Luo v Shiu
[2020] NZHC 611
•23 March 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-706
[2020] NZHC 611
BETWEEN ZHENLIN (ROBERT) LUO
First Plaintiff
KC BROTHERS LIMITED
Second PlaintiffANG YIP
Third PlaintiffMANFEI COMPANY LIMITED
Fourth Plaintiff
AND
XIAOLING (ANNIE) SHIU
First DefendantCont…
Hearing: 19 March 2020 Appearances:
A Barker QC for Plaintiffs/Applicants
D Bigio QC for Defendants/Respondents
Judgment:
23 March 2020
JUDGMENT OF LANG J
[on application for interim relief]
This judgment was delivered by me on 23 March 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
LUO v SHIU [2020] NZHC 611 [23 March 2020]
R & G PHOENIX LIMITED
Second Defendant
CSR POKENO LIMITED
Third Defendant
CIV-2020-404-34
UNDER THE Land Transfer Act 2017
IN THE MATTER of an application under s 143 BETWEEN ZHENLIN (ROBERT) LUO
First Applicant
R & G PHOENIX LIMITED
Second ApplicantCSR POKENO LIMITED
First RespondentXIONGLING (ANNIE) SHIU
Second RespondentALISON HEIDI ST JOHN, MAURICE DESMOND HAYES and MICHAEL GRAHAM SMITH
Third Respondents
CIV-2020-404-32
UNDER THE Land Transfer Act 2017
IN THE MATTER of an application under s 143 BETWEEN ANG YIP
First Applicant
MANFEI COMPANY LIMITED
Second ApplicantCSR POKENO LIMITED
First RespondentXIONGLING (ANNIE) SHIU
Second RespondentALISON HEIDI ST JOHN, MAURICE DESMOND HAYES and MICHAEL GRAHAM SMITH
Third Respondents
[1] This judgment deals with issues arising out of three separate proceedings. Two of the proceedings are applications to sustain caveats. The third is a substantive proceeding arising out of joint venture agreements (JVA’s) Ms Xiongling (Annie) Shiu has entered into with Mr Zhenlin (Robert) Luo and Ms Ang (Anny) Yip. The agreements relate to the acquisition of parcels of land situated near Pokeno.
[2] The land in question currently has a rural zoning and comprises farmland. The Waikato District Council is currently considering whether to re-zone the land so it can be subdivided for residential purposes. Mr Luo and Ms Yip say Ms Shiu persuaded them to purchase parcels of land on the basis that the land would be re-zoned and developed in tandem with adjoining land at 53 Munro Road. Ms Shiu has paid a deposit of $2 million for the Munro Road land and is due to complete the purchase of it on 1 May 2020. Mr Luo and Ms Yip say Ms Shiu told them they would make significant profits from the re-zoning and development of the land.
[3] Mr Luo and Ms Yip contend Ms Shiu has breached, and will continue to breach, her obligations under the JVA’s. They have lodged caveats over the Munro Road land to prevent her from disposing of or encumbering it without their consent. During the hearing Mr Barker advised me that Ms Yip and Mr Luo no longer seek to sustain their caveats against the Munro Road property. The applications in the caveat proceedings are accordingly dismissed with no issue as to costs.
[4] Mr Luo sought summary judgment in the substantive proceeding in the form of an order requiring Ms Shiu to nominate R & G Phoenix Ltd (Phoenix) as purchaser to complete the acquisition of one of the blocks of land in mid-2021. Mr Luo has already paid significant deposits for the purchase of this land. Mr Luo also sought an order removing Ms Shiu as a director of Phoenix. During the hearing Mr Barker advised me Mr Luo accepted neither of these applications could proceed at the present time.
[5] In the substantive proceeding Mr Luo and Ms Yip also seek interim injunctive relief designed broadly to protect their positions under the JVA’s pending trial. During the hearing the parties agreed to the following orders by consent:1
That Ms Shiu either personally, or in her capacity as a director of R & G Phoenix, will:
i.Not sell, assign or otherwise encumber her interest or the interests of R & G Phoenix under the sale and purchase agreements for 87/89, 119 and 133 Helenslee Road;
ii.Provide all information as to the re-zoning, subdivision and development of 87/89, 119 and 133 Helenslee Road before any decisions concerning the re-zoning, subdivision and development of those properties are made;
iii.Make no material decisions concerning the re-zoning of the properties at 87/89, 119 and 133 Helenslee Road other than following discussion with either the agreement of Mr Luo or an order of the Court.
Leave is reserved to the parties to seek further orders as required.
Should the Court make an interim order prohibiting Ms Shiu from selling or otherwise disposing of the Munro Road land?
[6] The only remaining issue in the substantive proceeding is whether I should make an interim order prohibiting Ms Shiu from disposing of her interest in the Munro Road land without the consent of the plaintiffs or an order of the Court. The plaintiffs say this is necessary to ensure Ms Shiu does not sell or otherwise dispose of her interest in the Munro Road land to a person who will not be subject to the obligations imposed on her by the JVA’s.
[7] Ms Shiu opposes such an order on two grounds. First, she says the plaintiffs cannot establish a serious issue to be tried that affects her interest in the Munro Road land. Secondly, she says the balance of convenience weighs heavily against the making of such an order. She is in the throes of obtaining finance to enable her to complete the purchase of the Munro Road property. This is a major issue in the current economic climate because she is required to borrow approximately $10 million to
1 Ms Shiu is currently on bail and one of her bail conditions is that she is not to have direct or indirect contact with Mr Luo and Ms Yip. Ms Shiu will need to obtain a variation of her bail conditions before she will be able to comply with these orders.
complete the purchase. Ms Shiu says she would be required to disclose the existence of such a condition to any prospective lender. Given the current level of volatility in the financial markets she is concerned this may prevent her from obtaining finance. If she cannot obtain finance she will be unable to complete the purchase of the Munro Road property
Background
[8] Mr Luo and Ms Yip have joined forces for the purposes of the present proceedings, but they came into contact with Ms Shiu separately. For a considerable period of time neither was aware the other was dealing with Ms Shiu.
Mr Luo
[9] Mr Luo says he first met Ms Shiu in December 2016. He quickly became aware of her interest and involvement in the Pokeno West Development. He says she told him she had entered into several agreements to buy properties that would form part of the development. These included an agreement to purchase a property at 133 Helenslee Road. Ms Shiu had entered into this agreement on 30 December 2016.
[10] Mr Luo says Ms Shiu offered him the opportunity to join her in the acquisition and development of 133 Helenslee Road. He and Ms Shiu subsequently signed a JVA on 12 January 2017. In his affidavit he describes the essential terms of the agreement from his perspective as follows:
a.Ms Shiu, Mr Guoyi Zhong and I were partners in the development of 133 Helenslee;
b.Ms Shiu would be responsible for negotiating with the vendor and managing the rezoning process and all other matters related to the development of 133 Helenslee;
c.After consulting with me and Mr Zhong, Ms Shiu would sign the sale and purchase agreement in her name but on behalf of the joint venture;
d.The development and purchase of 133 Helenslee was to be financed by me, and I would initially lend to the joint venture a total of
$1,700,000, being:
i.$1,100,000 for the deposit;
ii.$100,000 for the initial portion of [the real estate agent’s] Commission Payment (with the remaining $100,000 payable upon settlement);
iii.$200,000 for consultants’ fees for the rezoning from rural to residential; and
iv.$300,000 for subdivision and related costs.
e.The costs of purchase of 133 Helenslee and any development costs funded by me would be repaid from the proceeds of sale of 133 Helenslee together with interest at a rate of 6% per annum once 30% of the land or houses are sold.
f.After 133 Helenslee was subdivided, the parties would confer and decide, after considering what was in the best interests of all parties, whether to:
i.Sell the subdivided land as a whole;
ii.Sell the subdivided land as individual parcels; or
iii.Continue with the development of 133 Helenslee.
g.The profits and losses of the joint venture would be allocated as follows, after repaying the principal and interest lent by me:
i.40% to Ms Shiu;
ii.45% to Mr Luo; and
iii.15% to Mr Zhong.
[11] Once the parties signed the JVA Mr Luo says he paid the required deposit for 133 Helenslee Road the same day.
[12] Mr Luo says he and Ms Shiu continued to discuss the acquisition and development of other land in the vicinity of 133 Helenslee Road. On 18 October 2017 he entered into a second JVA with Ms Shiu, this time relating to the acquisition and development of the land at 87-89 and 119 Helenslee Road. He describes the terms of this agreement as follows:
a.Ms Shiu and I were partners in the development of 87/89 and 119 Helenslee;
b.The total price of both properties was approximately $8,250,000;
c.The development and purchase of 87/89 and 119 Helenslee was to be financed by me, and I would initially lend to the joint venture a total of $2,900,000 as follows:
i.$2,500,000 for the initial deposits ($1,000,000 for the deposit for each property and a further $500,000 within 6 months for 119 Helenslee);
ii.$400,000 for the whole of [the real estate agent’s] Commission Payments for both lots (with 87/89 being treated as a single lot);
d.The costs of rezoning and subdivision were to be funded by me as and when they arose, and were estimated to be approximately $1,000,000 ($500,000 each for 87/89 and 119 Helenslee);
e.The costs of purchase of 87/89 and 119 Helenslee and any development costs funded by me would be repaid from the proceeds of sale of 87/89 and 119 Helenslee together with interest at a rate of 6% per annum once 20% of the land or houses are sold;
f.The profits and losses of the joint venture would be shared equally between Ms Shiu and me;
g.A development company would be incorporated to be nominated under the sale and purchase agreements and the shareholding of which would be 50% each to Ms Shiu and me;
h.Ms Shiu explained, and I understood the agreement to require, that after 87/89 and 119 Helenslee were subdivided, the parties would confer and decide, after considering what was in the best interests of all parties, whether to:
i.Sell the subdivided land as a whole;
ii.Sell the subdivided land as individual parcels; or
iii.Continue with the development of 87/89 and 119 Helenslee.
[13] Mr Luo says that on 17 October 2017 Ms Shiu’s accountants incorporated Phoenix as the entity Ms Shiu was to nominate as purchaser of 87-89 and 119 Helenslee Road. Ms Shiu and Mr Luo were each to own one half of the shares in Phoenix through other companies they controlled. Ms Shiu was to be Phoenix’s sole director on the basis that she would be responsible for the day to day oversight of the development.
[14] Mr Luo says he has now made payments totalling more than $1.2 million in fulfilment of his obligations under the JVA relating to 133 Helenslee Road. He has made payments totalling $2.9 million under the JVA relating to 87-89 and 119 Helenslee Road. Mr Luo contends Ms Shiu has represented from the outset that all the land to which the JVA’s related would be rezoned and developed in tandem with
the much larger block of adjoining land Ms Shiu was purchasing at 53 Munro Road, Pokeno.
[15] He now believes Ms Shiu intends to renege on this agreement and, once rezoning has taken place, will develop or re-sell the land at 53 Munro Road on her own. She will not make it available for a subdivision development in conjunction with the Helenslee Road properties that are subject to the two JVA’s to which he is party. Mr Luo says Ms Shiu acquired the land at 53 Munro Road cheaply because it did not have road frontage as did the Helenslee Road properties. She stands to benefit greatly from any subdivision because the value of the land at 53 Munro Road will increase significantly. Mr Luo says the opposite will be the case with the land he is required to acquire under the two JVA’s. He says the road frontage of this land means it was expensive to purchase and will not be economic to subdivide and/or resell separately to the land at 53 Munro Road. He therefore says he will suffer financial loss as a result of Ms Shiu making false representations.
Ms Yip
[16] Ms Yip says she first met Ms Shiu during 2014 when she met her on several occasions for social purposes. Ms Yip says that Ms Shiu subsequently telephoned her in May 2017 and spoke to her about the Pokeno West Development. Thereafter, they remained in regular contact and had several discussions about the proposed development.
[17] Ms Yip said that in June 2017 Ms Shiu proposed she should buy the land at 145C Helenslee Road which adjoined the other land to be included in the re-zoning proposal being considered by the Council. Ms Yip says Ms Shiu suggested the land at 145C Helensee Road should be developed as a joint venture. She said the development would be in accordance with a draft plan Ms Shiu had shown her of the re-zoning proposal.
[18] Ms Yip says she agreed to purchase 145C Helenslee Road on 12 June 2017. She incorporated a company called Manfei Company Limited to purchase the property and signed a JVA that she says contained the following essential terms:
a.We were partners in a development of 145C Helenslee;
b.the purchase of 145C Helenslee was to be financed by me and my business partner, Ms Man Fei through our company, Manfei;
c.It recorded the key terms of the sale and purchase agreement as described above;
d.The costs of purchase of 145C Helenslee and any development costs funded by me and Ms Main Fei would be repaid from the proceeds of sale of 145C Helenslee together with interest at a rate of 6% per annum;
f.it was expected that a sale would take place in the next 4 years;
g.All profits and losses were to be shared equally between Ms Shiu and me.
[19] Ms Yip says that on 12 June 2017 she paid a deposit of $700,00 into the trust account of the conveyancing solicitor acting for Ms Shiu at that time. On 25 October 2017 she paid a further deposit of $400,000.
[20] In late 2017 and early 2018 Ms Yip says she became concerned that, once all the land had been rezoned for residential purposes, Ms Shiu would either on-sell 53 Munro Road for a substantial profit or, alternatively, develop that property on her own. She has also now learned that the current version of the plan that is being used for re- zoning purposes shows significantly fewer sections on 145C Helenslee Road than Ms Shiu represented would be the case. The current plan also shows a park or reserve on 145C Helenslee Road and this further reduces the number of sections Ms Yip will be able to sell. Ms Yip is concerned the manner in which the re-zoning is currently being advanced will therefore be greatly to her detriment.
Ms Shiu’s position
[21] Ms Shiu says she became involved with Mr Luo through his family, who were interested in investing in property development projects in New Zealand. They agreed to buy the land at 133 Helenslee Road for the sum of $3.1 million. Settlement was to be deferred for 40 months to allow the re-zoning process to occur. Mr Luo and his family were to fund the deposits payable under the agreement for sale and purchase and the re-zoning costs. They then signed the first JVA on 12 January 2017. The
parties to this agreement were Ms Shiu, Mr Luo and Ms Shiu’s uncle, Mr Guoyi Zhong.
[22] A few weeks later Ms Shiu learned the property at 53 Munro Road was about to come on the market for around $13 million. Ms Shiu says this property was situated behind the property at 133 Helenslee Road and did not have a road frontage. She believed it could be developed for residential purposes once the Helenslee Road property had been developed. She says she suggested Mr Luo’s father should buy the Munro Road property but he said he could not afford to.
[23] On 31 January 2017 Ms Shiu and her husband agreed to buy the Munro Road property for $12 million. The agreement for sale and purchase required her to pay a deposit of $2 million and complete the purchase 36 months later. She says her family paid the deposit. She then told Mr Luo and his father she had bought the Munro Road property and that they should work together to have the area rezoned and share the costs in doing so. She says there was no suggestion they would develop the two properties together.
[24] Ms Shiu says that she became aware in March 2017 that the properties at 87- 89 and 119 Helenslee Road were being sold together. She discussed this with Mr Luo and his father and after some delay they agreed the properties should be purchased. She then signed the agreement to buy 119 Helenslee Road on 19 May 2017. She did not sign the agreement to purchase 87-89 Helenslee Road until 8 December 2017. In the interim she and Mr Luo signed the second JVA on 18 October 2017.
[25] Ms Shiu denies making any representations to Mr Luo about the development of all the land as a single project and points out that the various parcels of land were purchased incrementally. She also denies making any representations about the number of sections any development could produce and says she was wholly reliant in this context on advice from the surveyor. She also denies telling Mr Luo and Ms Yip that she intended to sell or develop the land as she pleased.
[26] Ms Shiu says she signed the agreement for sale and purchase relating to the property at 145C Helenslee Road on 17 April 2017. She subsequently ran into Ms Yip
at the gymnasium and began talking to her about the Pokeno rezoning project. She says she suggested Ms Yip should consider working with her to acquire 145C Helenslee Road and have the land re-zoned. She denies suggesting their co-operation would also extend to developing the land once it had been re-zoned or that their endeavours would extend beyond the land at 145C Helenslee Road. Ms Shiu says Ms Yip eventually agreed to become involved in the project. Ms Yip then drew up the handwritten JVA that they both signed on 12 June 2017. They subsequently obtained consent from the vendor of the property to vary the agreement for sale and purchase to give Ms Yip further time to pay the second deposit and to settle the purchase.
[27] Ms Shiu says her relationship with Ms Yip had deteriorated significantly by October 2017, when the second instalment of the deposit was due. She also says she has taken no further steps in relation to the purchase of 145C Helenslee Road since November 2017 because she believes the complete breakdown of her relationship with Ms Yip resulted in the JVA with her being terminated. She says Ms Yip has hired her own rezoning consultants even though 145C Helenslee Road remains part of the submissions Ms Shiu is making to the Council in relation to the re-zoning of land in the Helenslee Road area.
The test for an interim injunction
[28] The test for an interim injunction is well established.2 In short, the applicant must establish a serious question to be tried. The Court must then ascertain whether the interim relief sought is warranted having regard to the overall interests of justice. This is commonly known as the balance of convenience test.
Serious question to be tried?
[29] When correctly analysed, I consider the claims by both Mr Luo and Ms Yip are based on representations made by Ms Shiu. The representations in question related to the manner in which the land to be purchased by Mr Luo and Ms Yip could be developed and the likely profit they could derive from that development. They say
2 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).
they based their respective decisions to buy the land on those representations and are now concerned that the representations may not prove to be correct.
[30] This means the plaintiffs may have a remedy in damages against Ms Shiu for misrepresentation or for engaging in misleading conduct. I do not consider, however, that the representations gave Mr Luo or Ms Yip any expectation they would have an interest in the land Ms Shiu was buying at 53 Munro Road. If Ms Shiu sells that land it may assist Mr Luo and Ms Yip to demonstrate her representations were misleading or false. As matters currently stand, however, I do not consider the plaintiffs have established that their claims against Ms Shiu provide any legal basis on which the Court could stop Ms Shiu from disposing of her land.
[31] I also consider the plaintiffs’ claims based on alleged breaches of the JVA’s to be weak to the extent that they allege Ms Shiu committed to join with them in developing the land once re-zoning had occurred. As Mr Luo’s description of the JVA’s demonstrates, the parties appear to have proceeded on the basis that they would co-operate in the re-zoning process. Once the land was re-zoned they would decide whether to sell the land or develop it. It therefore appears likely that any agreement to work in tandem only extended to the point where the land was re-zoned.
[32] In this context I place little weight on the fact that the surveyor assisting Ms Shiu in the re-zoning process has produced plans for the Council that include all the properties within the proposed subdivision. It is common ground that all the properties were to form part of the re-zoning process. And, as the surveyor points out, he has also included other properties owned by third parties simply because they are within the boundaries of the proposed subdivision.
[33] Taking these factors into account I accept the plaintiffs have established a serious question to be tried but do not consider they have established any legal basis on which the Court could impede Ms Shiu’s right to deal with the land at 53 Munro Road. In case I am wrong on that issue, however, I will go on to briefly consider where the balance of convenience lies.
Balance of convenience
[34] As will already be evident, I consider damages are likely to be the appropriate remedy for any wrongdoing the plaintiffs can prove on Ms Shiu’s part. This militates against the granting of injunctive relief at this stage.
[35] I also consider the likelihood of Ms Shiu disposing of her interest in the Munro Road land in the near future to be low. More to the point, however, I accept Mr Bigio’s submission for Ms Shiu that prospective purchasers of the property will almost certainly be interested in the land for its development potential. This means they are very likely to support the re-zoning process. I consider there is very little risk that the re-zoning process could be derailed if Ms Shiu sells or otherwise disposes of the Munro Road property,
[36] Furthermore, I consider an order that impedes Ms Shiu’s ability to sell or otherwise dispose of the Munro Road property could well jeopardise her ability to complete the purchase of the property. This would be problematic for all concerned. It would result in Ms Shiu losing the substantial deposit she has paid. The plaintiffs would also be left to continue the re-zoning process without her input. She has been meeting all the costs of the re-zoning process to date.
[37] I am therefore satisfied the balance of convenience tilts firmly against the granting of interim relief.
[38] It follows that I decline to make an interim order prohibiting Ms Shiu from selling or disposing of her interest in the land at 53 Munro Road without the agreement of the plaintiffs or an order of the Court.
Costs
[39] All but one aspect of the plaintiffs’ applications were resolved by consent during the hearing. I do not consider it appropriate to make an award of costs given that fact. Costs are therefore to lie where they fall in relation to all applications in CIV 2019-404-706.
Lang J
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