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…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2018] NZHC 3418
Decision Date: 19 December 2018

CaseChat Overview and Summary

The case of Li v 110 Formosa (NZ) Ltd involved a dispute over the beneficial ownership of $4.8 million paid by the plaintiff, Mr Li, towards the acquisition of land on which the Formosa Golf Course is located. Mr Li claimed that he was the beneficial owner of the funds and sought a commensurate beneficial ownership in the Formosa Property. The primary defendant, Mr Wang, disputed Mr Li's claim and argued that the funds originated from Mr Wang's family in China and were paid using Mr Li as a "conduit", with beneficial ownership vesting in Mr Wang. The court found that Mr Wang could not establish that the $4.8 million originated from him or his family in China, but also held that Mr Li had not discharged the burden of proving on the balance of probabilities that he had beneficial ownership of the funds. The court dismissed all of Mr Li's causes of action except for the resulting trust claim, which was made out on the basis that Mr Wang held the proportion of his shareholding in 110 Formosa representing the $4.8 million paid by Mr Li on resulting trust for Mr Li. The court also found that Mr Wang breached the Cooperation Agreement by utilising Mr Li's contribution and later cancelling his allocated shareholding, and awarded Mr Li damages of $4.8 million. The case highlights the importance of proving beneficial ownership in complex financial transactions and the role of resulting trusts in such cases.

Orders