Liu v He

[2024] NZHC 1721

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-004-000468

[2024] NZHC 1721

BETWEEN

HONG LIU

Plaintiff

HONG FUND LIMITED
Second Plaintiff

AND

HONGYAN HE

Defendant

Hearing:	13 May 2024
Appearances:	No appearance for the Plaintiffs P Rice for the Defendant
Judgment:	26 June 2024

JUDGMENT OF ROBINSON J

This judgment was delivered by me on 26 June 2024 at 4:30 pm pursuant to Rule 11.5 of the High Court Rules

…………………………………………………………………… Registrar/Deputy Registrar

Solicitors/Counsel: Essence Law, Auckland P Rice, Auckland

Copy to: The Plaintiffs

LIU v HE [2024] NZHC 1721 [26 June 2024]

Introduction

[1]    Between 2017 and 2018, the first plaintiff (Mr Liu) and the defendant (Ms He) entered into a joint venture arrangement whereby the second plaintiff, Hong Fund Limited (HFL) and a corporate vehicle associated with the defendant (which eventually came to be Hong Da Development Limited (HDDL)), would acquire and develop two properties at 42 and 44 Byron Avenue, Takapuna (the Properties).

[2]    The first step in the development was to acquire the properties. After some difficulty raising finance, on about 1 February 2018 HDDL entered into a loan agreement (the Loan Agreement) with a third-party lender, DBR Limited (DBR). The loan was for $4,479,200.00. Ms He and her partner guaranteed the loan and provided security by way of mortgages over two residential properties. It was a term of the Loan Agreement that HDDL would apply for a GST refund on the acquisition of the Properties and pay the full amount of that refund in partial satisfaction of the loan.

[3]    On about 2 February 2018, DBR paid $4,314,065.00 to the vendor’s solicitor trust account, and the properties were transferred to HDDL.

[4]    At the same time, they also agreed that Mr Liu would reimburse Ms He for her contribution to the development to date.

[5]    Ms He calculated that she was owed $483,148.46, being the total cash contributions to the project of $3,258,010.56 less Mr Liu’s cash contribution of

$2,774,862.10. On 31 May 2018 Ms He provided Mr Liu with spreadsheets and supporting documentation showing how she had calculated this amount.

[6]On 12 June 2018 Ms He instructed her lawyer to draft:

(a)A sale and purchase agreement selling the Properties to HFL for

$5,221,300.00 plus GST, with settlement to occur on 29 June 2018.

(b)A short-term loan agreement between Ms He and Mr Liu for a loan of

$483,148.46, repayable on 12 September 2018. Ms He instructed that the agreement was to record that interest would be payable if the loan

was not repaid on that date. Ms He copied Mr Liu into her email to her solicitors.

[7]    At 11:59 am on Friday, 29 June 2018, Ms He sent the draft term loan agreement to Mr Liu. It is the Auckland District Law Society’s standard Term Loan Agreement. Amongst other things it provided that:

(a)Ms He would lend Mr Liu the principal sum of $483,148.46;

(b)the loan term would expire on 28 September 2018; and

(c)the loan was interest free before 28 September 2018.

[8]    Ms He sent a final version of the Loan Agreement signed by her at 1:41 pm. Mr Liu signed and scanned it back to Ms He at 2:04 pm.

[9]    The WeChat correspondence between Ms He and Mr Liu during that day includes his confirmation to her that he had given his word and would not break it. He said: “I’ll pay you back before National Day”, which is 1 October.

[10]That correspondence also includes the following exchange:

Ms He: Haiyan Yang [Ms He’s lawyer] advised that you should find a lawyer to look at the personal loan agreement.

Mr Liu: No worries. I will sign it straight away.

[11]   Despite multiple demands, Mr Liu has not repaid Ms He any of the amounts owing under the Loan Agreement.

Procedural background

[12]This matter has a lengthy procedural background.

[13]   Apparently by way of a pre-emptive strike, Mr Liu issued these proceedings in March 2020. Amongst other things he sought a declaration that the Loan Agreement is void and unenforceable, and judgment in the sum of $233,171.45. Ms He defended

the proceeding and issued a counterclaim for judgment in the sum of $483,148.46, together with interest and costs. In an Amended Statement of Claim dated 7 May 2021, the plaintiffs alleged causes of action in undue influence; mistake under s 24 of the Contract and Commercial Law Act 2017 (CCLA); and for recovery of a debt in the amount of $233,171.45. Ms He denied the allegations in the amended claim and maintained her counterclaim.

[14]   The matter was set down for a two-day trial to commence on 2 February 2022. However, on 2 December 2021 Moore J vacated that fixture by  consent because   Mr Liu was in China for family reasons and, due to the COVID-19 pandemic, was unable to secure a space in managed isolation in order to return to New Zealand.

[15]   A two-day trial was set down to commence on 3 April 2023. The plaintiffs’ briefs of evidence were due to be served by 1 June 2022.

[16]   By 20 March 2023 the plaintiffs still had not filed any evidence. They sought leave to file a second amended statement of claim for an order for the taking of accounts. On 20 March 2023 Jagose J vacated the fixture and set the matter down for a three-day hearing on 1 September 2023. In the meantime, he allocated a fixture to hear the plaintiffs’ application for leave to file a second amended statement of claim and for accounts.

[17]   On 17 July 2023 van Bohemen J granted the plaintiffs leave to file a second amended statement of claim in the form exhibited to Mr Liu’s supporting affidavit. He dismissed the plaintiffs’ application for the taking of accounts and granted Ms He costs on a 2B basis with an uplift of 35 per cent. Justice van Bohemen also made timetable directions leading up to a trial on 9 October 2023. Amongst other things, the plaintiffs were to file briefs of evidence by 7 August 2023, a common bundle of documents by 18 September 2023 and opening submissions by 2 October 2023.

[18]   For various reasons (not all attributable to the plaintiffs) that did not occur. On 4 October 2023 Fitzgerald J adjourned the trial and allocated a three-day fixture commencing on 13 May 2024. There have been various timetable breaches since then, and counsel for the plaintiffs have been granted leave to withdraw.

[19]   When the matter came before me at 10:00 am on Monday, 13 May 2024, there was no appearance for the plaintiffs. The matter proceeded by way of formal proof on Ms He’s counterclaim.

Analysis

[20]   If the defendant appears at trial but the plaintiff does not, the defendant, if the claim has not been admitted, is entitled to judgment dismissing the proceeding.1 Where there is a counterclaim, the defendant must prove it so far as the burden of proof lies on the defendant.2

[21]   Ms He’s claim could not be more straightforward. She says Mr Liu is indebted to her for the principal sum of $483,148.46, together with interest and costs in accordance with the terms of the Loan Agreement between her and Mr  Liu dated   29 June 2018.

[22]   The plaintiffs’ draft Second Amended  Statement  of  Claim,  exhibited  to  Mr Liu’s affidavit in support of his application for leave to file it, alleges various causes including contractual mistake, undue influence, duress, unconscionable bargain, and unjust enrichment. As noted, the plaintiffs did not appear so Ms He is entitled to have their claims dismissed. Nevertheless, Mr Rice on her behalf responsibly addressed me in relation to these claims, to the extent that they might effectively operate as a defence to Ms He’s counterclaim.

[23]   I am satisfied that none of the claims (or defences) asserted by the plaintiffs could succeed. Mr Liu is an experienced commercial investor. There is evidence to suggest that he may have been under some commercial pressure from his own investors in China, but he was not under any “special disadvantage” known to Ms He that rendered him unable to assess his own best interests.3 The evidence shows that he was provided with Ms He's calculations of the amount owed to her one month before he signed the Loan Agreement. He was told to check those calculations and to

1      High Court Rules 2016, r 10.8.

2      High Court Rules, r 10.8(b).

3      John Burrows, Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn & Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at 12.5.3.

seek independent accounting advice. If he did not do so, that was his choice. He was not unduly influenced or under any duress.

[24]   Mr Liu knew how much Ms He claimed he owed her. He signed the Loan Agreement obliging him to repay Ms He this amount by 28 September 2018. I accept Mr Rice’s submission that even if Mr Liu retained some reservations as to the accuracy of Ms He’s calculations, by signing the Loan Agreement Mr Liu willingly and knowingly took the risk that the figure might be wrong.

[25]   It is well established that uncertainty about a fact does not amount to a mistake.4 Nor is there any evidence that the exchange of values was substantially unequal.5 The Loan Agreement formed part of the broader transaction pursuant to which Ms He arranged for the transfer of the Properties to the second plaintiff.

GST

[26]   In his pleadings and other material before the Court, Mr Liu contends that  Ms He has personally had the benefit of a GST refund in the amount of $718,302.57 that was paid to HDDL in relation to the purchase of the Properties. However, the evidence clearly shows that this was paid directly to DBR in partial satisfaction of its loan to HDDL, in accordance with the terms of the Loan Agreement between those two parties.

Interest

[27]   Pursuant to clause 3(c) of the Loan Agreement, interest accrues at the rate of 10 per cent per annum on the principal sum of $483,148.46, outstanding from the due date of 28 September 2018. On that basis, the total amount of interest accrued from 28 September 2018 to 13 May 2024 is $271,886.83. Interest continues to accrue at the rate of $132.37 per day.

4      Burrows, Finn, Todd and Barber Burrows, Finn & Todd on the Law of Contract in New Zealand, above n 3, at 10.3.3.

5      Contract and Commercial Law Act 2017, s 24(1)(b).

Costs

[28]   The defendant seeks judgment for her reasonable solicitor/client costs pursuant to clause 12 of the Loan Agreement, which reads as follows:

12.    Costs

a.Costs payable by you: You must pay to the lender upon demand, the lender’s legal costs (as between solicitor and client) for:

…

i.Costs on default: legal services arising from or relating to any default under this contract or the enforcement or exercise or attempted enforcement or exercise of any of the lender’s rights, remedies and powers under this contract…

Result

[29]The plaintiffs’ claim against the defendant is dismissed.

[30]   Judgment is entered against the first plaintiff in favour of the defendant in the principal sum of $483,148.46, together with interest in the amount of $271,886.83, accruing at a daily rate of $132.37.

[31]   The plaintiffs are to pay the defendant’s reasonable legal costs on a solicitor/client basis together with disbursements, all to be fixed by the Registrar.

Robinson J