Li v 110 Formosa (NZ) Ltd

[2018] NZHC 3418

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-1878

[2018] NZHC 3418

BETWEEN

JUN LI

Plaintiff

AND

110 FORMOSA (NZ) LIMITED

First Defendant

MENG WANG
Second Defendant

DINGZHI HUANG

Third Defendant [discontinued]

Hearing:

18 June to 13 July 2018; further memoranda 19 and 20 July 2018

Counsel:

DJ Heaney QC and JE Heaney for plaintiff DW Grove for first defendant

AJB Holmes and LE Mannis for second, fourth and fifth defendants

HM Twomey and R Woods for sixth defendants

Judgment:

19 December 2018

JUDGMENT OF FITZGERALD J

Solicitors:Solicitors:           Carson Fox Bradley Ltd, Auckland (X Li) Foy & Halse, Auckland (G Halse)

Cook Morris Quinn, Auckland (D Morris) Robertsons, Auckland (M Robertson)

Defendants continued GOLDEN BEACHLANDS HOLDINGS LIMITED

Fourth Defendant

Li v 110 Formosa (NZ) Limited [2018] NZHC 3418 [19 December 2018]

JENNY AND EAMON HOLDINGS LIMITED

Fifth Defendant

ARTHUR LOO AND FUI LOONG CHAN,

trading as LOO & KOO BARRISTERS, SOLICITORS NOTARY PUBLIC

Sixth Defendants

CONTENTS

Introduction  [1]

The pleaded claims  [10]

First cause of action — constructive trust (reasonable expectation)              [11]

Second cause of action — breach of fiduciary duty and knowing

assistance  [15]

Third cause of action — resulting trust (Quistclose principles)  [20]
Fourth cause of action — breach of contract  [24]

Fifth cause of action — unjust enrichment  [26] Sixth cause of action — constructive trust in Formosa Property (property obtained by dishonesty and knowing assistance in such dishonesty)  [28] Seventh cause of action — money had and received  [31]

Eighth cause of action — negligent breach of statutory duty  [33]

Factual background

Key participants in proposed purchase of Formosa Property  [47] Mr Li, Na Li and Mr Jiang’s initial interest in the Formosa Property  [54] Mr Wang and Mrs Zhou become interested in the Formosa Property  [62] Overseas Investment Act concerns  [76]

Has Mr Li established a beneficial interest in the $4.8 million?

Introduction  [157]
Key points arising from payment flow materials and diagrams                   [160]
The burden of proof (and other “burdens”)  [162]
Has Mr Li discharged the burden of proving on the balance of

probabilities   that he had beneficial ownership of the $4.8 million?           [168]

Legal causes of action

First cause of action — constructive trust  [188]
Second cause of action — breach of fiduciary duty and knowing

assistance  [195]

Third cause of action — resulting trust  [216]
Fourth cause of action — breach of contract  [232]
Seventh cause of action — money had and received  [253]
Eighth cause of action — negligent breach of statutory duty  [259]

Result  [267]

Costs  [272]

Introduction

[1]                 These proceedings turn largely, though not exclusively, on a single issue: who is the beneficial owner of $4.8 million paid by the plaintiff (Mr Li) towards the acquisition of land on which the Formosa Golf Course is located (the Formosa Property)?

[2]                 Mr Li says he is the beneficial owner. He says he borrowed the money from his mother to support an investment in an alleged joint venture to purchase the Formosa Property. The joint venture’s plans were to subdivide the Formosa Property for residential development, for profit.

[3]                 Mr Li advances many causes of action and claims for relief but, in short, he says that as beneficial owner of the $4.8 million, he should have a commensurate beneficial ownership in the Formosa Property.

[4]                 The primary defendant is the second defendant (Mr Wang).1 Mr Wang disputes Mr Li was the beneficial owner of the $4.8 million. Rather, he says the

$4.8 million belonged to or originated from Mr Wang’s family, and was paid towards the purchase of the Formosa Property using Mr Li as a “conduit”, with beneficial ownership in the funds vesting in Mr Wang.2

[5]                 By the end of the trial, however, Mr Holmes, senior counsel for Mr Wang, responsibly acknowledged that Mr Wang could not establish that the $4.8 million originated from him or his family in China. He says, however, that Mr Wang is entitled to put Mr Li to proof, and require Mr Li to establish that he has a right to the funds.

[6]                 Either of the fourth and fifth defendants (GBHL and JEHL respectively) was intended, at varying times, to be the corporate entity to purchase the Formosa Property. In the event, the first defendant (110 Formosa) purchased the property

1Mr Wang is a shareholder in the company which now owns the Formosa Property, 110 Formosa (NZ) Ltd, the first defendant.

2Counsel were agreed at the hearing that the Formosa Property is land to which the Overseas Investment Act 2005 applies. During the hearing, I expressed my concern at the consequences of the “conduit” argument, insofar as it was suggested the reason Mr Li was used as conduit was to avoid the effects of that Act. I return to this issue later in this judgment.

and remains its registered proprietor. Various claims are advanced against 110 Formosa in that role, principally on the basis of knowledge said to be imputed to it by Mr Wang, who was at the relevant times a director of that company.

[7]                 The sixth defendants are the partners of the law firm trading as Loo & Koo. Loo & Koo acted for Mr Wang, JEHL, GBHL, 110 Formosa and the third defendant (Ms Huang)3 on the purchase of the Formosa Property. Mr Li says Loo & Koo knew or ought to have known that he was the beneficial owner of the $4.8 million and they wrongfully permitted Mr Wang to deal with those funds without Mr Li’s permission. Loo & Koo deny those allegations. They say they acted at all times in accordance with their clients’ instructions as to the use of the funds.

[8]                 Despite Mr Li’s claims turning largely on the single issue outlined above, the proceedings were anything but straightforward. In addition to the many causes of action and forms of relief advanced, a large amount of documentary and oral evidence was adduced at trial, much of which was not relevant to the core issues requiring determination. Some of the evidence, including on quite key issues, was also in an unsatisfactory form, not meeting the requirements of the Evidence Act 2006 or the relevant High Court Rules. The pleadings were also subject to several last-minute additions and amendments, including during the trial itself. These matters have added to the difficulty in untangling the competing claims to the $4.8 million.

[9]The balance of this judgment is structured as follows:

(a)First, I provide an overview of the causes of action advanced by  Mr Li and the relief he seeks.

(b)Second, I provide an overview of the factual background to the claims.

(c)Third, I analyse and set out my findings on the key issue: who is the beneficial owner of the $4.8 million?

3      Mr Li discontinued his claim against Ms Huang.

(d)Finally, in light of my findings on the beneficial ownership of the

$4.8 million, I address each of the causes of action advanced by Mr Li.

The pleaded claims

[10]Mr Li advances eight causes of action.

First cause of action — constructive trust (reasonable expectation)

[11]This cause of action is advanced against 110 Formosa only.

[12]              Mr Li says 110 Formosa holds 32 per cent of its interest in the Formosa Property on an institutional or remedial constructive trust for Mr Li because:

(a)Mr Li paid $4.8 million of the $36 million purchase price;

(b)Mr Wang knew of Mr Li’s contribution;

(c)Mr Wang’s knowledge can be imputed to 110 Formosa, given he was at that time a director of 110 Formosa; and

(d)Mr Li reasonably expected that his contribution would yield an overall 32 per cent interest in the Formosa Property.4

[13]              In support of this cause of action, Mr Li relies primarily on the principles established in Lankow v Rose,5 as well as observations of the Court of Appeal in Fortex Group Ltd (in rec and in liq) v MacIntosh.6

[14]              Mr Li seeks a declaration recognising the constructive trust, as well as an order that 110 Formosa purchase his 32 per cent share in the Formosa Property for

4The 32 per cent is based on the terms of a “Cooperation Agreement” between, inter alia, Mr Li and Mr Wang, governing the acquisition of the Formosa Property.

5      Lankow v Rose [1995] 1 NZLR 277 (CA) at 294.

6      Fortext Group Ltd (in rec and in liq) v MacIntosh [1998] 3 NZLR 171 (CA) at 175.

$8.96 million.7 Alternatively, Mr Li seeks an account of profits from 110 Formosa by which it pays him $13 million — the alleged difference between the current market value of the Formosa Property and the amount paid for it, plus the return of his contribution of $4.8 million.

Second cause of action — breach of fiduciary duty and knowing assistance

[15]              This cause of action was originally advanced against all defendants.8 Mr Li alleges:

(a)Mr Wang owed him fiduciary duties, on the basis that the arrangement to acquire the Formosa Property was a joint venture giving rise to such duties;

(b)Mr Li contributed $4.8 million to the purchase of the Formosa Property;

(c)Mr Wang breached his fiduciary duties to Mr Li in several ways, including utilising Mr Li’s $4.8 million other than for the purpose for which it was advanced by Mr Li; and

(d)the remaining defendants knowingly assisted Mr Wang in breaching his fiduciary duties.

[16]              In advancing the proposition that the  relationship  between  Mr  Li and Mr Wang was one giving rise to fiduciary duties, Mr Li relies primarily on the Supreme Court’s judgment in Chirnside v Fay.9

7Being 32 per cent of the stated market value of the Formosa Property as at 1 October 2015 (the date 110 Formosa was “called to account” for Mr Li’s interest); minus $7.96 million, being a further amount Mr Li would have had to invested to acquire his full 32 per cent interest (leaving a sum of $6.84 million); plus the greater of Judicature Act interest on the sum of $6.84 million or 32 per cent of the increase in value of the Formosa Property from 1 October 2015 to the date of trial.

8In his written closing submissions, Mr Heaney QC, counsel for Mr Li, did not pursue it against JEHL and GBHL.

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

[17]              Mr Li seeks orders stripping the alleged errant fiduciary of his profits.    Mr Li says Mr Wang’s 19.75 per cent shareholding in 110 Formosa should be transferred to Mr Li. Mr Li says this is because Mr Wang made no contribution in substance to acquire that interest. And because there is no information before the Court as to the financial position of 110 Formosa, Mr Li says the appropriate remedy is in fact that Mr Wang’s shareholding in Formosa is cancelled, and Mr Li is declared to own a 19.75 per cent interest in the underlying Formosa Property (as a tenant in common with 110 Formosa).

[18]              As against the other defendants, it is alleged those parties knowingly assisted Mr Wang in his breach of fiduciary duty and accordingly “the award [against these defendants] in favour  of  [Mr  Li]  should  be  comparable  with  Mr Wang’s liability.”

[19] In the alternative to remedies based on an account of profits, Mr Li advances compensatory claims, on the basis outlined at [14] above, which yields a sum payable to Mr Li of $17.8 million. At least in relation to this cause of action, however (though in principle it should also apply to the same relief sought on other causes of action), Mr Heaney QC, senior counsel for Mr Li, accepts there is a “double up” in seeking recovery of Mr Li’s $4.8 million.10

Third cause of action — resulting trust (Quistclose principles)

[20]Again, this cause of action is advanced against all defendants.

[21]              Relying on the Court of Appeal’s judgment in Chang v Lee,11 Mr Li says that “where the terms of an advance are not agreed, there is an assumption of equitable ownership in the acquired property.” Mr Li also relies on principles governing a Quistclose trust.12

10     Given that under the Cooperation Agreement, Mr Li was to advance that sum plus a further

$7.96 million to acquire a 32 per cent interest in the company to own the Formosa Property.

11     Chang v Lee [2017] NZCA 308, [2017] NZAR 1223.

12So-named from the House of Lords decision in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (HL).

[22]              Mr Li says he advanced the $4.8 million solely for JEHL (and no other entity) to acquire the Formosa Property. As JEHL was not the corporate vehicle through which the Formosa Property was ultimately acquired, Mr Li says the purpose for which he advanced the $4.8 million failed and his funds ought therefore to have been returned to him. Mr Li says Loo & Koo and 110 Formosa knew of the specific purpose for which he advanced his funds, knew that purpose had failed, and each assisted in the breach of resulting trust when Mr Li’s funds were not returned to him.

[23]              Mr Li seeks the same relief on this cause of action as that on the second cause of action.

Fourth cause of action — breach of contract

[24]This cause of action is advanced against Mr Wang only. Mr Li says that:

(a)He and Mr Wang (together with others) were parties to a contract governing the acquisition of the Formosa Property, referred to as the “Cooperation Agreement”;

(b)He advanced his $4.8 million in accordance with the terms of the Cooperation Agreement;

(c)Mr Wang breached his obligations under the Cooperation Agreement by:

(i)failing to make his required contributions;

(ii)causing Mr Li’s contribution to be used by GBHL and then

110 Formosa to acquire the Formosa Property, thereby depriving Mr Li of any rights in the company owning the Formosa Property;

(iii)failing to ensure proper distribution of any profits from the venture to Mr Li;

(iv)wrongfully causing information under the Cooperation Agreement to be made known to GBHL and 110 Formosa; and13

(d)Because of Mr Wang’s alleged breaches, Mr Li suffered loss — being deprived of the 32 per cent interest in the Formosa Property that JEHL was to hold for him.14

[25]              Mr Li seeks compensatory damages calculated on the same basis as the compensatory relief sought on the breach of fiduciary duty claim.15

Fifth cause of action — unjust enrichment

[26]              A claim of “unjust enrichment” was pleaded as a free-standing cause of action. In his oral closing submissions, however, Mr Heaney did not press this cause of action to any real extent and his written closing submissions devoted scant attention to it.16

[27]              Mr Heaney was right not to press this cause of action separately to the other causes of action advanced. At least as the law in New Zealand presently stands, “unjust enrichment” is not a recognised cause of action.17 For these reasons, and given no substantive attention was given to it in counsel’s oral or written submissions, I have not addressed the fifth cause of action any further in this judgment.

13     Additional claims based on penalty clauses in the Cooperation Agreement were withdrawn.

14 Claims to recover the costs associated with these proceeding by way of damages for breach of contract were also withdrawn.

15 See [19] above. Claims to contractual interest on any damages payable were also withdrawn.

16Mr Li’s  closing submissions in fact stated: “Unjust enrichment is a restitutionary claim, as  there is no case in New Zealand where unjust enrichment has been found to exist as a cause of action in its own right [sic]. It is included here recognising that this Court will likely not find the cause of action available but the plaintiff raises it lest this matter finds its way to an appellate court.”

17 See Rod Milner Motors Ltd v Attorney-General [1992] 2 NZLR 568 (CA) and Villages of New Zealand (Pakuranga) Ltd v Ministry of Health (2006) 8 NZBLC 101,739 (HC). Both were applied more recently in Real Cool Holdings Ltd v Northpower Ltd [2012] NZHC 1604.

Sixth cause of action — constructive trust in Formosa Property (property obtained by dishonesty and knowing assistance in such dishonesty)

[28]              No specific pleading is directed to this cause of action (for example, the facts giving rise to the alleged constructive trust or who is said to be the trustee under such a trust), other than a list of alleged “dishonest conduct” on behalf of each of the defendants.

[29]              Mr Heaney says in his written closing submissions that “these issues have been traversed under the head of fiduciary duty” and “the factual matters raised in that section are equally applicable under this cause of action”. In his oral closing submissions, he described this cause of action as being “the second-limb to the second cause of action (breach of fiduciary duty)”.

[30]              Given the way in which this cause of action has been pleaded and advanced at trial, it is not possible for the Court to consider it as a free-standing claim (i.e. in addition to certain aspects of the second cause of action). For those reasons, I say nothing further in this judgment on the sixth cause of action.

Seventh cause of action — money had and received

[31]              This cause of action is advanced against 110 Formosa, Mr Wang, GBHL and Loo & Koo.

[32]              Mr Li says the $4.8 million was paid by him into Loo & Koo’s trust account for the purpose of JEHL purchasing the Formosa Property. As the funds were used for a different purpose, each of Mr Wang, GBHL, Loo & Koo and 110 Formosa are liable to account to Mr Li for the $4.8 million. Mr Li seeks judgment against those parties in that amount.

Eighth cause of action — negligent breach of statutory duty

[33]              This (final) cause of action is advanced against Loo & Koo only. Some controversy exists as to the form and manner in which it was advanced at the hearing.

[34]              Shortly before the trial commenced, Mr Heaney circulated an email to the Court and counsel for the other parties, signalling that Mr Li would seek leave at the commencement of the trial to amend his statement of claim to include, inter alia, the eighth cause of action. The email framed the proposed new cause of action as “Breach of statutory duty”. The proposed amended statement of claim which accompanied the email, together with the application to amend and memorandum in support, also referred to the eighth cause of action as breach of statutory duty. Relevant to the matters discussed in the following paragraphs, cl 10.2.3 of the proposed amended claim alleged “In breach of the duties above …”.

[35]              When the amended statement of claim was handed up at the hearing, however, the heading to the eighth cause of action had been amended to read “Negligent breach of statutory duty” (emphasis added), and cl 10.2.3 had been amended to allege that Loo & Koo acted “Negligently and in breach of statutory duty …” (emphasis added). Mr Heaney says he made it clear when that version of the statement of claim was handed up that the allegation was that Loo & Koo acted “negligently and” in breach of statutory duty.18 The last-minute addition of the words “Negligently and” presumably responds to authorities which suggest there is no such cause of action as “negligent breach of statutory duty”.19

[36]              Leave was granted to the amended statement of claim being filed. Rather than require the defendants to file new statements of defence, I directed they file memoranda setting out their defence to the amended claims.

[37] In Mr Li’s written closing submissions, the eighth cause of action was pursued as one of negligence exclusively, unconnected with an alleged breach of statutory duty (other than the existence of certain statutory duties under the Lawyers and Conveyancers Act 2006 being a factor said to support the proximity analysis on the issue of duty of care). Ms Twomey, senior counsel for Loo & Koo, objected to the cause of action being advanced in that manner, on the basis no such free- standing cause of action in negligence had been pleaded.

18 It was not clear to the Court, however, that such a distinction was being drawn and a free- standing claim in negligence in fact being pursued. It was evidently also not clear to counsel for Loo & Koo.

19     Attorney General v Carter [2003] 2 NZLR 160 (CA) at [41]–[43].

[38]              I accept Ms Twomey’s submission. In short, I do not consider it appropriate for what could be a complex negligence claim to be introduced effectively by the back door and at the last minute, through the addition of the words “Negligently and” in the manner outlined above.

[39]              The purpose of pleadings is to put parties on clear notice of the claims they will be required to meet. Separate causes of action are to be pleaded separately.20 The amended pleading did not, in my view, properly put Loo & Koo (or the Court) on notice of a purported free-standing cause of action in negligence. Had a free- standing negligence cause of action been pleaded from the outset, or at least in advance of trial, Loo & Koo would have been in a position to properly and fully consider such a cause of action and take advice on it; plead in response to that cause of action; and tailor their evidence and submissions accordingly. In my view, it was simply too late for Mr Li to seek to introduce a negligence cause of action in the manner and at the time outlined above.

[40]              Mr Heaney referred me to the Court of Appeal’s recent decision in Thompson v Turner Hopkins as an example of a breach of statutory duty claim failing, but the Court nevertheless permitting the pleading to be amended during the appeal itself to include a separate claim in negligence.21

[41]              The Court’s decision in Thompson v Turner Hopkins came about in quite different circumstances. In that case, Turner Hopkins had been granted defendant’s summary judgment on the claim of breach of statutory duty against it. That was the only cause of action advanced against Turner Hopkins and accordingly brought its involvement in the proceedings to an end.

[42]              The Court of Appeal concluded that the application for defendant’s summary judgment on the breach of statutory duty cause of action had been rightly granted. During the hearing of the appeal, however, counsel for Mr Thompson proposed a further cause of action against Turner Hopkins based on negligence.

20Commissioner of Inland Revenue v Chesterfield Preschools Ltd  [2013] NZCA 53, [2013] 2 NZLR 679 at [84].

21     Thompson v Turner Hopkins [2018] NZCA 197.

Mr Thompson was granted leave to file a draft amended statement of claim setting out the new cause of action. Turner Hopkins opposed the new cause of action being introduced at that late stage.

[43]              Permitting the negligence cause of action to be considered on the appeal (and as a result allowing the appeal), the Court stated the following:

[45]      We must now assess whether the proposed new cause of action should be considered on this appeal. We are mindful of the fact that a negligence cause of action was not before Associate Judge Doogue, and indeed not before this Court until the latter stages of the hearing of the appeal. However, last-minute applications to amend in the context of both strike-out applications and summary judgment applications are not uncommon. The pre-emptory nature of the summary judgment process and the severe consequences of judgment terminating a claim prompt the courts to be generous in such matters.

[46]      Thus in Westpac Banking Corp v M M Kembla New Zealand Ltd it was noted that courts do not strike out pleadings where a defect can be cured by amendment which the party is willing to make. It was said:

Similarly, the residual discretion of the Court under [r 12.2 of the High Court Rules 2016] to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would preempt a plaintiff exercising the  right  to  amend the pleadings in  terms of    [r 7.77]. Indeed, use of the discretion to enable amendment is arguably more necessary in the interests of justice in the case of summary judgment than in the case of strike-out because summary judgment results in issue estoppel.

[47]      It is hard on a defendant seeking summary judgment to have to face a very late addition to pleadings, involving as it does a new basis for claim. However when a party to proceeding chooses a truncated process such as strike-out or summary judgment it places the opposing party in a situation where it does not have the usual time and opportunity to develop a case as it would if the case went to trial. The prospect of amendment, even a very late amendment, must always be a possible development that can arise as a consequence of the chosen truncated process. If an amendment is required to allow the other party to better formulate its claim or defence it will generally be allowed. To prevent parties in the lead up to trial from airing all issues, or to require it to start again, runs against the just, speedy and inexpensive resolution of disputes. Delay and cost to the party seeking to strike out a summary judgment can be reflected to some extent by costs orders, but in the end if a party choses the shortened procedure, it must endure all the consequences.

[48]       We conclude that it is open to us to allow the appeal with the effect that summary judgment is refused, on the ground that an amendment to the statement of claim which is now proposed might raise a cause of action that could possibly succeed. We go on to consider the question of whether

the new negligence pleading could succeed.

[Footnotes omitted]

[44]              The claim was therefore permitted in the particular context of the truncated process applying to applications to strike out and defendant’s summary judgment. I do not consider the approach taken in Thompson v Turner Hopkins to be of any real guidance in this case. Mr Li had more than ample time and opportunity to develop a separate cause of action in negligence had he chosen to do so. There was no application to amend the statement of claim to include a free-standing negligence claim.

[45]              I will therefore consider the eighth cause of action on the basis of breach of statutory duty only. To the extent that claim is made out, Mr Li seeks recovery from Loo & Koo of $4.8 million.

[46]I now turn to the factual background to the above claims.

Factual background

Key participants in proposed purchase of Formosa Property

[47]              Both Mr Li and Mr Wang are relatively young men. Despite being the “main parties” to these proceedings, I formed the clear view during the hearing that neither of them were the “main players” in the arrangements to purchase the Formosa Property. Rather, each were acting largely, and potentially wholly, at the direction of their respective mothers. I will refer to Mr Li’s mother as Na Li, and to Mr Wang’s  mother as Mrs Zhou.22    Each of Mr Li, Mr Wang,  Na Li and     Mrs Zhou gave evidence. I comment further on issues arising in relation to some of their evidence later in this judgment.

[48]              Another important figure in the arrangements to purchase the Formosa Property is a gentleman named Weidong Jiang. Mr Jiang resides in China. It seems that Mr Jiang had intended to be a co-investor in the purchase of the Formosa Property but, fairly late in the piece, pulled out due to financial issues. Mrs Zhou

22     As they were by the parties at trial.

says it was Mr Jiang who helped her transfer money out of China and into New Zealand using Mr Li as a conduit.

[49]              Mr Jiang did not, however, give evidence at the hearing. As discussed later in this judgment, this leaves a key gap in the evidence. Mr Jiang would have no doubt been a crucial witness to both Mr Li and Mr Wang’s cases.

[50]              Mr Li proposed to adduce in evidence a handwritten statement signed by Mr Jiang. Mr Heaney accepted the statement was advanced for the truth of its contents and was therefore hearsay. After a brief voir dire in which I heard evidence from Na Li as to the circumstances in which she came to obtain Mr Jiang’s statement, I ruled the statement inadmissible hearsay evidence.23

[51]              The third defendant to these proceedings was Ms Huang, against whom Mr Li settled and discontinued his claim. Mr Heaney had indicated Ms Huang would be called to give evidence but she was not. That also gave rise to hearsay issues in the remaining evidence.

[52]              Ms Huang was instrumental in the transaction to purchase the Formosa Property, including in putting Mr Li and his family in touch with Mr Wang and his family, who had not previously met. Like Mr Jiang, it is unfortunate Ms Huang was not called to give evidence, as she could also have assisted in clarifying what was a somewhat opaque picture.

[53]I turn now to the chronology of events.

Mr Li, Na Li and Mr Jiang’s initial interest in the Formosa Property

[54]              Mr Li first met Ms Huang in 2012. He described her as a “mortgage broker”. Ms Huang assisted Mr Li and Na Li with the financing of a number of property purchases in New Zealand over the last several years.

23     In short, I was not satisfied as to the reliability of the statement, or Mr Jiang’s unavailability

— Evidence Act 2006, s 18.

[55]              In June 2013, Mr Li met Ms Huang at the Formosa Golf Course to discuss other properties of possible interest in the Flat Bush area.  During the meeting,  Ms Huang told Mr Li that the current owners of the Formosa Property were looking to sell it. Mr Li was interested.

[56]              While on a trip to China, he discussed the Formosa Property with his mother, Na Li, who he described as having experience in property investment.24 She was also interested. Mr Li said his mother said she would lend him the money to invest,25 as well as suggesting he try and find some co-investors.

[57]              Mr Jiang, with whom Na Li had a prior business relationship, was ultimately introduced as a potential co-investor.  In September 2013, Mr Li, Mr Jiang and  Na Li visited the Formosa Property. They were all  interested  in  purchasing it. Mr Li introduced Mr Jiang to Ms Huang. Mr Li also instructed Harrison Grierson (an engineering and planning firm) to provide advice on sub-division. In February 2014, Harrison Grierson confirmed that with an appropriate resource consent, the Formosa Property could be sub-divided into around 40 separate lots.

[58]              An agreement for sale and purchase of the Formosa Property was entered into in March 2014 (First Agreement). Shortly prior to that, an agreement was entered into by Mr Jiang and Na Li (referred to in the agreement as “Party A”) and Mr Li and Ms Huang (referred to in the agreement as “Party B”). Mr Li accepted the agreement reflected that Mr Jiang and Na Li were to purchase the Formosa Property. Na Li confirmed the ownership “split” was to be 70 per cent to Mr Jiang and 30 per cent to herself. The agreement also provided that Mr Li and Ms Huang were to receive a $1 million fee for assisting Mr Jiang and Na Li purchase the Formosa Property. It was to be paid into a bank account which separate evidence confirmed was that of Ms Huang’s husband. Na Li said that consistent with the ownership split of 70/30, Mr Jiang was to fund 70 per cent of the fee and Na Li  30 per cent.

24Na Li had also worked for a number of years as a senior executive of a hotel in China, and prior to that, as a governor of a branch of the Bank of China.

25     At that time, Mr Li was a sales manager at a firm named Benetech Ltd earning approximately

$2,200 per month.

[59]              But a separate agreement between Mr Li, Na Li and Ms Huang, to which Mr Jiang was not a party (and which Mr Li accepted Mr Jiang did not know about), provided that Ms Huang would repay 30-35 per cent of the $1 million service fee to Na Li. Na Li accepted in cross-examination that that was the effect of the document. That arrangement was, on its face, somewhat unusual.

[60]              Mr Li was the named purchaser under the First Agreement, though, as noted, ownership would ultimately vest in Mr Jiang and Na Li.26 The purchase price was

$38.9 million. The agreement was conditional on finance. Mr Li accepted in cross- examination that Mr Jiang was to provide most of the purchase moneys. A portion of the purchase price was also to be met by local finance, and attempts were also made to secure vendor finance. In the event, however, the finance condition was not fulfilled and the vendors cancelled the First Agreement.

[61]              Mr Li said that after the First Agreement had been cancelled, he had some further discussions with Ms Huang about purchasing the Formosa Property. As he and his mother did not have sufficient funds to purchase and develop the Formosa Property on their own, however, they took no further steps at that time to acquire it.

Mr Wang and Mrs Zhou become interested in the Formosa Property

[62]              Separately, in April 2014, Mrs Zhou was looking to purchase a commercial property in Auckland with her son Mr Wang. She was looking at properties with a real estate agent, Mr Daniel Huang and, through this, encountered Ms Huang (with whom Mrs Zhou had also worked previously in purchasing property in New Zealand). Mrs Zhou said Ms Huang told her about the opportunity to buy the Formosa Property.

[63]              Mrs Zhou said to Ms Huang that she did not have sufficient funds to purchase the property herself, and Ms  Huang  offered  to  assist  with  finance. Ms Huang also introduced Mrs Zhou to Mr Jiang (whom Ms Huang had met

26Na Li gave evidence that “Mr Jiang authorised Jun Li to hold the shares on [his] behalf. Actually the two shareholders were Weidong Jiang and me.”

through her earlier dealings in relation to the First Agreement) as a potential co- investor.

[64]              Mrs Zhou and Mr Jiang met in New Zealand in mid-April 2014. Mrs Zhou said Mr Jiang told her he could arrange for the transfer of her funds out of China to New Zealand through his businesses.27 Mrs Zhou said this would be of real assistance to her, given various export control restrictions for Chinese currency. Mrs Zhou said that to purchase the Formosa Property, she wanted to transfer a total of RMB 50,000,000 (approximately NZD 10 million) from China to New Zealand.

[65]              Two  written agreements were entered into at this time.  The first, dated  20 April 2014, was between Mr Wang, Mr Jiang and Ms Huang. It set out the proposed ownership of the Formosa Property, once purchased, as follows:

(a)Mr Wang — 30 per cent;

(b)Mr Jiang — 40 per cent; and

(c)Ms Huang — 30 per cent.

[66]              The agreement provided that Mr Wang and Ms Huang would enter into the agreement for sale and purchase, but Mr Wang would hold Mr Jiang’s share on his behalf.

[67]              The second agreement (or “letter of undertaking”) dated 21 April 2014 was between Mrs Zhou and Mr Jiang only. It provided as follows:

It is hereby promised that I, Weidong JIANG … on the basis of Madam Yanqin ZHAO’s … need to arrange funds for the project of purchasing the Formosa Golf Resort in Auckland, New Zealand, will personally undertake to assist Madam Yanqin ZHAO in arranging RMB fifty million … of funds from China, to be remitted into a receiving account in Auckland, New Zealand specified by Madam Yanqin ZHAO, as investment funds for the project, which are definitely not to be diverted for any other purpose.

27 To the extent this evidence was advanced for the truth of its contents it is of course hearsay. However, as addressed later in this judgment, it is not in dispute that around this time, Mrs Zhou and Mr Jiang agreed that Mr Jiang would assist Mrs Zhou in this way. See [68] below.

[68]              Entry into this agreement, and its terms, were pleaded as a positive allegation in Mr Wang’s statement of defence. Mr Li filed a statement of reply but did not deny that particular allegation. It is therefore deemed to have been accepted.28

[69]              An agreement for sale and purchase of the Formosa Property was entered into on 23 April 2014 (April Agreement). Mr Wang was shown as the purchaser, though Ms Huang’s name was added later. The purchase price was $36 million, with a $2 million deposit to be paid on 30 April 2014. Settlement was to take place on 29 August 2014.

[70]              Also on 23 April 2014, Mr Wang and Ms Huang travelled to Hong Kong to try to open a bank account for Mr Wang, to receive the funds to be sent from China by Mr Jiang. Mr Wang said this was unsuccessful.

[71]              Mrs Zhou said she then arranged for her brother in China to begin the process of transferring funds to Mr Jiang. Mrs Zhou’s brother did not give evidence. However, Mrs Zhou produced in evidence a receipt from Mr Jiang for the sum of RMB 1,350,000. The receipt confirmed Mr Jiang received the funds and guaranteed to transfer that amount to Mrs Zhou’s New Zealand bank account. Mrs Zhou said the funds were transferred by or via Mr Jiang to her bank account in New Zealand in various tranches over the period 28 April 2014 to 21 May 2014. The payments totalled approximately NZD 2,105,000.

[72]              Bank account records showing the various amounts arriving into Mrs Zhou’s New Zealand bank accounts were produced in evidence, though no documents “tracing” the flow of funds back to Mr Jiang. Two “certificates”, however, one signed by Mrs Zhou’s husband and one signed by Mrs Zhou, were sent by Mr Wang to Mr Jiang on 6 June 2014. The certificates confirmed the transfers referred to in the certificates (which line up with some of the amounts transferred into Mrs Zhou’s accounts in New Zealand) were for the purpose of a real estate project in New Zealand.

28     High Court Rules 2016, r 5.62(2).

[73]              Loo & Koo were engaged to act on the purchase. Their letter of engagement records Mr Wang and Ms Huang as the firm’s clients. Mr Fui Loong Chan was the nominated partner, and Ms Bibiana Lee  the  solicitor, to act  on the purchase.  Mrs Zhou delivered three separate cheques totalling $2 million (being the deposit amount) to Loo & Koo and, on 30 April 2014, they were delivered by courier to the vendors’ solicitors, Forrest Harrison.

[74]              Mr Wang and Ms Huang thereafter set about obtaining advice from various parties in relation to the Formosa Property, including valuation advice (from Jones Lang LaSalle); engineering advice (from Woods); and tax and accounting advice (from Deloitte). Deloitte arranged for the formation of a company through which the Formosa Property would be held, named “Jenny and Eamon Holdings Ltd” (i.e. the fifth defendant).

[75] It is not in dispute that between May and August 2014, Mrs Zhou arranged for payments totalling RMB 20,000,000 (approximately NZD 5,000,000) to be made to Mr Jiang, or to persons to whom Mr Jiang directed the payments be made, in order for Mr Jiang to again arrange the transfer of those funds to New Zealand.29 Mrs Zhou produced in evidence further receipts from Mr Jiang, in the same terms as the receipt referred to at [71] above, for at least some (but not all) of these funds.

Overseas Investment Act concerns

[76]              By June 2014, Mr Wang was giving thought to whether the proposed purchase of the Formosa Property might give rise to Overseas Investment Act 2005 (OIA) issues. Ms Huang is a New Zealand citizen and Mr Wang (and Mrs Zhou) are residents, but Mr Wang was concerned he had recently stayed longer than expected in China, just prior to entry into the April Agreement.

[77]              Mr Wang evidently discussed these matters with Loo & Koo, who made general inquiries with the Overseas Investment Office (OIO). Based on the OIO’s reply, Loo & Koo also discussed the matter with a partner from another firm with

29This was a positive allegation pleaded by Mr Wang in his statement of defence which was not denied in Mr Li’s statement of reply and is accordingly deemed to be admitted.

expertise in this area. Mr Wang separately sought advice from DLA Phillips Fox.30 The concern evidently related not only to Mr Wang’s extended stay in China, but also Mr Jiang’s proposed 40 per cent shareholding. Mrs Zhou said that given these matters were under consideration, she asked Mr Jiang not to transfer any of the additional funds which she had provided to him but which had not yet been sent to New Zealand, pending clarification of the OIA position.

[78]              Mrs Zhou said that Mr Jiang told her in or about late July or early August 2014 that he was having financial difficulties and was unlikely to be able to invest in the purchase of the Formosa Property after all. Mrs Zhou gave evidence that Ms Huang had been investigating local finance and had said $22 million would be available from a finance company named “Nali Finance Ltd”. With the $2 million deposit already paid and the approximately $5–6 million Mrs Zhou said she was expecting to receive from China via Mr Jiang, they would be about $6 million short of the total amount required to settle. One solution considered at the time was potential vendor finance to cover that amount.

[79]              Mrs Zhou said Mr Jiang also told her that he knew of someone who might be interested in joining the purchase of the Formosa Property,  namely Na Li.    Ms Huang was also a common connection between Na Li and Mrs Zhou. Mrs Zhou gave evidence that she spoke with Na Li over the telephone, and Na Li expressed interest and asked her to get in touch with her son, Mr Li.

[80]              Ms Huang then arranged for Mrs Zhou to meet with Mr Li at a café, sometime shortly prior to  13 August  2014.  There  is  a dispute  as to whether  Mr Wang was also at this meeting, though nothing turns on that. Mr Li said that at the meeting, Mrs Zhou said she had $20 million in a New Zealand bank account which she was going to loan to Mr Wang to  purchase the Formosa  Property.  Mrs Zhou denies this and says the parties did not discuss money at the meeting.

[81]              It is not in dispute that Mr Li and Mr Wang  later met at a carpark near   Mr Li’s home. Mr Wang shared some documents and information about the development potential of the Formosa Property (including a letter from Woods and

30     Privilege in the legal advice received was not waived.

a market research report from Bayleys). Mr Li says Mr Wang also gave him a copy of the April Agreement. Mr Wang denies that, though again, nothing turns on it.

[82]              Steps continued in the background to secure finance. Various communications with Nali Finance Ltd were produced in evidence. Concerns remained in relation to OIA implications. Mr Li acknowledged these concerns were factors in the structure of JEHL’s  eventual shareholding.  On 17 August 2014,  Mr Wang send a text message to Mr Li, setting out various documents Na Li and Mr Li would need to provide “for the tax plan, in case of the [Inland Revenue Department] and OIO inquiring”.

[83]              Na Li was also taking steps to draft a “joint venture agreement”. She sent  a draft to Mr Wang on 19 August 2014. Mr Wang said he did not really look at the document, and just forwarded it to his  mother  and Mr Jiang  for  comment.31  Mrs Zhou said she too failed to read the whole document (“as it was only prepared to address the Overseas Investment issues”). She said she had not discussed it previously with Na Li.

[84]              The draft agreement described the parties as “Party A” (Mrs Zhou and   Mr Wang) and “Party B” (Na Li and Mr Li). It set out that Party A would have a 68 per cent shareholding in the Formosa Property and Party B a 32 per cent shareholding. It recorded a total of $38 million in funding, split between Party A as to $25.84 million and Party B as to $12.16 million. Each party’s funding was to be provided in two stages, with the “initial stage” to be:

(a)$25.84 million for Party A; and

(b)$5 million for Party B.

[85]The draft agreement stated:

31Mrs Zhou said that she wasn’t sure she wanted Na Li and Jun Li involved in the purchase at  this time, but wanted to keep Na Li “as an option in the future” and for  that reason, asked  Mr Jiang to review the draft agreement. Why it was necessary for Mr Jiang to review the draft agreement in such circumstances was not explained.

Due to the limited timeframe available to Parties A and B making this agreement to purchase the aforementioned land title, Party A agrees that – of the 32% of shares (NZD 12.16 million) held by Part B  – the NZD      5 million of funds shall be self-raised by Party B; and that the balance of NZD 7.16 million shall be paid by Party A on account, which shall be paid back by loan(s) from bank(s) using the land as collateral after settlement. When Party A’s funds in the possession of Party B prior to the loan(s), Party A agrees payment of interest based on the present interest rates of bank(s) for temporary fund possession fees, which shall be deducted directly from Party B’s profits.

[86]              The agreement went on to address matters such as the intended future development of the Formosa Property, the establishment of a board of directors, the authority of the board and so on. Mrs Zhou noted that the draft did not reflect the expectation that Ms Huang would also invest, or Mr Jiang.32

[87]              On 20 August 2014, Mr Jiang sent Mr Wang a copy of the draft agreement with amendments, though it was largely in the same form as that sent by Na Li the previous day. Also on 20 August 2014, Mr Li corresponded with Mr Sean Plaxo at Plaxo Ltd (a finance company) in relation to a loan or mortgage of $7 million for six months.

[88]              On 21 August 2014, Ms Huang emailed Deloitte to confirm JEHL’s final shareholding. JEHL was the company expected to purchase the Formosa Property. The email made it clear there had been various earlier changes, as it concluded “sorry for always change, but this is the last time”. The shareholding in JEHL was requested to be:

(a)Mr Wang — 24.5 per cent;

(b)Mr Jiang (instead of Mrs Zhou) — 24.5 per cent; and

(c)A gentleman named Xuming He, who was evidently Ms Huang’s husband — 51 per cent.

32Though as noted, Mrs Zhou had also said Mr Jiang had earlier told her he was not in a position financially to invest. That difference was also not explained.

[89]              Mr Li was not included as a proposed shareholder at that time. In an email to Deloitte dated 25 August 2014, Ms Lee of Loo & Koo stated “we are advised that the shareholders of the company have been changed to ensure compliance with the Overseas Investment Act.”

[90]              It was not clear why, given his earlier stated financial difficulties, Mr Jiang was still a proposed shareholder in JEHL. Mr Wang said that Mr Jiang was also to fund Mr He’s shareholding. That is also inconsistent with Mrs Zhao’s evidence that Mr Jiang had financial difficulties and would be unable to invest.

[91]              On the evening of 26 August 2014, Mr Wang spoke with a Ms Liu of Deloitte. He said he was wanting to discuss the impact of Mr He’s shareholding being funded by Mr Jiang. Ms Liu sent Mr Wang a follow-up email, stating:

Further to our discussion tonight, we recommend you seek advice from your legal advisor to confirm the relevant OIO requirements including the aspect where funding is provided to Mr He from Mr Jiang. Please let me know if any structure is required to be changed post your discussion with your legal advisor.

[92]              Mr Wang said he discussed this with Mrs Zhou, who said she in turn discussed it with Mr Jiang. Mrs Zhou said she was worried about OIA implications of the money in China being transferred to her, as she had travelled so much recently. She said that if the money was transferred to Mr Li, and he was made a shareholder, “that way the Overseas Investment Office would see the money going to Jun Li who was a shareholder and we would be ok”. She said she asked Mr Jiang at this time to come to New Zealand.

[93]              At 9.40 am on 27 August 2014, Ms Huang sent an email to Deloitte, copied to Mr Wang, asking to again change the shareholding in JEHL to reflect the following:

(a)Mr Li — 32 per cent;

(b)Mr Wang — 24 per cent;

(c)Mr Jiang — 24 per cent;

(d)Mr He — 20 per cent.

[94]              The 32 per cent shareholding for Mr Li matched the 32 per cent which had been set out in Na Li’s  draft joint venture agreement she sent to Mr Wang  on    19 August 2014.

[95]              Company office records show that Mr Li was added as a shareholder of JEHL at 10.15 am on 27 August 2014. His 32 per cent shareholding was allocated from Mr He’s shareholding, which was reduced from 52 per cent to 20 per cent.

[96]              Mr Jiang arrived in New Zealand later that day. Mr Li collected him from the airport. Mr Jiang stayed that evening at Mr Li and his family’s home, but thereafter stayed at a motel.

[97]              Also on 27 August 2014, Na Li sent Mr Wang an updated draft joint venture agreement. In this agreement, Party A was Mrs  Zhou and  Mr Wang;  Party  C, Mr Jiang, had been added; and Party B remained Na Li and Mr Li. This version of the agreement recorded that Party A had a 46 per cent shareholding, Party C held 22 per cent33 and Party B held 32 per cent. The agreement noted:

The contract stipulates that Party B should raise NZD 8.96 million of funds by itself. However, by the time of settlement of the land Party B could only manage to raise NZD 5.16 million (which includes mortgage loan on account with two real estate properties as collateral). Party A agrees to use its self-owned real estate properties as its loan guarantor [sic], for a loan period of six months.

[98]              A further draft was sent by Na Li to Mr Wang later on 27 August 2014, which showed “Party B” as having a 30 per cent share.   The general tenor of    Mr Wang’s evidence was that he did not take any real notice of or read the agreements, but again forwarded them on to Mr Jiang and Mrs Zhou.

[99]              On 27 August 2014, Loo & Koo confirmed with the vendors’ solicitors that Mr Wang and Ms Huang had nominated JEHL as the purchaser under the April Agreement.

33Though went on to state Party C “(… temporarily holds a 22% shareholding on trust, and shall pay Party A NZD 8.36 million by bank loans and self-raised funds)”.

[100]          The following morning, 28 August, Mr Li, Mr Jiang and Mrs Zhou met at Loo & Koo. Mr Li had with him three bank cheques totalling $4 million. Mr Li said he provided these to the solicitor, Ms Lee, and she gave him a receipt in return. Ms Lee disputed that she had attended on the group (though did meet them briefly in reception as she passed through). As the visit was unannounced, she said she had her secretary attend on the group, who had then taken the cheques and arranged for their receipt into Loo & Koo’s trust account.

[101]          A document (described by Ms Lee as an internal Loo & Koo accounting document called a “green slip”) was produced in evidence which records Mr Li as “the payer” of the $4 million, and that the funds were to be held to the credit of Ms Huang and Mr Wang “on a/c purchase of [the Formosa Property]”.

[102]          On the corresponding receipt given to Mr Li, Ms Huang and Mr Wang’s names have been crossed out and replaced with JEHL. Mr Li says this change was made at his request on 28 August 2014. Ms Lee disputes that. She says the change, together with the same change made on other receipts concerning the purchase of the Formosa Property, were all made at the same time at Mr Wang’s request, when he  and  Mr Li  attended  Loo   &  Koo’s  offices  to   make  further   deposits  on 3 September 2014.34

[103]          I am clear in my view on this issue. I prefer Ms Lee’s evidence. I found her to be a credible and reliable witness. The fact all receipts were amended in exactly the same way is also more consistent with all edits having been made at the same time during the 3 September 2014 visit to Loo & Koo’s offices. It is further consistent with the receipt issued for funds deposited on that day, explicitly for the credit of JEHL (unlike the earlier receipts, which recorded the funds were for the credit of Mr Wang and/or Ms Huang). I consider Mr Li’s version of events implausible, as it would mean each of the three earlier receipts had been filled out and then amended in exactly the same way on three separate occasions.

[104]          I also formed the clear view that other than desiring to participate in the overall venture to purchase the Formosa Property, Mr Li was not involved in the

34 See [115] below.

detail of the legal arrangements to do so. He was more focused on activities to be taken after the purchase, in the context of the sub-division. I do not consider it credible that when he visited Loo & Koo’s offices, Mr Li was sufficiently across the detail of the transaction to have expressly stipulated the funds were for the purpose of JEHL and under the April Agreement only.

[105]          Mr Li also says that Loo & Koo were his solicitors. I do not agree. Mr Li accepted he had been involved in number of other property transactions in New Zealand and used the same lawyer on each occasion and had received letters of engagement  from her.  He did not receive  any letter of engagement  from Loo  & Koo. In addition, the meeting at Loo & Koo on 28 August was unscheduled, and I accept Ms Lee’s evidence that she did not attend on the group personally (other than informally, at reception). Mr Chan said he was passing through reception at the time and was briefly introduced to a gentleman who he now assumes was Mr Li, but had no further contact with him at that time. Mr Chan and Ms Lee also confirmed that, based on their experience of the Chinese community at that time, it was not unusual for projects to be funded through third parties, and for those third parties to deposit funds for the credit of the firm’s clients. In short, I am satisfied that at no time did Loo & Koo act for Mr Li on the transaction. The brief and unscheduled visit by Mr Li to Loo & Koo’s offices, and a chance encounter with Mr Chan as he passed through reception was insufficient to give rise to a formal solicitor/client relationship.35

[106]          Mr Li returned to Loo & Koo’s offices the following day, 29 August 2014, and deposited a further $200,000 towards the purchase of the Formosa Property. This time the receipt was made out to the credit of Ms Huang only. It did not mention Mr Wang. The narration was “purchase funds”.

[107]          A second deposit of $200,000 was paid into Loo & Koo’s trust account on 29 August 2014, the receipt for which showed the “payer” as Mr Wang. It was also receipted to the credit of Ms Huang. The narration recorded “purchase price”.

35And while Mr Li visited Loo & Koo’s offices again on 29 August and 3 September 2014, he  did not seek advice from Loo & Koo or provide any indication that he expected them to act on his behalf. Again, he was merely depositing funds.

Mr Wang’s evidence was that these were funds sourced from a loan from Mr Daniel Huang, the real estate agent with whom Mrs Zhou had originally been working.36

[108]          Settlement of the purchase of the Formosa Property was due to take place that day. There were, however, insufficient funds available for that to occur. Discussions took place with the vendors and the vendors’ “agent” (Mr Shih, who was to take a $2,000,000 commission on the sale), but no agreement reached. Later in the day on 29 August 2014, the vendors’ solicitors served a formal settlement notice requiring settlement by 3 September 2014.

[109]          A dinner was held at the Formosa Golf Club that evening. Shortly beforehand a document called the “Cooperation Agreement” was signed by Mr Li, Mr Wang, Mr He and Mr Jiang. Mrs Zhou said the Agreement had been prepared by Mr Jiang. It was in a similar (but not the same) form to the drafts Na Li had been sending to Mr Wang.

[110]The Cooperation Agreement’s key terms are as follows:

(a)The parties are Party A (Mr Wang and Mr He), Party B (Mr Li) and Party C (Mr Jiang).

(b)Clause 1(1) provides that “Party A holds 44%, Party C holds 24% and Party B holds 32% ownership of [the Formosa Property] (Party B’s   first   capital   contribution   is   $4.2   million;   another    NZD 7.96 million will be raised within six months).”

(c)The form of cooperation is described in cl 2(1) as “set up a (shareholding) limited company (“the Company”) to purchase and manage the Land and carry out joint investment and joint management and share risks as well as profits and losses”.

(d)Clause 2(2) states:

36 See [62] above.

As the three Parties have agreed within a short period of time to jointly purchase the abovementioned property ownership, Party A agrees to use its property to get a loan of NZD 6 million from a financial company for Party B and act as a guarantor. Party B shall pay the actual loan interests charged by the financial company or a bank. The loan term is 6 months. Party B shall raise another NZD 1.96 million on his own.

(e)Clause 2(4) states “The rights and liabilities each Party has in respect to the Company shall be in proportion to their actual capital contribution.” A table then set out the capital contributions, recording Party B (Mr Li) with a 32 per cent ownership, reflecting an actual contribution of $12.16 million (being $4.2 million, referred to as Mr Li’s “first capital contribution”, plus a further $7.96 million to be advanced later).

(f)Clause 2(7) states the following:

Party A, Party B and Party C agree to use the Land to take a loan from a financial company or bank after settlement of the Land. Party B’s share shall first be used to repay Party A, and Party B shall pay the actual loan interests charged by the finance company or bank. Alternatively, Party B shall raise funds within six months to repay Party A. If Party B fails to do so, Party B’s ownership shall be calculated based on his actual capital contribution. If Party B fails to pay his capital contribution in full within three months, his ownership ration shall be adjusted based on his actual capital contribution but it shall not be lower than 20%.

(g)Clause 4(1) provides that “profit shall be distributed based on actual capital contribution and ownership ratio”.

(h)There follows a number of clauses setting out the management roles each party was to take, expectations as to the development of the land and distribution of profits.

(i)The agreement also contained a confidentiality clause, pursuant to which all information provided by the parties to each other was to be treated as confidential.

[111]          While the Cooperation Agreement was signed by all parties, Mr Wang said he did not really understand or take any notice of its contents. He simply signed it at his mother’s request.

[112]          Mrs Zhou said that although the Cooperation Agreement referred to Mr Li as making an initial contribution of $4.2 million, he had not in fact done so. She also said the reference to the $6 million loan reflected that it was anticipated vendor finance in that amount would be available to enable settlement to proceed, though it had not yet been agreed. She said that it was thought Mr Li might at some point in the future raise finance to repay the vendor finance and thereby become a “proper investor”. Mrs Zhou also said that the Cooperation Agreement was simply “a document we needed to have to show the Overseas Investment Office if it investigated”.

[113]          It seems that, despite entering into the Cooperation Agreement, Mr Wang and Ms Huang remained concerned about OIA matters. After the agreement had been signed, they sought further advice on the subject, this time from Chapman Tripp.37

[114]          In the meantime, the parties were awaiting confirmation of finance to enable settlement to occur.  It was still hoped vendor finance might be available.  As of   3 September 2014, the vendors were entitled to cancel the April Agreement, but kept it on foot while negotiations continued.

[115]          Mr Li and Mr Wang again visited Loo & Koo’s offices on 3 September 2014. Ms Lee said this was another unscheduled meeting and as a result, she again had her secretary attend on the two gentlemen. The following occurred:

(a)Mr Wang requested the trust account receipt form from 29 August 2014 (confirming receipt from him of $200,000) to be amended to record that it had been received from Mr Li. After discussing this with her secretary, Ms Lee says she gave instructions to the Loo   & Koo accounts team to make the amendment.

37     Legal privilege in the advice was not waived.

(b)Mr Wang also asked for the other trust account receipt forms, including those relating to the deposit of $4 million by Mr Li on  28 August and $200,000 on 29 August, to be amended to show the funds being held to the credit of JEHL. Again, Ms Lee instructed the accounts team to make these changes.

(c)Mr Li delivered a further cheque for $400,000 towards the purchase of the Formosa Property. The receipt recorded that the funds were to be held to the credit of JEHL.

[116]          As to why the 29 August 2014 deposit by Mr Wang was to be amended to record it as having been received from Mr Li, Mr Wang said he understood Mr Jiang and Mr Li intended to attend Loo & Koo that day to deposit a further $200,000, but Mr Wang had called Mr Li to ask him to deposit it into Mrs Zhou’s ANZ bank account instead. Mr Li said he did not know why Mr Wang asked him to do this, but he did it anyway.38 Nor could Mr Wang recall exactly why this occurred. He believed it was so there was one record in place of amounts said to have been transferred to New Zealand by Mrs Zhou via Mr Jiang and Mr Li.

[117]On 9 September 2014, Mr Wang made arrangements to withdraw

$1.3 million from the funds held on trust at Loo & Koo. Those funds were disbursed as follows:

(a)a payment to Woods of $130,678.74;

(b)$40,000 paid to Mrs Zhou’s Westpac bank account;

(c)$129,000 paid to Mrs Zhou’s ANZ bank account;

(d)$200,000 by way of repayment to Daniel Huang;

(e)a re-deposit of $500,000 back into Loo & Koo’s trust account; and

38A bank account statement produced for Mrs Zhou shows a deposit into her account of $200,000 on 4 September 2014.

(f)a further deposit of $250,000 into Mrs Zhou’s ANZ bank account.

[118]No explanation was provided for the various payments to Mrs Zhou.

[119]          On 10 September 2014, the vendors formally cancelled the April Agreement. The deposit of $2 million was accordingly forfeited. Mrs Zhou said, however, that by that time, she, Ms Huang and Mr Shih (the vendors’ agent) had agreed new terms, pursuant to which the Formosa Property would be purchased for

$38 million, with a deposit of $5 million and the balance to be paid in instalments by 30 September 2015. The property would be leased by the purchaser(s) pending settlement. Loo & Koo corresponded with the vendors’ solicitors on 11 September 2014 seeking confirmation that a new agreement on those terms was acceptable.

[120]          Mr Wang accepted he did not immediately inform Mr Li that the April Agreement had been cancelled.

[121]On 12 September 2014, Na Li emailed Mr Wang stating the following:

Xiao Wang: I have sent you the Subdivision Proposal that I think is better, please discuss with your mother, and see if you could go with Jun Li and find a consultant who specialised in subdivision. Time is money. The fund that I have was obtained by financing. On one hand, there are interests occurred and accumulated from this loan every day; one [sic] the other hand, the money is now sitting there doing nothing, with no interest on savings. Furthermore, the European Central Bank has now lowered the interest rate, which would benefit the real estate market. While the China Banking Regulatory Commission has not yet restricted the Chinese residents’ consumption credit abroad, we can invite friends from China to come to New Zealand to spend and pay the credit back in China. So that we can sell our land quickly. It is unknown whether such economic environment would be continued next year. One can only accumulate their wealth when the timing is right, so we must hurry up and get the subdivision done. The money belongs to you when it is in your pocket. Remember this!!!

(Emphasis added)

[122]          On 18 September 2014, Mr Li went to Loo & Koo and met with Ms Lee. He said he wanted to withdraw $600,000 of the funds he had deposited. He said the purpose was to replenish a family flexi-loan account which was then in debit

and incurring interest.39 I observe that there was no suggestion at the time by Mr Li that he did not want to continue with the transaction at all, in which case he presumably would have sought to withdraw the full $4.8 million.

[123]          Ms Lee said that in response to Mr Li’s request, she told him she would need to seek instructions from Mr Wang. She telephoned Mr Wang, who said no. There is a conflict as to whether Mr Wang also telephoned Mr Li at this point. But in any event, it is not in dispute that Mr Li then told Ms Lee that he did not want to proceed with the withdrawal after all. Mr Li said Mr Wang and Mrs Zhou had told him at the time that settlement of the Formosa Property purchase was delayed and that he should wait a little longer.

[124]          On 19 September 2014, Mr Li, Mr Wang and Ms Huang attended the offices of Harrison Grierson (the firm from which Mr Li had originally taken advice about the Formosa Property)40 to discuss its potential development. Email correspondence followed the next Monday to Mr Li (copied  to  Mr Wang  and  Ms Huang), in which Harrison Grierson set out their responses to earlier queries Mr Li had emailed through on 18 September 2014 in preparation for the meeting.

[125]          In the meantime, steps continued to negotiate a new agreement with the vendors of the Formosa Property. By 24 September 2014 in-principle terms had been agreed. On 26 September 2014, GBHL (the fourth defendant) was incorporated and was nominated to be the purchaser.41 Mr Wang was its sole director and held 80 per cent of its shares. Ms Huang held the remaining 20 per cent.

[126]          On 29 September 2014, Mr Li again visited the offices of Loo & Koo and met with Ms Lee. Mr Li says this was the first time he became aware the April Agreement had been cancelled. I do not accept that. I consider Mr Li was aware

39Bank records produced showed the “Lee Family Trust” bank account was in debit at that time to the sum of $454,124, $600,000 having been withdrawn from the account on 28 August 2014, and used to part fund the $4 million deposit to Loo & Koo on 28 August 2014. See further [6](d) of Schedule A to this judgment.

40 See [57] above.

41 Mr Wang said he had been advised by Mr Shih, the vendors’ agent, that given the problems  with the April Agreement, the vendors would be uncomfortable with JEHL being the purchaser again.

at some point prior to this, though when is not clear. Ms Lee, whose evidence I accept, said that Mr Li had asked her to confirm the April Agreement had been cancelled, which she did. She also said Mr Li mentioned an amount of funds which he understood Loo & Koo were holding towards the purchase. While she was not able to recall the specific amount, it was much greater than the amount Loo & Koo were actually holding. Ms Lee said she was taken by surprise at the amount suggested by Mr Li, and, without considering issues of privilege, reflexively denied his suggestion and said that Loo & Koo held only $5.8 million.

[127]          Mr Li asked for copies of the files relating to the purchase, which Ms Lee declined to give him, on the basis he was not Loo & Koo’s client.

[128]          At 4.26 pm on the same day, Mr Wang sent Mr Li his Chinese telephone number by text message, to which Mr Li had replied “thanks”. Half an hour later, Mr Li emailed Ms Lee, stating:

This is Jun Li. Could you please give a call to Eamon and me, there are a very important agreement between me and M Wang about the control of the 4.8 million we invested. Could you give us a call ASAP.

[129]Ms Lee forwarded Mr Li’s email to Mr Wang, stating:

Eamon,

We advise that $4,600,000^[42] of the deposit was receipted by us credit of Mr Jun Li.^[43] We are now advised by Mr Jun Li that you are agreeable that we keep him informed of the agreement to purchase 110A Jack Lachlan Drive, Beachlands. And to seek his consent prior to using the amount of

$4,600,000.

Please confirm that this is acceptable to you.

[130]          Mr Wang said he did not respond to Ms Lee, but spoke with his mother to ask what was happening. Mrs  Zhao  said  she  spoke  about  it  with  Mr Jiang. Mr Wang said that as far as he understood the situation, the matter was being “sorted out” in China and they were waiting for Mr Jiang to speak with Na Li.

42Ms Lee confirmed that the correct amount was in fact $4.8 million once the $200,000 received from Mr Wang, but altered to be receipted from Mr Li, was taken into account.

43It is not in dispute that the reference in the email to the funds being to the credit of Mr Li is incorrect.

[131]          Later the same day, Ms Lee received a telephone call from Mr Li. He continued to request copies of the files and that his prior consent would be obtained to use of the $4.8 million.

[132]          The following day, 30 September 2014, Mr Li texted Mr Wang, asking him to call him, also asking whether Mr Wang had contacted the lawyers and “what time could we go to see them to settle the difference”. Mr Wang seemed to be avoiding speaking with Mr Li, and replied by text:

I have called a couple of times, all went through voice mail, I left a message and they will call me back. Once they called me I will let you know. Thanks.

[133]          Mr Wang texted Mr Li again later that day, saying he was “stuck in the North”, he would check his emails when home and call the solicitors the following morning to make an appointment. The same day, Mr Wang also signed a new agreement for sale and purchase of the Formosa Property (September Agreement).

Its terms were consistent with the in-principle agreement set out above.44

[134]          On 1 October 2014, Mr Li twice followed up with Mr Wang. In the meantime, the countersigned September Agreement had been received by Loo & Koo from the vendors’ solicitors. The purchaser was GBHL. Ms Lee confirmed that, having sought Mr Wang’s instructions, she then arranged to pay the vendors’ solicitors the $5 million deposit.

[135]          At 1.37 pm, Mr Li text Mr Wang again asking him to call him. They evidently spoke as, at 2.01pm, Mr Wang sent Mr Li a copy of the September Agreement.   Mr Wang  said that as they were still waiting to hear back from     Mr Jiang in China, he decided that to avoid any issues in the interim he would offer Mr Li shares in GBHL proportionate to a $4.8 million contribution (being 13 per cent). Mr Wang said Mr Li wanted to see the September Agreement before he considered the proposal, hence Mr Wang sending it to him at that time.

44     At [119] above.

[136]          It seems there was a further discussion between the two later that day in which Mr Li agreed to become a shareholder, though it is not clear whether this conversation took place before or after the deposit had been paid. Mr Wang accepted in cross-examination, however, that he did not have Mr Li’s express consent to the $4.8 million being used by GBHL for the deposit.

[137]          At 3.32 pm that afternoon, Mr Li emailed Ms Lee stating “Could you contact Eamon now. Cause me and Eamon need to talk to you immediately.” Shortly afterwards, Mr Li attended in person at Loo & Koo’s offices. Mr Wang was not there. Mr Chan and Ms Lee met with Mr Li for some time. Both gave evidence that it was not clear from what he told them what his role was in the overall transaction. Ms Lee recorded a contemporaneous file note of the meeting which stated:

Attended to Jun Li met him a couple of times before. Came in with clients to pay $ towards purchase price of 110A Jack Lachlan Drive. We do not know his role in transaction. Told us he had put in $4,800,000 (supported by our receipts to him) to the purchase of above. We asked him about his role in the transaction, whether he has shares in the company purchasing the property, whether he is an investor or he has just loaned the money to our client. Advised him that he needs to talk to Eamon Wang and Jenny Huang who are our clients and the only people we have received instructions from to date. He has to sort out his role whether as a creditor to our client or an investor and our client will have to give us instructions as to his role. Asked him to seek independent advice. He rang Jenny Wang (his solicitor) in the middle of our meeting. He then advised that she is not acting in this matter. He wants a copy of the file. We advised him that we can’t take instructions from him – we have always been dealing with Eamon & Jenny who are our clients and advised him to resolve this matter with them first.

[138]          There was no evidence to suggest that up to this point in time, Mr Li had communicated to Mr Wang, or any of the other parties to the Cooperation Agreement, that he no longer wanted to participate in the Agreement or had asked for his money to be returned.

[139]          Mr Li texted Mr Wang the following morning (2 October 2014) with his contact details for registration of the GBHL shares to be allocated to him. Mr Wang replied at 1.06 pm, noting that he had already added Mr Li as a shareholder, but

that the change would probably not show on the Companies Office website until overnight.45

[140]          Later the same day, Mr Li texted Mr Wang, stating that “after serious consideration”, he did not want the shares in GBHL and asking for “any of our investment” to be returned within 10 working days. Mr Li said he had initially agreed to the shareholding as he felt he had no option, but he had subsequently decided he did not want to pursue the opportunity with Mr Wang, as he doubted Mr Wang would be able to settle the new contract in any event.

[141]          Mr Li also telephoned Ms Lee that day. Unbeknown to her, he recorded at least a part of their discussion. He queried how Mr Wang could have given instructions about the use of the $4.8 million deposited by Mr Li. Ms Lee reiterated Loo & Koo’s position that the funds had been deposited by Mr Li for the credit of Loo & Koo’s clients and accordingly they were required to deal with the funds in accordance with their clients’ instructions. Ms Lee reiterated that Mr Li would need to seek independent legal advice. Ms Lee also said Mr Li referred to the Cooperation Agreement, which was the first time she became aware of it.

[142]          Mrs Zhao said that by this time, she had heard back from Mr Jiang in China, who told her to ignore Mr Li. Mr Jiang said he would deal with the situation.

[143]          There were no further communications at this time between Mr Wang and Mr Li.

[144]          Over the coming months, Mr Wang and his mother looked to find new co- investors to settle the September Agreement — Ms Huang had not been able to raise finance and Mr Jiang had advised he no longer had the funds to invest.

[145]          Ultimately, Daniel Huang (the real estate agent) and Ms Gui Rong (Wendy) Wen became co-investors. A new company, 110 Formosa (the first defendant), was formed in  November  2014.  Its  shareholders  were  Mr  Wang  (30  per  cent); Mr Huang (40 per cent) and Ms Wen (30 per cent). All three were also directors.

45     The change showed on the Companies Office website on 3 October 2014 at 11.21 am.

[146]          On 4 December 2014, Mr Wang arranged for Mr Li’s shares in GBHL to be transferred back to himself.

[147]In early December 2014, 110 Formosa entered into two agreements:

(a)The first was an agreement by which GBHL nominated 110 Formosa as purchaser under the September Agreement. The agreement recorded 110 Formosa would reimburse GBHL for all amounts GBHL had paid under the GBHL Agreement (the $5 million deposit).

(b)The  second  was  a  shareholders’  agreement   in   relation   to  110 Formosa. This recorded that GBHL (referred to as “Wang’s affiliate”) had incurred costs of $5 million, and that as part of the nomination agreement, 110 Formosa was indebted to GBHL for that amount. The relevant clause further recorded that to repay a debt GBHL owed to Mr Wang, GBHL had directed 110 Formosa to pay the $5 million directly to Mr Wang. And rather than pay the

$5 million directly to Mr Wang, the agreement recorded that sum would be offset against the amount Mr Wang was to pay under the agreement by way of subscription for his shares in 110 Formosa.46 It also recorded  the  same  “set-off”  arrangement  for  amounts  Mr Wang is recorded as having paid by way of an “exclusivity fee” to the vendors to retain the right for GBHL to enter into the September Agreement47 and $1 million paid to Mr Shih as part of his commission.

[148]          On 9 December 2014, Loo & Koo nominated 110 Formosa as purchaser under the September Agreement. On 10 December, 110 Formosa registered a caveat on the Formosa Property’s title. Ms Wen made further capital contributions to 110 Formosa (of $6 million) in December 2014 and March 2015, which were

46     A total of $12.6 million to be called upon in two tranches.

47     Presumably the earlier $2 million deposit forfeited under the April Agreement.

used to pay further instalments of the purchase price due under the September Agreement.

[149]          The first that Mr Wang heard from Mr Li after their communications in October 2014 was in February 2015, when Mr Li lodged a caveat over the Formosa Property. Mr Li’s caveat was said to protect Mr Li’s interest as “cestui que trust” and pursuant to the Cooperation Agreement.

[150]          Na Li came to New Zealand in March 2015 and met with Ms Wen. These events were the first Ms Wen and Mr Huang knew of the earlier dispute between Mr Wang and Mr Li as to the ownership of the $4.8 million.

[151]          As settlement under the September Agreement had not yet occurred (not due to take place until September 2015), the vendors applied to remove Mr Li’s caveat. Mr Li applied for an order that his caveat be sustained. The High Court ordered its removal, though the judgment noted a new caveat could be lodged once title had passed to 110 Formosa.48

[152]          Mr Li also lodged a complaint with Police and gave a statement about the purchase of the Formosa property dated 20 August 2015. Other than Mr Li being taken to his statement in cross-examination, and Mr Wang confirming the Police had not spoken to him about the matter, there was no further evidence on this topic.

[215]Mr Li’s second cause of action is accordingly dismissed.

Third cause of action — resulting trust

[216]          As noted earlier in this judgment, Mr Li advanced this cause of action on the basis of observations of the Court of Appeal in Chang v Lee.94 Despite this cause of action attracting only one paragraph in Mr Li’s closing submissions, in my view it is perhaps the most logical cause of action in this case.

[217]          In Chang v Lee, the Court referred to the observations of Lord Browne- Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council that a resulting trust arises where:95

… A makes a voluntary payment to B or pays (wholly or in part) for the purchase of a property which is vested in either B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B; the money or property is held on trust for A (if he is the sole provider of the money) or in the case of the joint purchase by A and B in shares proportionate to their contribution. It is important to stress that this is only a presumption, which presumption can be easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer …

[218]Lord Browne-Wilkinson went on to state that:96

… resulting trust[s] are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention. … If the settlor has expressly, or by necessary implication, abandoned any beneficial interest in the trust property, there is in my view no resulting trust …

94Chang v Lee [2017] NZCA 308, [2017] NZAR 1223. Although this was the basis upon which the resulting trust claim was advanced in Mr Li’s closing submissions, the pleadings also refer to a Quistclose trust, being a species of resulting trust. I address the Quistclose trust argument at [223] below.

95 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL) at 708.

96     At 708.

[219]The Court of Appeal in Chang v Lee stated:97

[20] The rationale for a resulting trust is that, absent evidence to the contrary, the law presumes a person intends to retain the beneficial ownership of funds which he advances towards the purchase price of a property. The legal owner [of the purchased property] holds title to the property subject to the payer’s equitable interest. In this way a trust results to the payer to the extent of his or her contribution. Evidence which might contradict or rebut the presumption is traditionally of an intention to gift or of consideration in that nature of satisfaction of independent indebtedness

…

[220]The Court also observed:98

Lord Browne-Wilkinson’s reference to the parties’ common intention is to their respective intentions about beneficial ownership of the advance. While this language resembles that of contract, we are not here concerned with whether the parties agreed to be bound by a mutually beneficial bargain — it is accepted they did not. The question is whether their common intention was for Mr Chang to transfer the money for a specific purpose rather than to effect an outright transfer of ownership through which Ms Lee can now treat the property as her exclusive asset. In the former case equity fastens on Ms Lee’s conscience and presumes a common intention for Mr Chang to benefit from the application of the funds.

(Emphasis added, footnote omitted)

[221]          Here, the evidence does not establish a common intention, or any intention on the part of Mr Li himself, that he would have a beneficial interest in the Formosa Property.99 But there was an (actual) common intention that in return for their contribution of funds, each investor would receive a commensurate interest in the corporate vehicle to purchase the Formosa Property. While the concept of a resulting trust is very often deployed to give a beneficial interest in real property, it also applies to other forms of property which have been acquired with funds advanced by a party other than the legal owner. For example, a resulting trust was found to apply in Hostick v The New Zealand Railway & Locomotive Society Waikato Branch Inc, where the property the subject of a resulting trust was a

97     Chang v Lee [2017] NZCA 308, [2017] NZAR 1223.

98 At [22].

99 See [191]–[193] above.

locomotive train.100 And in Westdeutsche, the property in question was money owed to a bank.101

[222]          There was no evidence in this case that Mr Li intended the funds advanced by him to the credit of Ms Huang and Mr Wang to be a gift or a loan. Rather, they were advanced for the purpose of contributing to the purchase of the Formosa Property via a corporate entity, resulting in Mr Li acquiring a commensurate share in the corporate entity itself. To put it another way, there is no evidence to suggest Mr Li intended that proportion of Mr Wang’s registered shareholding in the corporate entity which now owns the Formosa Property, and which reflects Mr Li’s contribution, was the subject of an outright transfer to Mr Wang.

[223]          I have used the phrase “corporate entity” in connection with the party to purchase and own the Formosa Property given the alternative basis upon the resulting trust claim was advanced by Mr Li, namely a Quistclose trust.102

[224]          A Quistclose trust arises where a loan or advance of funds is made for a specific purpose and, upon the failure of that purpose, a resulting trust applies over the funds in favour of the lender.

[225]          In this case, Mr Li says he advanced the $4.8 million for the purpose of JEHL, and no other entity, purchasing the Formosa Property. When that purpose failed (upon the cancellation of the April Agreement), Mr Li says a resulting trust over the $4.8 million arose in his favour.

[226]          I do not accept the purpose for which Mr Li advanced the $4.8 million was as refined as being for JEHL, and JEHL only, to purchase the Formosa Property, nor that the advance was for the purpose of the April Agreement only.

100Hostick  v The New  Zealand  Railway  & Locomotive Society  Waikato  Branch Inc  [2006] 3 NZLR 842.

101Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL).

102Named in light of the leading decision on such trusts, Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 (HL). See also Potter v Potter [2003] 3 NZLR 145 (CA).

[227]          Where a party has transferred property subject to a condition that it is to be used for a specific purpose, the terms on which it is so transferred must be clear and express.103 I am satisfied that when Mr Li deposited funds with Loo & Koo on 28 and 29 August 2014, he did not do so exclusively to the credit of JEHL. Rather, he did so to the credit of Mr Wang and/or Ms Huang, and for the general purpose of those funds being used in the transaction to acquire the Formosa Property.104 In other words, no specific purpose concerning JEHL was communicated by Mr Li at the time he advanced those funds. And, when Mr Li deposited further funds with Loo & Koo on 3 September 2014, I am satisfied there was no change in his purpose for that advance, namely for the general purpose of purchasing the Formosa Property.105 The instruction to change the various receipts to reflect the funds being held to the credit of JEHL came from Mr Wang, not Mr Li.

[228]          That Mr Li’s purpose in advancing the funds was for the more general purpose of putting a corporate entity in funds to acquire the Formosa Property, rather than JEHL specifically, is also consistent with the terms of the Cooperation Agreement. Clause 2(1) of that agreement provided that the “form of cooperation” was to “set up a (shareholding) limited company (“the Company”) to purchase and manage the Land”. There is no reference to JEHL. The cancellation of the April Agreement and the subsequent incorporation of GBHL as the new corporate vehicle to carry out the purchase did not mean the purpose for which Mr Li had advanced his funds had failed.

[229]          Accordingly, Mr Li’s objective when making the various payments was met when those funds were used to pay the deposit under the September Agreement. Mr Li’s request that the $4.8 million be returned to him was first made on 2 October 2014 — after the funds had been paid towards the acquisition of the Formosa Property.

103 See, for example, Bristol & West Building Society v Mothew [1998] Ch 1 (CA) at 24 per Millett LJ. See also Zhong v Wang (2006) 7 NZCPR 488 (CA) at [83]-[85].

104 The 28 August 2014 receipt recorded the narration as “on account purchase of 110 Jack  Lachlan Drive Beachlands”. The 29 August 2014 receipt recorded the narration as “purchase funds”.

105   The 3 September 2014 receipt recorded the narration as “part settlement fund”.

[230]          Despite the purpose for which Mr Li advanced the $4.8 million having been met, a resulting trust in Mr Li’s favour nevertheless arises, on the basis of those principles discussed in Chang v Lee above. Mr Li deposited money (that I am satisfied was legally and beneficially his) but never received his commensurate shareholding in the corporate entity which acquired the Formosa Property. Rather, those shares went to Mr Wang. I am satisfied Mr Wang holds the shares on resulting trust for Mr Li.

[231]          The third cause of action is accordingly made out. There will be a declaration that Mr Wang holds that proportion of his shares in 110 Formosa representing the $4.8 million paid by Mr Li on resulting trust for Mr Li.

Fourth cause of action — breach of contract

[232]          This cause of action is advanced against Mr Wang only. A range of alleged breaches were pleaded in the statement of claim. Yet the only submissions made on behalf of Mr Li on this cause of action were as follows:

A plaintiff is entitled to expectation damages for breach of contract. The fourth cause of action is against Eamon Wang only and the loss to be claimed under this head will be calculated in the same way as the compensatory losses have been calculated for the breach of fiduciary cause of action.

[233]          This puts the Court in the difficult position of discerning what aspects of this cause of action are pursued and on what basis.

[234]          Mr Li alleges Mr Wang breached cl 2(1) of the Cooperation Agreement which provides as follows:

2.Form of cooperation

1)Set up a (shareholding) limited company (“the Company”) to purchase and manage the Land and carry out joint investment and joint management and share risks as well as profits and losses. Party A, Party B and Party C shall purchase the Land at a total price of NZD 38 million.

[235]Mr Li says that Mr Wang breached this term in three ways:

(a)By failing to contribute the amount he was to contribute (said to be

$16.72 million);

(b)By forming GBHL and then 110 Formosa — thereby diverting the opportunity to purchase the Formosa Property to each of those companies; and

(c)By diverting Mr Li’s contribution of $4.8 million to the benefit of GBHL and 110 Formosa.

[236]          I do not find this aspect of the claim made out. On Mr Li’s case, the Cooperation Agreement was a valid and binding agreement, properly reflecting the intended relationship between the parties. As noted earlier, I am satisfied the agreement did not require any particular entity to be the corporate vehicle to purchase the Formosa Property. As such, the mere fact Mr Li’s funds were used by (or “diverted to”) GBHL to pay the deposit is not itself a breach. Further, it is not explained how Mr Wang’s own alleged shortfall in contribution has led to any loss being suffered by Mr Li.

[237]          The second aspect of the Cooperation Agreement said to have been breached by Mr Wang is cl 2(4), which provides that:

The rights and liabilities each Party has in respect to the Company shall be in proportion to their actual capital contribution.

[238]          Mr Li says Mr Wang breached this clause by causing his contribution to be diverted to the benefit of GBHL and 110 Formosa; failing to make any contribution to JEHL as contemplated by cl 2(5); and depriving Mr Li of any rights and liabilities in the company owning the Formosa Property.

[239]          I do not consider cl 2(4) in and of itself imposed a positive obligation on Mr Wang. Rather it is a statement of the parties’ common intention at the time as to the consequences of their respective contributions. It is clear, however, that the overall effect of the Cooperation Agreement’s terms is that each party was entitled to a shareholding in the corporate vehicle to purchase the Formosa Property in proportion to their level of contribution.

[240]          The comments above at [236] apply equally to the alleged breach of cl 2(4) by Mr Wang in causing Mr Li’s contribution to be diverted to the benefit of GBHL and 110 Formosa, and Mr Wang allegedly failing to make any contribution himself.

[241]          I turn to the allegation that Mr Wang breached cl 2(4) by depriving Mr Li “of any rights and liabilities in the company owning the Formosa land”.

[242]          On 1 October 2014, Mr Wang offered Mr Li a shareholding in GBHL proportionate to Mr Li’s contribution (thereby acting in compliance with cl 2(4)), an offer which Mr Li accepted. Mr Li was then registered as a shareholder in GBHL. However, on 2 October 2014, and after Mr Li became aware he had been made a shareholder in GBHL, he communicated to Mr Wang that he did not want a shareholding after all and instead requested his contribution to be returned to him. Mr Li said that by that time, he was concerned Mr Wang would not be able to settle the purchase of the Formosa Property.

[243]          By seeking to withdraw from the transaction, Mr Li arguably repudiated the Cooperation Agreement (at least in relation to his continuing involvement in it). There is no evidence, however, that Mr Wang accepted Mr Li’s repudiation, or communicated any such acceptance to Mr Li. Rather, Mr Wang simply left Mr Li’s shareholding in GBHL as it was for some months. He took no steps to liaise with Mr Li as to his $4.8 million. As such, at that time, the Cooperation Agreement remained on foot as between Mr Wang and Mr Li. Mr Wang’s subsequent cancellation of Mr Li’s shareholding in GBHL (there being no evidence this was communicated at the time to Mr Li), while retaining the benefit of Mr Li’s contribution, must then have amounted to a breach of the Cooperation Agreement.

[244]          Mr Li says he has suffered loss as a result of Mr Wang’s breach, namely being deprived of the 32 per cent interest in the Formosa Property that JEHL was to hold for him. Mr Li seeks damages of $8.96 million based on being deprived of that level of ownership in the joint venture company.

[245]          However, Mr Li would only have acquired a 32 per cent interest had he made his full contribution under the Cooperation Agreement. The terms of the

Cooperation Agreement are clear in my view that each investor’s interest in the joint venture company would be proportionate to their actual capital contribution.106 Mr Li did not adduce any evidence that he was ready, willing and, importantly, able to contribute the further $7.36 million required to acquire his full 32 per cent interest.

[246]          Accordingly, Mr Li paid $4.8 million for shares representing a commensurate interest in the joint venture company. He has not received those shares, or the return of his $4.8 million. Other than having paid out his $4.8 million, however, Mr Li advanced no evidence of any additional loss. In particular, Mr Li did not call evidence of any alleged loss of profits or loss of chance.107 On that basis, his loss cannot be greater than the $4.8 million paid for shares which he did not receive.

[247]          I am therefore satisfied Mr Wang breached the Cooperation Agreement by utilising Mr Li’s contribution and later cancelling his allocated shareholding. Mr Li’s loss as a result of such breach is confined, however, to the equivalent of his original contribution, namely $4.8 million. He is entitled to damages in that amount.

[248]          Mr Li alleged a number of other breaches of the Cooperation Agreement, most of which were withdrawn at trial.108 The remaining aspect of this cause of action can be dealt with briefly (again receiving no attention in Mr Li’s closing submissions).

[249]          Mr Li seeks a contractual payment of $2.869 million pursuant to cl 8(1) of the Cooperation Agreement, which provides as follows:

106See, in particular, cl 2(4).   The capital contributions and “ownership ratio details” set out in   cl 2(5) were clearly what was expected to occur. Further, cl 2(7) again reflected that Mr Li’s ownership of the joint venture company was to match his actual capital contribution. The reference to “not being less than 20 percent” is in my view, a reference to his capital contribution not being less than 20 per cent, rather than his ownership interest not being less than 20 per cent.

107 Valuation evidence was adduced, but in relation to the Formosa Property itself and not its corporate owner, 110 Formosa.

108   See above n 13–15.

8.Liability for breach of agreement

1)When any of the Parties fails to contribute capital in full and on time as agreed, he shall pay the non-defaulting parties interest starting from the 11^th day the contribution is late. Interest shall be calculated based on the bank’s loan interest rate for the same period. If the Party fails to contribute his capital in full by more than three months, he shall pay the non-defaulting parties interest until he contributes his capital in full. Interest shall be calculated based on twice the bank’s loan interest rate for the same period.

[250]          The above obligation is not predicated on a non-defaulting party (or parties) “topping up” the defaulting party’s contribution and thereby suffering loss. Nor is there any suggestion or pleading in this case that Mr Li suffered any loss as a result Mr Wang failing to make his required contributions under the Cooperation Agreement. Enforcement of this aspect of the Cooperation Agreement would accordingly give Mr Li a very significant windfall.

[251]          Given the clause is not predicated on any other party to the Cooperation Agreement incurring any loss from the failure to contribute, the clause arguably acts as an unenforceable penalty.109 Further, if the contribution remains unpaid for three months, the obligation is then to pay double the “bank’s loan interest rate” for an indeterminate period of time. Enforcement of such a clause could be seen as exorbitant or unconscionable.110 Further and in any event, Mr Li did not adduce any evidence to support the pleaded claim of the “bank’s loan interest rate” being

4.75 per cent, upon which Mr Li’s damages claim is calculated.

[252]          This aspect of the fourth cause of action is accordingly dismissed. Nonetheless, the fourth cause of action is made out to the extent Mr Wang breached the obligation to provide Mr Li with shares in 110 Formosa commensurate to his

$4.8 million contribution. Mr Li is accordingly entitled to damages of $4.8 million, reflecting his loss.

109See the discussion of recent developments in the law of penalty clauses in Honey Bees Preschool Ltd v 127 Hobson Street Ltd [2018] NZHC 32, [2018] 3 NZLR 330.

110 At [45].

Seventh cause of action — money had and received

[253]          This cause of action is advanced against 110 Formosa, Mr Wang, GBHL and Loo & Koo. Mr Li alleges that he paid the $4.8 million into Loo & Koo’s trust account to be held “to the credit of [JEHL] for the specified purpose of [JEHL’s] purchase of the Formosa [Property].” Mr Li says that each of Mr Wang, GBHL and Loo & Koo caused the money to be used for a different purpose. He claims each of those defendants is therefore liable to account to him for the $4.8 million. Mr Li alleges 110 Formosa received the benefit of the funds paid by Mr Li, and is accordingly also liable to account to Mr Li in the sum of $4.8 million.

[254]          Again, this cause of action received scant attention in Mr Li’s closing submissions. Mr Heaney referred to it as an “insurance policy” only.

[255]          In very simple terms, the cause of action of money had and received is based on money received by a defendant who has no right to retain it. It is a personal restitutionary claim. It is not necessary to show fault on the part of the defendant, and it does not turn on the continued existence or retention by the defendant of the money received.111

[256]          A claim of money had and received can be advanced when money has been paid for a particular purpose which does not come about. An example of the claim being used in such circumstances is Martin v Pont.112 In that case, the Ponts paid to their accountant, Mr Martin, $600,000 for the purpose of investing the money with a nominated finance company. Before that occurred, Mr Martin’s daughter, an employee of Mr Martin’s firm, misappropriated the money.  The Ponts sued  Mr Martin, his former partner and his daughter to recover the money, alleging, among other causes of action, money had and received. Summary judgment was entered against Mr Martin on the claim of money had and received. Mr Martin appealed.

111For a general discussion of the cause of action, see Napier v Torbay Holdings Ltd [2016] NZCA 608, [2017] NZAR 108 at [18]–[21].

112   Martin v Pont [1993] 3 NZLR 25 (CA).

[257]          Tipping J, delivering the judgment of the Court of Appeal, surveyed the nature of the cause of action for money had and received, confirming, inter alia, that the claim did not depend on continued possession of the money. Applying the principles to the facts before the Court, Tipping J stated:113

The Ponts, as principal, entrusted their money to Mr Martin’s firm for their use and benefit, and for a particular purpose, namely the purpose of investing the funds with Nathan Finance. Mr Martin and his firm did not carry out that purpose. Thus the Ponts, as principal, may recover the money as had and received by Mr Martin and his firm to their use.

(Emphasis added)

[258]          Unlike in Martin v Pont, I have concluded that the money paid by Mr Li to the credit of Mr Wang and/or Ms Huang was for the purpose of putting a corporate vehicle in funds to purchase the Formosa Property. That purpose was met.114 On that basis, the seventh cause of action must fail.

Eighth cause of action — negligent breach of statutory duty

[259]          I have addressed earlier in this judgment the basis upon which I examine this cause of action, namely being one of negligent breach of statutory duty, not a common law claim in negligence.115

[260]          In this case, it is alleged that by reason of ss 110 and 113 of the Lawyers and Conveyancers Act 2006 (Act) and rule 11.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (Rules), Loo & Koo owed Mr Li the following duties:

(a)to hold the funds advanced by Mr Li in a trust account in the name of Mr Li;

(b)to disburse the funds only in accordance with a direction of Mr Li; and

(c)not to pay the funds for the benefit of GBHL.

113   At 27.

114   See the discussion above at [226]–[230].

115 See [33]–[45] above.

[261]          It is alleged that Loo & Koo breached each of these duties. As a consequence, Mr Li seeks judgment against Loo & Koo in the sum of $4.8 million.

[262]          As counsel for Loo & Koo submit, there is no such cause of action of “negligent breach of statutory duty”. As the Court of Appeal has explained, “[i]f the statute itself creates a duty to take care, a breach of that duty will result in a breach of statutory duty simpliciter, not a negligent breach of statutory duty.”116

[263]          In the case of a breach of statutory duty simpliciter, it will then be a separate question as to whether that breach gives rise to civil remedies. As the Court of Appeal noted in Thompson v Turner Hopkins, a court considering this question will need to examine whether such legislative intent can be discerned from the construction of the relevant section in its statutory context.117 The Court further observed that:118

A court will not lightly assume a legislative intention to create a right to sue for damages for a breach of the statute in the absence of words that are clearly of that effect. It is, after all, very easy for the legislature to spell out the consequences of breach ...

[264]          To the extent not based on a  free-standing  negligence  cause  of action, Mr Heaney accepted that “a breach of statutory duty simpliciter” is not available to Mr Li, given, among other matters, the detailed penalty provisions in the Act. In doing so, Mr Heaney accepted the Court of Appeal’s decision in Thompson v Turner Hopkins supports that conclusion.

[265]          I therefore do not consider it necessary, or appropriate, to consider this cause of action in any detail, and in particular, whether Loo & Koo breached any provisions of the Act or the Rules. In my view, given the very detailed regulatory framework and penalty provisions for breach of the Act and the Rules, Mr Heaney’s concession on the availability of a cause of action for breach of statutory duty was a proper one. The Act and the Rules provide a comprehensive scheme as to the required standards and rules to which solicitors are expected to adhere and the

116   Attorney-General v Carter [2003] 2 NZLR 160 (CA) at [41].

117   Thompson v Turner Hopkins [2018] NZCA 197 at [14].

118 At [16].

consequences of not doing so. The presence of such a detailed or comprehensive scheme generally tells strongly against a legislative intent that the provisions in question were intended also to give rise to a civil remedy for breach.119 The fact the Act also provides that breach of some provisions, including s 110,120 amounts to an offence, reinforces this conclusion.

[266]          The cause of action of negligent breach of statutory duty (or breach of statutory duty simpliciter) is accordingly dismissed.

Result

[267]          For the reasons set out in this judgment, there will be (but pending an election by the plaintiff, as to which see below) orders that:

(a)Mr Li’s third cause of action, resulting trust, is made out, on the basis that  Mr  Wang  holds  that  proportion  of  his  shareholding   in 110 Formosa which represents an original contribution of

$4.8 million, on resulting trust for Mr Li.

(b)Mr Li’s fourth cause of action, breach of contract, is made out, and Mr Wang is to pay Mr Li damages in the sum of $4.8 million.

(c)Mr Li’s claims are otherwise dismissed.

[268]          As will be appreciated, the outcomes and remedies on the third and fourth causes of action are inconsistent. Before making formal orders on those causes of action upon which judgment can be entered, Mr Li must confirm his election between the two remedies.121 He is to file a memorandum within 20 working days from the date of this judgment confirming his election. I will then make a formal order in accordance with that election.

119X (Minors) v Bedfordshire County Council [1995] 2 AC 633 (HL); Mawhinney v Waitakere City Council [2007] NZRMA 173 (HC) at [46].

120 See Lawyers and Conveyancers Act 2006, s 110(4).

121   Amity Inns Ltd v RH & PL Papps Ltd [2007] 3 NZLR 553 (CA) at 555.

[269]          Given none of Mr Li’s claims against 110 Formosa and Loo & Koo have been made out, it is not necessary to address the various cross-claims by those parties against Mr Wang.

[270]          Finally, there is the question of Mr Wang’s undertaking  to the  Court of  19 June 2018 and whether (if so, when) he ought to be released from it.

[271]          Mr Wang may file a memorandum on that matter within 30 working days of the date of this judgment. If the parties are able to reach an agreed position in this regard, a joint memorandum may be filed.

Costs

[272]          The parties are encouraged to reach agreement on costs. If they cannot, any party seeking costs may file a costs memorandum within 30 working days of the date of this judgment.  Any memoranda in reply are to be filed  within a further  10 working days. No memorandum is to exceed seven pages in length. I will thereafter deal with the question of costs on the papers.

Fitzgerald J

Schedule A – summary of payment flows for deposit122

[1]                  The deposit of $4 million made by Mr Li on 28 August 2018 was composed of three cheques drawn from three different bank accounts.

[2]                  The first was a cheque for $1,434,220.00 drawn on an ANZ account in the name of Mr Li and his wife. That account received the following deposits to fund the cheque:

(a)$47,643.96 from UK Winway Trading Ltd (received123 26 August 2014, although the underlying bank transfer form is dated 25 August 2014);

(b)$613,749.24 from Well Stable Ltd (received 26 August 2014, although the underling bank transfer form is dated 25 August 2014);

(c)$656,456.26 from Well Stable Ltd (received 27 August 2014, although the underling bank transfer form is dated 26 August 2014); and

(d)$116,372.00, being a cheque drawn from an ANZ savings account in the name of Mr Li. This amount was in turn funded by two international deposits into that account, namely:

(i)a deposit from “Lin Bin” of $58,186.93 on 25 August 2014; and

(ii)a deposit from “Lai Wenjie” of the same amount also on

25 August 2014.

[3]                  Of the total sum of $1,434,220.00, Mr Li was accordingly in possession of, or instructions had been given regarding the transfer of, a total of $777,767.06 before 26 August 2014.

122 The sums in bold in this Schedule total the amount set out and discussed at [14] below.

123 The reference to “received” in this schedule is to the date shown on Mr Li’s bank statement for the relevant account.

[4]                  The second source of the deposit made on 28 August 2018 was a cheque in the sum of $1,038,000 drawn on a Westpac account in Mr Li’s name. That account received the following deposits to fund that amount:

(a)$47,643.96 from UK Winway Trading Ltd (received on 26 August 2014, although the underlying bank transfer form is dated 25 August 2014);

(b)$358,055.96 from Well Stable Ltd (received on 27 August 2014, although the underling bank transfer form is dated 26 August 2014); and

(c)$632,586.31 also from Well Stable Ltd (received on 27 August 2014, although the underlying bank transfer form is dated 26 August 2014).

[5]                  Accordingly, of the total sum of $1,038,000, Mr Li was in possession of, or instructions had been given regarding the transfer of, a total of $47,643.96 before   26 August 2014.

[6]                  The third source of the deposit made on 28 August 2014 was a cheque in the amount of $1,527,780 drawn on an ANZ Online account in Mr Li’s name. The payment from the ANZ Online account was in turn sourced from the following:

(a)a deposit from Na Li of $135,772.50 on 21 August 2014 from the sale of a property owned by her in Sprott Road, Auckland;

(b)funds already in the account before 25 August 2014 in the sum of

$348,006.70;

(c)a deposit from a Bank of China account in Mr Li’s name in the sum of

$415,990.00, which can be traced back to bank accounts of Na Li in China (into which deposits totalling approximately NZD1,257,500 from unknown sources had been made between 14 and 20 August 2014);

(d)a deposit on 28 August 2014 from an ANZ account in the name of the “Lee Family Trust”124 in the sum of $600,000 (which took the Lee Family Trust bank account to it maximum overdraft limit); and

(e)a deposit on 28 August 2014 from an account of Na Li in the sum of

$27,950.80.

[7]                  In relation to the $600,000 received from the Lee Family Trust bank account, a deposit of $50,000 was made back into that account on 29 August 2014, from Mr Li’s ANZ Go account, and a further deposit made back into it, also from Mr Li’s ANZ Go account, of $100,000 on 8 September 2014. In turn, Mr Li had received into his ANZ Go account:

(a)a deposit from UK Winway Trading Ltd of $47,843.96, shown in the account as received on 26 August 2014 (although the underlying bank transfer form is dated 25 August 2014);

(b)a deposit from a “Wang Liqoing” of $58,504.73 on 29 August 2014;

and

(c)a deposit from “Li Qiaolan” of $58,644.62 on 2 September 2014.

[8]                  Even allowing for the deposits back into the Lee Family Trust bank account, that account nevertheless funded  $450,000  of  the  $4  million  deposit  made  on  28 August 2014.125

[9]In relation to the deposit into Mr Li’s ANZ Online account from Na Li of

$27,950.80 on 28 August ([6](e) above), Mr Li transferred to Na Li the following day the sum of $122,000 from his ANZ Go account, which effectively “replenished” the payment from Na Li with a substantial surplus.  However, a cheque in an amount of

$200,000 was then drawn on Na Li’s account on 29 August 2014 which funded the deposit made by Mr Li with Loo & Koo on 29 August 2014 in the same amount.

124 Although with the spelling “Lee” rather than “Li”, the account has the same address as Mr Li’s other bank accounts.

125 This was the account in relation to which Mr Li wished to withdraw $600,000 of the funds held by Loo & Koo on 18 September 2014; see [122] of the judgment.

Accordingly, although payments were from Na Li’s account on 28 and 29 August 2014 totalling $227,950.80, she received into that account on 29 August $122,000 from Mr Li. This nevertheless resulted in a net “withdrawal” from Na Li’s account of

$105,950.80 towards the Loo & Koo deposits on 28 and 29 August.

[10]              And in relation to the transfer from Mr Li to Na Li of $122,000 on 29 August 2014, Mr Li had in turn received into his ANZ Go account the sum of $124,183.77 from Well Stable Ltd on 27 August 2014 (although the underling bank transfer form is dated 26 August 2014). That sum therefore effectively “funded” his $122,000 transfer to his mother, with a small balance remaining.

[11]As to the 3 September 2014 deposits by Mr Li with Loo & Koo:

(a)A bank cheque was drawn that day for $400,000 on Mr Li’s ANZ Go

account; and

(b)A bank cheque for $200,000 was drawn from the same account and at Mr Wang’s request, deposited into Mrs Zhou’s bank account (see [116] of the judgment).

[12]              As at 29 August 2014, Mr Li’s ANZ Go account had a balance of $58,541.96 (largely reflecting the surplus of payments received from UK Winway Trading Ltd, Well Stable Ltd and Wang Liqiong over the period 26 to 29 August; its opening balance on 25 August 2015 was only $209.50). Three further deposits from international sources were then made into Mr Li’s ANZ Go account:

(a)the deposit from “Li Qiaolan” in the sum of $58,644.62 on 2 September 2014 (see [7](c) above);

(b)a deposit from UK Winway Trading Ltd of $71,217.70 on 3 September 2014 (though the underlying bank transfer form is dated 2 September 2014); and

(c)a deposit from Well Stable Ltd of $536,711.64 on 3 September 2014 (though again, the underlying bank transfer form is dated 2 September 2014).

[13] This brought the balance of Mr Li’s ANZ Go account to $725,115.92, from which the two bank cheques referred to at [11] above (totalling $600,000) were drawn on 3 September 2014. A later transfer was also made to the Lee Family Trust bank account — that payment of $100,000 on 8 September 2014 and referred to above at [7].

[14]              As stated in the judgment at [160](d), from the above analysis, I am satisfied that payments made to Mr Li totalling approximately $2.329 million are inconsistent with Mr Wang and Mrs Zhou’s evidence that the whole of the $4.8 million was money belonging to or originating from them and transferred to New Zealand using Mr Li as a “conduit”. This is on the basis that payments totalling that amount (which I have highlighted in this schedule):

(a)were the subject of transfer instructions pre-dating the evening of     26 August 2014, being the point at which Mrs Zhou and Mr Wang said it was decided to use Mr Li as a “conduit” for their funds to come from China;

(b)can be traced to Na Li or Mr Li’s bank accounts and have not been “funded” or “replenished” by off-shore payments (for example, the

$450,000 (net) withdrawn from the Lee Family Trust account);

(c)originated and belonged to Na Li (being the deposit from the sale of her Sprott Road property); or

(d)can be traced back to Na Li’s accounts in China which were in sufficient funds prior to 26 August 2014 to fund the payments made (see the $415,990.00 funded by transfers from Na Li’s accounts in China).