Luo v Astorwood Investments (NZ) Limited HC Auckland CIV 2009-404-4449
[2010] NZHC 2219
•10 December 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-004449
BETWEEN GUO PING LUO AND JIAN (JORDAN) YANG
Plaintiffs
ANDASTORWOOD INVESTMENTS (NZ) LIMITED
First Defendant
ANDRICHARD GREGORY VESEY Second Defendant
ANDEUGENE YUQUIN LI AND HAIMING XIONG
Third Defendants
Hearing: 15-17 November 2010
Appearances: C T Patterson and E J Grove for Plaintiffs
W A McCartney (granted leave to withdraw) for First and Second
Defendants
K F Quinn for Third Defendants
Judgment: 10 December 2010 at 4.30 p.m.
JUDGMENT OF VENNING J
This judgment was delivered by me on 10 December 2010 at 4.30 pm, pursuant to Rule 11.5 of the
High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Davenports West, Auckland Carson Fox Legal, Auckland Harrison Stone, Auckland
Copy to: C T Patterson, Auckland
W A McCartney, Auckland
K F Quinn, Auckland
LUO AND YANG V ASTORWOOD INVESTMENTS (NZ) LIMITED AND ORS HC AK CIV-2009-404-
004449 10 December 2010
Introduction
[1] The plaintiffs, Mrs Luo and her son Jordan Yang are Chinese nationals. They paid $200,000 to Astorwood Investments (NZ) Limited in the expectation they would receive Niuean citizenship which in turn would make it easier for them, particularly Jordan, to obtain New Zealand citizenship.
[2] Matters have not turned out as the plaintiffs expected. They paid over the
$200,000 but have not obtained permanent citizenship of Niue, let alone New
Zealand. They seek to recover the $200,000 from the defendants.
Brief background
[3] Jordan Yang came to New Zealand in 1999 to study. Through mutual contacts he was introduced to the third defendants Eugene Li and his wife Haiming Xiong. Mr Li and Ms Xiong have New Zealand citizenship. When Jordan became ill Mr Li and Ms Xiong cared for him. As a result Jordan and his family, particularly his mother Mrs Luo, developed a friendship with Mr Li and Ms Xiong.
[4] Jordan Yang went back to China between 2002 and 2007 but returned to New Zealand at the end of 2007. Mrs Luo accompanied him. The friendship with Mr Li and Ms Xiong was resumed. Their friendship was extended to business dealings. Ms Xiong is a real estate agent. She sold a property to Jordan Yang which Mrs Luo financed. Mr Li and Ms Xiong also introduced Mrs Luo, who is herself a businesswoman, to a number of business contacts in New Zealand.
[5] In early 2008 Jordan Yang told Mr Li and Ms Xiong that he wanted to live in New Zealand. They told Jordan about Astorwood. At the time Astorwood had an arrangement with the Niuean Government. Under the arrangement Astorwood placed and managed investments by Chinese investors in Niue. In return the Niuean Government granted permanent residency to the investors. Because of Niue’s relationship with New Zealand, it was expected that permanent residency of Niue would facilitate permanent residency in New Zealand.
[6] Jordan Yang discussed the matter with his mother. After some discussion about the extent of the investment required, Mrs Luo gave him the $200,000 agreed on as the investment required. Jordan in turn paid the money over to Ms Xiong to pass on to Astorwood. The plaintiffs understood that this was to obtain permanent residency in Niue for Mrs Luo, her husband, and their daughter as well as for Jordan. They understood they would receive the Niuean citizenship in three to 13 weeks.
[7] Although the money was paid over in early 2008, the plaintiffs had still not received Niuean citizenship by the end of that year. They pursued the matter with the third defendants and Astorwood. On 3 March 2009, Mr Vesey, a director of Astorwood, signed a guarantee (dictated in Chinese by Jordan Yang) which translates to:
On behalf of Astorwood I guarantee that by 15 May 2009, the Niue residency application will be completed and the passport stamped. After the expiry date, the application will be withdrawn and the NZ$200,000 investment funds will be refunded.
[8] During May 2009, on a date which is in issue, the plaintiffs were presented with copies of documents said to be Niuean visas providing special permanent residency to Mrs Luo, her husband and daughter (but not Jordan) issued on 11 March
2009. The visas were subject to a condition “valid for 90 day entry to Niue per calendar year”.
[9] The plaintiffs do not consider the visas to be genuine or to be of any practical use to them. Jordan Yang did not receive even the limited form of visa. These proceedings followed.
Preliminary matters
[10] At the outset of the hearing Mr McCartney sought leave to withdraw as counsel for the first and second defendants. The Court also received an email communication from Mr Vesey advising that he was unable to provide funds to ensure representation for Astorwood or for himself. Mr Vesey said that he could not attend himself as he was in China at the time of the hearing. In the circumstances I granted leave to Mr McCartney to withdraw as counsel.
[11] It is apparent from Mr Vesey’s email that he must have been aware of his, and Astorwood’s financial position for some time. He has also been aware of the date of the fixture for some time. He could have appeared and represented himself but chose not to do so. In those circumstances the case proceeded in the absence of representation for the first and second defendants.
[12] On 10 February 2010 Harrison J directed counsel to file a statement of issues for trial. The parties were unable to agree but the plaintiffs have filed a statement identifying the following issues:
a) What representations were made to the plaintiffs, and who by?
b)Were the parties who made the representations acting “in trade” in terms of the Fair Trading Act 1986?
c) Were the misrepresentations misleading and/or deceptive in terms of s 9 of the Fair Trading Act 1986?
d)To the extent any of the representations were made by one or some of the defendants and not by others, did those other defendants “aid, abet counsel or procure” any of the misrepresentations, or were they directly or indirectly knowingly concerned in such misrepresentation being “made” in terms of s 43(a)?
e) Were any of the defendants who did make representations acting as agents for any of the other defendants when doing so?
f) Was there a contract entered between the plaintiffs and the first defendant, and if so, what were its terms?
g) Were the terms of the contract breached?
h) What remedies are the plaintiffs entitled to?
[13] The affidavits filed in relation to an earlier application for interim relief were taken as the parties’ evidence in chief with the parties available for cross- examination on those affidavits (where required). In addition, supplementary evidence was given by some witnesses. An additional witness, Mr Zhou, was called for the third defendants.
The claim against Astorwood
[14] The plaintiffs’ claim against Astorwood is based on a breach of contract. The plaintiffs plead that Astorwood agreed to invest the $200,000 in investments it administered in Niue and agreed that it would apply for, and obtain, Niuean permanent residency for the plaintiffs under the Niuean investor migrant programme. The plaintiffs say that Astorwood breached the terms of that contract.
[15] It is fair to say that the evidence of the circumstances leading to the plaintiffs paying over the $200,000 and their relationship with Astorwood is confused. The best explanation of the circumstances surrounding Astorwood’s business and the arrangement it had with the Niuean Government is found in the affidavit of Mr Yu. Mr Yu acted as solicitor for Astorwood. He swore a detailed affidavit at the time the plaintiffs applied for interim relief by way of freezing orders.
[16] Astorwood was initially established by Mr Michael Arnold and Mr Ralph Zhu. Subsequently Mr Vesey became a director. Mr Yu confirms that Astorwood was set up to act as an immigration and foreign investment policy advisor to the Niuean Government. Astorwood and the Niuean Government agreed to operate an investor category for immigration purposes. This enabled investors with Astorwood to obtain Niuean permanent resident visas from the Government.
[17] The relationship was confirmed in a letter of 23 June 2006 from the Minister of Trade and Investment to Mr Arnold:
As per the agreement, the Government in Niue shall provide all approved ventures funded by the investment programme with foreign enterprise licenses, including incentives available in the Development & Investment Act 1992, as well as offer of any other reasonable requirement to enable such ventures to effectively carry out its business on Niue. Approved
investors in the programme will also be granted the opportunity to hold permanent residence on Niue to guarantee security and confidence in their investments. Astorwood itself shall be granted sole right to apply for allocation of investor funds generated by this programme to fund individual projects carried out on Niue.
(emphasis added)
[18] Consistent with that arrangement Astorwood’s website in 2008 stated, inter alia:
• The Investment Itself
All investor funds in this project are pooled together to finance development projects on Niue that are selected by the Niuean Government and Astorwood Funds Management Ltd as being most likely to be of national benefit to Niue and also bring profitable returns to investors. Investors are all individuals who collectively hold shares in all projects funded by investment capital. Individual investors are entitled to receive a proportion of the dividends according to the size of their investment.
• The Parties Involved
This investment project is an exclusive agreement between Astorwood Investments (NZ) Ltd and the Government of Niue. Astorwood Investments has sole right to make applications to the Government on behalf of potential investors who wish to invest capital and receive benefits from their involvement in this programme. Only recognised agencies of Astorwood Investments may attract investors and collect applications to be processed for Government approval by Astorwood ...
Government will authorise Astorwood to screen, select, consider and approve applicant suitability for candidates suitable for making investments, subject to final approval by Government. Government will endorse approved candidates’ travel documents, work, and permanent residence visas of the appropriate types upon receiving Astorwood’s confirmations of such suitability within fourteen (14) days of receiving confirmation of each investor’s funds transfer.
(emphasis added)
[19] I interpolate here that Mr Patterson suggested Astorwood never had the ability to obtain valid Niuean permanent residency for its clients. He referred to two Niuean statutes, the Entry Residence and Departures Act 1985 and the Development Investment Act 1992 which provided for residency. But in the absence of any expert evidence as to the legal position under those Acts (and in the absence of evidence of further relevant regulations), the letter from the Minister of Trade and Investment is the best evidence and confirms that Astorwood had such an arrangement.
[20] The shares in Astorwood were originally held by Mr Zhu and Mr Arnold. In February 2008 Mr Zhu advised Mr Yu that Mr Arnold had sold or agreed to sell his shares in Astorwood to a Mr Zhou. Mr Zhou’s shares were in turn to be transferred to Mr Vesey as a trustee for Mr Zhou. Mr Zhou asked Mr Yu if he and his partner would also agree to invest in Astorwood’s business. Mr Zhou explained he had a group of 10 or so investors interested in putting in $20,000 each. Mr Yu and his partner together invested $20,000. It is not clear if separate shareholdings were issued to the investors or whether they were part of the shares held in trust by Mr Vesey.
[21] The third defendants were aware of Astorwood through their business connections within the Chinese community in New Zealand. Ms Xiong knew Mr Zhu, having met him at a dinner in 2007. She also knew Mr Vesey because he was the manager at Ray White Real Estate which had an office in the same building as the office that Ms Xiong worked in as a real estate agent. Through Mr Zhu and Mr Vesey Ms Xiong became aware of Astorwood’s business and the arrangements it had with the Niuean Government. The third defendants also had a business relationship with Mr Zhou and were involved in a number of ventures with him. When Jordan Yang asked about New Zealand residency Ms Xiong told him about Astorwood and introduced him to Mr Zhu.
[22] The plaintiffs paid the $200,000 to the third defendants for Astorwood in two separate tranches, $20,000 on 19 March 2008 and the balance of $180,000 on 28
May 2008. The third defendants in turn passed the money on to Astorwood in three separate tranches. Ms Xiong said that she understood she was given the $200,000 to hold because Mrs Luo, who was not in New Zealand at the time, was concerned that Jordan would otherwise spend the money if it was left with him. Ms Xiong said she paid the $200,000 across to Astorwood in three separate tranches after obtaining Mrs Luo’s approval to do so. I accept Ms Xiong’s evidence about this. Mrs Luo was evasive when questioned on this issue, but I am satisfied Ms Xiong obtained her approval before passing the money over to Astorwood. Astorwood issued the following receipts to the plaintiffs for the $200,000: 29 May 2008 – $10,000; 6
June 2008 – $40,000; and from Yu Lawyers $150,000 – 26 June 2008.
[23] While the receipts issued on behalf of Astorwood record the money as being in relation to Niue Investments, the plaintiffs were not particularly interested in investing in Niue. The plaintiffs always saw the Niuean investment scheme as a means of obtaining permanent residency in Niue. That is confirmed by what transpired when the plaintiffs were not able to obtain residency.
[24] When the permanent residency had still not been granted by early 2009 the plaintiffs became concerned. The third defendants arranged a meeting of the plaintiffs with Mr Zhu and Mr Zhou of Astorwood on 3 March 2009. At that meeting the guarantee was drafted and taken to Mr Vesey for execution. He duly signed it on behalf of Astorwood.
[25] On a date in May, which Mr Li says was before 15 May 2009 and which Mr Jordan Yang says was on 30 May, Mr Li was given copies of the resident visas for Mrs Luo, her husband and daughter by Astorwood. Mr Li showed these to Jordan Yang.
[26] The date the copies of the visas were shown to Jordan Yang is largely immaterial. Although the visas referred to permanent residency status they were stamped with the following condition:
Valid for 90 day entry to Niue per calendar year
Also there was no visa for Jordan. A principal purpose of the whole exercise had been to obtain permanent residency of Niue for Jordan.
[27] Prima facie, the plaintiffs did not get what they had bargained for in return for their $200,000.
[28] It seems the reason Astorwood was not able to provide the permanent residency visas was as a consequence of a change in policy following a change in Government after an election in Niue in June 2008. Mr Yu says that in December
2008 he became aware that the situation had changed. The new Niuean Government had instructed an Australian law firm to issue a letter to Astorwood notifying that it was the new Government’s intention to terminate the agreement with Astorwood.
Mr Yu says that he understood from Astorwood that by March 2009 the Niuean Government had issued permanent residency visas for all current Astorwood applicants (including the plaintiffs) but with an additional condition that the applicants had to stay in Niue for a minimum 90 days a year.
[29] Mr Yu’s firm received investment funds from a number of Astorwood’s clients, including $150,000 of the $200,000 paid by the plaintiffs. Mr Yu confirmed that only $150,000 was paid into his trust account on behalf of the plaintiffs. He has no knowledge of the disposition of the balance $50,000.
[30] The evidence, taken as a whole, leads me to conclude that there was a contract between the plaintiffs and Astorwood that in exchange for $200,000 paid to it, Astorwood agreed to invest that money in Niue and agreed to apply for and obtain permanent residency for the plaintiffs (and Mrs Luo’s husband and daughter) in accordance with its arrangement with the Niuean Government.
[31] It is apparent from Mr Yu’s evidence that Astorwood breached that agreement. One hundred and fifty thousand dollars at least of the $200,000 paid by the plaintiffs was paid out on the instructions of Mr Vesey to entities other than for investment in Niue. Mr Yu produced a letter, signed by Mr Vesey on 27 June 2008, directing Mr Yu’s firm to distribute the $150,000 paid in by the plaintiffs as follows:
$30,000 to Ralph Zhu
$20,000 to Qi Hui Zhou
$70,000 to John’s Garden Limited
$7,500 to Astorwood’s bank account
$7,500 to Michael Arnold
The balance of $13,992.50 was paid out in satisfaction of legal fees, and lease and valuation obligations.
[32] Further, Astorwood was in breach of the other principal term of the agreement, that it was to obtain permanent Niuean residency for the plaintiffs.
[33] While visas were obtained for Mrs Luo, her husband and daughter, no visa of any type was obtained for Jordan. The visas for Mrs Luo and the others were not permanent residence visas. On their face they only permitted the holder to live in Niue for 90 days a year.
[34] Ms Quinn obtained a concession from the plaintiffs in cross-examination that they understood the visas were subject to approval of the Niuean Government. However, while not expressly stated, I find there was an implied term that if the visas were not obtained, the $200,000 was to be returned. The plaintiffs did not agree to pay $200,000 for the chance of obtaining permanent residency. The permanent residency of Niue was the only reason the plaintiffs paid over the
$200,000 to Astorwood.
[35] In summary, and referring to the issues identified by Mr Patterson, there was a contract between Astorwood and the plaintiffs that, in exchange for $200,000 which Astorwood was to invest in Niue, Astorwood would apply for and obtain permanent residence visas for the plaintiffs (and their family).
[36] As Astorwood was unable to provide what it had contracted with the plaintiffs to provide and has failed to return the $200,000, it is in breach of the contract it had with the plaintiffs. The plaintiffs have made out their case against Astorwood and are entitled to judgment.
The plaintiffs’ case against Mr Vesey
[37] The plaintiffs’ case against Mr Vesey is based on ss 9 and 43 of the Fair Trading Act 1986 and takes two alternative forms. Firstly, it is pleaded that Mr Vesey is himself in breach of s9 of the Act through his guarantee. It is claimed that Mr Vesey was acting “in trade” when dealing with the plaintiffs and that the guarantee was a representation by him of Astorwood’s ability to obtain Niuean residency for the plaintiffs by 15 May 2009. It is said that such a representation was
misleading and/or deceptive by virtue of the Niuean Government having terminated its relationship with Astorwood in December 2008, meaning Astorwood was unable to perform its obligations. The plaintiffs also say that Astorwood had not applied for a visa for Jordan at all as a further basis for breach.
[38] The allegation that Astorwood had not applied for a visa for Jordan at all can be dealt with shortly. The basis for it is a letter from the Niuean police of 17 June
2009. In that letter the Niuean police advised the plaintiffs’ solicitors that applications for permanent residency had been made for Mrs Luo, her husband and daughter. The letter made no reference to any application on behalf of Jordan.
[39] The letter from the police must be considered in context. The letter was in direct response to a letter from the plaintiffs’ solicitors of 11 June 2009. In that letter the solicitors said they acted for Mrs Guo Ping Luo, her husband and her daughter. The letter enclosed an authority for Ms Luo and on behalf of her family and requested information relating to their applications for immigration. The letter did not refer to Jordan Yang at all. In the circumstances it is not surprising the police did not refer to an application by Jordan Yang. Jordan Yang confirmed an application for residency was filled out for him. There was no reason for Astorwood not to process it, along with the others. The plaintiffs have not established that Astorwood did not make an application on behalf of Jordan Yang.
[40] The first claim against Mr Vesey is based on the guarantee he gave on behalf of Astorwood. However, even accepting for present purposes that it could be said Mr Vesey was engaged in trade and the representation in the guarantee was misleading or deceptive, the plaintiffs’ case as pleaded against him in relation to the effect of the guarantee cannot succeed.
[41] The relevant parts of s 43 are as follows:
43 Other orders
(1) Where, in any proceedings under this Part of this Act, or on the application of any person, the Court finds that a person, whether or not that person is a party to the proceedings, has suffered, or is likely to suffer, loss or damage by conduct of any other person that constitutes or would constitute—
(a)A contravention of any of the provisions of Parts 1 to 4 of this Act; or
(b) Aiding, abetting, counselling, or procuring the contravention of such a provision; or
(c)Inducing by threats, promises, or otherwise the contravention of such a provision; or
(d) Being in any way directly or indirectly knowingly concerned in, or party to, the contravention of such a provision; or
(e)Conspiring with any other person in the contravention of such a provision—
the Court may (whether or not it grants an injunction or makes any other order under this Part of this Act) make all or any of the orders referred to in subsection (2) of this section.
[42] Section 43(1) requires the Court to be satisfied that the conduct which breached s 9 was an operating cause of the plaintiff’s loss or damage: Red Eagle Corporation Ltd v Ellis.[1]
[1] Red Eagle Corporation Ltd v Ellis [2010] 2 NZLR 492 (SC) at [29].
[43] In the present case, by 3 March 2009 when Mr Vesey signed the guarantee on behalf of Astorwood, the $200,000 had already been paid over to Astorwood and, it appears, had been disbursed by that company. There is no evidence that if the guarantee had not been given at that time the plaintiffs would have at that time been able to force Astorwood to repay the $200,000. Such evidence as there is suggests that by early 2009 it was in poor financial position and would have been unable to repay the $200,000 even before the guarantee was given.
[44] The guarantee provided by Mr Vesey on 3 March 2009 cannot, in the circumstances, have been causative of the plaintiffs’ loss.
[45] The second basis for the plaintiffs’ claim against Mr Vesey was clarified in the statement of issues. The plaintiffs claim that Mr Vesey is liable under s 43 through his assistance of Astorwood’s breach of s 9. The plaintiffs say that Mr Vesey aided, abetted, counselled or procured Astorwood’s misrepresentations or was directly or indirectly knowingly concerned in Astorwood’s representations.
[46] This was not the subject of a specific pleading against Mr Vesey. It was an issue proposed by the plaintiffs as an issue for trial. However, I note that in Newport v Coburn & Ors the Court of Appeal accepted that, if there was a pleading of a breach of s 9 of the Act, and there was a finding of breach by the defendant as a party, it was not strictly necessary to plead liability by virtue of s 43(1).[2] The same reasoning applies to the position of Mr Vesey in this case. The plaintiffs plead against him generally that he was engaged in trade in soliciting the payment of moneys to Astorwood in return for Astorwood providing investment and
[2] Newport v Coburn & Ors (2006) 11 TCLR 831 (CA).
immigration services. That is in effect a pleading that Mr Vesey aided or abetted Astorwood’s misrepresentation in breach of s 9. There is no need to directly plead liability under s 43(1).
[47] Mr Vesey was at all material times a director of Astorwood. He was also recorded as a shareholder in Astorwood (although the evidence suggests he held those shares in trust for others). While Jordan Yang emphasised that he was dealing with the third defendants rather than Mr Vesey or anyone else from Astorwood, for the reasons that follow I consider Jordan Yang’s evidence on that point as unsatisfactory. I find that Jordan Yang did in fact meet and deal with the shareholders of Astorwood, Mr Zhu and Mr Vesey before he and his mother agreed to pay the $200,000 to Astorwood to obtain permanent residency.
[48] At those meetings Mr Vesey, as a director of Astorwood, would have been a party to the representations made on its behalf. This is confirmed by the evidence of Ms Xiong, who confirmed under cross-examination that there were many occasions involving meetings with Jordan and representatives of Astorwood, including Greg Vesey, that involved discussion about the investment in Astorwood and its arrangement with the Niuean Government.
[49] Further, I accept Mr Patterson’s submission that it is reasonable to infer that as a director of Astorwood Mr Vesey would have known of the contents of Astorwood’s website and the full extent of its business operations and the arrangement it had with the Niuean Government.
[50] I also note that the guarantee document Mr Vesey signed in March 2009 referred to the $200,000 investment and tied it to the issue of residency.
[51] I find that before the plaintiffs paid over the $200,000 to Astorwood, Mr Vesey had aided or abetted Astorwood to make the representation to the plaintiffs that in return for the $200,000 Astorwood would apply for and obtain permanent residency for the plaintiffs and would invest the $200,000 in its Niuean investment programme. Mr Vesey was aware the plaintiffs had paid $200,000 to Astorwood for that money to be invested in accordance with Astorwood’s arrangement with the Niuean Government.
[52] Despite that, shortly after Astorwood received the money, as a director of Astorwood, Mr Vesey then directed Mr Yu to pay out $150,000 of the $200,000 to entities associated with Astorwood or its shareholders rather than investing the money in accordance with the arrangement with the Niuean Government. While Mr Vesey says he did not prepare the letter, he accepts it is his signature.
[53] Taken overall, the evidence satisfies me that Mr Vesey must have been aware of the financial position of Astorwood and, despite that, intended the plaintiffs to act on the basis of the representations that Astorwood would obtain permanent residency for the plaintiffs through its investor scheme and then subsequently, through his own actions, took steps which made it difficult, if not impossible for Astorwood to fulfil those representations.
[54] In this second head of claim the causation issue does not arise because Mr Vesey was actively involved in disbursing $150,000 of the $200,000 at least. I find the plaintiffs make out their claim against Mr Vesey personally on the basis of ss 9 and 43(1)(a) and (b) of the Act.
The plaintiffs’ claim against the third defendants
[55] The plaintiffs’ case against the third defendants is premised on the basis that at all material times the third defendants acted as Astorwood’s agents. The plaintiffs plead that the third defendants were engaged “in trade” and represented that:
a) Astorwood would invest the $200,000 in investments in Niue; and
b)Astorwood would apply for and obtain Niue permanent residency for the plaintiffs and the plaintiffs’ family.
[56] The question for the Court is whether the third defendants, or either of them, made a representation relating to Astorwood with the actual or apparent authority of Astorwood as opposed to simply acting as a conduit when conveying information relating to Astorwood. Mr Patterson accepted that if the third defendants were innocent agents acting as “mere conduits” then they could have no liability under the Act.[3]
[3] Goldsbro v Walker [1993] 1 NZLR 394; Yorke v Lucas (1985) 158 CLR 661, 666; Red Eagle v Ellis at [38].
[57] A preliminary point arises. As Ms Quinn submitted, while the third defendants are sued jointly there is no basis for asserting they are jointly liable just because they are husband and wife. If they are to be liable as agents it must be on the basis that each of them was separately acting as an agent of Astorwood.
[58] Actual authority may be conferred expressly or implicitly. There is no evidence that Astorwood gave the third defendants authority in either of those ways to act or make representations on its behalf.
[59] The plaintiffs’ case is essentially that the third defendants expected to receive a benefit from the plaintiffs’ payment of $200,000 to Astorwood, and, as such, made representations about Astorwood to the plaintiffs to encourage them to invest. They say that because of the third defendants’ relationship with Astorwood and their financial interest in it (or the $200,000) the third defendants had apparent authority to act as agents of Astorwood.
[60] There is some difficulty for the plaintiffs with that proposition. The essence of the doctrine of apparent authority is that the principal (Astorwood) must represent to the party (the plaintiffs) that the agent (the third defendants) has authority to make the representations: Savill v Chase Holderness (Wellington) Ltd.[4] Further, the
[4] Savill v Chase Holderness (Wellington) Ltd [1989] 1 NZLR 257, at 304-305.
burden of proving the apparent authority lies on the party alleging it: Mountain Lake Holdings Ltd v Darrell McGregor (Contractor) Ltd.[5] The evidence of such apparent authority is lacking.
[5] Mountain Lake Holdings Ltd v Darrell McGregor (Contractor) Ltd (2007) 8 NZBLC 101,921 at [15].
[61] To support the plaintiffs’ argument of agency Mr Patterson submitted that Mr Li was an investor or shareholder in Astorwood even though Mr Li denied that. The basis for the submission is found in one of Mr Vesey’s affidavits. In one of the four affidavits Mr Vesey swore in these proceedings he says that he was told by his business partner John Xiong that there was a group of 10 Chinese investors who wanted to buy into the company but who needed a New Zealander in the place of Michael Arnold to deal with the Niuean Government. Mr Vesey said he agreed to take Michael Arnold’s 50 per cent of the shares to be held on behalf of the 10 investors and that one of those investors was Mr Eugene Li. He understood that each of the investors had contributed $20,000.
[62] Mr Vesey was not available for cross-examination on that affidavit. Mr Li and Ms Xiong have denied that Mr Li was one of the 10 investors in Astorwood. I have some reservations about the truthfulness of their evidence on this aspect of the case. Mr Vesey had no particular reason to mis-state the position when he made his affidavit in September 2009, particularly as to the detail of Mr Li being one of the investors. On the other hand, by the time the matter came on for hearing Mr Li and Ms Xiong may well have considered it would not be in their interests for Mr Li to have acknowledged he was a shareholder or investor in Astorwood.
[63] The plaintiffs are understandably suspicious of the third defendants’ relationship with Astorwood and the parties behind Astorwood. Seventy thousand dollars of the $150,000 held by Astorwood’s solicitors relating to their investment was paid to a company called John’s Garden Limited (it seems that should be a reference to John’s Garden Developments Limited). The third defendants are shareholders of that company together with Ms Linan Zhou. Ms Linan Zhou holds the shares on behalf of Qi Hui Zhou. Qi Hui Zhou is the Mr Zhou who is a business associate of the third defendants.
[64] Evidence was also led of a number of common business interests the third defendants had with Mr Zhou. Mr Li was and/or is a director and/or shareholder in three companies with Mr Zhou: Top Village Te Arawa Ltd, Pro Fence and Wall Ltd and Top Village Developments Ltd. Ms Xiong was and/or is a director and shareholder in six companies in which Mr Zhou has shares held on trust for him: Oxford Garden Developments Ltd, Johns Park Development Ltd, Oxford Homes Ltd, Gabor Investments Ltd, Oxford Park Developments Ltd, and John’s Garden Developments Ltd.
[65] Mr Zhou became actively involved in the management of Astorwood after his investment in it in early 2008. Mr Yu effectively confirmed the same in his affidavit in which he stated amongst other things:
Messrs Zhu, Zhou and Vesey were the ones actively involved in management of Astorwood and in particular the Niuean permanent residency applications.
[66] Mr Zhou gave evidence that he had lent money to Astorwood and that the
$70,000 paid by Astorwood to John’s Garden Developments Ltd was paid to that company at his direction and was in part repayment of the money Astorwood owed him. The further $20,000 was a further repayment, direct to him. He denied the payments had anything to do with the third defendants.
[67] The evidence confirms there was a closer business relationship between Mr Zhou (including the companies he was involved in) and the third defendants than the third defendants were prepared to admit to.
[68] However, accepting for present purposes that there was a close business relationship between the third defendants and Mr Zhou, and that Mr Li was a minority shareholder in Astorwood, neither of these features necessarily make the third defendants agents of Astorwood for the purposes of making representations under the Act. A shareholder is not an agent of the company: Megavitamin Laboratories (NZ) Ltd v Commerce Commission.[6] Nor does it mean the third defendants were acting in trade.
[6] Megavitamin Laboratories (NZ) Ltd v Commerce Commission (1995) 6 TCLR 231.
[69] This is not a case where the third defendants can be said to be the alter ego of
Astorwood by effectively conducting its business: Kinsman v Cornfields Ltd.[7]
[7] Kinsman v Cornfields Ltd (2001) 10 TCLR 342 (CA) at [22].
Astorwood was controlled by Messrs Zhu, Zhou and Vesey.
[70] In my judgment, while some of the third defendants’ evidence is unsatisfactory, the weight of the evidence supports the position argued for by Ms Quinn on their behalf. Mr Li and Ms Xiong, through their relationship with Messrs Zhu and Zhou and through Ms Xiong’s contact with Mr Vesey, were certainly aware of Astorwood and the arrangement it had with the Government of Niue and its investment/immigration business in Niue. Mr Li was interested enough to invest some money in Astorwood itself (as opposed to through Astorwood). But in their dealing with the plaintiffs about Astorwood and Niuean residency, they were acting as mere conduits.
[71] When Jordan Yang indicated to the third defendants that he was interested in obtaining permanent residency in New Zealand they told him about the arrangement that Astorwood had with the Niuean Government and later put him in contact with those directly behind Astorwood, Mr Zhu, Mr Vesey and Mr Zhou. The third defendants acted as a go-between for the plaintiffs and Jordan Yang. They relayed the various offers Astorwood made to Jordan Yang as to the extent of the investment that was required. When the investment was agreed at $200,000, between Jordan Yang and Astorwood, they assisted Jordan with his application for residency. Mr Li helped Jordan complete the visa application form, for instance. But none of those acts leads to the conclusion that Mr Li or Ms Xiong had authority to act as Astorwood’s agents. They passed on information concerning Astorwood’s business, put the plaintiffs in touch with the people behind Astorwood and relayed the various offers Astorwood made to the plaintiffs. In doing so they were acting as conduits.
[72] The plaintiff’s case is based on Jordan Yang’s evidence that he only dealt with the third defendants and had not met those behind Astorwood, Messrs Zhu and Vesey in particular, before investing the $200,000. But his evidence was inconsistent in a number of important respects. In his evidence he disavowed any suggestion the $200,000 was paid as an investment at all. He said that:
I have always been saying that I – there was never anything about investment discussed about it, all I knew was that I paid $200,000 in exchange for a residents permit.
[73] But that is quite contrary to his affidavit evidence when he said the payment was made in exchange for an investment. He sought to explain the matter on the basis that:
I need to make some corrections, [to the affidavit] mainly because of my wife’s translation issue. I have always been telling her that I just pay the money, rather than invest. There is nothing about investment.
[74] Even allowing for the difficulty in translation Jordan Yang’s evidence about that and a number of other matters was not satisfactory. He dictated the terms of the guarantee that Mr Vesey signed. It referred to investment.
[75] Next, Jordan Yang travelled to Niue with Mr Zhu, Michael Arnold, Mr Vesey and Mr Li. He sought to downplay the reason for that visit. Significantly, the visit was in early March 2008, before any money was paid over. Jordan also spoke to Mr Zhu about contacting his father in China.
[76] A more minor point is that Jordan Yang also deposed in his affidavit that the residency permits had been shown to him by Ms Xiong but under cross-examination accepted that was wrong and that it was Mr Li who had brought the residency permits to him.
[77] I accept the evidence of Ms Xiong and Mr Li that they introduced the plaintiffs and particularly Jordan Yang to Mr Zhu and Mr Vesey of Astorwood. I do not accept Jordan Yang’s evidence that he paid over the $200,000 without discussing the arrangement with Mr Zhu and Mr Vesey directly and before satisfying himself about Astorwood.
[78] I find that the plaintiffs made the decision to pay $200,000 to Astorwood after Jordan Yang had met and discussed the arrangements with Mr Zhu and Mr Vesey and, perhaps, Mr Zhou. The plaintiffs satisfied themselves that by paying the
$200,000 to Astorwood they would in turn receive permanent Niuean residency.
[79] Despite Jordan Yang’s attempt to resile from his affidavit evidence that he understood the $200,000 was to be paid and invested in Niue in return for the residence visas, that was always the basis of the arrangement Astorwood had with the Niuean Government. The residents’ visas were only granted by the Niuean Government to investors. There was no other basis suggested for the visas to be granted.
[80] It is important to have regard to what representations the plaintiffs say the third defendants made and what the plaintiffs actually rely on for their case against the third defendants. Mr Patterson accepted that the representations were effectively contained in Mr Jordan Yang’s affidavit. They are:
7.... [The third defendants] said they had some business acquaintances with a company, Astorwood ... that had an arrangement with the Niue Government. The way they explained it, Astorwood managed investments by Chinese investors in Niue, and in return the Niue Government would grant permanent residency to the investors. They said that with Permanent Niue Residency I would be entitled to live and work in New Zealand, in after three years apply for citizenship in New Zealand. They said that they had discussed my situation with the shareholders of Astorwood, and that if I could invest $400,000 in Niue through Astorwood, Astorwood would be able to get me permanent residency in Niue.
Although Jordan Yang then said that the information he was given was consistent with the contents of Astorwood’s website he accepted in cross-examination that he could not read English and had not read the website. He then goes on to say:
9.I did not have $400,000, but I did discuss the proposal with my mother, who let me know that she thought it was a lot of money to invest in order to get residency. A few days later Eugene and Haiming told me that after further discussion with the shareholders of Astorwood they had agreed that they could get me Niue Residency if I could invest $200,000 through Astorwood. I was quite enthusiastic, and again discussed this with my mother, who still had reservations. I explained this to Eugene and Haiming, and they came back with another proposal, - that if we invested $200,000
Astorwood would get Niue Permanent Residency for me and my whole family. ...
(emphasis added)
[81] Those two paragraphs are the high point of the evidence against the third defendants as to the representations it is said they made as agents of Astorwood. In
my judgment that evidence does not support the proposition the third defendants were the plaintiffs’ agents. It is consistent with the third defendants acting as a conduit and passing on information about and from Astorwood to the plaintiffs. Jordan Yang accepts in the passages that the third defendants explained Astorwood’s business to him and even says that the third defendants had discussed matters with Astorwood’s shareholders before responding to him. The “they” referred to in para 9. above must be a reference to Messrs Zhu and Vesey. The third defendants were merely passing on information about Astorwood, and what Astorwood had told them about the investment it required from the plaintiffs.
[82] While there are unsatisfactory aspects of the evidence of both the plaintiffs and the third defendants overall, the evidence does not support the plaintiffs’ claim that Astorwood held out the third defendants as its agents or, for that matter, that the plaintiffs actually understood from Astorwood that the third defendants were its agents and had authority to make representations on its behalf. The information that the third defendants passed to the plaintiffs was passed on in the third defendants’ capacity as a go between.
[83] Next, even if I am wrong and it could be said the third defendants were acting as agents of Astorwood (as opposed to merely as a conduit), the representations could, in any event, be seen as an accurate statement of future intent. As Ms Quinn submitted, the representation Jordan Yang relies on was no more than if the plaintiffs invested $200,000 with Astorwood it would put forward applications for permanent residency to the Niue Government under the arrangement it had with that Government. There was nothing misleading or deceptive in such a representation because the representations were made in March 2008 and until the election in mid
2008 there was such an arrangement in place, and it appears that Astorwood actually made the applications. There is no evidence that the third defendants knew or intended that Astorwood would misapply the investment moneys.
[84] It is trite law that a promise as to a future event is not a representation. For the representation to be actionable it must be a statement of fact: Megavitamin
Laboratories (NZ) Ltd v Commerce Commission; Commerce Commission v Vero
Insurance NZ Ltd;[8] see also Muollo v Creative Design Ltd.[9]
[8] Commerce Commission v Vero Insurance NZ Ltd (2006) 8 NZBLC 101,871.
[9] Muollo v Creative Design Ltd (2006) 8 NZBLC 101,675.
[85] For the above reasons the plaintiffs fail to establish the third parties were agents of Astorwood. Even if the third defendants were agents, the plaintiffs fail to make out any actionable representations which were false and misleading for the purposes of s 9.
[86] The plaintiffs also raised, in the statement of issues, the argument that the third defendants “aided, abetted, assisted or procured” Astorwood to make the representations. In order for the plaintiffs to make out a claim under s 43 of the Act against the third defendants, the plaintiffs must establish the third defendants knew of the essential falsity of the representations and intended to assist Astorwood to mislead: Megavitamin. For the above reasons the evidence does not support such findings in this case.
Result
[87] The plaintiffs are to have judgment against the first and second defendant for
$200,000 with interest at the Judicature Act rate from 26 June 2008 together with costs on a 2B basis.
[88] The plaintiffs’ claim against the third defendants is dismissed with costs to the third defendants on a 2B basis.
Venning J
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