Jin v Luo

[2023] NZHC 2417

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-419-269

[2023] NZHC 2417

BETWEEN

QIAN JIN

First Plaintiff

W&L LIMITED (3324069)

Second Plaintiff

AND

LIN LUO

First Defendant

KNOX PROPERTY INVESTMENTS LIMITED (4538427)

Second Defendant

JJ QUALITY PROPERTIES LIMITED (5023300)

Third Defendant

Hearing:

9-16 August 2021; 22 & 30 March 2022

Appearances:

K H Morrison and T Y Yao for the Plaintiffs

G J Kohler KC and A M Cook for the Defendants

Judgment:

31 August 2023

INTERIM JUDGMENT OF HARLAND J ON LIABILITY

Solicitors:           Meredith Connell, Auckland

O’Sheas Law Ltd, Hamilton

Counsel:            G J Kohler KC, Auckland

JIN v LUO [2023] NZHC 2417 [31 August 2023]

Introduction  1

Matters of background and context  4

The parties  4

The properties  14

The claims, defences and counterclaims  20

The claims  20

Alternative causes of action  35

Defences and counterclaims  44

The witnesses  49

The relevant documents  52

Issues to be determined  55

The property purchases – a timeline  56

Property purchases in 2011  59

Peachgrove Road  59

8 Nicks Way  84

Chamberlain Road  88

Properties purchased and events in 2012  102

Properties purchased and events in 2013  118

Properties purchased and events in 2014  159

Properties purchased and sold, and events in 2015  175

Properties sold and developed in 2016 and 2017  181

Loan summary  187

The claims  188

First and fifth causes of action - properties held on trust  189

Legal principles  193

The defence  201

Nicks Way  206

Robinson properties  230

Seddon Road  246

Radnor Street  263

Victoria Street  279

12 Knox Street  294

Alternative defences  309

Limitations and laches  310

Clean hands  316

No leave to bring claims  322

Property interests to be created in writing  323

Proceedings already settled  324

Second and thirds causes of action – breach of duties  327

Legal principles  330

The arguments  342

Discussion  350

Onus  350

Sections 131 (good faith and in best interest) and 133 (proper purpose)       353

Section 194 (accounting records)  364

Fiduciary duties  377

Counterclaims  381

Debt  382

Advances to Mr Jin  386

St Lukes  388

Yan Zhang  396

Tian Hong Wang  400

Repayment  410

Advances for 16 Farnworth Avenue  415

Advances for 164 Cumberland Road  439

Advances to Zhenxiao Xia  444

Breach of agreement / fiduciary duties by Jin  451

Loss caused by freezing orders, lodging of caveats  479

Summary of findings  485

Remedies  486

Costs  489

Introduction

[1]    In 2011, alive to the opportunities the market presented, Mr Jin and Ms Luo decided to enter a business relationship to invest in property together via W&L Ltd (W&L), a company incorporated for that purpose. This proceeding arises because of the breakdown of their business relationship. Its complexity arises from the fact that there are few documents to record the extent of the property investment business they were undertaking. As a result, properties one says were purchased for their own separate benefit, the other claims were part of their joint business. The key issue is, therefore, which properties are part of their joint business venture and which are not.

[2]    The proceeding comprises a derivative action including claims of constructive and resulting trust and breaches of director’s and fiduciary duties, as well as alternative claims alleging a right to subrogate, that certain funds advanced to the business were a loan repayable on demand, or that such funds are claimable as monies had and received. Counterclaims and affirmative defences are pleaded. Declarations are sought, as well as orders for sale. Part of the relief claim by both parties is an inquiry and/or accounting to quantify any alleged loss, but counsel agree this should await the outcome of this judgment on liability.

[3]    I suggested to counsel that this case was “factually dense”. They did not disagree. The writing of the judgment has proved all of us correct, at least in this respect. A roadmap is necessary. I therefore commence this judgment with an overview of the various parties and entities involved, as well as the properties in issue, before providing a summary of the claims and defences. I then undertake my specific analysis in relation to each of the properties in issue.1 There is an element of duplication involved in this approach, but it is needed to cement the narrative that underpins the analysis.

1      Seven properties are the subject of the plaintiffs’ claims, but only one of these concerns the first plaintiff. One property is also the subject of the first defendant’s counterclaim.

Matters of background and context

The parties

[4]    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 to learn English. She obtained an accounting degree from Massey University in 2007 and went on to complete a one- year graduate diploma in accounting from Waikato University. She became a New Zealand citizen at the end of 2017.

[5]    Ms Luo met David Lee in 2004 when she was living in Auckland. When Mr Lee moved to Hamilton in 2007, Ms Luo went with him, and they eventually married. They have three children together but separated in 2018. These matters are mentioned for two reasons. Firstly, because Mr Lee was involved in many of the decisions about the various property investments entered into by the parties, either jointly or separately, but he was not a witness in this proceeding. Secondly, because the properties purchased as investments were developed and, in some cases, sold between 2011 and 2017 when the children of the relationship were born, it was a very busy time for Ms Luo.

[6]    In 2005, Mr Jin’s father, Shanmei Jin (Mr Jin Snr), came to New Zealand. He met Mr Lee and they decided to undertake a joint venture investing and developing property projects together. They used a company, Create and Holdings Ltd (C&H), and other third parties to hold the properties they developed and invested in.

[7]    Between 2006 and 2008, Mr Jin lived with Mr Lee in Hamilton. During this time, Mr Jin began learning about property investment from Mr Lee, who was his mentor.

[8]    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 but owned by others as part of their business were sold. Mr Jin contends that these sale proceeds, amounting to $217,900, were put into his and Ms Luo’s

property investment business. Ms Luo became involved because Mr Lee’s financial position was precarious.

[9]    Mr Jin is the plaintiff only in respect of the fifth cause of action, in which he claims an interest under a resulting trust in a property at 12 Knox Street, Hamilton (Knox Street), owned by Knox Property Investment Ltd (KPIL). He is, however, interested in the outcome of the remaining causes of action by virtue of his shareholding in the second plaintiff.

[10]   The second plaintiff is W&L. Mr Jin and Ms Luo agreed that W&L would be the vehicle through which they would undertake their joint property investments, with the understanding that both would be equal shareholders in recognition of their contributions to its business. The plan was that Mr Jin would contribute the money, while Ms Luo would either do or arrange for the work necessary to advance the business to be done. Both Mr Jin and Ms Luo were free to undertake their own personal property investments over this time.

[11]    W&L was incorporated on 21 March 2011. At the time, Mr Jin and Ms Luo were contemplating their first property investment together at 44 Peachgrove Road, Hamilton (Peachgrove Road), in respect of which funding was needed from a bank. However, because Mr Jin was not a New Zealand resident at the time, Ms Luo was appointed as the sole director of and shareholder in W&L. Achieving formal recognition of his shareholding took a long time and was a source of frustration for Mr Jin, but it has now occurred.

[12]   The second defendant, KPIL, was incorporated on 10 July 2013. Ms Luo is an equal shareholder with Chuan Jiang, who is also the sole director. As noted above, KPIL is the registered proprietor of Knox Street, the property which is the subject of the fifth cause of action and the only claim brought by Mr Jin.

[13]   The third defendant, JJ Quality Properties Ltd (JJQPL), was incorporated on 6 March 2014. Ms Luo has been the sole director and shareholder since its incorporation.   JJQPL is the registered proprietor of 6 and 8 Knox Street and 91–   95 Victoria Street, Hamilton (Victoria Street), and was the registered proprietor of 1A

Radnor Street, Hamilton (Radnor Street). The beneficial ownership of Victoria Street and the sale proceeds of Radnor Street are in dispute in these proceedings.

The properties

[14]   There are various properties referred to in evidence which form part of the pleaded case. They are introduced briefly at this point. Most of the properties are situated in Hamilton. However, one property, 8 Chamberlain Road, is situated in Massey, Auckland (Chamberlain Road), and the properties at Robinson Avenue and Farnworth Avenue are in Rotorua. It is agreed that two of the properties, Peachgrove Road (an apartment building which provided rental income) and Chamberlain Road (land which was subdivided into sections that were then sold), are owned by W&L and form part of Mr Jin and Ms Luo’s joint property investment business. The funding and financing of these properties is relevant to the claims where the source of the money obtained for Ms Luo’s purportedly personal property investments is disputed. These two properties are part of the second and third causes of action which allege breaches by Ms Luo of her director’s and fiduciary duties to W&L.

[15]   I next set out the chronological order in which the properties were purchased, followed by the same properties, as well as Peachgrove Road and Chamberlain Road, being referenced to the years in which they were purchased. I do this to indicate the level of activity that occurred over a relatively short period of time, which helps to explain how and why each property was leveraged.

[16]   The properties in which W&L claims a beneficial interest in chronological order of purchase are:

(a) 8 Nicks Way, Hamilton — a section purchased by Ms Luo from Mr Jin’s former wife in September 2011 for $240,000, upon which a house was built at a cost of $440,101.60. Ms Luo says it is her family home and her separate property;

(b) 32A, 32D and 32J Robinson Avenue, Rotorua — sections purchased by Ms Luo in March and May 2012, upon which three houses were built at a cost of $326,282.90 in respect of 32A, $292,685.84 for 32D, and

$350,009.02 for 32J — excluding financing costs. These properties were sold between October 2012 and August 2013 for $365,000, $347,000, and $450,000 respectively;

(c) 35 Seddon Road, Hamilton — a building comprising two three-bedroom units and one unit with eight fully furnished bedrooms each with a living area and a bathroom. This property was purchased by Ms Luo in early 2013 for $610,000 and refurbished and renovated over a two-year period at a cost of $140,221.10. It was purchased with the intention that the units and bedrooms be rented out to provide a source of income, which was what happened from February 2014 onwards. This property is now owned by KPIL;

(d) 1A Radnor Street, Hamilton — bare land upon which two units were built that became 18C and D Tisdall Street. They are referred to in this judgment as “Radnor Street”. These units were eventually owned by JJQPL but have been sold; and

(e) 6-8 Knox Street and 91-95 Victoria Street, Hamilton — a property comprising one building and a carpark in three titles which was extensively renovated over a three-year period at a cost of more than $4 million. It is owned by JJQPL. This property is referred to in this judgment as “Victoria Street”.

[17]   The property in which Mr Jin claims an interest is 12 Knox Street, Hamilton. This property was purchased in KPIL’s name in August 2013 for $700,000. Mr Jin claims he made a $50,000 contribution towards the purchase of the property, but Ms Luo contends this was a repayment of an earlier loan.

[18]   The periods of property investment activity referenced by the date of initial purchase by one of the parties to this proceeding but regardless of ownership were:

(a)in 2011, the Peachgrove Road, Chamberlain Road and Nicks Way properties;

(b)in 2012, the Robinson Avenue sections; and

(c)in 2013, the Seddon Road, Radnor Street, Knox Street and Victoria Street properties.

[19]    The use to which monies were put, provided either personally by the parties or others, are at the heart of the plaintiffs’ claims. These will be presented factually in this judgment in two ways - chronologically in the form of a detailed timeline in which the properties to which they relate are bolded for ease of reference, and in tabular form in respect of the funding for each property. The latter approach is taken because there were a number of lending entities involved and refinancing arrangements made that are not easy to follow. Without wanting to complicate matters but accepting that the agreed W&L properties (Peachgrove Road and Chamberlain Road) and the financing of them are part of the picture, reference to the arrangements for these properties is also required.

The claims, defences and counterclaims

The claims

[20]   Eight of the nine causes of action are brought by W&L as derivative actions. Some are alternative causes of action. I set them out in the following table:

Cause of Action	Defendant/s	Properties	Registered Proprietors	Relief
1. Constructive or resulting trust for W&L	Ms Luo JJQPL	Nicks Way Robinson Ave Seddon Rd Radnor St Victoria St	Ms Luo Ms Luo before sold Ms Luo JJQPL JJQPL	Declaration of Trust for W&L; Section 339 PLA orders for sale of: -     Nicks Way -     Seddon Rd -     Victoria St
ALTERNATIVE 4. Subrogation
ALTERNATIVE 6. Loan	Ms Luo	Nicks Way Robinson Ave Seddon Rd	Judgment in sum to be quantified
ALTERNATIVE 7. Money had and received

ALTERNATIVE 8. Loan	JJQPL	Radnor St Victoria St	Judgment in sum to be quantified
ALTERNATIVE 9. Money had and received
2. Breach of director’s duty and failing to keep accounting records re: W&L (ss 131, 133 & 194 Companies Act 1993)	Ms Luo	Nicks Way Peachgrove Rd Chamberlain Rd (or sale proceeds) Robinson Ave (or sale proceeds) Seddon Rd Radnor St (or sale proceeds) Victoria St	a)  Declaration b)  Taking of accounts
3. Breach of fiduciary duty to W&L	Ms Luo	Nicks Way Peachgrove Rd Chamberlain Rd (or sale proceeds) Robinson Ave (or sale proceeds) Seddon Rd Radnor St (or sale proceeds) Victoria St	a)  Declaration b)  Taking of accounts c)  Compensation
5. Resulting Trust	KPIL	Knox St	a)  Declaration of Trust for Jin b)  Order updating title c)  Taking of accounts

[21]   The first cause of action is brought by W&L as a derivative action against Ms Luo and JJQPL. It is claimed that the Robinson Avenue, Nicks Way and Seddon Road properties owned by Ms Luo, and the Radnor Street and Victoria Street properties owned by JJQPL, are held on constructive and/or resulting trust for W&L.

[22]   The relief sought in respect of each of property is a declaration that the property is or was held wholly or in part for W&L. In relation to Nicks Way, Seddon Road and Victoria Street, an order for sale under s 339 of the Property Law Act 2007 (PLA) is also sought.

[23]   The defendants deny that these properties were beneficially owned by W&L; rather, they say they were the separate property of either Ms Luo or JJQPL.

[24]   The second cause of action is a claim that Ms Luo breached ss 131, 133 and/or 194 of the Companies Act 1993 (Companies Act) by breaching her director’s duties and failing to keep accounting records correctly recording the transactions of W&L. The specifics of the alleged breaches are set out in paragraphs [74]–[78] of the Amended Statement of Claim.

[25]   This cause of action requires the financial transactions in respect of Nicks Way, Peachgrove Road, Chamberlain Road (or its sale proceeds), the Robinson Avenue properties (or its sale proceeds), Seddon Road, Radnor Street (or its sale proceeds) and Victoria Street to be considered.

[26]   The relief sought is a declaration that Ms Luo has breached her duties under ss 131, 133 and/or 194 of the Act. Consequential orders relating to the taking of accounts are to be determined at a subsequent hearing.

[27]Ms Luo denies any of the alleged breaches.

[28]   The third cause of action is a claim that Ms Luo breached her fiduciary duties to W&L in relation to the same properties referred to in [25] above. The specifics of the alleged breaches are set out in paras [74]–[77] of the Amended Statement of Claim.

[29]   A declaration is sought that Ms Luo has breached her fiduciary duties as director of W&L. Consequential orders relating to the taking of accounts and compensation are also sought in relation to W&L, both in respect of any current account adjustments required and any profits made, and for any assets or funds of W&L that Ms Luo allegedly misapplied or for losses caused, including the amounts payable under the Chamberlain judgment.2

[30]   If the Court does not accept that the properties referred to belong to W&L, then it is claimed that Ms Luo breached her fiduciary duties by misapplying W&L’s assets

2      Huang v Luo and W&L Limited CIV-2015-419-307.

through applying funds that belonged to W&L or that were obtained by using either assets of W&L as security or a guarantee by W&L in relation to the purchase, maintenance or improvement of the same properties. It is also claimed that Ms Luo has made use of W&L’s business opportunities for her personal benefit and profit.

[31]Ms Luo denies any breach of her fiduciary duties.

[32]   The fifth cause of action is the only cause of action that Mr Jin has brought in his personal capacity. The claim is against KPIL and relates to 12 Knox Street. Mr Jin contends there is a resulting trust in his favour for the proportion of his contribution towards the purchase price of Knox Street. This depends on whether I find the $50,000 Mr Jin paid towards the purchase of the property in May 2013 was a contribution by him to the property in terms of ownership or the repayment of $50,000 he had borrowed earlier from Ms Luo.

[33]   The relief sought is an order declaring that KPIL holds Knox Street on resulting trust for Mr Jin, that his ownership be recorded and that an account be made for any profits made on his share.

[34]KPIL denies any liability to Mr Jin.

Alternative causes of action

[35]   The fourth cause of action by W&L against Ms Luo and JJQPL is an alternative to the first cause of action. It is claimed that W&L is entitled to be subrogated to the mortgages over the properties which are the subject of the first cause of action and that this right of subrogation gives rise to an equitable charge over the properties to the extent of the mortgage payments. The relief sought is a declaration to that effect, as well as an order for sale under s 339 of the PLA and/or in equity, and that the proceeds of sale be applied in satisfaction of W&L’s respective interest in the properties.

[36]   The sixth cause of action by W&L against Ms Luo is an alternative to the first and fourth causes of action. It relates to Robinson Avenue, Nicks Way and Seddon Road. If I find that these properties do not belong to W&L, then W&L contends that the application by Ms Luo of any funds belonging to it to the purchase, maintenance

or improvement of these properties constitutes a loan from W&L to her repayable on demand.

[37]   The relief sought in respect of this cause of action is judgment in the amount of such payments to be quantified subsequently.

[38]   The seventh cause of action by W&L against Ms Luo is an alternative to the sixth cause of action. It relates to the same three properties and is a claim for money had and received. The relief sought is judgment in the amount to be quantified at a later date.

[39]   The eighth and ninth causes of action are both brought by W&L against JJQPL in relation to Radnor Street and the Victoria Street properties.

[40]   The eighth cause of action is an alternative to the first and fourth causes of action. W&L claims that the application of any funds belonging to it, used to purchase, maintain, or improve these properties, constitutes a loan from W&L to JJQPL repayable on demand.

[41]   The ninth cause of action is an alternative to the eighth cause of action. It is a claim for money had and received.

[42]   As with the sixth and seventh causes of action, the relief sought for the eighth and ninth causes of action is judgment in an amount yet to be quantified.

[43]Ms Luo and JJQPL deny any liability to W&L at all.

Defences and counterclaims

[44]   The defendants have advanced several positive defences and alternative defences, as well as counterclaims.

[45]   It is accepted that Ms Luo is required to repay any current account debts to W&L on demand. It is also accepted that, if the Court finds Ms Luo has wrongly used monies she is liable to repay, she is also liable to pay interest and damages.

[46]   In general, Mr Kohler KC submitted that the declarations sought are not the appropriate remedy. He submitted that the overall remedy is for W&L to be placed in liquidation as soon as possible and the liquidator should determine what is owed (if anything) to the company by either Mr Jin or Ms Luo. This approach is attractive, but s 241 of the Companies Act does not provide me with the jurisdiction to consider it as an option in the absence of an application.

[47]   Further additional and alternative defences are also pleaded. I address these generally now, but in more detail later. It is claimed that:

(a)   some causes of action are statute barred and/or the equitable doctrine of laches applies;

(b)   in relation to the first cause of action, equity should not intervene because Mr Jin does not come to court with clean hands;

(c)   in relation to the fourth and sixth to ninth causes of action, no leave was granted to bring a derivative action for them, therefore they cannot be pursued. But, in any event, the claim is misconceived and pointless because, although accepting that current account debts are repayable on demand by both Ms Luo and Mr Jin, currently there is no demand;

(d)   in relation to the fourth cause of action, the subrogation claim is in relation to unspecified mortgages. Because the remedy sought is discretionary and is designed to prevent unjust enrichment, it cannot be considered in the abstract free from particular transactions and security documents;

(e)   s 25 of the PLA provides that a disposition of land or the creation of a trust that relates to land must be in writing and signed by the person making the disposition or creating the trust. This did not happen in relation to the properties at issue here and is fatal; and

(f)   Ms Luo and Mr Jin agreed to draw funds from W&L, as is reflected in their current accounts in W&L, which are required to be considered on any

calculation about the parties’ entitlements or they are debts due by Mr Jin to W&L and/or Ms Luo.3

[48]There are also counterclaims which, in summary:

(a)   seek to recover advances made to Mr Jin amounting to $464,128.95 by either W&L or Ms Luo;

(b)   claim that the fifth cause of action was settled in the Chamberlain Road proceedings and cannot now be pursued;

(c)   allege breaches of the partnership agreement/fiduciary relationship by Mr Jin in relation to Peachgrove Road, Chamberlain Road and 16 Farnworth Avenue, Rotorua; and

(d)   seek losses caused by the freezing order and caveats lodged against several of the properties.

The witnesses

[49]   The witnesses for the plaintiffs were Mr Jin, Jason Ji, Jingjing Huang and Jay Shaw (an accountant).

[50]   The witnesses for the defendants were Ms Luo and Steven Stark (an accountant).

[51]   As well, there were 21 volumes of documents produced to the Court and the common bundle comprised many thousands of pages.

The relevant documents

[52]   Despite the large number of documents in the common bundle, I agree with counsel for the defendants that very few assisted me to determine W&L and Mr Jin’s

3      The statement of defence to the amended statement of claim and counterclaim states the recovery of advances is “a further defence and counterclaim”. In the plaintiffs’ closing, this is addressed only under the first counterclaim.

beneficial  ownership  or  otherwise  in  the  properties  in  issue.     There are an extraordinary number of transactions included, largely because:

(a)   there is little documentation to record the parties’ relationship in relation to each of the assets; and

(b)   Ms Luo’s treatment of funds between the various entities did not always respect the separate legal personality of those entities, her view being that so long as the transactions were recorded in W&L’s current account, that was sufficient.

[53]   In regard to the accounting evidence, in the case of Mr Shaw, it was designed to identify the payments made using W&L loan funds and to identify the properties which have received the benefit of funds derived from W&L’s bank account. The purpose of Mr Stark’s evidence was to provide independent evidence about Ms Luo’s treatment of drawings in the current account. The accountant’s evidence, therefore, was different or, as aptly described by Mr Kohler, ran in parallel.

[54]   In my view, both Mr Jin and Ms Luo are responsible for the lack of precision, both legally and generally. As Mr Kohler said, they simply did not document their relationship in any realistic fashion. Much was left to informal understandings, Chinese custom and family relationship expectations. Despite having been advised to enter into a shareholders’ agreement or adopt a company constitution, they formally resolved in a Declaration of Trust on 10 August 2012 not to do so. They are both therefore responsible for the tangled web that must now be unravelled.

Issues to be determined

[55]   Bearing in mind that the key issue is which properties are part of Mr Jin and Ms Luo’s joint business venture, the specific issues to be determined, with reference to the pleadings, are as follows:

1.           Are or were the Nicks Way, Robinson Avenue, Seddon Road, Radnor Street and Victoria Street properties held on trust for W&L (first cause of action)? If no:

2.           Can W&L succeed on any of its alternative causes of action (fourth, and sixth to ninth causes of action)?

3.           Did Ms Luo have, and if so, did she breach, any director’s and/or fiduciary duties she owed to W&L (second and third causes of action)?

4.           Does KPIL hold 12 Knox Street on a resulting trust for Mr Jin to the extent of his contribution towards its purchase price (fifth cause of action)?

5.           Can any of the counterclaims by the defendants against Mr Jin succeed?

The property purchases – a timeline

[56]   I set out the factual background to each of the properties purchased purportedly as part of the joint business venture.

[57]   Mr Jin’s position is that seven properties, or their sale proceeds, are W&L’s assets. These include the five properties referred to in para [16] above, and Peachgrove Road and Chamberlain Road. There was a dispute about whether Ms Luo knew Jianming Huang, Mr Jin’s cousin-in-law, owned half of the Chamberlain Road property before February 2014. This is relevant to the second and third causes of action and the counterclaim.

[58]   The background to the purchases and loans obtained in relation to Peachgrove Road and Chamberlain Road are relevant to the other causes of action because it is the intermingling of funds used to purchase and/or develop these properties which provide the foundation for them. In this respect, the order in which the various purchases occurred is important, because certain themes became evident, a modus operandi so to speak, which is revealed by dealing with the properties in chronological order.

Property purchases in 2011

Peachgrove Road

[59]   The claim against Ms Luo by W&L concerning Peachgrove Road relates to the second and third causes of action, that being the alleged breaches by Ms Luo as W&L’s director of ss 131 and 133 of the Companies Act, and of her fiduciary duties. Ms

Morrison submitted, however, that the way the purchase of Peachgrove Road was undertaken is also relevant in assessing Ms Luo’s credibility as a witness in relation to the other property transactions and whether they were W&L investments or not. Of course, the same argument could be mounted in relation to Mr Jin.

[60]   In February or March 2011, Mr Lee and Ms Luo noticed that a property at 44 Peachgrove Road, Hamilton was for sale. It comprised a building containing 24 one- bedroom apartments available to be rented out. The asking price was $1,950,000. As Mr Lee and Ms Luo did not have enough funds to complete the purchase, Ms Luo said Mr Lee approached Mr Jin. To recap, Mr Lee and Mr Jin’s property investment company, C&H, had been placed in liquidation in November 2010, but not all of their joint property investment business was undertaken by it.

[61]   Mr Jin was interested in becoming involved in the investment. W&L was incorporated on 21 March 2011, as outlined in para [11] above. Mr Jin said he agreed to the arrangement for Ms Luo to be the sole director and shareholder of W&L on the understanding she would hold 50 per cent of the shares in W&L for him on trust.

[62]   Mr Jin said that on 8 June 2011 he and Ms Luo signed a letter of engagement for James Law Solicitor to act on the purchase. At the time, he understood the purchase price was $1,920,000, but he acknowledged that Ms Luo and Mr Lee handled the detailed aspects of the transaction.

[63]Mr Jin’s understanding was that the purchase price would be funded by:

(a)   a deposit of $195,000, of which $184,212.50 he funded as a shareholder of W&L;

(b)   $217,900 being the sale proceeds of properties that were part of his father and Mr Lee’s joint business;

(c)   a BNZ loan of $1,480,000; and

(d)   some contribution from Ms Luo as a shareholder of W&L.

[64]   Mr Jin said that it was only after the dispute between the parties arose in 2014 and legal proceedings commenced that he became aware of how Peachgrove Road was purchased. He contends Ms Luo made complicated arrangements to effect the purchase of Peachgrove Road, involving Yingquan Wang who Mr Jin was aware was a friend of Mr Lee’s residing in Beijing.

[65]   Ms Luo contends that, at a meeting with one of the agents, Eddie Zhao, at which Mr Lee, Mr Jin and she were present, they discussed the purchaser of the property being Mr Wang. She contends Mr Jin was present when the agreement was signed and that the agents had gone to the vendors that evening and they had signed the agreement. She said the parties had not discussed in any detail what the relationship would be between herself and Mr Jin, and that none of them knew how much money was needed to purchase Peachgrove Road because that would depend on what money could be arranged through a bank.

[66]   Ms Luo said that Mr Lee referred them to his BNZ manager in Auckland, who Mr Jin also knew, and all three of them went to the BNZ branch to meet him. She said this meeting was very brief and the manager was clear that he would not assist. Because of this, Ms Luo said she decided to go to Westpac in Hamilton to apply for the loan herself. Westpac agreed to lend her $1,480,000 based on a valuation Ms Luo had obtained.

[67]   The documents reveal that the purchase of Peachgrove Road was effected in three transactions. The first was a purchase by Mr Wang from the vendor, Peachgrove Residential Ltd, for $1,950,000 (later reduced to $1,920,000). The second was a sale by Mr Wang to Ms Luo. These two transactions settled on the same day, 1 July 2011. The third transaction was the sale by Ms Luo to W&L on 1 August 2011. Ms Luo said the second transaction was in her name because Westpac’s loan offer was to her personally.

[68]The purchase price for the second transaction (Mr Wang to Ms Luo) was

$2,480,000 inclusive of GST. As the property was a going concern, GST was not payable, so the agreement was varied, and the purchase price was reduced to

$2,156,521.80 plus GST.

[69]   Ms Luo contends that Mr Jin’s contribution was to be the deposit plus any balance of cash beyond the bank lending that was needed to complete the purchase. She said that Mr Jin only paid $184,212.50 towards the deposit, so she had to come up with the balance of $10,787.50. On top of this, there were legal costs. Ms Luo said the total cost to complete the purchase was $1,953,847.15. The amount was paid by the Westpac loan for $1,478,000 and the cash paid by Mr Jin and her, totalling

$475,847.15. Ms Luo contends she contributed a total of $291,634.65 and Mr Jin contributed $184,212.50.

[70]   Blackwells trust account statement shows a payment into their trust account for $220,000 on 16 June 2011. Ms Luo said this amount was paid by Henry Wu of Intop Homes Ltd (Intop Homes) on her behalf. Mr Wu and his building company, Intop Homes, feature on several occasions in the narrative. He was not called as a witness in the proceeding. Ms Luo said Mr Wu owed money to her parents and her parents arranged for him to pay it. The amount was paid by two bank cheques for

$110,000 each, one from the bank account of Intop Homes and the other from Mr Wu’s family bank account. Mr Wu’s bank statements and the trust account statement from Blackwells were produced in the bundle of documents.

[71]   The documentary evidence also establishes that the balance of the payments, apart from Mr Jin’s contribution to the deposit, were made from Ms Luo’s personal Westpac and ASB bank accounts between June and July 2011.

[72]   Mr Jin left for China immediately after the settlement of the purchase of Peachgrove Road to be with his sick father. He did not return to New Zealand until August 2012, but he said that, as soon as W&L was set up and had acquired Peachgrove Road, he asked Ms Luo to correctly reflect his 50 per cent shareholding in W&L.

[73]   In her closing submissions, Ms Morrison provided a useful table summarising the funds contributed to the purchase of Peachgrove Road. However, it was not clear nor satisfactorily explained why it was necessary for the initial purchase to be in the name of Mr Wang and then, at an increased price and on the same day, a subsequent purchase was necessary transferring the property to Ms Luo. This is especially

puzzling because W&L was already incorporated and there is no dispute that the property was to be purchased for the benefit of W&L and, a matter of days later, W&L purchased the property for the same price as the transaction that had been agreed between Ms Luo and Mr Wang.

[74]   The dispute between the parties about Peachgrove Road concerns whether Mr Jin’s contribution was greater than Ms Luo says it was. Ms Luo’s position is that Mr Jin contributed only $184,212.50, but Mr Jin said, in addition to that sum, he also contributed $217,900 which was the legacy amount due to him from his father and Mr Lee’s property investment business. Substantively, the point is important to the value of the parties’ respective shares in W&L which they agree is the credibility issue referred to above. This is to be determined at a later date.

[75]The inconsistencies appear to be as follows:

(a)   Mr Jin said he did not know about the Wang transaction, however, Ms Luo said that he was present at a meeting with one of the agents when this was discussed; and

(b)   Ms Luo has given two inconsistent accounts as to how she obtained the

$220,000 she said she contributed. In this proceeding, she said it came from Mr Wu to repay a family debt but, in her affidavit of 18 December 2020 filed in these proceedings in relation to an interlocutory application by the defendants for better discovery by the plaintiffs, she confirmed the accuracy of her earlier brief of evidence in which she said she had paid

$205,000 to Blackwells, $25,000 of which had been borrowed by her from Mr Wu.

[76]   Although I agree with Ms Morrison that Ms Luo has given two inconsistent accounts about the amount she contributed to Blackwells for the purchase from Mr Wang, I am not persuaded that this significantly impacts my assessment of her credibility, given my assessment of the conflict in the evidence about a note Mr Jin said Mr Lee provided to him, which I next address.

[77]   To support Mr Jin’s credibility, Ms Morrison referred to a note Mr Jin said Mr Lee had provided to him in which Mr Lee set out the sale proceeds of prior properties purchased by Mr Lee and Mr Jin Snr. This amounts to $217,900 and reflects the funds which Mr Jin said were used to make up the balance required for the Peachgrove Road purchase. Although Mr Jin’s evidence was that Mr Lee had advised him of this, this is a hearsay statement and therefore inadmissible because Mr Lee has not been called to give evidence. The note is able to be admitted as a note given to Mr Jin by Mr Lee, but the question remains as to the truth of its contents, given that it was written by Mr Lee in relation to matters about which Mr Jin had no personal knowledge.

[78]Mr Jin’s evidence was that he did not know exactly where Mr Lee had kept the

$217,900 or whether he had applied those funds to something else. However, I was asked to infer that, as Mr Lee was in New Zealand and Mr Jin Snr was in China, the funds were likely to be in Mr Lee’s control and available for Mr Lee to access. Ms Morrison submitted that the funds could have been in the possession of Mr Wu of Intop Homes. This is because Mr Wu and Intop Homes had extensive prior business dealings with Mr Lee and Mr Jin Snr’s business (a matter Mr Jin referred to in his evidence), and the handwritten note referred to payments or prospective payments to Mr Wu for properties at 3 Chesham Street, 27C Borman Road and 21 Borman Road. Ms Morrison opined that, in the event the $220,000 did come from Mr Wu’s bank account, it could have been Mr Wu contributing some of the funds before the final accounting between Mr Wu / Mr Lee / Mr Jin Snr that was still to be done at the time of the handwritten note.

[79]   Ms Morrison also sought to place weight on Ms Luo’s attempt to disavow any knowledge of the note. She submitted this was not credible because of the reference to 3 Chesham Street, an address Mr Lee had arranged for her to reside at and in respect of which she had received a deposit of $40,000 on 24 June 2011 into her ASB bank account in relation to its sale.

[80]   I am not persuaded that the note, purportedly from Mr Lee, takes matters any further. Neither Mr Lee nor Mr Wu were called to give evidence or were summonsed to do so by either Mr Jin or Ms Luo. In the absence of Mr Lee’s evidence about the matters referred to and/or the whereabouts of the $217,900, I do not have a sufficient

foundation upon which to infer these funds were introduced by Mr Wu or someone else towards the purchase of Peachgrove Road. All that can be said is that Mr Wu contributed a total sum of $220,000 to the purchase price for Peachgrove Road, but whether it was contributed to repay a debt to Ms Luo’s family or whether it related to funds owed to Mr Lee and Mr Jin Snr is a matter about which there is simply no independent evidence. I decline therefore to find this was a credit in favour of either Mr Jin or Ms Luo in the absence of further independent admissible evidence.

[81]   As to Ms Luo’s contribution in managing Peachgrove Road, I am satisfied that this occurred. Although there was a property management company which undertook this task from the time W&L purchased Peachgrove Road in August 2011 until mid- 2013, I accept that, thereafter, Ms Luo fulfilled that task. It is also clear that she received a director’s salary for the financial years ended 2012 and 2013 (and wages for the financial year ended 2013), credited to her shareholder current account. For the years ending 31 March 2015 and 2016, Ms Luo also received a shareholder’s salary which was credited to her current account. Ms Morrison submitted that Ms Luo was adequately compensated for her work. I accept this submission.

[82]   By way of completeness, I refer to the rental income received from Peachgrove Road. Mr Shaw’s accounting evidence for the second plaintiff is that the net rental surplus from Peachgrove Road was extensively intermingled with funds from other sources and applied to a variety of purposes, including meeting costs associated with other properties and Ms Luo’s personal expenses. Even if the amount of the surplus rental income is disputed, I accept Ms Morrison’s submission that the Bookkeeping Record provided by Ms Luo on 12 June 2013 is an important piece of evidence, as it lists the rental income on 12 June 2013 as $126,871.89. The accounting for the rental income is not a matter I need to address in this liability judgment because it is accepted Peachgrove Road is a W&L asset. However, it will need to be included by the person appointed to take accounts.

[83]   Mr Shaw’s evidence also addressed the loans over Peachgrove Road. The initial loan was provided by Westpac (as referred to above), but this loan was refinanced in December 2012 with $1,500,000 provided by Kookmin Bank, secured by way of mortgage over Peachgrove Road. As well, an overdraft facility of $150,000

was provided, also secured over Peachgrove Road. The total funds from Kookmin Bank amounted to $1,650,000. Mr Shaw said the total funds from Kookmin Bank were applied to repay the Westpac loan and benefit the properties at Nicks Way, Robinson Avenue and Seddon Road, with unidentified cheque payments from the account amounting to $64,040. This will also be considered further by me when determining whether Nicks Way, Robinson Avenue and Seddon Rd were part of the joint business venture or not.

8 Nicks Way

[84]   This property was initially purchased as vacant land. It was allegedly part of Mr Lee and Mr Jin Snr’s joint property business, C&H. However, Mr Jin says that by the time of settlement, C&H was winding down and therefore it was agreed between himself, Mr Jin Snr and Mr Lee that Mr Jin would complete the purchase in his name with the intention it would be part of his joint business with Ms Luo. The certificate of title records the property being transferred to Kim Jin on 8 April 2010 and it then being transferred to Lin Hui Zheng on the same day. Mr Jin gave evidence that this was because he was unable to obtain a loan necessary to complete settlement, so the section was transferred to Ms Zheng, his then wife, who was able to obtain a loan. Mr Jin and Ms Zheng are said to have held Nicks Way on trust for Mr Lee and Mr Jin Snr’s joint business. There was a mortgage to the Bank of New Zealand (BNZ) registered against the title in April 2010 when the property was initially purchased.

[85]   On 8 September 2011, Ms Zheng sold the property to Ms Luo. By this time, Ms Zheng and Mr Jin had separated. Title to Nicks Way was transferred to Ms Luo on 16 September 2011 and a loan from the BNZ was raised in the name of Ms Luo, secured by way of mortgage over Nicks Way.

[86]   Ms Luo says that the property was purchased as an intended home for her and her family. At the time, she was pregnant with her and Mr Lee’s first child. She arranged for an architect to design a house which she, Mr Lee and their family resided in from 5 February 2012. After their separation, Mr Lee has remained living in this property.

[87]   Although it will be outlined more specifically shortly, Mr Jin claims that this property was held on trust for W&L. Ms Luo maintains this property was not part of her and Mr Jin’s joint business venture; rather, she maintains it is her separate property.

Chamberlain Road

[88]   The claim against Ms Luo by W&L concerning Chamberlain Road relates to the second cause of action alleging breaches of ss 131 and 133 of the Companies Act and the third cause of action alleging breach of fiduciary duties by Ms Luo as W&L’s director.

[89]   Ms Luo said that, in July or August 2011, she and Mr Lee became aware of a property at Chamberlain Road in Massey, Auckland comprising five ha of bare land with two old houses on it, which could possibly be subdivided. Mr Jin agreed that he and Ms Luo decided to invest in this property on behalf of W&L. The arrangements to purchase this property would have been made while Mr Jin was in China visiting his sick father.

[90]   As outlined above, in September 2011, Ms Luo purchased Nicks Way from Mr Jin’s former wife, Ms Zheng. On 26 October 2011, Mr Lee and Ms Luo’s first son was born. I mention these matters because of what was going on personally in Mr Jin, Ms Luo and Mr Lee’s lives at around the time Chamberlain Road settled on 15 November 2011.

[91]   On 10 November 2011, W&L entered into a Deed of Nomination and was nominated as the purchaser of this property.

[92]   How Chamberlain Road was funded was a matter of dispute between the parties. The purchase price was $1,950,000. Ms Luo’s said that the agreement was for Mr Jin to provide cash and for her to attend to the borrowing and do the work as had been agreed, she says, in relation to Peachgrove Road.

[93]   Mr Jin said that his cousin-in-law, Mr Huang, was invited to invest in the property and that he and Mr Huang would contribute the funds necessary to make up the investment sum as well as borrowings from the bank. Mr Jin said Mr Huang met

with Mr Lee several times in Hamilton and Mr Lee travelled to visit him in Auckland several times to discuss how the joint investment in Chamberlain Road would proceed.

[94]   Mr Jin said that, eventually, he, Mr Lee, Mr Huang and Ms Luo agreed that Mr Huang would provide the necessary equity to settle the purchase of Chamberlain Road on the basis he would own a 50 per cent share in it and the other 50 per cent share would be owned by W&L.

[95]   Mr Jin contends that the purchase price for Chamberlain Road was paid in the following way:

(a)   $785,000 provided by Mr Huang, comprising funds of $590,000 contributed by him and funds of $195,000 contributed by Mr Jin. A settlement statement from Jenny Wang and Associates dated 19 October 2011 records the purchase price and the deposit of $195,000. Mr Jin’s cheque stub records showing that payment, as well as the Barfoot and Thompson Ltd records receipting the payment, are also available;

(b)   $1,000,000 borrowed by W&L from the BNZ; and

(c)   $200,000 borrowed by Mr Jin from Adamant Investments (Adamant) on behalf, he said, of W&L.

[96]   Mr Jin’s evidence was that all parties, that is Mr Huang, Ms Luo and he, agreed that W&L was responsible for meeting all the interest and principal repayments on the BNZ and Adamant loans.

[97]   Ms Luo said she knew that Mr Jin had dealings with Mr Huang but she was not aware of the details, even though she said she asked Mr Jin a number of times about the extent of his involvement. She said Mr Jin told her to deal only with him, not Mr Huang. She said she thought the Chamberlain Road project was a joint venture project between Mr Jin and her via W&L and, at the time, she knew nothing of any ownership structure for Chamberlain Road as between Mr Jin and Mr Huang. Evidence from Mr Lee about the arrangements with Mr Huang may have assisted but was not forthcoming.

[98]   The involvement of Mr Huang in this venture was the subject of a separate High Court proceeding between Mr Huang (as plaintiff) and Ms Luo and W&L (as defendants). This proceeding was settled with orders made by consent.4 The parties agreed that Mr Huang’s contributions totalled $1,692,679, including the $195,000 deposit, further cash payment of $590,000, various advances amounting to

$376,175.22 and payments to contractors amounting to $531,503.67.

[99]   Within two or three months of the purchase of Chamberlain Road, the bridging finance of $200,000 from Adamant was due to be paid. Mr Jin arranged for Mr Huang to refinance the money to pay Adamant and Ms Luo signed a loan agreement with Mr Huang on behalf of W&L. There are documents recording this. Monthly interest was paid to Mr Huang until the cooperation agreement was signed in February 2014. Mr Huang lent a further $153,787 to W&L as capital was required to progress with the subdivision.

[100]  There is a dispute about who did what in relation to the subdivision at Chamberlain Road. Ms Luo contends she did extensive work, including attending to the obtaining of resource consent and organising civil work for the project as soon as resource consent was obtained. She said Mr Jin did nothing or virtually nothing. This was challenged by Mr Jin whose witness, Mr Ji, particularly said that he and Mr Jin worked on the project together and that Mr Jin was mostly there apart from when he was in China.

[101]  The subsequent issues to do with the Chamberlain Road development are dealt with as they arise in the timeline associated with the purchase and financing of the five properties, the ownership of which are in dispute.

Properties purchased and events in 2012

[102]  Mr Jin said that, at the end of 2011 or beginning of 2012, Mr Lee telephoned him advising that Ms Luo planned to use W&L to invest in sections situated at Robinson Avenue, Rotorua. At some stage, Mr Wu of Intop Homes had purchased six sections there. The call between Mr Lee and Mr Jin would have been while Mr Jin

4      Huang v Luo, above n 2.

was in China. Mr Jin said he agreed with Mr Lee’s suggestion. Ms Luo agreed that Mr Jin was asked if he wanted to get involved in the Robinson Avenue properties, but says he declined to do so.

[103]  Again, Mr Lee’s evidence on this point would have been instructive but was absent. Evidence from Mr Wu may also have assisted.

[104]  On 28 February 2012, Ms Luo signed sale and purchase agreements to purchase the sections at 32A, 32D and 32J Robinson Avenue from Intop Homes for

$100,000, $105,000 and $85,000 respectively (including GST) and funded the building of the houses on the sections through three National Bank loans in her personal name.

[105]  In February 2012, Ms Luo also moved with Mr Lee and their infant son into Nicks Way.

[106]  On 8 March 2012, Ms Luo obtained a loan of $153,000 from ANZ for the purchase of 32A and 32D Robinson Avenue. The sections were transferred to Ms Luo and a mortgage in favour of ANZ registered against the titles.

[107]  On 11 May 2012, 32J Robinson Avenue was transferred to Ms Luo and a mortgage in favour of Westpac was registered as additional security for W&L’s Westpac loan of $1,480,000 which had been used to purchase Peachgrove Road.

[108]In August 2012, Mr Jin came back to New Zealand.

[109]  On 10 August 2012, a Declaration of Trust was signed. This is an important document. In this document, Ms Luo agreed to transfer 50 per cent of the shareholding in W&L to Mr Jin. The properties referred to as assets of W&L were Peachgrove Road and Chamberlain Road, not Nicks Way or the Robinson Avenue sections. In relation to the funds contributed to Peachgrove and Chamberlain Roads, the Declaration of Trust recorded the following under background:

…

C.     Subsequently when the Company purchased the properties situated at 44 Peachgrove Road, Hamilton and 8 Chamberlain Road, Massey, Auckland, Qian transferred an approximate sum of $818,749 being half of the funds contribution for the purchases.

[110]  As well, the Declaration of Trust is important because, in it, the parties agreed that there were no debts, charges or liabilities apart from those described in the Annual Report in respect of which, as an example, the BNZ and Westpac mortgages are noted. The BNZ had a mortgage over Nicks Way, and Westpac had a mortgage over 32J Robinson Avenue.

[111]  Mr Jin and Ms Luo acknowledged that they were advised to take independent accounting and taxation advice in relation to the transfers of shares, have the Annual Report audited, and enter into a shareholders’ agreement or adopt a company constitution, but they resolved not to do so. Both also noted that they had obtained the consent of the mortgagee banks (Westpac and BNZ) and they would advise the banks of the transfer of the shares following the registration of the transfer.

[112]  On 30 August 2012, Ms Luo entered into an agreement to sell 32D Robinson Avenue for $347,000.

[113]  In September 2012, Ms Luo confirmed to the Inland Revenue Department (IRD) that she held the properties at Robinson Avenue on behalf of W&L. Ms Luo explained that this was because she did not want to be classed by the IRD as an investor. An investigation by the IRD followed and W&L and Ms Luo’s personal and business tax affairs were the subject of an audit from 7 September 2012. The auditing process finally finished on 26 February 2015 and no discrepancies were found.

[114]  On 24 October 2012, Ms Luo sent a document to Mr Guo, her lawyer, confirming that the vendor’s name in relation to the sale of 32D Robinson Avenue should be “Lin Luo (holding the property in trust for W&L Ltd)”. Ms Luo instructed that the surplus funds from the sale were to be directed to W&L’s 00 bank account.

[115]  On 29 October 2012, Ms Luo forwarded the correspondence between her and Mr Guo regarding the sale of 32D Robinson Avenue to Mr Jin.

[116]  On 18 December 2012, W&L obtained a loan of $1,650,000 from Kookmin Bank. This loan was drawn down and used to fully repay W&L’s Westpac $1,480,000 which had been secured over 32J Robinson Avenue and Peachgrove Road. The mortgage in favour of Westpac on the title of 32J Robinson Avenue was discharged.

[117]  Meanwhile, the Chamberlain Road project in Auckland was continuing, although the application for resource consent was only lodged with the Council in July 2012.

Properties purchased and events in 2013

[118]  In early 2013, Ms Luo became aware that 35 Seddon Road, Hamilton was on the market for sale.

[119]  Mr Jin said he, Ms Luo and Mr Lee viewed Seddon Road 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 does not agree that this was a W&L purchase. She accepts she may have mentioned to Mr Jin that she was proposing to purchase the property, but she maintains he did not contribute anything to it. Again, the lack of evidence from Mr Lee is notable by its absence.

[120]  On 16 February 2013, Ms Luo offered to pay $610,000 to purchase Seddon Road which was accepted on the same day. An agreement for sale and purchase was signed.

[121]  On 12 March 2013, the deposit of $30,000 for the purchase of Seddon Road was paid out of W&L’s Kookmin Bank account.

[122]  On 20 March 2013, Ms Luo entered into an agreement to sell 32A Robinson Avenue for the sum of $365,000.

[123]  On 9 April 2013, Ms Luo obtained a loan of $610,000 from the BNZ (BNZ loan 04). This loan was used to purchase Seddon Road and it was secured by way of a mortgage over Seddon Road and Nicks Way. An unlimited guarantee from W&L was also provided.

[124]  Also on 9 April 2013, Ms Luo obtained another loan of $90,000 from the BNZ (BNZ loan 03) using Seddon Road and Nicks Way as security. Ms Luo said this loan was obtained to help with W&L’s cash flow. The BNZ loan 03 was also subject to a guarantee by W&L. On 11 April 2013, Seddon Road was transferred into Ms Luo’s name and the mortgage in favour the BNZ was registered against the title.

[125]  On 15 April 2013, the resource consent for Chamberlain Road was issued. Preparation for the civil works began shortly afterwards. Mr Jin maintains that between 2013 and 2014, as he and Mr Ji were living in Auckland, they were responsible for checking the site and monitoring construction daily. Over this period, Mr Jin said that Mr Lee and Ms Luo lived in Hamilton and would travel to meet them every one or two weeks. I accept that Ms Luo did all the work associated with obtaining the resource consent, which was not a straightforward exercise. She also organised the contractors who undertook the civil works, but there was an engineer who supervised some of the civil works.

[126]  In May 2013, Ms Luo said Mr Jin borrowed $50,000 from her which he requested be paid to his lawyers, Prestige Law. Ms Luo understood the funds were needed for Mr Jin’s restaurant. The documentary evidence shows that on 17 May 2013 Ms Luo paid $50,000 by an ANZ bank cheque to Prestige Law.

[127]  Over this period, Ms Luo became aware of the Radnor Street property being for sale by tender. It was a small bare piece of land behind the Police Station in Hamilton, which was for sale with building consent in place and two unit titles, meaning two units could be built on the section. Mr Jin said he and Mr Lee visited this property and discussed using W&L to purchase it.

[128]  Ms Luo said she submitted a tender for Radnor Street on 21 May 2013. On the same day, she signed an agreement to purchase it in her own name for $250,000 (including GST). Mr Jin contends that the deposit for Radnor Street was derived from the sale proceeds of 32A Robinson Avenue, which settled on 8 May 2013. Ms Morrison submitted this can be inferred from a withdrawal by Ms Luo from her ANZ 00 account on 27 May 2013 by way of cheque for a sum of $37,500.

[129]  On 19 June 2013, Ms Luo sent Mr Jin a document referred to in the trial as the Bookkeeping Record. This is an important document because it refers to and/or records:

(a)   32A and 32D Robinson Avenue;

(b)   the $90,000 BNZ loan 03 secured over Seddon Road;

(c)   as an expense the deposit paid for Radnor Street of $37,500;

(d)   all the loan balances as at 24 April 2013 for Nicks Way, Chamberlain Road, Seddon Road, Peachgrove Road and 32A Robinson Avenue; and

(e)   “Westpac loans” for Mr Jin and appears to record expenses paid on behalf of Mr Jin between 14 June 2011 and 22 May 2013 amounting to

$170,858.43.

[130]Ms Luo also included:

(a)   a breakdown of the rent received and expenses relating to Peachgrove Road for the period July 2011 to May 2013. The rent received was recorded as $126,871.89;

(b)   rental received and expenses incurred in relation to Chamberlain Road, being $25,888.78 for rent and expenses amounting to $351,267.08 between December 2011 and May 2013; and

(c)   expenses amounting to $69,814.01 for Nicks Way, largely comprising the interest paid for the BNZ loan 01 and the BNZ loan 02, rates and insurance.

[131]  Because of the Bookkeeping Record reference and the withdrawal from Ms Luo’s ANZ 00 account which coincides with the sale of 32A Robinson Avenue, I accept that the deposit for Radnor Street came from the sale proceeds of 32A Robinson Avenue.

[132]On 4 July 2013, Ms Luo signed an agreement to sell 32J Robinson Avenue

for $450,000.

[133]   Also, around this time, Ms Luo became aware that the property at 12 Knox Street, Hamilton 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.

[134]  As the property was proceeding to auction, Ms Luo said the funds needed to invest in the property were uncertain as they would depend on the auction sale price and what bank financing could be obtained. Ms Luo said Mr Jin came to her and Mr Lee’s home at Nicks Way the night before the auction, discussed it and was told that Ms Luo would need the $50,000 she had lent him back if she was successful at the auction. She said they discussed paying the amount directly to the agent as part of the deposit if they were successful at the auction.

[135]  Mr Jin maintains that $50,000 he provided towards the deposit was not the repayment of a loan. He contends he did not owe either Ms Luo or Mr Lee any amount at all. Rather, at that time he said Mr Lee owed him money and he said he had filed legal proceedings against Mr Lee to recover this debt. The details of these proceedings were not provided. Mr Jin said he had previously paid $50,000 to W&L for the development of Chamberlain Road which had recently been paid back to him, so this was how Mr Lee knew he had $50,000 available to contribute. No bank statement was provided to verify this.

[136]  On 13 June 2013, Mr Jin, Mr Lee, and Ms Luo attended the auction. The property was passed in. Afterwards, Ms Luo signed an agreement to purchase the property for $700,000.

[137]  The particulars and terms of sale agreed following the auction were produced in evidence. The document, as signed by Ms Luo, described the purchaser as “W&L Limited and/or nominee of 8 Nicks Way, Flagstaff, Hamilton”.

[138]  Mr Jin paid the $50,000. He said he thought the $20,000 balance was to come from W&L, but in fact Ms Luo paid the $20,000 from her personal ANZ account. This was the $70,00 required for the deposit.

[139]  Ms Luo’s evidence was she expected the purchase would be a joint venture project but that it would require more money from Mr Jin, not simply a repayment of the money she said she had lent him. She said she asked Mr Jin if he wanted to put in

$70,000 to match the $70,000 she had put in, but he told her he had nothing to put into the property and was no longer interested in it.

[140]  Bank funding was sought for the balance of the purchase price of $630,000. Because of issues to do with earthquake strengthening and the state of the property generally, Ms Luo was only able to borrow $300,000 from a finance company, ASAP Finance. Ms Luo was unable to raise the balance of the funds and settle the purchase on the settlement date. A settlement notice was issued.

[141]  Mr Jin said he thought the financing was sought on behalf of W&L, not Ms Luo personally, but he did not provide any evidence to suggest he knew about the details of the funding, the shortfall or the settlement notice.

[142]  Mr Lee and Ms Luo approached their friend, Chuan Jiang. He agreed to invest in the property and to pay the balance required to settle the purchase in return for a 50 per cent share in the property.

[143]  Mr Lee told him about this, although Mr Jin still thought W&L was the other investor.

[144]  KPIL was incorporated by Ms Luo on 10 July 2013 with Ms Luo and Mr Jiang as joint shareholders, and Mr Jiang as the sole director. Ms Luo’s case is that she took this investment with Mr Jiang, and it had nothing to do with Mr Jin. Mr Jin did not know about the incorporation of KPIL at this time.

[145]On 4 July 2013, Ms Luo signed an agreement to sell 32J Robinson Avenue

for $450,000.

[146]  On 31 July 2013, W&L entered into a Deed of Nomination in which KPIL was nominated as the purchaser of 12 Knox Street. The Deed of Nomination stated that the $70,000 deposit had been paid by W&L and that KPIL was to repay the deposit to W&L on or before settlement.

[147]  KPIL’s bank statements do not record any payment to W&L between the time KPIL was incorporated on 10 July 2013 up to 1 August 2013 when settlement of the purchase occurred. Mr Jin highlighted in his evidence two payments of $3,000 each made by W&L to KPIL’s bank account on 29 August 2013 and 25 September 2013. He also noted that KPIL’s bank account also records two interest payments on 2 September 2013 and 1 October 2013 of $2,790 and $2,700 respectively, paid to ASAP Finance who advanced the funds to KPIL that were secured by way of mortgage over the property settlement. Mr Jin contends that the W&L deposit into KPIL’s bank account was to cover interest payments to ASAP Finance on these dates.

[148]  The Deed of Nomination is consistent with Mr Jin’s understanding that 12 Knox Street was to be a W&L project, but it is equally consistent with Ms Luo’s evidence that although this may have been the case initially, that position changed when Mr Jin said he did not have any funds to put into the project.

[149]  On 3 September 2013, Ms Luo entered into a Deed of Nomination in respect of the Radnor Street property in which her mother was nominated to purchase it. At this stage, Ms Luo’s parents had come out from China and were living with her.

[150]  On 6 September 2013, the Radnor Street property was transferred to Ms Luo’s mother with a loan from Basecorp Finance Ltd (Basecorp) secured by way of mortgage and registered against the title.

[151]  At some time over this period (Mr Jin says in late 2013, Ms Luo says mid- 2013), Ms Luo also became aware that the Victoria Street property was for sale. The property comprised three titles with one building and a carpark.

[152]  Ms Luo said that 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 says Ms

Luo suggested W&L purchase it, however, he did not want to provide any further capital personally until Ms Luo had updated the share register for W&L. He also said he was unsure about W&L’s financial status at this time, but he did not object to W&L making the investment.

[153]  Ms Luo said that after the visit, Mr Jin talked to Mr Lee about investing in the property. Although not privy to these discussions, Ms Luo’s understanding was that Mr Jin was not interested in becoming involved, so she looked for another investor and approached another friend of hers, Xiao Liu.

[154]  On 16 September 2013, W&L entered into an agreement to purchase Victoria Street for $2,550,000. A deposit of $200,000 was paid.

[155]  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.

[156]  On 17 October 2013, Ms Luo obtained a $500,000 loan from the BNZ (BNZ loan 05) which was secured by mortgage over Nicks Way and Seddon Road and guaranteed by W&L. When this loan was drawn down, $302,561 was used to repay the loan from ASAP Finance and its mortgage over 12 Knox Street was discharged. The rest of the loan was used to pay various expenses for properties which Mr Jin contends are W&L assets, and for Ms Luo’s personal expenses.

[157]  On 22 October 2013, W&L entered into a Deed of Nomination nominating Sunshiny Property Investment Limited (Sunshiny Property) to purchase the Victoria Street property. Ms Luo was a director and shareholder in Sunshiny Property with Ms Liu who is referred to in paragraph [153] above.

[158]  On 20 December 2013, $76,414.80 from KPIL’s ASB bank account was used to partially repay the $192,000 BNZ loan 01 for Nicks Way which was secured by way of mortgage over Nicks Way and guaranteed by W&L. The BNZ mortgage secured against the title of Seddon Road was discharged.

Properties purchased and events in 2014

[159]  Chamberlain Road needed further funds to advance the stage 1 subdivision, but Ms Luo said the BNZ refused to provide further funding.

[160]  In early February 2014, Ms Luo said Mr Jin telephoned her to arrange a meeting with him, Emily Huang, Jason Ji, David Lee and herself. The meeting took place at the Nicks Way address. At this meeting, Ms Luo said Mr Jin told her for the first time that he had not paid any money towards the Chamberlain Road development, rather, Mr Huang (Emily Huang’s father) had contributed the money and now wanted to claim a 50 per cent interest in the development. Ms Luo said she and Mr Lee did not agree with this and no agreement was reached at the meeting. Ms Luo said that Emily Huang said initially $195,000 had been paid by Mr Jin but her father had since reimbursed that amount to him. I infer this was the reason Mr Huang was claiming a half share in Chamberlain Road.

[161]  On 6 February 2014, Ms Luo said Emily Huang, Jason Ji and Mr Jin came to her home again, this time accompanied by Mr Jin’s mother. A document dated 6 February 2014, known as the Cooperation Agreement, written in Mandarin, was presented to Ms Luo. The Cooperation Agreement records that Mr Huang and W&L each own 50 per cent of Chamberlain Road. Ms Luo said, after negotiating all day, she was persuaded to sign the agreement as she and Mr Lee were not in a good financial position at that time and Emily Huang promised that her father would continue funding the development costs for Chamberlain Road. From Ms Luo’s perspective, this fundamentally changed the arrangement she understood she and Mr Lee had with Mr Jin.

[162]  Mr Jin’s evidence was that both he and Mr Huang were surprised to hear that BNZ had refused further funding because, at that time, they understood W&L had only borrowed $1 million and there had been significant cash injected into the project which would have been sufficient to justify further funding. Mr Jin said Ms Luo and Mr Lee wanted he and Mr Huang to inject further cash into Chamberlain Road so that further loans could be raised, however, both refused to do so without a written record of the

Chamberlain joint venture. Mr Jin said this was the reason the Cooperation Agreement was needed.

[163]  Mr Jin said it was around this time that he and Mr Huang discovered that, without their knowledge or consent, Ms Luo had in fact obtained further loans BNZ in her own name which were guaranteed by W&L and supported by the existing BNZ mortgage over Chamberlain Road. Specifically, these loans were:

(a)   $90,000 drawn down 11 April 2013;

(b)   $610,000 drawn down on 11 April 2013; and

(c)   $500,000 drawn down on 17 October 2013.

[164]  On 12 February 2014, Ms Luo obtained a loan of $500,000 from ANZ which was secured by way of mortgage over Seddon Road. When the loan was drawn down and $71,647 was paid to Ms Yang, a friend of Ms Luo’s, for an unknown reason but the balance was paid onto Ms Luo’s ANZ 00 account. Ms Luo said the balance of the loan was used for the various properties as required.

[165]  After the Cooperation Agreement was signed, the relationship between Mr Jin and Ms Luo deteriorated. It is not clear if the lack of trust that followed included Mr Lee as well.

[166]  On 6 March 2014, JJQPL was incorporated with Ms Luo as the sole director and shareholder.

[167]  The business relationship between Ms Luo and Ms Liu, referred to in para [157], soured. On 23 April 2014, Ms Luo and Ms Liu entered into a settlement agreement. As part of the agreement, Sunshiny’s nomination to purchase Victoria Street was cancelled. Ms Luo agreed to pay Ms Liu $247,436 to reimburse her for various contributions Sunshiny had made to the property, including refunding the deposit of $200,000, and she agreed to resign as a director of Sunshiny. Ms Luo also agreed to repay Ms Liu the sum of $33,954.87 which had lent to Ms Luo for the Radnor Street development.

[168]   On 14 May 2014, W&L entered into a Deed of Nomination in which JJQPL was nominated as the purchaser of Victoria Street.

[169]  On 29 May 2014, Mr Jin said Mr Lee arranged for W&L to obtain a loan of $4 million from Pearlfisher to complete the development of stage 1 at Chamberlain Road. The loan came at a higher interest rate of 11 per cent. The loan was secured by a general security agreement over the assets and undertakings of W&L, a first ranking mortgage over Chamberlain Road, and a second ranking mortgage over Peachgrove Road.

[170]  Although the purpose of the loan was to assist with funding the refinance and completion of the 16 lot residential subdivision at Chamberlain Road and part of the loan was used for this purpose, Mr Jin said that a significant amount of it was used to repay various BNZ loans secured over other properties and was used to pay expenses not related to Chamberlain Road. He said this was done without his or Mr Huang’s authority. At this point, Lewis Solicitors were acting on instructions from Mr Lee and Ms Luo.

[171]  The documentary evidence confirms the following payments which Mr Jin said were not related to the repayment of the Chamberlain loan:

(a)   $72,000 to fully repay the BNZ loan of $90,000 secured over Nicks Way;

(b)   $418,332.60 to fully repay the BNZ loan of $430,000 secured over Nicks Way;

(c)   $501,025.75 to fully repay the BNZ loan of $500,000 secured over Nicks Way;

(d)   $116,041.78 to fully repay the remaining BNZ loan (initially of $192,000) secured over Nicks Way;

(e)   $1,003,049.78 to fully repay the BNZ loan of $1 million secured over Chamberlain Road;

(f)   $158,886.87 to complete JJQPLs purchase of Victoria Street (authorised by Mr Lee and Ms Luo);

(g)   $408.73 paid to Ms Luo’s BNZ 00 account;

(h)   $100.00 paid for BNZ security discharge fee; and

(i)   $6,968.86 used to repay the overdraft and interest accrued in W&L’s BNZ 00 account.

[172]  On 30 May 2014, the day after obtaining the Pearlfisher loan for W&L, Ms Luo obtained a loan of $1,650,000 from ANZ for JJQPL which was used by it to fund the purchase of Victoria Street. This loan was secured by way of mortgage over Victoria Street and W&L provided an unlimited guarantee in respect of it.

[173]  Serious disputes about the Chamberlain Road subdivision surfaced. A lawyer's letter followed, and a caveat was lodged by Mr Huang and Mr Jin over Chamberlain Road. This culminated in Ms Luo undertaking to:

(a)   repay W&L for the funds removed from the Chamberlain project;

(b)   permit securities to be registered against Nicks Way and Seddon Road in relation to the funds removed from the Chamberlain Road project; and

(c)   to instruct an agent to market the sale of the project with any offers for the purchase of sections to be referred to Mr Huang for approval.

[174]  The undertakings were provided on the proviso that the caveat over Chamberlain Road was withdrawn, the amount payable to W&L by Ms Luo was to come from her share of the sale proceeds of the sections, Ms Luo agreed to make up any shortfall from her personal funds and that she would cooperate with Mr Huang and Mr Jin to sell the sections.

Properties purchased and sold, and events in 2015

[175]  At the beginning of 2015, Ms Luo said she prepared a spreadsheet setting out all the expenses relating to Chamberlain Road and provided it to Jason Ji. She said

there were four meetings, attended by Mr Ji, Mr Huang, Mr Jin, Mr Lee and herself at the beginning of 2015, two of which occurred at Nicks Way in Hamilton and two at Mr Jin’s home in Auckland. At these meetings, Ms Luo said she tried to explain to those present the expenses of the development. She described the meetings as being very unpleasant. She said Mr Ji shouted, yelled and slammed the table with his fist and would not let her explain the spreadsheet. She said she felt intimidated, and it got to the point where she simply had to leave the meetings. However, there was no request made to bring the Chamberlain Road development to an end after stage 1.

[176]  On 22 April 2015, JJQPL refinanced the ANZ loan and obtained a new loan from Basecorp secured by way of mortgage over Victoria Street. The ANZ mortgage over this property was discharged.

[177]  Between April and August 2015, Stage 1 of the Chamberlain Road subdivision was completed, and all sections (lots 1-16) were sold. W&L received net sale proceeds of $5,064,693.64. The Pearlfisher loan of $4,513,380.50 was fully repaid from the sale proceeds by 25 May 2015.

[178]  On 4 August 2015, Mr Jin issued proceedings in the High Court against Ms Luo seeking a declaration that he was a 50 per cent shareholder in W&L and that Ms Luo was holding these shares as a trustee on his behalf. These proceedings were referred to in the evidence as the shareholder proceedings. It is not clear what happened to these proceedings but, in any event, there is no issue that Mr Jin is a 50 per cent shareholder in W&L.

[179]  On 1 September 2015, Mr Huang and Mr Jin issued proceedings in the High Court against Ms Luo, Mr Lee and W&L about Chamberlain Road, claiming a breach of their joint venture agreement, a breach of fiduciary duty and a claim that W&L held the Chamberlain Road property and any sale proceeds from it in trust for the parties to the partnership. These proceedings were referred to in the evidence as the Chamberlain proceedings.

[180]  On 30 September 2015, Radnor Street was transferred to JJQPL for a purchase price of $735,000. A loan was obtained from Basecorp secured by way of a

mortgage over the title. Mr Jin contends that, when Ms Luo’s mother, Ms Yang, owned Radnor Street, the development costs in respect of it were largely met by funds from W&L and from the ANZ loan for $500,000.

Properties sold and developed in 2016 and 2017

[181]  On 3 May 2016, Mr Jin discontinued his claim as plaintiff in the Chamberlain proceedings, and Mr Huang proceeded with them as the sole plaintiff.

[182]   On 13 July 2016, JJQPL entered into an agreement to sell 18D Tisdall Street for $598,000. This was one of the units at Radnor Street. The other was 18C. It was not until 10 October 2016 that the new titles for Radnor Street (18C and 18D Tisdall Street) were issued.

[183]  On 15 December 2016, JJQPL refinanced Radnor Street (now 18C and 18D Tisdall Street) by obtaining a loan from Westpac secured by way of mortgage over 18C Tisdall Street. The Basecorp loan was fully repaid.

[184]  On 17 December 2016, JJQPL entered into an agreement to sell 18C Tisdall Street for $675,000.

[185]  In April 2017, some three years after the development had been proposed, the renovations at Victoria Street were completed. The Basecorp loan was repaid, and its mortgage discharged. A new loan was taken out with Westpac secured by way of a mortgage over Victoria Street.

[186]  On 18 July 2017, the Chamberlain proceedings were settled, including, Ms Luo contends, any issues to do with Seddon Road.5

Loan summary

[187]  The following table summarises the various loan transactions for each property:

5      The chronology provided by the plaintiffs refers to stage 2 of the Chamberlain Road subdivision but it does not feature in these proceedings.

Property	Loan details	Loan Security	Loan used for	Loan repaid by
Peachgrove	1 July 2011	Of which
Road (W&L)	$1,480,000 from Westpac by Ms Luo	$1,478,000 is used to settle the purchase of
Peachgrove Rd
1 August 2011	To replace the loan
$1,480,000	in Ms Luo’s name
from Westpac
by W&L
18 December	To replace Westpac
2012	loan with Kookmin
$1,500,000	Bank loan and an
from Kookmin	overdraft of
Bank by W&L	$150,000
Chamberlain	15 November	To settle the
Road (W&L)	2011 $1,000,000 from BNZ by	purchase of Chamberlain Rd
W&L
15 November	To settle the	April–August
2011	purchase of	2015, Stage 1 (lots
$200,000 from	Chamberlain Rd	1 – 16)
Adamant	Chamberlain Road
Investments by	sold. Pearlfisher
Mr Jin on	loan fully repaid on
behalf of W&L	25 May 2015
29 May 2014	$1,107,809 used to
$4,000,000	repay BNZ loans
from Pearlfisher	unrelated to
by W&L	Chamberlain Rd;
$158,867 used to
purchase Victoria
St
Nicks Way	16 September	$160,209,48 paid	20 December 2013,
(Ms Luo)	2011 $192,000 from	to Ms Zheng’s solicitor to	$76,414.80 from KPIL’s ASB
BNZ (01)	discharge original	account;
BNZ mortgage on	29 May 2014,
settlement	$116,041.78 of
loan from
Pearlfisher;
After 29 May 2014,
interest on loan
became part of
capitalised interest
on Pearlfisher loan.
W&L paid interest
costs from sale

proceeds of Chamberlain Rd
3 October 2011 $430,400 from BNZ (02)	Secured by BNZ’s existing mortgage over Nicks Way	Meet the construction costs of house on Nicks Way	29 May 2014 $418,332.60 of the Pearlfisher loan; After 29 May 2014, interest on the loan became part of the capitalised interest on the Pearlfisher loan. W&L paid interest costs from sale proceeds of Chamberlain Rd.
14 April 2013 $90,000 from BNZ (03)	Nicks Way & Seddon Rd, guaranteed by W&L	Drawn down to Ms Luo’s BNZ account, largely used for W&L purposes	$72,000 of the Pearlfisher loan
14 April 2013 $610,000 from BNZ (04)	Nicks Way & Seddon Rd, guaranteed by W&L	Drawn down and used towards purchase of Seddon Rd
17 October 2013 $500,000 from BNZ (05)	Nicks Way & Seddon Rd, guaranteed by W&L	$302,561 was used to repay ASAP Finance loan mortgaged over 12 Knox St; the remaining towards expenses relating to W&L assets and Ms Luo’s personal expenses	$501,025.75 of the Pearlfisher loan
Robinson	8 March 2012	For purchase of
Avenue (Ms Luo)	$153,000 from ANZ by Ms Luo	32A & 32D Robinson Ave
11 May 2014,
mortgage in
favour of
Westpac
registered as
additional
security for
W&L’s
Westpac
$1,480,000
loan (used to
purchase
Peachgrove
Rd)

[407]  I infer that the payments to Mr Wang were made at either at Mr Jin and/or Mr Lee’s request. However, there is no evidence from Mr Lee on this point. There is no reason why W&L would have paid Mr Wang for anything unless it was at the request of Mr Jin or Mr Lee via Ms Luo.

[408]  Ms Luo has the burden of proving that these payments were made at Mr Jin’s request. The difficulty with Ms Luo’s explanation about the payment being made from her personal BNZ loan for $90,000 is that this loan (BNZ 03) was not drawn down until between 14 April and 3 May 2013, whereas the payments to Tian Hong Wang referred to all occurred in 2012.

[409]  Despite this, because of the matters referred to in para [407] above, Ms Luo has satisfied me that either she or W&L can recover all of the funds advanced to Mr Wang at Mr Jin’s direction. Whether the debts are owed to W&L or Ms Luo will need to await the final accounting exercise. I am also satisfied the advance to cover the interest on the Farnworth Avenue mortgage can also be recovered for the reasons I outline later in my analysis of the advances made in relation to this property.

Repayment

[410]  There were two payments made from Ms Luo’s ASB account on 16 December 2013, one of $15,000 and one of $5,000. Both payments were narrated by Ms Luo as “repayborrowing”.

[411]  Ms Luo said these payments were advances to Mr Jin but she could not recall what they were for. Mr Jin said they were repayments from Ms Luo and/or W&L to him for money she had previously borrowed from him.

[412]  Although Mr Jin referred to this in his reply brief of evidence, there is nothing to independently verify that funds were advanced earlier from him to Ms Luo. Having said that, the notations indicate that both were repayments for borrowing.

[413]  In the absence of independent evidence from Mr Jin, I reject his explanation. Equally however, there is no explanation from Ms Luo as to what the background to these funds being paid from her personal account was.

[414]  There is insufficient evidence for me to conclude these are either repayments of funds lent to Ms Luo by Mr Jin or advances by Ms Luo to Mr Jin. Ms Luo’s claim for these amounts fails.

Advances for 16 Farnworth Avenue

[415]  The property at 16 Farnworth Avenue, Rotorua comprises 4 ha with an old farmhouse on it. Ms Luo said that Mr Lee and Mr Jin Snr agreed to purchase the property with the plan of subdividing it and sharing the profits equally.

[416]  Mr Jin said that the property was purchased as an investment property in 2006 by Jin Lin Huang, his mother-in-law, on his recommendation. When she became unhappy with the purchase, Mr Jin said he purchased it from her for $800,000. This comprised two transactions. The first was a deposit of $200,000 to Ms Huang in China. It was then agreed Mr Jin Snr would pay the remainder of the purchase price to Jin Lin Huang so she would not be disadvantaged by the exchange rate (as would have been the case if she transferred the sale proceeds from New Zealand to China).

[417]  The property was transferred to Mr Jin on 24 April 2007. A loan was obtained from Westpac secured by way of a mortgage. Ms Luo said that before C&H went into liquidation it paid the loan and costs relating to this property, but Mr Lee was responsible for organising the subdivision, including obtaining resource consent for it. Ms Luo said the property was not transferred to C&H so that tax would not be paid on any capital gain.

[418]  Ms Luo said that after C&H went into liquidation it was agreed that the development of the property would be undertaken by W&L. Ms Luo claims that this property, owned by Mr Jin, was held in trust for W&L.

[419]  The issue is whether monies advanced to Mr Jin for his benefit in relation to Farnworth Avenue created an interest for Ms Luo personally, or through W&L as an express resulting or constructive trust. Alternatively, if this was not a joint project, it is claimed that Ms Luo’s contribution is a debt due to her or W&L on demand.

[420]  The pleadings do not seek a declaration of trust, rather, the claim in relation to Farnworth Avenue was part of a claim for judgment for a specific sum. The claim by Ms Luo is that W&L and she, in her personal capacity, advanced the total sum of

$236,993.10  to  Mr Jin  in  respect  of  this  property.   Of this  sum,  she claims that

$161,578.94  was  advanced  from  W&L,  with  the  balance  of  $75,414.16  being

advanced by her personally. Schedule 4 to Ms Luo’s brief of evidence sets out the details of the various payments made.

[421]  Ms Luo’s evidence was that Mr Lee spent about three to four years on the subdivision for this property before she became involved in 2011. Ms Luo said the agreement with Mr Jin was that she would receive a 50 per cent share of the proceeds of the Farnworth development, similar to the arrangements they had for Peachgrove and Chamberlain Road. She said she did not think it necessary to transfer this property into W&L’s name and she accepts that doing this was never discussed.

[422]  Ms Luo said that, from July 2011 until the beginning of 2015, she arranged to pay the interest on the Westpac mortgage and subdivision costs, sometimes from W&L’s account and sometimes from her own bank account. She said Mr Jin gave her his online banking ID and password for her to check his bank account and make the mortgage loan repayments.

[423]  From 2011 to 2015, Ms Luo said she and Mr Lee commissioned a soil report (in May 2012), a geotechnical report (December 2013), finalised a resource consent application (April 2013) and arranged for it to be presented to the council. The Rotorua District Council’s resource consent decision was issued in January 2014. Ms Luo said Mr Jin was not involved in any of this work, he did not pay any of the mortgage, subdivisional costs or expenses and basically left everything to her and Mr Lee.

[424]  In relation to the payments she outlined in sch 4, Ms Luo said Mr Jin was fully aware of them and had specifically requested she pay most of them.

[425]  Ms Luo said Mr Jin put the property on the market for sale without telling her or Mr Lee at the end of 2015 and has since allowed the resource consent to lapse. She lodged a caveat against the title when the relationship with Mr Jin soured. She later found out (through discovery) that the Farnworth Avenue, Peachgrove Road and Chamberlain Road properties had been used as security for the loan Mr Jin obtained from Adamant which he had obtained to settle the Chamberlain Road purchase, which was part of W&L’s property investment portfolio.

[426]  Mr Jin does not accept that Farnworth Avenue was a joint investment project he undertook with Ms Luo. Mr Jin said that the payments from Ms Luo and W&L were payments made to him on behalf of Mr Lee, in accordance with his agreement with Mr Lee. He said that he had initially agreed with Mr Lee to develop the property, however Mr Lee failed to meet the interest payments on the loan and pay for the subdivision costs as had been agreed. The fact Mr Lee did not fulfil his side of the agreement in relation to Farnworth Avenue is an issue to be resolved, Mr Jin says, between himself and Mr Lee. It does not involve Ms Luo or W&L.

[427]  Mr Jin provided the following background to provide context to his agreement with Mr Lee about the payments made by W&L and Ms Luo for Farnworth Avenue. Initially, he said he had paid the loan repayments from his own Westpac account, and then made payments from C&H’s account to himself. He said Mr Lee told him these payments would be accounted for as between C&H and himself, so the Farnworth Avenue project would not affect Mr Jin Snr’s 50 per cent shareholding of the company.

[428]Between 16 April 2008 and 7 August 2009, payments from C&H totalling

$38,178 were made to Mr Jin’s Westpac 00 account, with a further $10,748.44 made to Mr Jin’s Westpac 91 account over the same period, which was the mortgage account for the $600,000 Westpac loan in respect of Farnworth Avenue.

[429]Mr Jin made payments amounting to $132,025.28 towards the Westpac loan of

$600,000 between 7 May 2007 and 7 August 2009. From 8 August 2009 until 31 July 2011, Mr Jin was the only one making the repayments on the Westpac loan. He said he met repayments which were not covered by C&H’s deposits. Over that period, Mr Jin said he paid $86,740.43.

[430]  However, from 16 August 2011 to 10 January 2013, Mr Jin received payments from W&L totalling $31,902.34 into his Westpac 91 account which were referenced “Farnworth Avenue”. W&L made further payments amounting to $54,422 from 15 February 2013 to 4 December 2014, but this time into Mr Jin’s Westpac 00 account. These payments were also referenced “Farnworth Avenue”. Other payments for expenses, being rates, water bills and resource consent costs, were paid by W&L

between  9  May  2012  and  16  December  2014.     These payments amounted to

$42,230.58.

[431]  Mr Jin said he assumed all the above payments by W&L were drawings by Ms Luo in fulfilment of Mr Lee’s part of the agreement they had made in relation to Farnworth Avenue.

[432]  Ms Luo also made payments amounting to $20,552 from her personal bank account into both of Mr Jin’s Westpac accounts from 1 August 2011 to 9 October 2014. Again, Mr Jin says he assumed these were on Mr Lee’s behalf for Farnworth Avenue. Mr Jin said he met all other costs for the property during that period.

[433]  Mr Jin said that to his knowledge Mr Lee did not do any work in relation to the subdivision and development of Farnworth Avenue until January 2014, when he obtained a resource consent for the development of eight lots on the property. Mr Jin said they had not agreed to an eight-lot subdivision, so he intended to “amend” the consent to provide for a larger development.

[434]  Again, the lack of evidence from Mr Lee was notable by its absence. The Bookkeeping Record (dated 12 June 2013) only refers to this property under the heading “Jul 12 total”. Under the heading “expenses”, the sum of $43,952.34 is recorded as “JinQian loan 91 - Rotorua Farworth” and the sum of $9,426.84 is recorded also as an expense attributed to “Farworth Rates”.

[435]  The Declaration of Trust (10 August 2012) between Ms Luo and Mr Jin, referring to W&L projects, only refers to Peachgrove and Chamberlain Roads. However, as with other properties that have been referred to in this judgment, I have not found this to be determinative.

[436]  Mr Jin does not challenge the work done by Ms Luo in relation to this property after she became involved in 2011. I accept that Ms Luo would not have undertaken the work she did in relation to the property for nothing. Ms Luo’s evidence that she and Mr Lee progressed the subdivision documentation does not sit easily with this being a W&L project, but other evidence establishes Mr Lee’s involvement, at least

initially, in identifying a property that might be of interest to the parties accords with his role as a mentor to both Mr Jin and Ms Luo in relation to property development matters.

[437]  Ms Luo’s pleadings do not seek a declaration. Rather, in relation to the separate advances by W&L and Ms Luo, judgment in respect of those specified sums outlined in the table above are sought.

[438]  Ms Luo does not agree that the payments made by W&L and herself were effectively for the benefit of Mr Lee. In the absence of any independent evidence, I am not prepared to find this was the case. I am satisfied that the payments made by W&L and Ms Luo are debts owed to both of them, and that judgment should be entered in favour of W&L and Ms Luo in respect of 16 Farnworth Avenue as sought. 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.

Advances for 164 Cumberland Road

[439]  The advances referred to in the counterclaim for 164 Cumberland Road are advances from W&L ($41,405.35) and from Ms Luo ($16,434.91). These are set out in detail in sch 5 to Ms Luo’s brief of evidence. The Bookkeeping Record of 12 June 2013 includes as expenses the sum of $37, 312.66 for this property. These expenses are detailed on a separate page entitled “164 Cumberland”.

[440]  Mr Jin’s evidence was that Cumberland Road was an investment property to benefit his father and Mr Lee. He said the property was held on trust by his ex-wife at Mr Lee’s direction. Mr Jin said that he and Ms Luo continued to develop this property following W&L’s incorporation until it could be sold, which is why W&L met the ongoing payments for the property.

[441]  Mr Jin said that the payments recorded in the Bookkeeping Record for Cumberland Road support his argument, because no one contends that the property had anything to do with W&L so there would therefore be no need for it to fund the expenses relating to this property. Ms Morrison submitted it is not credible that Ms

Luo continued to make the payments in the circumstances she alleges because, as a director of W&L, she could have simply refused to do so. Ms Morrison also referred to Ms Luo commissioning a valuation for the property for financing purposes. Again, she submitted there is no reason why this would occur unless Mr Jin’s version of events is correct.

[442]  Neither party contend that this property was a W&L project. Although there is no independent evidence to support what either Mr Jin or Ms Luo say were the arrangements for this property prior to the payments being made, it is clear they had nothing to do with W&L. Neither is it suggested that the payments made by Ms Luo in respect of this property were gifts.

[443]  In absence of Mr Lee’s evidence about these events, I find the advances by W&L and Ms Luo are sums that are able to be recovered from Mr Jin.

Advances to Zhenxiao Xia

[444]  Zhenxiao Xia is Mr Jin’s mother. Ms Luo said Mr Jin instructed her to make advances to Ms Xia for expenses in relation to a property at Lake Road. The advances claimed amount to $12,770.02 being advances amounting to $8,685.05 from W&L and $4,085.97 from Ms Luo.

[445]  The Bookkeeping Records includes a slightly lesser amount for expenses in relation to Lake Road, namely, the sum of $12,319.23. These are further particularised on a separate page in the Bookkeeping Record entitled “Lake Road”. They are noted as payments between 26 July 2011 and 16 March 2012 for rates and interest.

[446]  Mr Jin said Ms Xia held Lake Road on trust for Mr Lee and Mr Jin’s father, and Mr Lee instructed them to continue to fund Lake Road using W&L.

[447]  This property was sold by the mortgagee. At the time this occurred, Mr Jin was in China as his father was ailing and passed away in May 2012. Mr Jin said Mr Lee spoke to him and recommended that, as the property was not profitable, they should “let it go”. Mr Jin said he went along with Mr Lee’s advice. Mr Jin did not

personally receive the notices of mortgagee sale as he said his mail was delivered to Mr Lee while he was in China.

[448]  Ms Morrison submitted that this property, Cumberland Road and the $217,900 invested in Peachgrove Road were all seed assets to be used for W&L. Again, Ms Morrison submitted that, as with the expenses relating to 164 Cumberland Road, if Lake Road had nothing to do with W&L, Ms Luo could have simply refused to make payments relating to it, especially if W&L had no surplus funds. She therefore submitted that Ms Luo’s position was not credible.

[449]  On the evidence, I am not prepared to find that W&L had an interest in this property or that there was any agreement that it would permanently be responsible for these expenses. It is not clear on the evidence where any of the proceeds over and above those owed to the mortgagee went after the mortgagee sale or indeed if there were any.

[450]  In the absence of independent evidence, I am not persuaded by Mr Jin’s evidence that the property at Lake Road was held on trust for his father and Mr Lee. However, the payments made by W&L and Ms Luo did not benefit Mr Jin. They benefitted Ms Xia, the owner of the property. Ms Luo’s claim in respect of Lake Road does not succeed.

Breach of agreement / fiduciary duties by Jin

The issues

[451]  Mr Kohler submitted Mr Jin and Ms Luo were in a partnership or joint venture relationship in relation to the purchase and management of Peachgrove Road and Chamberlain Road. In relation to Peachgrove Road, Mr Jin performed all his obligations, but Mr Kohler submitted the same is not the case in respect of Chamberlain Road. For that property, the agreement was Mr Jin would provide capital, while Ms Luo would be in charge of managing the property and sourcing finance.

[452]  The second counterclaim brought against Mr Jin is a breach of the partnership agreement and breach of fiduciary duty arising from the joint venture. This is based

on Ms Luo’s claim that in fact Mr Jin contributed only $184,212.50 to Peachgrove Road and that Mr Huang contributed the remaining equity being $195,000 for Peachgrove Road and $590,000 for Chamberlain Road, without her knowledge. Mr Kohler submitted the Chamberlain proceedings and the subsequent settlement which required W&L to pay Mr Huang were a consequence of Mr Jin’s breaches. Ms Luo seeks an enquiry as to the loss suffered and an order that accounts be taken of the joint venture/partnership.

[453]  Mr Jin’s position is that Ms Luo was aware of Mr Huang’s involvement and the Chamberlain proceeding was simply a result of her failure to fulfil W&L’s obligations owed to Mr Huang for his contributions.

The relationship between Ms Luo, Mr Jin and Mr Huang

[454]  I start with the amount Mr Jin is said to have contributed to the Peachgrove and Chamberlain Road projects.

[455]  The Declaration of Trust entered into on 10 August 2012, after the purchases of Peachgrove and Chamberlain Roads, is an important starting point. It records that Mr Jin “transferred an approximate sum of $818,749, being half of the funds contribution for the purchases” of Peachgrove and Chamberlain Roads. This amount is at odds with Ms Luo’s argument that Mr Jin’s contribution was only $184,212.50.

[456]  In relation to the sum of $818,749, Mr Jin said this figure was explained to him by Mr Guo, Ms Luo’s lawyer, as an estimated value of the shares he owned in W&L. Mr Jin also said his English reading ability was limited, with Mandarin being his mother tongue, and no translation of the documents was provided to him, nor was he told to obtain the services of an independent lawyer. Mr Jin said that his relationship with both Mr Lee, as his mentor and father’s former business partner, and Ms Luo was one of trust, and therefore he did not question the document.

[457]  As Ms Luo also signed the document, she must have accepted the $1,637,497 recorded as the shareholder current account and therefore both she and Mr Jin’s shares in the company were being valued at $818,749. As she was responsible for certain accounting functions and given her background, there must have been some basis she

knew of that provided justification for this figure. The accuracy of this figure was the subject of submissions.

[458]  While the accuracy or otherwise of the amount stated in the Declaration adds to the overall picture, the specific figure is not the key here. In my view, the main issue is whether Mr Huang became involved expecting to be a partner in the venture without Ms Luo’s knowledge.

[459]  Ms Luo signed an agreement on behalf of W&L in February 2014 with Mr Huang that confirmed his 50 per cent share of Chamberlain Road. Prior to this, Ms Luo claims she did not know about his involvement.

[460]  Mr Jin contends Ms Luo knew of Mr Huang’s interests in Chamberlain Road before February 2014. First, reference is made to funds totalling $143,409 which Jingjing (Emily) Huang deposited into W&L’s bank account on 7 and 8 November 2012 on behalf of Mr Huang and which were recorded in the account details as “investment”. Mr Ji and Ms Huang’s evidence was that these payments followed a dinner meeting attended by Ms Luo in mid-2012, at which Mr Huang’s contributions were a topic of conversation. The funds were also recorded as “funds contributed” in W&L’s general ledger for the year ended 31 March 2013.

[461]  There was also the sum of $222,000 provided by Mr Huang to W&L in April 2012. This was documented as a loan in the financial statements for the year ended 31 March 2013. This was only the deposit by Mr Huang that was recorded as a loan.

The arguments

[462]  Mr Kohler submitted that Mr Jin’s actions constitute a breach of the fiduciary obligations he owed to Ms Luo because he arranged for Mr Huang to effectively fund his share of what Ms Luo thought were his responsibilities to their joint venture partnership revealing Mr Huang’s expectation of an interest in it. In respect of this submission, he cited Chirnside v Fay, but provided little insight as to how exactly that case applies to the present circumstances.52

52     Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433.

[463]  Ms Morrison submitted that Mr Jin was not in a partnership with Ms Luo and therefore he did not owe her any fiduciary duties. Ms Morrison relied on Dold v Murphy, where the dispute between the parties was whether two shareholders of a company had entered a fiduciary relationship.53 The Court of Appeal referred to three indicia that are required to establish a fiduciary relationship to be present, where the relationship is not inherently fiduciary. At para [55], the Court said:54

[55] We consider the relevant principles can be summarised in this way. Some relationships are inherently fiduciary in nature, involving trust, confidence and a degree of dependence, such as solicitor and client and trustee and beneficiary. In other cases a fiduciary relationship is only likely to be inferred when the legal relationship between parties involves: (1) the conferral of powers in favour of the alleged fiduciary, which may be used to affect the proprietary rights of the beneficiary; (2) the apparent assumption of a representative or protective responsibility by the alleged fiduciary for the beneficiary (for example, to promote the beneficiary's interests, or to prefer the interests of the beneficiary over those of third parties); and (3) the implied subordination (although, not necessarily, elimination) of the alleged fiduciary's own self-interest.

[464]  Ms Morrison submitted the relationship between Mr Jin and Ms Luo, as shareholders of W&L, is not inherently fiduciary in nature. In respect of the three indicia set out above, she submitted there was no conferral of powers in favour of Mr Jin which were used to affect Ms Luo’s proprietary rights, he did not assume a representative or protective responsibility by for Ms Luo, and there was no implied subordination of his own self-interest. Thus, she submitted Mr Jin did not owe fiduciary duties to Ms Luo.

[465]  In Dold v Murphy, the Court of Appeal found there was not a fiduciary relationship:55

[58] What is missing here are the basic indicia indicated above in [55]. No particular power is conferred on Mr Murphy. He is simply one shareholder among three. As a result, he has no particular representative responsibility or obligation to actively promote other shareholders’ interests over his own or those of third parties. This is not a case like Chirnside v Fay involving an unincorporated joint venture where one party is given particular responsibilities, and takes personal advantage of the opportunity presented by them to the exclusion of the interests of the other venturer. Nor is it like

53 Dold v Murphy [2020] NZCA 313, [2021] 2 NZLR 834.

54 Citing Chirnside v Fay above n 52; Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169; and Amaltal Corp Ltd v Maruha Corp [2007] NZSC 40, [2007] 3 NZLR 192.

55 Dold v Murphy, above n 53, at [58]-[59].

Amaltal, where one of the contracting parties was given exclusive responsibility for undertaking accounting and tax arrangements on behalf of the combined venture. Here, the parties may be taken to have considered it sufficient to organise their affairs on the basis of a company…

…

[59]      … [I]t would be quite exceptional to impose fiduciary duties on a minority shareholder. As the Supreme Court observed in Amaltal, when commercial parties elect to use an incorporated vehicle for a loose joint venture, it is unlikely that their relationship as a whole will be fiduciary in nature …

[466]  Ms Morrison submitted the same outcome should follow in this case; Ms Luo and Mr Jin chose to form W&L to carry out their property investments through a corporate structure and Mr Jin was simply an equal shareholder.

[467]  Ms Morrison further submitted that the $818,749 stated in the Declaration of Trust prepared by Ms Luo’s lawyer, Mr Guo, was half of the amount of $1,637,497 recorded in the financial statements representing the shareholder current account. As that figure was known to Ms Luo to be incorrect because it included fictional transactions for Peachgrove Road and the Adamant loan, Ms Morrison submitted Ms Luo cannot rely on her own incorrect instructions to Mr Guo and the accounting records she prepared to subsequently found a claim against Mr Jin.

[468]  Ms Morrison noted that she further submitted it was accepted in the shareholder proceeding that Mr Jin had a 50 per cent shareholding in W&L and the Court made consent orders to this effect on 8 October 2019. The Chamberlain proceeding between Mr Huang and Ms Luo was settled on 18 July 2017. Ms Morrison submitted that Ms Luo cannot seek to relitigate these matters now.

The cases

[469]  Three Supreme Court decisions assist in outlining the principles applicable that apply when considering whether fiduciary duties arise from a particular relationship. These cases are Chirnside v Fay, Paper Reclaim Ltd v Aotearoa International Ltd and Amaltal Corporation Ltd v Maruha Corporation.56

56     Chirnside v Fay, above n 52; Paper Reclaim Ltd v Aotearoa International Ltd, above n 54; Amaltal Corporation Ltd v Maruha Corporation, above n 54.

[470]  In Chirnside v Fay, Tipping J said the key point is not what description is given to the relationship, but whether the relationship is of a kind that gave rise to fiduciary duties.57 There is no “single formula” for deciding whether or not a fiduciary relationship outside of the recognised categories exist,58 but all such relationships are marked by the entitlement of one party to place trust and confidence in the other.59

[471]  In Paper Reclaim Ltd v Aotearoa International Ltd, the Court observed that the labelling of a relationship as a joint venture should be done cautiously by, first, deciding what the parties have actually agreed upon and then considering whether a particular aspect of that agreement gives rise to a fiduciary relationship.60 Blanchard J held that “a fiduciary relationship will be found when one party is entitled to repose and does repose trust and confidence in the other.”61

[472]  Similarly, the Supreme Court in Amaltal Corporation Ltd v Maruha Corporation held that a particular aspect of a commercial relationship can involve a fiduciary obligation.62 In this case, an employee of one of the shareholder parties was seconded to the company, Maruha Corporation, to undertake its accounting and tax returns. Although the Court determined that the relationship, as a whole, was not a fiduciary one, it found that both the seconded employee and the shareholder owed fiduciary obligations of loyalty to Maruha Corporation in relation to the company’s accounting functions.63

Discussion

[473]  In my view, relationship between Mr Jin and Ms Luo is analogous to that in Chirnside v Fay to an extent. Ms Luo was primarily responsible for progressing the project at Chamberlain Road, and Mr Jin’s role was to provide capital. Both Mr Jin and Ms Luo depended upon one another to achieve their common objective and they agreed to share the profits produced. Both worked on the project, with Mr Jin having

57     Chirnside, above n 52, at [71].

58 At [75].

59 At [80].

60     Paper Reclaim Ltd v Aotearoa International Ltd, above n 54, at [31].

61 At [31].

62     Amaltal Corp Ltd v Maruha Corp, above n 54, at [21].

63 At [21].

several meetings with Mr Lee and Mr Huang to organise the funds to satisfy the full purchase price.

[474]  However, the property development in Chirnside v Fay was an unincorporated joint venture. The Supreme Court in Amaltal also observed that if an incorporated vehicle is used for a loose joint venture, it is unlikely their relationship as a whole will be fiduciary in nature.64 In this case, W&L was incorporated for the very purpose of being the vehicle through which the parties’ property investments would be channelled. Unlike the factual situation in Amaltal Corporation Ltd, there is no particular aspect of the agreement between Mr Jin and Ms Luo in relation to Chamberlain Road that resulted in Mr Jin owing special obligations to Ms Luo or W&L outside his role as shareholder. Mr Jin was in China from shortly after W&L’s incorporation in March 2011 until August 2012 and then again in mid-2012 until 2013. He had no particular responsibilities to fulfil apart from providing capital. His involvement was to some extent “hands-off” although, in 2013 when construction began on the site, he and Mr Ji went regularly to it to monitor progress. Both also met with Mr Lee who Mr Ji said was the lead person who managed the development process. This was because, during this time, Ms Luo gave birth to her first child and was preoccupied, or as she said in her evidence, “had much more on [her] mind”.

[475]  While Mr Jin’s role was different from that of the seconded employee in Amaltal, providing the capital was his role and Ms Luo trusted and placed confidence in him that he would do this as they had agreed. The context in which this occurred is also relevant. Ms Luo relied upon Mr Jin’s assurances that he had fulfilled his obligations and did not enquire any further into this matter.

[476]  I am satisfied that, while Ms Luo was aware 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. Mr Huang’s involvement by Mr Jin was a direct breach of that trust. By including Mr Huang, who ended up with a 50 per cent share of the property (some of which Mr Jin received a proportion of), Mr Jin excluded Ms Luo’s interests. Instead of Ms Luo receiving 50 per cent of the shares through her

64 At [20].

shareholding in W&L, this change in ownership structure meant she instead had 25 per cent, that being an equal proportion of the 50 per cent W&L had which was shared with Mr Jin. Furthermore, Mr Huang’s involvement gave rise to the Chamberlain proceedings whereby a settlement was reached from which Mr Huang received payments.

[477]  As to other more peripheral matters referred to by Ms Morrison relating to Ms Luo’s knowledge of Mr Huang, such as an email she forwarded to Emily Huang regarding a late invoice and Mr Ji’s involvement in the Chamberlain project (he was Mr Huang’s son-in-law), I find these are less persuasive, either singularly or collectively. The key point made on behalf of Ms Luo is, although she may have known about Mr Huang’s involvement and even that he contributed funds, her belief was that such contributions were made to Mr Jin which would have to be repaid by Mr Jin from his share in W&L rather than creating a separate interest in the joint venture itself.

[478]  I am satisfied that Mr Jin breached the partnership agreement he and Ms Luo shared, that each would own 50 per cent shares in W&L. The effect of the settlement with Mr Huang is that Ms Luo has effectively ended up, together with Mr Jin, only owning 25 per cent of the interest W&L had in Chamberlain Road. The agreement was always that each would own 50 per cent of the shares in W&L in respect of all of its property investments. Given the authorities referred to, it is less certain whether this amounts to a breach of a fiduciary duty, however, the claim is brought also on the basis of a breach of partnership agreement. I am satisfied that there was a partnership agreement and that Mr Jin breached this agreement. The effect of the Huang settlement, as it relates to Mr Jin and Ms Luo’s shares in W&L, will need to await the final accounting exercise.

Loss caused by freezing orders, lodging of caveats

[479]  Mr Jin obtained ex parte freezing orders on 20 October 2017 and lodged a caveat over the defendants’ properties. Mr Kohler submitted that, if Mr Jin is found

to have no interest in the properties, he is liable for damages under the Land Transfer Act 1952, s 146(1), which provides:65

Any person lodging any caveat without reasonable cause is liable to make to any person who may have sustained damage thereby such compensation as may be just.

[480]Given my findings, this claim only relates to the Knox Street property.

[481]  The issue is whether the caveator has “an honest belief based on reasonable grounds that the [caveator] had a caveatable interest when they lodged the caveat”.66

[482]Ms Morrison submitted the caveat was lodged with reasonable cause.

[483]  Again, Ms Luo seeks an enquiry into losses, but provided a calculation of the loss via Mr Stark amounting to $198,345. Unfortunately, appendix 3 outlining the calculation by Mr Stark is missing from the casebook of evidence. Mr Jin reserves his position on loss until any such enquiry is granted.

[484]  The specifics of this counterclaim will need to be resolved at a later date once quantum is better established and both parties have had the opportunity to make submissions in relation to it.

Summary of findings

[485]  I now summarise the findings I have made in relation to causes of action and counterclaims:

(a)Are or were the Nicks Way, Robinson Avenue, Seddon Road, Radnor Street and Victoria Street properties, beneficially owned by W&L (first cause of action)?

Yes in respect of all properties, in shares yet to be determined.

65     Reproduced almost word for word in the Land Transfer Act 2017, s 148.

66     Couchman v Taylor CA172/95, 29 April 1996 at 7; affirmed Cotton v Keogh [1996] 3 NZLR 1 (CA).

(b)Can W&L succeed on any of its alternative causes of action (fourth, sixth to ninth causes of action)?

Given the findings in A, it is not necessary to determine the alternative causes of action.

(c)Did Ms Luo have and did she breach any directors and/or fiduciary duties she owed to W&L (second and third causes of action)?

Yes.

(d)Does KPIL hold 12 Knox Street on a resulting trust for Mr Jin to the extent of his contribution towards its purchase price (fifth cause of action)?

No.

(e)Can any of the counterclaims by the defendants against Mr Jin succeed?

(i)      In debt:

(aa)     advances to Mr Jin - yes in part, as outlined above;

(bb)advances for Farnworth Avenue – yes, in an amount to be determined;

(cc)advances for Chamberlain Road – yes, in an amount to be determined;

(dd)     advances to Xia – no;

(ii)     Breach of agreement/fiduciary duties – yes breach of agreement;

(iii)   Loss caused by freezing orders/caveat – to be resolved after quantum is better established.

Remedies

[486]  Declarations of trust are sought. Declarations of trust are made in relation to properties referred to above, but the extent of the interest is reserved until the taking of accounts has occurred, because this process will crystalise the share W&L has in

each of the properties concerned. There are several ways this process can be undertaken. The first would be for the Court to make a direction under pt 16 of the High Court Rules. Given Ms Fatupaito assisted in this regard in relation to the Chamberlain proceedings, she may well be an appropriate person to undertake the task. It may be however that, after reflecting on the judgment, the parties decide on an alternative way to resolve their differences, including whether the option of liquidation outlined by Mr Kohler is one they wish to pursue.

[487]  There is also the question of the counterclaims. The quantum of the successful counterclaims will also need to be crystalised by the taking of accounts.

[488]  I therefore direct that the parties are to file and memorandum, joint if possible, setting out any further directions they seek to further resolve the proceedings. Such a memorandum is to be filed by 5.00 pm on Friday 29 September 2023.

Costs

[489]Costs are reserved until the quantum claim has been resolved.

Harland J