made on behalf of her.
[114]At [80].
Ms Luo’s pleadings did not directly raise this issue. It seems the issue was raised only through her brief. In any event, Ms Luo bore the burden of proving that Mr Wu made the payment on her behalf.
Mr Wu’s payment was made directly to the solicitors who were acting on the purchase of Peachgrove Road. Ms Luo said that Mr Wu owed money to her parents and her parents arranged for him to pay the $220,000 towards the purchase. However, as the Judge noted, this was inconsistent with the account that Ms Luo had given of the origins of the $220,000 in an earlier affidavit.[115] Further, this was an issue on which we would have expected Ms Luo to call Mr Wu as a witness to confirm that he had made the payment on her behalf. Ms Luo did not call Mr Wu and did not explain why she had not.
[115]At [75(b)].
Mr Kohler’s submissions on this issue were directed solely towards explaining why the Judge was correct to reject Mr Jin’s contention that Mr Wu made the payment on his behalf. Mr Kohler did not make any submissions as to why, despite the matters to which we have just referred, the Judge should have found that the payment was made on Ms Luo’s behalf. His submissions assumed that if Mr Jin’s account was rejected, then Ms Luo’s account should be accepted. We consider that assumption was incorrect. Ms Luo had to prove that Mr Wu made the payment on her behalf, and to do so it was not sufficient for her to show that Mr Jin’s account should be rejected.
In these circumstances, Ms Luo has not satisfied us that the Judge made any error in declining to find that Mr Wu made the payment on Ms Luo’s behalf.
Costs
Success (or a lack thereof) has been shared equally on the appeal and the cross‑appeal. Except for one matter, costs should lie where they fall. The exception concerns the scheduling fee of $2,700, which was paid by Mr Jin. Given that the hearing also involved Ms Luo’s cross‑appeal, she should pay half that fee to Mr Jin.
Result
The appeal is dismissed.
The cross‑appeal is allowed in respect of Ms Luo’s counterclaim for the Xia advances. We otherwise dismiss the cross‑appeal.
Ms Luo is to pay disbursements of $1,350 to Mr Jin.
Solicitors:
Meredith Connell, Auckland for Appellants
O’Sheas Law, Hamilton for Respondents
0
3
0