Mo v Yang
[2021] NZHC 1792
•15 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-001927
[2021] NZHC 1792
BETWEEN QINGHUA MO and YU HUANG
Plaintiffs
AND
ZHE YANG and JACKSON ING WEI LAW
Defendants
CIV-2018-404-002619 BETWEEN
AND
QINGHUA MO and YU HUANG
PlaintiffsTAMAKI HOMES LIMITED
First Defendant
ZHE YANG and JACKSON ING WEI LAW
Second Defendants
Contd/…2
Hearing: 10 – 28 May 2021 Appearances:
G D Wiles and R P Kaur for Ms Mo, Mr Huang and DH and PM Ltd
I M Hutcheson and R Y Bae for Mr Yang, Mr Law, Ms Yang and Tamaki Homes Ltd
Judgment:
15 July 2021
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Thursday, 15 July 2021 at 4:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
MO v YANG [2021] NZHC 1792 [15 July 2021]
CIV-2019-404-000506
BETWEEN ZHE YANG and JACKSON ING WEI LAW
Plaintiffs
AND
DH and PM LIMITED
First Defendant
QINGHUA MO and YU HUANG
Second Defendants
CIV-2019-404-000997 BETWEEN
QINGHUA MO and YU HUANG
First PlaintiffsAND
DH and PM LIMITED
Second Plaintiff
ZHE YANG
First Defendant
YAN YANG
Second Defendant
Table of Contents
Para No.
Introduction [1]
3 Huxley Place, Glen Innes [6]
Issues [16]
Analysis [17]
Result on Huxley Place project [37]
12 Ropata Avenue, Point England [54]
Disputed contributions to Ropata Avenue project [67]
Issues [78]
Analysis [79]
Result on Ropata Avenue project [101]
47 Union Road, Howick [109]
Issues [119]
Analysis [120]
Result on Union Road project [136]
8 Taurima Avenue, Point England [138]
Disputed contributions to Taurima Avenue project [148]
Issues [150]
Analysis [151]
Result on Taurima Avenue project [172]
Lot 4, 342 Bawden Road, Dairy Flat [178]
Issues [184]
Analysis [185]
Result on Bawden Road project [199]
Conclusion [203]
Introduction
[1] By order of Associate Judge Bell, these four proceedings were heard together with a direction that the evidence at the hearing would be used for all proceedings:
(a)CIV-2018-404-001927 (Huxley Place proceeding);
(b)CIV-2018-404-002619 (Ropata Avenue proceeding);
(c)CIV-2019-404-000506 (Union Road and Taurima Avenue proceeding); and
(d)CIV-2019-404-000997 (Bawden Road proceeding).
[2] The proceedings involve wide ranging disputes about a number of property developments in which funds have been invested without formal documentation.
[3] Zhe (Calvin) Yang and Jackson Wei Ing Law are property developers. Their projects included the purchase and redevelopment of properties at 3 Huxley Place, Glen Innes; 12 Ropata Avenue, Point England; 47 Union Road, Howick; 8 Taurima Avenue, Point England; and Lots 3 and 4, 342 Bawden Road, Dairy Flat (now 61 and 63 Follies Way). Mr Yang and Mr Law are the defendants in three of the proceedings, but are plaintiffs in the Union Road and Taurima Avenue proceeding. In the Ropata Avenue proceeding, the first defendant, Tamaki Homes Limited, is a company Mr Yang and Mr Law established to carry out the development. They also have a project management company, Vinjax Limited, of which they are both directors and shareholders. Mr Yang has a sister, Yan (Emily) Yang, who had some involvement in the developments.
[4] Qinghua (Pat) Mo and her husband Yu (David) Huang provided funds for these projects and others. In the Union Road and Taurima Avenue proceeding, the first defendant, DH and PM Limited, is a company Ms Mo and Mr Huang set up to take title to the Union Road property. Yoke Foong Yong, a friend of the developers, also provided funds for three of the developments — Huxley Place, Ropata Avenue and Taurima Avenue.
[5]As summarised by Associate Judge Bell:1
[5] The parties did not record their arrangements in writing. They do not agree on all the terms. It is not clear that their agreements are enforceable under contract law. Some may be too uncertain to be given effect. They do not agree on the amounts of the financiers' funding. The developers say that the financiers have overstated their claims by more than $1m. Some payments were made through intermediaries. Some were in cash. Records of transactions are poor. The parties disagree which projects some payments were for. Not all the projects were completed as originally planned. Overall, the financiers say that they are substantially out of pocket and have not received what they were promised. The developers acknowledge some liability, but not as much as the financiers claim.
3 Huxley Place, Glen Innes
[6] In November 2015, Mr Yang entered into an agreement to purchase 3 Huxley Place, Glen Innes, for $860,000 with settlement due on 19 February 2016. Mr Yang and Mr Law planned to subdivide the property and build four units on it. Following discussions with Mr Yang, Ms Mo and Mr Huang agreed to invest in the project. They contributed $260,000 in three separate payments prior to settlement.
[7] On 19 February 2016 the purchase was settled, and the title transferred into the name of Ms Yong, another investor in the project, as Mr Yang’s nominee. The property was then rented to tenants. On 14 April 2016, Ms Mo and Mr Huang contributed a further $90,000 to the project, making their total investment $350,000. These contributions are not disputed. Mr Yang proceeded to apply for resource consent for the subdivision, which was approved on 5 April 2017.
[8] On 21 August 2017, without the knowledge of Ms Mo and Mr Huang, Ms Yong entered into an agreement to sell the undeveloped property for $1.2 million with settlement due on 25 August 2017. On settlement, the net proceeds of sale were split between Mr Yang, Mr Law and Ms Yong. Mr Yang and Mr Law have not repaid the
$350,000 to Ms Mo and Mr Huang because of what they say was a subsequent agreement with them to transfer their contributions to another project.
[9]There are three causes of action in the statement of claim.
1 Mo v Tamaki Homes Ltd [2020] NZHC 2492 at [5].
(a)Breach of contract in terms of which Ms Mo and Mr Huang contributed
$350,000 to the project, failure to subdivide or develop the property, failure to consult prior to selling the property, and failure to account for contributions and/or profits upon sale;
(b)Breach of a resulting trust in terms of which Ms Yong, as the nominee of Mr Yang, held title to the property for the benefit of Ms Mo and Mr Huang to an extent in proportion with their contribution to its purchase price; and
(c)Breach of the Fair Trading Act 1986 alleging Mr Yang and Mr Law engaged in misleading or deceptive conduct by making false representations to Ms Mo and Mr Huang, failure to consult with or inform them about the sale of the property and failure to account to them for the proceeds of sale.
[10]Ms Mo and Mr Huang say the terms of the oral investment agreement included:
(a)They would provide funding in various sums as requested by Mr Yang and Mr Law up to a total sum of $350,000;
(b)Mr Yang and Mr Law would use their contributions as part payment of the purchase price of the property and/or to fund in part the proposed building development on the property, as they saw fit;
(c)Mr Yang and Mr Law would obtain mortgage finance sufficient to complete the purchase and fund the subdivision and building development;
(d)The subdivision would result in four titles on the property;
(e)Ms Mo and Mr Huang’s contribution would remain unsecured against the property;
(f)Mr Yang and Mr Law would complete the purchase of the property and the subdivision and carry out the building development at their own cost with a targeted completion date of mid-2017, but no later than December 2017;
(g)Upon completion of the subdivision and building development, Mr Yang and Mr Law would convey the unencumbered title to a completed three-bedroom unit on one of the four lots in the subdivision to Ms Mo and Mr Huang.
[11] In response, Mr Yang and Mr Law say there was no discussion or agreement as to how they would use or apply the initial contributions paid by Ms Mo and Mr Huang. Although not discussed or agreed, it was implicit in the agreement that they would otherwise fund the subdivision and building development. In general discussion, the expectation that construction work would take about a year (after both resource consent for the subdivision and building consent were granted) was mentioned, but there was no discussion about when the construction work would begin and no specific agreement that it would be completed by December 2017.
[12] Furthermore, Mr Yang and Mr Law say it was always understood and agreed that Ms Mo and Mr Huang would purchase the unit on the smallest lot in the proposed subdivision at cost price by paying the balance of the cost price over and above the contributions made by them to the project, on the proviso that if the resource consent allowed for a three-bedroom unit on the smallest lot, then Ms Mo and Mr Huang would increase their contributions to $410,000. There was admittedly no discussion of cost price and how it might be calculated.
[13] Mr Yang and Mr Law say that they were successful in obtaining resource consent for a three-bedroom unit on the smallest lot, but that Ms Mo and Mr Huang failed to pay the additional $60,000 as agreed.
[14] Mr Yang and Mr Law further say that on or about 7 August 2017 (about two weeks before the property was sold), Ms Mo approached Mr Law and asked if she and Mr Huang could transfer their interest in the Huxley Place project to another
development project being undertaken by Mr Yang and Mr Law (the Taurima Avenue project) in order to realise the return on their investment sooner. Mr Law says that he agreed to that request on condition that Ms Ho and Mr Huang would pay the agreed further initial contribution of $60,000 and that they would transfer the title for 8 Taurima Avenue (which was held by Ms Mo and Mr Huang together with Ms Yang) back to Mr Yang and Mr Law to enable them to complete that development.
[15] Ms Mo says that she only considered the proposal to transfer their contributions from the Huxley Place project to the Taurima Avenue project much later, when there appeared to be no other option available to secure their funds. However, she also says that there was no concluded agreement to such a transfer.
Issues
[16] The issues for the Court to determine in respect of 3 Huxley Place, Glen Innes, are:
(a)What were the agreed terms on which Ms Mo and Mr Huang invested
$350,000 towards the purchase and development of the property at 3 Huxley Place?
(b)Did Mr Yang and Mr Law breach any of the agreed terms?
(c)Did the parties enter into an agreement in or about August 2017 whereby Ms Mo and Mr Huang’s investment of $350,000 was transferred to the Taurima Avenue project on condition that Ms Mo and Mr Huang were to pay a further $60,000 and transfer title for 8 Taurima Avenue back to Mr Yang and Mr Law to enable them to complete that development?
Analysis
[17] The first issue is the terms of the agreement, if any. There is no dispute that Ms Mo and Mr Huang paid the following amounts to Mr Yang, Mr Law or Ms Yong as an investment in the Huxley Place project:
Payment Date Amount NZ$ From A/c Name From A/c # Received A/c Name Received A/c # 26 Nov 15 50,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Zhe Yang xx-xxxx- xxxxx97-00 30 Nov 15 50,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Zhe Yang xx-xxxx- xxxxx97-00 18 Feb 16 160,000.00 Tianyou Shi xx-xxxx- xxxxx06-00 Y F Yong xx-xxxx- xxxxx88-00 14 Apr 16 90,000.00 Tianyou Shi xx-xxxx- xxxxx06-00 J I Law & M Yeh xx-xxxx- xxxxx62-00 Total 350,000.00 [18] There is, however, a fundamental dispute as to the terms on which Ms Mo and Mr Huang invested the money. The $350,000 paid was 40.7 per cent of the purchase price of $860,000, although only $260,000 was paid prior to settlement. Ms Mo and Mr Huang say that, in return for their contribution, Mr Yang agreed to give them the unencumbered title to a new three-bedroom unit to be built on Lot 1 of the four subdivided lots. They would pay nothing further for their unit. On the other hand, Mr Yang and Mr Law acknowledge offering Ms Mo and Mr Huang the smallest lot with a two-bedroom unit on it, at cost. Ms Mo and Mr Huang would therefore pay, say, another $350,000 for their unit. They also say that if resource consent allowed for a three-bedroom unit then it was agreed that Ms Mo and Mr Huang would increase their initial contribution to $410,000.
[19] There is no contemporaneous documentation evidencing the agreed terms of the investment. There are no WeChat messages or emails recording the agreement.2 The negotiations were entirely oral. The bank statements evidencing the payment of the four sums of money totalling $350,000 do not assist in ascertaining the basis on which the money was paid.
[20] The main protagonists, Ms Mo, Mr Yang and Mr Law each gave evidence and were cross-examined. No one varied from their brief of evidence. Their positions were and remain dramatically opposed. No one gave detailed evidence of the date, time and place of any of the discussions which led to the agreement. Ms Mo merely said:
In mid-November 2015, Calvin invited David and I to invest in that property
… In return we would own a 3-bedroom, new residential unit on Lot 1 of the proposed subdivision of the property. It was agreed that we would provide
2 WeChat is a popular Chinese social media application used for messaging and video calling.
funding in different amounts, as requested by Calvin and Jackson, up to a total sum of $350,000.
[21]Similarly, Mr Yang said:
Pat and David were offered the smallest lot with a two-bedroom house at cost in return for her proposed $350,000 contribution, but we proposed and Pat agreed that if resource consent allowed for a three bedroom unit on her lot, then Pat would increase her initial contribution to $410,000.
[22] In the circumstances, I do not believe that any of the parties are lying, but they obviously all proceeded on a mistaken understanding of the agreement. Ms Mo and Mr Huang thought they were getting a new three-bedroom unit for $350,000. Mr Yang and Mr Law thought they were providing a new three-bedroom unit at cost, say,
$700,000.
[23] Courts will always seek to uphold a common contractual intention embodied in an agreement despite the absence of provision as to some matters, or ambiguous or uncertain wording, if the nature of the obligations intended to be assumed can be established and given effect.3
[24] Mr Bruce Sheppard, the accountant who gave evidence on behalf of Mr Yang and Mr Law, says that the conduct of the parties may be analysed as leading to a number of different possible commercial arrangements:
(a)Ms Mo entered into a progressive payment agreement or pre-sale contract on oral terms, making payments to a builder pursuant to that arrangement; or
(b)Ms Mo entered into an option to purchase, albeit the option price was not settled. Alternatively, it was simply a first right of refusal to purchase; or
(c)Ms Mo was a lender to Mr Yang on oral terms; or
3 Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at [3.7.6].
(d)Ms Mo purchased an interest in the whole project in return for a profit share on oral terms.
[25] Unfortunately, in the absence of any contemporaneous documentation or any relevant business practice from which inferences can be drawn, it is not possible to establish the exact nature of the commercial arrangement. Although the arrangement involved the ownership of a new unit on a subdivided lot, Ms Mo is also seeking a
40.7 per cent share of the net profit on sale of the unsubdivided property, even though some of the funds contributed by Ms Mo were paid to Mr Yang after Ms Yong had purchased the property as nominee for Mr Yang. In the circumstances, it is not possible to establish a clear and common intention as to the nature of the commercial arrangement and, in particular, the terms of any return on the $350,000 investment. I am reluctantly drawn to the conclusion that no contract was therefore ever concluded.
[26] The second issue is whether the terms of the agreement were breached. In light of my finding that there is no concluded contract, it is unnecessary to determine whether, as part of the contract, Mr Yang and Mr Law undertook to complete construction of the new three bedroom unit of Ms Mo and Mr Huang by December 2017. If it was necessary to determine this issue, I would find that Mr Yang and Mr Law did not give any such undertaking. While they obviously did discuss timeframes with Ms Mo and Mr Huang, discussion of such timeframes does not, without more, impose a binding obligation on Mr Yang and Mr Law. Ms Mo and Mr Huang are unable to point to anything beyond discussion of such timeframes which may result in a binding obligation.
[27]The third and final issue is whether Ms Mo and Mr Huang’s contribution of
$350,000 was transferred to the Taurima Avenue project at about the time that the sale of 3 Huxley Place was settled on 25 August 2017. They point to a WeChat exchange between Ms Mo and Mr Law on 7 August 2017 at a time when Mr Yang was not talking to Ms Mo because of a falling out and was not in regular communication with Mr Law because he was overseas in China. Ms Mo was obviously keen to close off all property financing agreements with Mr Yang and Mr Law because their relationship had broken down.
[28]Ms Mo messaged Mr Law:
Also I have paid another house cash to u both one and half year ago Haley [Huxley] I think. But I think it will have long way to go. I am thinking if Trauma [Taurima] is under my name shall we change the house to trauma.
[29]Mr Law responded:
I remember. U have half of Huxley … Ok. Let me talk to Calvin. He need to respond to me on this.
[30]Towards the end of the WeChat exchange, Ms Mo reminds Mr Law:
Can u also please check with Calvin that the deal with 580k and also the haxley [Huxley] cash we paid, can we transfer to Trauma [Taurima] project n we can make the deal finish.
[31]There was no concluded agreement on the basis of this WeChat exchange.
[32] In evidence, Mr Yang said that Mr Law told him that Ms Mo had proposed, and he had agreed, to transfer her interest in the Huxley Place project to the Taurima Avenue project on condition that she and Mr Huang would pay a further $60,000 for the bigger house at cost price in the Taurima Avenue project and transfer the title for Taurima Avenue back to them so they could complete that development. He further said he was not involved in this discussion, but “since I understood and believed Jackson had already agreed to this with Pat, I did not make any issue out of it.”
[33] Mr Yang and Mr Law appear to rely on an email sent by Ms Mo to them on 13 February 2018 in which she states:
At the end of 2015, we paid 350,000 dollars in cash to you to purchase a new house from the construction project at 3 Huxley Place, Glen Innes, Auckland.
… Because all three parties agree to transfer the new house at 3 Huxley Place, Glen Innes, Auckland, to the project on 8 Taurima Avenue, Pt England, Auckland, then after the construction of the 5 townhouses at 8 Taurima Avenue, Point England, Auckland is completed Calvin and Jackson will pay the profit which is made from selling one new house and our principal investment at 3 Huxley Place, Glen Innes, Auckland, back to us in cash. The estimated repayment date is August of this year. If the progress of the project is delayed, both sides will negotiate a new agreement.
[34] Ms Mo explains this on the basis that the email was sent well after their relationship had broken down and at a point in time when she and her husband felt
pressured to make concessions in relation to the various property investment projects they were involved in, to try and recover the huge sums of money they had invested.
[35] The email is, in any event, inconsistent with the position taken by Mr Yang four days later, on 17 February 2018. In a WeChat group chat with Ms Mo and Mr Law, Mr Yang states:
5. I have never discussed with you about transferring [your interest in] Huxley to Taurima. This is completely impracticable. If transferred to Taurima, then Taurima is done for nothing, and I am better off stopping now.
6. The capital of Huxley that I mentioned only referred to the capital which, as I have said, would be repaid as soon as possible. I have spoken about this matter many times and will not repeat again.
[36] In those circumstances, it has not been proven that Ms Mo and Mr Huang’s contribution of $350,000 was transferred to the Taurima Avenue project at about the time that 3 Huxley Place was sold in August 2017. Even if there was some sort of proposal to treat their contribution as having been made to the Taurima Avenue project, the terms of the proposed transfer were just so vague that there cannot be any concluded contract binding on the parties.
Result on Huxley Place project
[37] As to breach of contract, I have determined that there is no concluded contract in relation to the payment of $350,000 by Ms Mo and Mr Huang to Mr Yang and Mr Law in four instalments between 26 November 2015 and April 2016. There can therefore be no breach of contract.
[38] As to breach of resulting trust, Ms Mo and Mr Huang argue, in the alternative, that their contribution to the purchase price generated trustee obligations imposed on Mr Yang and Mr Law, and their nominee Ms Yong. Counsel submits that the rationale for finding a resulting trust in the present case is explained in Equity and Trusts in New Zealand, as follows:4
Where A (the transferor) pays for property and transfers it into the name of B (the transferee), who has given no valuable consideration, B holds the property for A on a resulting trust. This is because equity presumes, in the absence of
4 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [12.3.1(1)].
a contrary intention, that A, who paid for the property, intended to retain beneficial ownership. Similarly, if B has made a partial contribution to the purchase of property put into his or her sole name, B holds A’s fractional share in the property on a resulting trust for A. Again, it is presumed that A, who contributed to part of the purchase money, intends to retain ownership in the property to the extent of that contribution. This has been the case for centuries.
[39]Counsel also cites Equity and Trusts, as follows:5
Purchase price resulting trusts arise so as to recognise that a person who has contributed to the purchase price of property acquires an equitable interest in the property in proportion to the size of her contribution to the total of her purchase price.
[40] The difficulty with this approach is that a substantial portion of the contributions by Ms Mo and Mr Huang were made after settlement of the purchase of the property. Furthermore, the pleadings do not allege that the contributions made prior to settlement were to be exclusively applied to the purchase of the property. The statement of claim alleges that the oral investment agreement included a term that:
The Defendants would use the Plaintiffs’ contributions as part-payment of the purchase price of the property and/or to cover the proposed building development on the property, as they saw fit.
…
The Plaintiffs’ contribution would remain unsecured against the title(s) to the property.
Ms Mo, in her brief of evidence, confirms this agreement and acknowledges that their contributions remained unsecured against the title to the property.
[41] In those circumstances, a presumption of a resulting trust cannot arise. There has been no tracing of where the contributions made by Ms Mo and Mr Huang were applied. There is no certainty that any of the contributions were in fact applied to the purchase of the property, although it appears likely that the sum of $160,000 transferred into the account of another investor in the project, Ms Yong (who became the registered proprietor of the property on settlement as nominee for Mr Yang), the day before settlement, was utilised in settlement of the purchase price.
5 Alistair Hudson Equity and Trusts (9th ed, Routledge, London, 2016) at 448.
[42] In the further alternative, Ms Mo and Mr Huang allege that Mr Yang and Mr Law are in breach of the Fair Trading Act by falsely representing that the property remained available for development as an asset notwithstanding its sale to a third party, failing to consult with them before deciding to sell the property and failing to account to them following the sale of the property.
[43] This cause of action was not vigorously pursued by counsel, who described its inclusion as being a “belts and braces” approach. While I accept that Mr Yang and Mr Law are ‘in trade’ in terms of the definition of the Fair Trading Act, Ms Mo and Mr Huang have not proven that Mr Yang and Mr Law engaged in conduct that was misleading or deceptive or likely to mislead or deceive within the meaning of the Act.
[44] As to the allegations of falsely representing that the property remained available for development, Ms Mo and Mr Huang rely on a secretly recorded telephone call between Ms Mo and Mr Law on 24 February 2018 conducted in Mandarin. In particular, they rely on the following translated passage:
Ms Mo: So, with Huxley, do you guys intend to build?
Mr Law:We … well … I of course wish to build. However, I and … [in light of] of such cooperation relationship among the three of us, of course shouldn’t build, lest more problems from longer delays.
Ms Mo: Yeah.
Mr Law: Call it off, yes, call it off. Ms Mo: Yeah.
Mr Law:About this, I … I … I, and Calvin Yang … In a minute I’ll call him once we hang up. Regarding this, as far as I’m concerned, I feel – “Yes”, if we can dispose of it or whatever, at least we have to include your interest, ok? This I can …
Ms Mo: Right, because you … because I can …
Mr Law:On my part, I can. For me, I don’t see a problem. I can’t blame anyone for being involved.
Ms Mo:Right, right. Because … because I feel … because I feel … because Calvin Yang told me that it was because of relationship issues between him and you that you guys were not building. However you guys took … did take our 350,000 in 2015. So during the three years, you can’t say that this
350,000 … we also incurred interest ourselves on this 350,000, and we missed so many opportunities. And previously you agreed that …
Mr Law: Yeah, yeah, yeah, yeah, ok, ok, ok, ok.
[45] Mr Law said that he told Ms Mo that he “wanted to build” rather than “wish to build”. The translator acknowledged that what Mr Law said could be translated as in the past tense. Furthermore, Ms Mo also acknowledges in the conversation that she had been told by Mr Yang that they were not building because of relationship issues (between him and Mr Law).
[46] Mr Yang and Mr Law admit to failing to consult with or advise Ms Mo and Mr Huang at the time that they were selling the property and failing to account to them for their $350,000. However, they say that there was an agreement that the funds would be transferred to the Taurima Avenue project; I have not found this arrangement to have been established.
[47] Although remaining silent or failing to disclose information can constitute misleading or deceptive conduct, a failure to consult, advise or account to Ms Mo and Mr Huang in the present case is not misleading or deceptive conduct, which would entitle them to damages under the Fair Trading Act. There was no concluded contract between the parties into which a requirement to consult, advise or account could be implied. Ms Mo and Mr Huang also did not alter their position to their detriment as a consequence of these failures.
[48] As to relief, I find that even though there was no concluded contract between the parties, each of whom proceeded on a radically different understanding of the basis of the commercial arrangement, there is nonetheless a remedy available to Ms Mo and Mr Huang to restore them to their original position. That is the restitutionary remedy of money had and received.
[49] In Napier v Torbay Holdings Ltd,6 the Court of Appeal confirmed that the remedy of money had and received is available in circumstances where there has been a payment of money which would not have been paid but for a mistake of fact made.
6 Napier v Torbay Holdings Ltd [2016] NZCA 608.
The crediting of a sum from one account to another account is the equivalent of payment. A claim for money had and received is a personal claim rather than a proprietary claim over the thing itself. It does not turn on an ability to trace funds. Whether the funds went directly into an account that was in overdraft or not is irrelevant. It also does not depend on proof of any wrongdoing or impropriety on the part of the recipient. It does not turn on the continued existence or retention of the money received. Although unjust enrichment may be seen as underpinning a claim for money had and received, there is no actual requirement of unjust enrichment.
[50] Mr Yang and Mr Law have always acknowledged, subject to the alleged variation transferring the investment to the Taurima Avenue project, that they received sums totalling $350,000 from Ms Mo and Mr Huang for the Huxley Place project. Counsel therefore responsibly accepts, while opposing Ms Mo and Mr Huang’s claim to a 40.7 per cent interest in the sale proceeds of Huxley Place, that Mr Yang and Mr Law could not, in conscience, resist an order for repayment of the funds advanced on the basis of monies had and received.
[51]Ms Mo and Mr Huang seek not only the return of their contribution of
$350,000, but also a 40.7 per cent share of the profits on the sale of Huxley Place (which they calculate at $117,240.29). They also seek interest on both their contributions and profit share. Under the Interest on Money Claims Act 2016, interest is calculated at $170,706.87. Alternately, under the Reserve Bank of New Zealand SME business lending rates, calculated interest is $174,080.59. They therefore seek a total sum of either $520,706.87 or $524,080.59.
[52] The claim for money had and received cannot, however, include a claim for profits on the utilisation of the money advanced. It is purely a restitutionary remedy. If a payer is entitled to any profit on the funds advanced, then logically he or she is also responsible for any losses. That cannot be the case. Interest in terms of the Interest on Money Claims Act is also more appropriate than the SME business lending rates.
[53] There will accordingly be judgment in CIV 2018-404-001927 for Ms Mo and Mr Huang against Mr Yang and Mr Law in the sum of $350,000 plus interest of
$39,019.83 in terms of the Interest on Money Claims Act from the date of the sale of 3 Huxley Place, Glen Innes, (25 August 2017) to the date of commencement of this trial (10 May 2021), making a total of $389,019.83.
12 Ropata Avenue, Point England
[54] On 19 May 2015, Mr Law entered into an agreement to purchase 12 Ropata Avenue, Point England, for $1.15 million with settlement due on 31 July 2015. Mr Law and Mr Yang planned to subdivide the property and build five units on it. Following discussions with Mr Yang, Ms Mo and Mr Huang agreed to invest in the project.
[55] On 31 July 2015 the purchase was settled, and the title transferred to Tamaki Homes Limited, a company formed by Mr Yang and Mr Law to carry out the development. Mr Yang and Mr Law obtained a loan from FM Custodians Limited for
$1,803,385.75 to settle the purchase and for construction funding.
[56] Mr Yang and Mr Law proceeded to apply for resource consent and building consent. Once both consents were obtained, construction commenced. Between 30 September 2015 and 19 April 2016, Ms Mo and Mr Huang say they made initial contributions totalling $409,173, as follows:
Amount NZ$ From A/c Name From A/c # Received A/c Name Received A/c # 30 Sep 15 55,787.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx37-095 Y F Yong xx-xxxx- xxxxx21-
025
30 Sep 15 160,000.00 DH & PM Limited xx-xxxx- xxxxx18-000 Jackson Ing Wei Law & Y hiko Chen xx-xxxx- xxxxx33-25 21 Dec 15 9,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Yan Yang xx-xxxx- xxxxx15-00 21 Dec 15 49,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx50-50 Yan Yang xx-xxxx- xxxxx15-00 21 Dec 15 12,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx37-095 Yan Yang xx-xxxx- xxxxx15-00 26 Jan 16 15,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx37-095 JI Law & M Yeh xx-xxxx- xxxxx62-00 28 Jan 16 45,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx37-095 JI Law & M Yeh xx-xxxx- xxxxx62-00 16 Mar 16 13,386.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Yenku hiko Chen xx-xxxx- xxxxx47-01 19 Apr 16 50,000.00 DH & PM Limited xx-xxxx- xxxxx18-000 Yan Yang xx-xxxx- xxxxx15-00 Total 409,173.00 [57] They also say that between 4 May 2015 and 26 June 2017 they made further contributions totalling $995,000.00, as follows:
Payment date Amount NZ$ From A/c Name From A/c # Received A/c Name Received A/c # 04 May 15 70,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Jackson Law xx-xxxx- xxxxx62-00 04 May 15 180,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Jackson Law xx-xxxx- xxxxx62-00 04 May 15 130,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Jackson Law xx-xxxx- xxxxx62-00 10 Oct 16 50,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx50-00 Yan Yang xx-xxxx- xxxxx15-00 17 Oct 16 100,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Yan Yang xx-xxxx- xxxxx15-00 17 Oct 16 100,000.00 Friend’s ANZ cheque Not provided N.A. N.A 24 Oct 16 10,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx50-50 Yan Yang Not provided 14 Nov 16 8,000.00 Qinghua Mo & Yu
Huang
xx-xxxx-
xxxxx66-01
Yan Yang Not
provided
14 Nov 16 35,000.00 Lei Zhao xx-xxxx- xxxxx98- 000 Yan Yang Not provided 14 Nov 16 15,000.00 DH & PM Limited xx-xxxx- xxxxx24-00 Yan Yang xx-xxxx- xxxxx15-00 14 Nov 16 42,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx50-00 Yan Yang xx-xxxx- xxxxx15-00 06 Feb 17 50,000.00 For. M Trading Not provided Yan Yang xx-xxxx- xxxxx93-00 14 Feb 17 74,500.00 For. M Trading Not provided Vinjax Ltd xx-xxxx- xxxxx69-00 15 Feb 17 75,500.00 For. M Trading Not provided Tamaki Homes Ltd xx-xxxx- xxxxx70-00 26 Jun 17 55,000.00 DH & PM Limited xx-xxxx- xxxxx24-00 Jackson Law xx-xxxx- xxxx55-00 Total 995,000.00 Ms Mo and Mr Huang acknowledge receipt of three repayments from Mr Yang and Mr Law in October 2017 amounting in total to $105,000, leaving a remaining balance outstanding of $890,000.
[58] Finally, they say that they made cash contributions towards the Ropata Avenue project totalling $112,200, as follows:
Payment date Amount NZ$ From A/c Name From A/c # To A/c 03 Nov 16 3,300.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. 15 Nov 16 20,000.00 Various Accounts Various Accounts N.A. 19 Dec 16 30,000.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. 23 Dec 16 2,000.00 Qinghua Mo & Yu Huang xx-xxxx-xxxxx50-50 N.A. 23 Jan 17 10,500.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. 10 Mar 17 10,000.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. 16 Mar 17 10,000.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A.
17 Mar 17 9,000.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. 20 Mar 17 7,000.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. 28 Mar 17 2,400.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. 10 Apr 17 8,000.00 DH & PM Limited xx-xxxx-xxxxx24-00 N.A. Total 112,200.00 [59]A large number of these contributions are disputed in some way.
[60] The Ropata Avenue development has now been completed, and three units have been sold to members of the public at the market price. A fourth unit has been sold at cost to Ms Yong, who contributed $380,000 to the project. The cost price was assessed as $800,000, of which Ms Yong owes $420,000. Ms Mo and Mr Huang have a caveat over the fifth unit, claiming an interest in it. It is valued at $1.1 million.
[61]There are three causes of action in the statement of claim.
(a)Breach of contract in terms of which Ms Mo and Mr Huang contributed
$1,516,373 to the property, failure to subdivide or develop the property, failure to consult prior to obtaining mortgage finance over the property, failure to consult prior to listing the subdivided lots for sale, and failure to repay contributions;
(b)Breach of a resulting trust in terms of which Tamaki Homes Limited held title to the property for the benefit of Ms Mo and Mr Huang to the extent of their full contribution of $1,411,373 (being their total contribution of $1,516,373 less $105,000 repaid); and
(c)Breach of the Fair Trading Act alleging Mr Yang and Mr Law engaged in misleading or deceptive conduct as follows: failure to disclose a loan of approximately $1.8 million from FM Custodians Limited secured by the property and funding in an undisclosed amount from Ms Yong, failure to disclose their obligations to Ms Mo and Mr Huang as investors in the Ropata Avenue project to their loan-provider, failure to consult and obtain consent prior to diverting funds advanced for the Ropata Avenue project to other projects and failure to consult prior to listing the lots for sale.
[62]Ms Mo and Mr Huang say the terms of the oral investment agreement included:
(a)They would provide funding in various sums as requested by Mr Yang and Mr Law amounting to approximately $400,000;
(b)By contributing approximately $400,000, Ms Mo and Mr Huang would acquire an immediate equitable ownership interest in the property and in due course an unencumbered title to one of the allotments to be created following subdivision of the property, being Lot 1;
(c)Mr Yang and Mr Law undertook to obtain all necessary consents and carry out at their own cost construction of five townhouses on the property with each townhouse, including that to be built on Lot 1, to have its own separate title; and
(d)Mr Yang and Mr Law undertook to complete the subdivision and construction of the townhouses by the end of December 2016.
[63] Ms Mo and Mr Huang also say that they provided further contributions totalling $995,000 on condition that Mr Yang and Mr Law would not seek to obtain a bank loan or offer any mortgage security over the property. In addition to the initial investment contributions and the further contributions made by Ms Mo and Mr Huang, they say that the cash contributions of $112,200 were loans repayable on demand.
[64] In response, Mr Yang and Mr Law admit entering into an oral agreement with Ms Mo and Mr Huang in terms of which Ms Mo and Mr Huang would contribute
$400,000 to assist in development of the property. In return, Ms Mo and Mr Huang would receive one of the lots after subdivision with a unit built on it at cost price. Mr Yang and Mr Law also say that at the time they entered into the oral agreement, they did not discuss or agree which lot was to be allocated to Ms Mo and Mr Huang and there was no agreement as to any specific lot to be allocated to them. Mr Yang and Mr Law also say that they did not discuss or agree with Ms Mo and Mr Huang how the cost price was to be calculated, but now say that it should be calculated to include subdivision costs, development costs, construction costs, management costs,
holding costs and interest where applicable. They also say that there was no agreement that the subdivision and construction of the townhouses would be completed by the end of December 2016.
[65] Tamaki Homes Limited counterclaims against Ms Mo and Mr Huang. It says that in breach of the oral agreement between the parties, Ms Mo and Mr Huang have refused to pay the balance owing calculated as being the difference between the cost price of Lot 1 and the initial contributions made by them. It therefore seeks judgment for the difference between the cost price of Lot 1 and the initial contributions made by Ms Mo and Mr Huang.
[66] Mr Law also counterclaims against Ms Mo. He says that Ms Mo remains indebted to him in the sum of $105,000 in respect of the unpaid balance of the purchase price of Lot 3, 342 Bawden Road, Dairy Flat. Mr Law therefore seeks judgment in the sum of $105,000 plus interest.
Disputed contributions to Ropata Avenue project
[67] Ms Mo and Mr Huang say that their initial contributions to the Ropata Avenue project totalled $409,173.7 They refer to nine transactions in which funds were transferred from their company’s or their own account to five different accounts associated with Mr Yang and Mr Law.
[68] As to the first payment of $55,787 on 30 September 2015, Mr Yang and Mr Law acknowledge that $40,000 was a contribution to the Ropata Avenue project, but say that the remaining $15,787 was a part payment to Mr Law of the purchase price for Lot 3, 342 Bawden Road. They also say that the eighth payment of $13,386 is a contribution to the purchase of a property at 40 Wimbledon Crescent, Glen Innes, while the ninth payment of $50,000 was a personal loan to Mr Yang that has been repaid with interest.
[69] If these adjustments are made, Mr Yang and Mr Law acknowledge that Ms Mo and Mr Huang made initial investment contributions to the Ropata Avenue project
7 See above, para [56].
totalling $330,000. However, Mr Yang and Mr Law say that the sum of $57,096.70 should be added to that total. The sum of $57,096.70 was applied to the purchase of 8 Taurima Avenue, Glen Innes, but is properly accounted for as a contribution to the Ropata Avenue project. If the two sums are added together, the initial investment contributions totalled $387,096.70 or approximately $400,000, which Ms Mo and Mr Huang say they agreed to initially invest in return for a unit in the completed subdivision.
[70]There is fundamental disagreement over the further contributions totalling
$995,000 and cash contributions totalling $112,200. As to the further contributions totalling $995,000,8 Mr Yang and Mr Law note that the first three payments of
$70,000, $180,000 and $130,000 totalling $380,000 were made on 4 May 2015 and so cannot relate to the Ropata Avenue project as the agreement for sale and purchase of 12 Ropata Avenue was not signed until over two weeks later, on 19 May 2015. Mr Yang and Mr Law say that the total sum of $380,000 relates to the purchase of Lot 3, 342 Bawden Road, by Ms Mo and Mr Huang.
[71]Mr Law had purchased Lot 3, 342 Bawden Road, in early December 2014 for
$725,000 with delayed settlement as the title had not yet issued. He paid a deposit of
$105,000. Mr Law says he subsequently reached an agreement with Ms Mo and Mr Huang to sell Lot 3 to them for $1,125,000. As the purchase by Mr Law had not yet settled, Ms Mo and Mr Huang agreed to pay Mr Law $400,000, refund him his deposit of $105,000 and then pay the balance of the purchase price of $620,000 ($725,000 minus the deposit of $105,000) on settlement after title had been issued. Because it was agreed that Mr Law would nominate Ms Mo and Mr Huang as the purchaser under the sale and purchase agreement which he had signed, no separate sale and purchase agreement for sale and purchase was completed.
[72] Mr Law further says that Ms Mo agreed to pay him $400,000 in two instalments — $250,000 on 4 May 2015 and $150,000 on 28 September 2015.
[73] Although Ms Mo and Mr Huang made three payments totalling $380,000 to Mr Law on 4 May 2015, the total sum received was split into two for the purposes of
8 See above, para [57].
a term loan agreement entered into between the parties. The first amount was
$250,000, which Ms Mo had agreed to pay on 4 May 2015 as part payment for Lot 3. It was to be treated as a loan pending settlement on which no interest was payable in case the property did not settle for some reason. The second amount was $130,000 and was a separate personal loan upon which interest was payable.
[74] Mr Law says that Ms Mo had agreed to pay a second sum of $150,000 on 28 September 2015 as part payment for Lot 3. Mr Law further says that the personal loan of $130,000 was instead offset against the second instalment of $150,000 payable by Ms Mo and Mr Huang on or about 28 September 2015. This left a shortfall of
$20,000. In discussions with Ms Mo, Mr Law says he agreed to fix interest on the
$130,000 personal loan and legal fees at $4,213, which left a balance owing by Ms Mo and Mr Huang of $15,787. Mr Law says that this sum was then paid to him by Ms Mo and Mr Huang as part of the larger payment of $55,787 on 30 September 2015.9
[75] As to the remaining sums claimed by Ms Mo and Mr Huang as further contributions to the Ropata Avenue project, Mr Yang and Mr Law deny receiving a bank cheque for $100,000 from Ms Mo and Mr Huang on 17 October 2016. They also say that the sum of $55,000 received by Mr Law on 26 June 2017 was a personal loan to him, which was fully repaid in two lump sum payments of $28,737.50 on 24 and 25 October 2017.
[76] Mr Yang and Mr Law therefore acknowledge receiving $460,000, but say that these were contributions to the Taurima Avenue project. Specifically, these were:
Payment date Amount NZ$ From A/c Name From A/c # Received A/c Name Received A/c # 10 Oct 16 50,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx50-00 Yan Yang xx-xxxx- xxxxx15-00 17 Oct 16 100,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-00 Yan Yang xx-xxxx- xxxxx15-00 24 Oct 16 10,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx50-50 Yan Yang Not provided 14 Nov 16 8,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx66-01 Yan Yang Not provided 14 Nov 16 35,000.00 Lei Zhao xx-xxxx-
xxxxx98- 000
Yan Yang Not provided 14 Nov 16 15,000.00 DH & PM Limited xx-xxxx- xxxxx24-00 Yan Yang xx-xxxx- xxxxx15-00
9 See above, para [56].
14 Nov 16 42,000.00 Qinghua Mo & Yu Huang xx-xxxx- xxxxx50-00 Yan Yang xx-xxxx- xxxxx15-00 06 Feb 17 50,000.00 For. M Trading Not provided Yan Yang xx-xxxx- xxxxx93-00 14 Feb 17 74,500.00 For. M Trading Not provided Vinjax Ltd xx-xxxx- xxxxx69-00 15 Feb 17 75,500.00 For. M Trading Not provided Tamaki Homes Ltd xx-xxxx- xxxxx70-00 Total 460,000.00 [77]Mr Yang and Mr Law also deny receiving any of the cash sums totalling
$112,200, which Ms Mo says she or Mr Huang personally handed to Mr Yang, Mr Law or Ms Yang.10
Issues
[78] The issues for the Court to determine in respect of 12 Ropata Avenue, Point England, are:
(a)What were the terms on which Ms Mo and Mr Huang made an initial contribution of approximately $400,000 towards the purchase and development of the property at 12 Ropata Avenue?
(b)How much exactly was the initial investment?
(c)Did Mr Yang and Mr Law undertake to carry out the subdivision and complete the construction of the five units planned for the property no later than December 2016?
(d)Did Ms Mo and Mr Huang make further contributions to the Ropata Avenue project totalling $995,000 between May 2015 and June 2017?
(e)Were the further contributions made on condition that Mr Yang and Mr Law would not obtain a bank loan or offer any mortgage security over the property to a bank or other lender?
10 See above, para [58].
(f)Did Ms Mo and Mr Huang make cash contributions totalling $112,200 to the Ropata Avenue project as requested by Mr Yang and Mr Law between November 2016 and April 2017?
Analysis
[79] The first issue is the terms on which Ms Mo and Mr Huang made the initial contribution of approximately $400,000. There is again a fundamental dispute as to these arrangements. Ms Mo and Mr Huang say that, in return for their initial contribution of $400,000, Mr Yang agreed to give them the unencumbered title to a new unit to be built on Lot 1 of the five subdivided lots. They would pay nothing further for their unit. On the other hand, Mr Yang and Mr Law acknowledge offering Ms Mo and Mr Huang one of the units when complete, at cost. Ms Mo and Mr Huang would therefore pay, say, another $400,000 for their unit.
[80] Again, there is no contemporaneous documentation evidencing the agreed terms of the investment. There are no WeChat messages or emails recording the agreement. The negotiations were entirely oral. The bank statements evidencing the payment of sums of money totalling approximately $400,000 do not assist in ascertaining the basis on which the money was paid.
[81] The main protagonists, Ms Mo, Mr Yang and Mr Law each gave evidence and were cross-examined. Again, no one varied from their brief of evidence. Their positions were, and remain, dramatically opposed. No one gave detailed evidence of the date, time and place of any of the discussions which led to the agreement. Ms Mo merely said:
In around July 2015 Calvin persuaded David and I to invest in the property at 12 Ropata Avenue. Calvin told us that by investing about $400,000 in the proposed building project, we would receive title to our own brand-new townhouse at Lot 1 of the property (out of the five lots) within one year, and no later than December 2016. Jackson and Calvin agreed to be responsible to obtain all necessary consents and carry out at their own cost construction of the five townhouses on the property, with each townhouse to have its own separate title.
…
Jackson told me that by having access to cash outside of a normal financier, him and Calvin would have the cashflow to get the project going immediately.
I believe the investment agreement was a win for both sides as I could get a brand-new townhouse for my parents: and Jackson would have received funding to start this development project.
[82]Similarly, Mr Yang said:
Pat … agreed to contribute funds to the development and the agreed understanding was that they would … receive one lot at cost in return. This means that when the development and the houses were completed, they would receive title to one lot after they paid the cost price of developing that lot and building the house on that lot.
There was no discussion or agreement as to how the cost price of the completed unit would be calculated. My expectation was that the cost price would include all costs relating to the subdivision and development, including management costs and interest where applicable. But as I say, this was not discussed or agreed.
[83] In the circumstances, I do not believe that any of the parties are lying, but they obviously all proceeded on a mistaken understanding of the agreement. Ms Mo and Mr Huang thought they were getting a new unit for approximately $400,000. Mr Yang and Mr Law thought they were providing a new unit at cost, say $800,000. This was acknowledged by Ms Mo in a secretly recorded telephone conversation with Mr Law on 24 February 2018, in which the following exchange took place:
Mr Law: It’s impossible that the house was [purchased for] $400,000.
Ms Mo:I know, I know. Hey Jackson, Jackson, here is the thing – I don’t have any issue now, I understand that there might truly have been some misunderstanding at the time, so you guys … we can now go by your cost price, for example, yours was
$700,000 or $750,000 and any event, it’s okay as long as we can take back our capital of $400,000, plus all the profit, right, this is what we all agreed, right?
[84] In those circumstances and for the same reasons as expressed in relation to the Huxley Place project, I am again reluctantly drawn to the conclusion that no contract was ever concluded in relation to the Ropata Avenue project.
[85] As to the second issue — the amount of the initial investment, I accept that Ms Mo and Mr Huang made an initial contribution of $330,000 towards the Ropata Avenue project in various sums between 30 September 2015 and 19 April 2016. I also accept the evidence of Mr Law that the sum of $15,787, being part of the payment of
$55,787 on 30 September 2015, was part of the sum of $400,000 paid by Ms Mo and
Mr Huang towards the purchase of Lot 3, 342 Bawden Road. There are WeChat messages between Ms Mo and Mr Law, which taken together establish the arrangements for payments that were made between them.
[86] Furthermore, I also accept on the basis of WeChat messages and screenshots that the sum of $13,386 advanced on 16 March 2016 was not paid towards the Ropata Avenue project, but rather towards the Wimbledon Crescent project, in respect of which there is no claim. The payment was for 20 per cent of the architect’s quote for
$49,500 plus GST, which he required before starting work ($11,385 (inclusive of GST)) and $2,001 towards a CCTV system for the property.
[87] Finally, I also accept on the basis of bank statements and a reconciliation prepared by Mr Huang that the sum of $50,000 which was advanced on 19 April 2016 was a personal loan to Mr Yang, which carried an interest rate of 5.5 per cent and which was fully repaid with interest (a total of $54,137.27) on 18 October 2017.
[88] Mr Yang and Mr Law say that the sum of $57,096.70 should be added to the initial contributions made by Ms Mo and Mr Huang to the Ropata Avenue project. It was, however, utilised to settle the purchase of 8 Taurima Avenue and so should be accounted for in the Taurima Avenue project. I therefore find that the initial contributions made by Ms Mo and Mr Huang to the Ropata Avenue project totalled
$330,000.
[89] Again, if necessary, I would find that Mr Yang and Mr Law did not give an undertaking that they would carry out the subdivision and complete the construction of the five units planned for the property no later than December 2016. While they obviously did discuss timeframes with Ms Mo and Mr Huang, discussion of such timeframes does not, without more, impose a binding obligation on Mr Yang and Mr Law. Ms Mo and Mr Huang are unable to point to anything beyond discussion of such timeframes which may result in a binding obligation.
[90] As to the fourth issue — the amount of further contributions, Ms Mo and Mr Huang say they advanced various sums totalling $995,000 between May 2015 and June 2017.
[91]Of these further contributions, a total of $380,000 paid in three instalments of
$70,000, $180,000 and $130,000 on 4 May 2015 is disputed. Mr Yang and Mr Law say that these sums (together with $15,787, which was part of a payment of $55,787 on 30 September 2015) represent the sum of $400,000 (less legal fees and interest on a personal loan of $130,000 from 4 May 2015 to 30 September 2015), which Ms Mo had agreed to pay to Mr Law in order to be nominated as purchaser of Lot 3, 342 Bawden Road on settlement on 22 May 2017. Therefore, they say that these contributions were not made to the Ropata Avenue project.
[92] On the other hand, Ms Mo says that although she did have discussions with Mr Law about purchasing Lot 3, she walked away from the deal when she realised that Mr Law would make $400,000 profit on the original purchase price of $725,000, which he had agreed to pay in December 2014. She says that the $380,000 paid to Mr Law on 4 May 2015 was a personal loan for six months to enable him to purchase the property located at 12 Ropata Avenue. Mr Law and Mr Yang did not repay the loan on time and told Ms Mo that the sum of $380,000 had been “rolled into” that property.
[93] On this issue, I prefer the evidence of Mr Law and Mr Yang for the following reasons:
(a)On 17 May 2017, Mr Law formally nominated Ms Mo and Mr Huang as purchasers of Lot 3, 342 Bawden Road, in terms of the agreement for sale and purchase dated 2 December 2014. Ms Mo and Mr Huang then settled the purchase of Lot 3, 342 Bawden Road on 22 May 2017. This indicates that Ms Mo and Mr Huang had not walked away from the deal but had reached an agreement with Mr Yang to purchase Lot 3.
(b)Even before settlement, Ms Mo had reached agreement to sell a half share of Lot 3 to Li Zhang Lu for $600,00, which valued the lot at
$1.2 million. Ms Lu had in fact paid approximately $400,000 to Ms Mo before Ms Mo was formally nominated by Mr Yang as the purchaser of Lot 3. After settlement, Ms Mo and Mr Huang signed a
property sharing agreement and deed of declaration of trust acknowledging that they held a one-half share of Lot 3 for Ms Lu.
(c)Prior to the sale of a one-half share to Ms Lu, Mr Yang discussed the price to be paid by Ms Lu with Ms Mo in a WeChat exchange dated 19 April 2017:
Ms Mo: Because this land of ours has been held for more than one year, nearly two years, yes, two years [payment of $380,000 on 4 May 2015]. How would you feel if I quoted her 1.3 or
1.4 million? Is it ok? Do you think it’s reasonable? Because I was told by the valuer that the land price could be up to 1.5 to 1.6 million. Do you think I am quoting too high at 1.3 or
1.4 million, considering I have invested so much cash in holding this land for two years?
Mr Yang: She wants half. 1.3 might be too high.
Mr Yang: I’ve told her that you paid Jackson 400 thousand. So, she can estimate the cost.
Think about how long ago you paid Jackson the 400 [thousand] and add on the bank interest (for the time you have held the land) then add on some profit [for the selling price to Ms Lu].
(d)After the WeChat exchange with Mr Yang on 19 April 2017, Ms Mo received a valuation report on Lot 3 dated 5 May 2017, valuing the property at $1.3 million.
(e)Less than a month after settlement and after having sold a one-half share of Lot 3 to Ms Lu, Ms Mo attempted to renegotiate the terms under which she had been nominated as purchaser of Lot 3. In a WeChat message to Mr Law on 14 June 2017, she says:
This was the offer for the lot – two years ago in May, we gave you $400,000 in cash, when you agreed to sell the lot to us at
$1,125,000, which you have bought at $725,000 and paid the deposit of $105,000. I understand you are short of cash this year. I’m tight on my side too, because of the loan for Union Road and Trauma [Taurima] from ASB. If you are pulling out, I have to repay $355,000 to the bank, and Ropata is not building as fast as expected. Plus, you need more cash for Trauma [Taurima] too, so I’m selling half of this lot to Zhuzhu [Ms Lu] at the price of
$1,200,000. I know that we have made a deal already. Thanks for giving us the chance to renegotiate. Among the $400,000 I gave you for the lot, $200,000 is my mother’s. I guaranteed her that it would go up to 1.5-1.6 million dollars, so I will pay her
back the profit of selling at the price of 1.5 million dollars as well as the interest of her $200,000. We are partners now. I would like to ask you, is it possible for us to divide the profits of this lot like this? You bought it at the price of $725,000, and Lily has paid $600,000 to buy half of it now. Half of your cost price is
$362,500, [meaning your profit is] 600 – 362.5 = 237.5. Can you take this $237,500 as your profit on this lot, not to earn from me on the other half?
I mean that I have paid the previous $400,000 plus $20,000 to settle on this lot, while you paid $105,000 in cash. I have put in
$420,000, and half of your cost is $362,500, that is, I have paid
$57,500 more. I know you have done a lot of work to be able to get the price of $725,000, but from my point of view, I have been doing my best to cooperate with you. And I didn’t ask you to pay me back the money I can spare whenever possible. For all the money I paid in advance, I also need to pay interest to the bank. I dare not touch Lily’s $600,000 because I promised to lend you money when you needed it for Trauma [Taurima] later. Please think about it.
Because to date, I haven’t asked you to pay me the interest of the
$400,000. Your profit is $237,500 + $50,000 (two years’ interest of the $400,000) = $287,500. Now, as you know in this market, I have to hold this land and the price is still dropping, and I’ll need to pay back the loan in a year. I can’t get any profit in the short term. The interest is now very high, 5.6%.
This is inconsistent with Ms Mo walking away from the deal to purchase Lot 3 for $1,125,000, but later agreeing with Mr Law to accept nomination as purchaser without any form of payment to Mr Law. If Ms Mo had bought the property for $725,000 there would not have been any profit to Mr Law and no reason to ask him, “Can you take this
$237,500 as your profit on this lot, not to earn from me on the other half?” Ms Mo also specifically refers to cash payments of $400,000, “two years ago in May”, which is consistent with the payments of
$70,000, $180,000 and $130,000 on 4 May 2015 (albeit with a difference of $20,000).
(f)Ms Mo acknowledges telling Ms Lu that she had paid $400,000 to Mr Law to secure the property and be nominated as the purchaser. Ms Mo says she lied to Ms Lu. I do not believe her — she told the truth to Ms Lu.
[94] There are two other payments which have not been proven to be further contributions by Ms Mo and Mr Huang to the Ropata Avenue project — the sum of
$100,000 in the form of a friend’s ANZ Bank cheque on 17 October 2016 and the sum of $55,000 advanced by DH and PM Limited to Mr Law on 26 June 2016.
[95] Ms Mo says the funds for the ANZ Bank cheque were sourced from their friend Leo Yang’s account and that she herself deposited the bank cheque into Ms Yang’s bank account. Ms Yang denies receiving the money and has provided her bank statements to confirm her denial. Ms Mo says that Leo Yang has closed his account and returned to China and acknowledges being unable to trace the money.
[96] Furthermore, I accept that the sum of $55,000 paid to Mr Law on 26 June 2016 was a personal loan, which was paid back with interest at 6.8 per cent in two instalments of $28,737.50 on 24 and 25 October 2017. Here I again rely on bank statements and a reconciliation prepared by Mr Huang.
[97] Taking away the sums of $380,000 paid on 4 May 2015, $100,000 paid on 17 October 2016 and $55,000 paid on 26 June 2017, leaves the sum of $460,000 as further proven contributions.
[98] However, Mr Yang and Mr Law say that the sums totalling $460,000 were contributions not to the Ropata Avenue project, but to the Taurima Avenue project. On balance I think that is right. Mr Yang and Mr Law had received construction funding from FM Custodians Limited for the Ropata Avenue project. Furthermore, Ms Mo acknowledged that the contributions related to the Taurima Avenue project in an email dated 10 May 2018 to which she attached a table of her and Mr Huang’s contributions to the Taurima Avenue project. It included the sums of $50,000, $100,000, $10,000,
$42,000, $74,500, $50,000 and $75,500, totalling $402,000, which largely correlate with those claimed in the third amended statement of claim as relating to the Ropata Avenue project. In cross-examination, Ms Mo was unsure whether their further contributions were utilised in the Ropata Avenue project or the Taurima Avenue project.
[99] The further contributions were not made on condition that Mr Yang and Mr Law would not obtain a bank loan or offer any mortgage security over the property to a bank or other lender. I accept that it was always understood and agreed that the contributions from Ms Mo and Mr Huang and from Ms Yong would not be sufficient to cover the subdivision and building development costs. Ms Mo says she was told that the cost would be $2.4 - $2.5 million. It would have been impossible for Mr Yang and Mr Law to complete the development without further funding, which must have been expected and understood.
[100] The final issue is whether Ms Mo and Mr Huang made cash contributions totalling $112,200 to the Ropata Avenue project as requested by Mr Yang and Mr Law between November 2016 and April 2017. Mr Yang, Mr Law and Ms Yang vigorously deny either requesting or receiving the alleged cash contributions. They have produced personal and company bank records for seven days after the alleged cash payments. There are no deposits shown which may correlate to such payments. In the absence of any corroborating evidence, Ms Mo and Mr Huang are unable to prove these cash contributions on the balance of probabilities.
Result on Ropata Avenue project
[101] I have determined that there is no concluded contract in relation to the contributions totalling $330,000 by Ms Mo and Mr Huang to Mr Yang and Mr Law in various sums between 30 September 2015 and 28 January 2016. There can therefore be no breach of contract.
[102] In the alternative, Ms Mo and Mr Huang argue for a purchase price resulting trust. They seek orders in equity analogous to those available under the Property Law Act 2007,11 setting aside dispositions which prejudice creditors. For the same reason as expressed in relation to the Huxley Place project, I find that a presumption of a resulting trust cannot arise. All the contributions made by Ms Mo and Mr Huang to the Ropata Avenue project were made after settlement of the purchase of the property on 31 July 2015. Ms Mo says she viewed the contributions as “seed funding”, which would enable the development to get off the ground.
11 Property Law Act 2007, p 6, subpt 5, ss 344-350.
[103] In the further alternative, Ms Mo and Mr Huang allege that Mr Yang and Mr Law are in breach of the Fair Trading Act for, in effect, failing to disclose to them and to a third party lender all the financial arrangements put in place to fund the development. Again, I am of the view that Ms Mo and Mr Huang have not proven that Mr Yang and Mr Law engaged in conduct that was misleading or deceptive or likely to mislead or deceive within the meaning of the Act. There was no concluded contract between the parties into which a requirement to advise Ms Mo and Mr Huang of other investors in the project could be implied. Ms Mo and Mr Huang also allege that FM Custodians Limited were not advised, but they are not parties to the proceeding and make no such claim themselves.
[104] Ms Mo and Mr Huang seek, firstly, an order for specific performance of the contract they say they entered with Mr Yang and Mr Law to receive a completed unit on Lot 1 of the development or, alternatively, a declaration of unencumbered ownership of the unit. Secondly, they seek judgment for their further contribution of
$890,000 ($995,000 less admitted repayments of $105,000) and cash contributions of
$112,200, together with interest. An order for specific performance or declaration is unavailable given my finding that there is no concluded contract between the parties.
[105] There is, however, a remedy available to Ms Mo and Mr Huang to restore them to their original position and that is the restitutionary remedy of money had and received, as applied in the Huxley Avenue project. There will, therefore, be judgment in CIV 2018-404-002619 for Ms Mo and Mr Huang against Mr Yang and Mr Law in the sum of $330,000 plus interest of $32,446.59 in terms of the Interest on Money Claims Act from when the development was substantially completed (31 December 2017), to the date of commencement of this trial (10 May 2021), making a total of
$362,446.59.
[106] The counterclaim by Tamaki Homes Limited against Ms Mo and Mr Huang for the difference between the cost price of the unit on Lot 1 and the contributions made by the plaintiffs must also be dismissed in light of my finding that there was no concluded contract between the parties. In light of my finding, there is also no basis for the continuation of the caveat over the property.
[107] As to the counterclaim by Mr Law in relation to the sum of $105,000, being the unpaid balance of the purchase price of Lot 3, 342 Bawden Road, Ms Mo and Mr Huang have always acknowledged owing that sum to Mr Law. Ms Mo and Mr Huang are the registered proprietors of Lot 3, having paid the balance of the purchase price (approximately $620,000) on 22 May 2017. Mr Law is, however, yet to be reimbursed for the deposit of $105,000, which he paid upon agreeing to buy the property in December 2014. There will, accordingly, also be judgment in CIV 2018 404-002619 for Mr Law against Ms Mo and Mr Huang in the sum of
$105,000 plus interest of $12,738.28 in terms of the Interest on Money Claims Act from settlement of the property purchase (22 May 2017) to the date of commencement of this trial (10 May 2021), making a total of $117,738.28.
[108] Leave is granted to apply for any further orders necessary for sale of the property and the preservation of the proceeds of sale to enable both judgments to be satisfied.
47 Union Road, Howick
[109] On 14 March 2015, Mr Law entered into an agreement to purchase 47 Union Road, Howick, for $1,240,000 with settlement due on 25 September 2015. Mr Yang and Mr Law planned to subdivide the property into three lots and build two houses on it while retaining the existing house as Lot 1. Following discussions with Mr Yang and Mr Law, Ms Mo and Mr Huang agreed to invest in the project.
[110] On 25 September 2015, the purchase was settled and the title transferred to DH and PM Limited, a company set up by Ms Mo and Mr Huang to take title to the property. The purchase price was paid as follows:
Deposit paid by Mr Yang and Mr Law
$124,000
Mortgage funds obtained by Ms Mo and Mr Huang from the ASB Bank secured against the property
$850,000
Balance paid by Mr Yang and Mr Law
$268,133
Total
$1,242,133
[111] Mr Yang and Mr Law proceeded to apply for resource consent and building consent. Earthwork commenced in February 2018. The foundations for Lot 2 were
dug and poured and waste and stormwater pipelines were 90 per cent completed before work stopped. Mr Yang and Mr Law say they have been unable to secure finance and continue development of the property due to the failure of Ms Mo and Mr Huang to transfer the title back to them. Although initially tenanted, the existing house is now vacant because it is part of a building site which was fenced off when work on the property stopped.
[112] Mr Yang and Mr Law say that since settlement, the mortgage and other outgoings on the Union Road property have been serviced:
(a)Using rental income received by DH and PM Limited;
(b)Applying the rebate of $7,000 received from the ASB Bank on drawdown of the mortgage;
(c)Multiple lump sum payments made to Ms Mo and Mr Huang by Mr Yang and Mr Law when requested by them for reimbursement of invoices; and
(d)Monthly automatic payments of $5,000 from about March 2017 and continuing to date.
[113] There are three causes of action relating to the Union Road project in the statement of claim:
(a)Breach of contract by Ms Mo and Mr Huang’s failure to execute a deed of trust and transfer the property to Mr Yang and Mr Law;
(b)Breach of an express/implied/resulting trust pursuant to which DH and PM Limited holds the property on behalf of Mr Yang and Mr Law; and
(c)Breach of fiduciary duty alleging that Ms Mo and Mr Huang and their company, DH and PM Limited, owed duties as fiduciaries to Mr Yang and Mr Law to avoid unauthorised personal profit or benefit from the
relationship and avoid conflict between personal interest and duties to the beneficiaries, and to avoid divided loyalties.
[114]Mr Yang and Mr Law say the terms of the oral investment agreement included:
(a)DH and PM Limited would be nominated as purchaser to hold the property on trust for Mr Yang and Mr Law;
(b)DH and PM Limited would arrange a bank loan of $850,000 which would be applied towards the purchase price;
(c)They would pay the balance of the purchase price and all outgoings on the property, including mortgage and insurance payments;
(d)DH and PM Limited would advise them of any shortfall in the monthly automatic payments, which shortfall they would pay; and
(e)DH and PM Limited would transfer the property to them upon refinance of the original ASB Bank loan.
[115] In response, Ms Mo and Mr Huang say that DH and PM Limited’s retention of title to the property would also be regarded as a form of security for the separate advance by them to Mr Yang and Mr Law of the sum of approximately $400,000, being the agreed purchase price of a unit in the Ropata Avenue project. They also say the property financing agreement was limited to a maximum period of six months from settlement date within which period Mr Yang and Mr Law undertook to arrange alternative finance and provide appropriate replacement security for their advance of
$400,000 to the Ropata Avenue project. Finally, Mr Yang and Mr Law undertook to pay all outgoings on the Union Road property.
[116] Ms Mo and Mr Huang say Mr Yang and Mr Law breached the property financing agreement by failing to pay all outgoings on the Union Road property. They itemise various outgoings totalling $25,749.86, which they say have not been paid. They also say Mr Yang and Mr Law failed to arrange the refinancing of the ASB Bank
loan, or take appropriate steps to take the title back, or complete the development in a timely manner.
[117] However, based on subsequent analysis by their accountant, Arran Boote, Ms Mo and Mr Huang have agreed to the application of the sum of $25,749.86 from unidentified lump sum repayments made by Mr Yang and Mr Law so as to treat the outstanding outgoings as having been paid. They also acknowledge receiving net rental income from the house on the property from 1 March 2016 to 3 July 2017 totalling $32,441.61, which they have deducted from their claim for reimbursement.
[118] Ms Mo and Mr Huang therefore counterclaim against Mr Yang and Mr Law seeking a declaration that they hold an equitable lien over the property securing their
68.55 per cent proportionate ownership interest in the property and an order directing the sale of the property or, alternatively, judgment for $850,000 plus any outstanding outgoings and interest.
Issues
[119] The issues for the Court to determine in respect of 47 Union Road, Howick, are:
(a)What were the terms on which Ms Mo and Mr Huang’s company, DH and PM Limited, became the legal owners of 47 Union Road and secured an $850,000 loan from ASB Bank?
(b)Did Mr Yang and Mr Law contribute to the servicing of the ASB Bank loan and any other outgoings in respect of the property? If so, to what extent?
(c)Did Mr Yang and Mr Law act in breach of their agreement with Ms Mo and Mr Huang by failing to (i) arrange refinancing of the ASB Bank loan and (ii) produce alternative security for the contribution of
$400,000 made by Ms Mo and Mr Huang to the Ropata Avenue project?
(d)Did Ms Mo and Mr Huang wrongfully refuse to sign a deed of trust and/or transfer title to the property to Mr Yang and Mr Law?
Analysis
[120] It should be noted at the outset that apart from arranging the mortgage advance, Ms Mo and Mr Huang did not contribute any funds towards either settlement of the purchase of the Union Road property or towards the subdivision and building development. They have paid outgoings, including interest on the mortgage, for which they have been and continue to be reimbursed. I agree with Mr Sheppard, the accountant who gave evidence on behalf of Mr Yang and Mr Law, that the mortgage advance arranged by Ms Mo and Mr Huang cannot be regarded as an equity investment or contribution by them, which would give them a proportionate ownership interest in the property (68.55 per cent) based on a claimed contribution to the purchase price. If the mortgage advance had been an equity investment by Ms Mo and Mr Huang, there is simply no basis upon which Mr Yang and Mr Law would have been called upon to pay the interest on it.
[121] Again, there is no contemporaneous documentation evidencing the agreed terms on which DH and PM Limited became the legal owners of the property and secured the $850,000 loan from ASB Bank. There are no WeChat messages or emails recording the agreement. The negotiations were entirely oral. The mortgage documentation does not assist in ascertaining the basis on which it was obtained.
[122] Ms Mo and Mr Huang say that a primary reason why they were registered as owners of the property was to provide them with some security in relation to the unsecured funds they had contributed to the Ropata Avenue project. That is denied by Mr Yang and Mr Law. Ms Mo and Mr Huang also say that Mr Yang and Mr Law agreed to take the title to the property back in six months. That is also denied. Mr Yang and Mr Law say the agreement was that once the subdivision had been completed the existing house on the property would be sold and the proceeds would repay the mortgage.
[123] Again, in the absence of any contemporaneous documentation or relevant practice from which inferences can be drawn, it is not possible to establish the exact
nature of the commercial arrangement. The only arrangements the parties agree upon are that Mr Law would nominate DH and PM Limited as purchaser of the property; Ms Mo and Mr Huang would obtain a loan of $850,000 to be secured against the property; Mr Yang and Mr Law would pay all outgoings on the property including interest on the mortgage advance; Mr Yang and Mr Law would proceed to subdivide the property and build two units on the subdivided property; and the title would be transferred back to Mr Yang and Mr Law at some stage during the development process.
[124] As to the second issue, it has been established that Mr Yang and Mr Law have contributed and continue to contribute to the servicing of the ASB Bank loan and other outgoings in respect of the property. When there was a measure of cooperation between the parties, a reconciliation schedule for both the Union Road and Taurima Avenue properties was prepared by Mr Huang and provided to Mr Yang and Mr Law. On the basis of this schedule, both lump sum and regular payments have been made by Mr Yang and Mr Law to Ms Mo and Mr Huang for reimbursement of outgoings.
[125] Subsequent to the trial, counsel for Ms Mo and Mr Huang provided an updated costs schedule for the Union Road and Taurima Avenue properties. It discloses outgoings between 1 December 2020 and 31 May 2021 totalling $26,804.99 and reimbursements of $25,000, leaving a shortfall of $1,804.99 to be paid by Mr Yang and Mr Law to Ms Mo and Mr Huang.
[126] As to the third issue, it has not been established that Mr Yang and Mr Law are in breach of their agreement with Ms Mo and Mr Huang by failing to either arrange refinancing of the ASB Bank loan after six months or produce alternative security for their contribution of $400,000 made to the Ropata Avenue project. That is because the exact terms of the commercial arrangement between the parties are uncertain. If the allegation of a limited six month duration is correct, then it was clearly varied by the parties as evidenced by the 23 May reconciliation (and prior reconciliations) and a WeChat message on 24 August 2016 from Ms Mo proposing to re-fix the mortgage for 24 months. The highwater mark of Ms Mo and Mr Huang’s case that Mr Yang and Mr Law agreed to title being held by Ms Mo and Mr Huang as security for advances made by them to the Ropata Avenue project. Ms Mo relies on a WeChat exchange
Mr Law:Half the profit on one house … right, that’s the equivalent of your having half, yep, I remember this.
The nearly $300,000 was a total of $260,000 in seven instalments between October and November 2016, while the further $200,000 was paid in instalments of $50,000,
$74,500 and $75,500 between 6 and 15 February 2017.
[157] The total contributions made by Ms Mo and Mr Huang towards the Taurima Avenue project were $517,096 leaving aside the mortgage advance of
$715,000, which was not an equity contribution.
[158] Again, I am of the view that the commercial arrangement amounts to a trust. In a WeChat message to Mr Law on 14 June 2017, Ms Mo said:
There are several points I want to make clear.
12 See above, at [76].
1.for Trauma [Taurima], I am just doing you a favour for the loan; I do not own the house.
[159]In an email to Mr Yang and Mr Law on 13 February 2018, Ms Mo stated:
4.Regarding the construction investment project at 8 Taurima Ave, Point England, Auckland.
The house is now in my company and Emily’s name. It is being held on behalf of both of you. In terms of the ownership, we, three parties, will sign the Deed of Trust that is prepared by you.
Because you will build 5 new houses at 8 Taurima Ave, Point England, Auckland, we will cooperate with you on the sale of the houses and other matters concerning the transfer of the ownership. After you confirm a buyer of a new entity, we will transfer the property through a Sale & Purchase agreement or other legal ways in accordance with the result of our negotiation. The money which is obtained from selling the property will be used to settle the 715,000 dollars ASB loan.
[160] Again, a deed of trust was then prepared, but never signed. Ms Mo wanted to reach a global settlement with Mr Yang and Mr Law, rather than settle each project individually.
[161] In Ms Mo’s affidavit sworn on 19 November 2018, she stated that the arrangement was that as security for the contribution [to pay part of the settlement monies] she and Mr Huang would retain title to the property together with Mr Yang’s sister, who did not contribute, but was included as Mr Law’s nominee. Ms Mo further says:
After 6 months (ie by June 2016) the Defendants would arrange alternative finance and construction funding and take title to the property.
[162] In all the circumstances, I find it established on the balance of probabilities that Ms Mo and Mr Huang together with Ms Yang hold the property on trust for Mr Yang and Mr Law. Again, it does not however necessarily follow that Ms Mo and Mr Huang have wrongly refused to sign a deed of trust and/or transfer title to the property to Mr Yang and Mr Law in the circumstances as they existed at the time of any request to do so. As to the terms of the trust, I find that there is sufficient certainty to imply the same terms as the trust in relation to the Union Road property.
[163] As with the Union Road property, Mr Yang and Mr Law have paid for the servicing of the ASB Bank loan and any other outgoings in respect of the property. The reconciliations which have been prepared by Mr Huang relate to both the Union Road and Taurima Avenue properties. The costs record provided by counsel for Ms Mo and Mr Huang subsequent to the trial also relates to both properties and attached invoices for maintenance or remedial work done at both properties. It records total expenditure of $26,804.99 for both properties from 1 December 2020 to 31 May 2021 and reimbursements of $25,000, leaving a shortfall of $1,804.99.
[164] The accountant for Ms Mo and Mr Huang, Mr Boote, acknowledges payments made to Ms Mo and Mr Huang of $126,017.92 plus $215,000. He classified these payments as “in the nature of an early return of the capital” contributed by Ms Mo and Mr Huang. Mr Boote took this approach because the $5,000 monthly payment (from March 2017 to September 2020) from Mr Yang and Mr Law’s company, Vinjax Limited, were recorded as “owners’ drawings” in Vinjax’s financial records. However it is classified, it is clear that the regular monthly payment of $5,000, together with the irregular lump sum payments totalling $126,017.92, have been used and are available for use by Ms Mo and Mr Huang to pay mortgage interest and other outgoings on the property. As noted earlier, Mr Boote has arbitrarily classified $25,749.86 as relating to the Union Road property in order to eliminate any liability for the payment of outgoings on Union Road “due to lack of details provided on the bank statements”.
[165] There is again a fundamental dispute as to the terms on which Ms Mo and Mr Huang made the contributions of $517,096. Ms Mo and Mr Huang say that they agreed to provide mortgage finance of $715,000 in return for an equal share of profit from the sale of the five townhouse units to be built on the property. As to the extra
$57,096.70 provided on settlement, Ms Mo says that Mr Law told her he would pay her back. Ms Mo does not specify what the agreement was in relation to further contributions of $460,000 made by herself and Mr Huang. In her brief of evidence, Ms Mo says this sum was part of a $995,000 which she and Mr Huang provided to Mr Yang and Mr Law to complete development of the Ropata Avenue project. She merely says:
The project was subject to significant delay, Calvin said that if we did not provide these sums, the project would not be completed, and our investment would be put at risk.
[166] At trial, Notwithstanding Ms Mo gave evidence that the agreement was that she and Mr Huang would receive an equal share of profit from the sale of the five townhouses. However, she had earlier said in a WeChat message to Ms Yang on 11 February 2018:
Fifthly, regarding the loan of over five hundred thousand [dollars] my mother lent to your elder brother [and Mr Law]. [We need to] confirm the date of repayment and the interests in a loan receipt. [The repayment] should also include half of the profit from one of the houses in Trauma [Taurima]. (Your elder brother mentioned that the amount is about one hundred thousand [dollars]).
[167]Furthermore, in an affidavit sworn on 19 November 2018, Ms Mo said:
… and so it was proposed by Calvin that David and I would provide part of the settlement monies. The agreement was that David and I would receive either one of the completed units in the development or the equivalent monetary value calculated as a percentage of our contribution against the overall cost of the completed project.
[168] On the other hand, Mr Yang and Mr Law say that the funding that Ms Mo proposed was just for settlement of the purchase of the property. It did not extend to cover the necessary financing required to complete the construction of the intended five townhouse development. They say the oral agreement with Ms Mo and Mr Huang was that they would receive 50 per cent of the after tax profit from the sale of one lot in return for their contribution to the project (after repayment of the funds provided).
[169] Again, there is no contemporaneous documentation evidencing the agreed terms of the investment. There are no WeChat messages or emails recording the agreement. The negotiations were entirely oral. The bank statements which evidence the payment of sums of money totalling $517,096.70 do not assist in ascertaining the basis on which the money was paid. The parties obviously all proceeded on a mistaken understanding of the agreement, including whether it applied only to the provision of the mortgage advance or to the provision of the contributions totalling $517,096.70 as well.
[170] Various options have been put forward. Ms Mo and Mr Huang would receive one of the completed units in the development or the equivalent monetary value calculated as a percentage of the contribution against the overall cost of the completed project, or fifty per cent of the profit from the sale of the five townhouse units to be built on the property or fifty per cent of the profit from the sale of one unit.
[171] In those circumstances and for the same reasons as expressed in relation to the Huxley Place and Ropata Avenue projects, I am again reluctantly drawn to the conclusion that no contract was therefore ever concluded in relation to the contributions made by Ms Mo and Mr Huang to the Taurima Avenue project. Because there is no concluded contract, Mr Yang and Mr Law therefore did not act in breach of their agreement with Ms Mo and Mr Huang by failing to complete the development and disclose the costs associated with partial completion of the project.
Result on Taurima Avenue project
[172] As pleaded, Ms Mo and Mr Huang have sought orders for the taking of accounts to determine the costs actually and properly incurred by Mr Yang and Mr Law in completing the units up to the present stage and the “value of the equity which [Ms Mo and Mr Huang] are entitled to recover calculated having regard to their entitlement under the investment agreement” with consequential directions. In addition, they seek orders directing a sale of the property under the Property Law Act 2007 and directions for the disbursement of the net proceeds of sale.
[173]At trial, counsel advised that his instructions were to indicate to the Court that
- provided Ms Mo and Mr Huang were permitted leave to amend their claim at this stage - they would prefer to avoid the inconvenience of taking accounts and obtaining a sale order. Instead, Ms Mo and Mr Huang claim damages as assessed by Mr Boote, and rely on Mr Boote’s investigations, evidence, and calculations as set out in Table 7 of his reply brief. Those calculations start off with the agreed estimated value of the property, as noted by Mr Sheppard in his brief, of $3 million.
[174] On this basis Ms Mo and Mr Huang were prepared, if necessary by a formal pleading amendment, to restrict their claim to the outstanding contribution ($574,415.47) and for the reasons given by Mr Boote, 50 per cent of profit share
($336,450.31), or alternatively and subject to the Court’s determination on the merits, the 33.7 per cent profit share ($227,137.34) referred to in Mr Boote’s Tables 7 and 8.
[175] In light of the finding that there is no concluded contract, the claim as pleaded or as varied must fail. There is, however, a remedy available to Ms Mo and Mr Huang to restore them to their original position and that is the restitutionary remedy of money had and received, as applied in the Huxley Place and Ropata Avenue projects. For similar reasons, it is appropriate to apply this remedy to the Taurima Avenue project also.
[176] Accordingly, there will be judgment in CIV 2018-404-000506 for Ms Mo and Mr Huang in the sum of $517,096.70 plus interest of $41,389.11 in terms of the Interest on Money Claims Act from when construction work ceased (30 June 2018) to the date of commencement of this trial (10 May 2021), making a total of $558,485.81.
[177] There will also be a declaration that Ms Mo and Mr Huang together with Ms Yang hold 8 Taurima Avenue, Point England, on trust for Mr Yang and Mr Law. I also make an order that Ms Mo, Mr Huang and Ms Yang transfer the property at 8 Taurima Avenue, Point England, to Mr Yang and Mr Law or their nominee on condition that:
(a)The ASB Bank mortgage advance is repaid in full and discharged as part of the transfer;
(b)Ms Mo and Mr Huang are reimbursed for any outgoings on the property which they have paid as trustees and not been reimbursed. If the sums to be paid, if any, cannot be agreed between the parties, then the amount is to be jointly determined by the parties’ accountants, Mr Sheppard and Mr Boote.
Lot 4, 342 Bawden Road, Dairy Flat
[178] On 2 December 2014, Mr Yang entered into an agreement to purchase Lot 4, 342 Bawden Road, Dairy Flat, for $750,000 with settlement due 10 working days after issue of a new Certificate of Title. Mr Yang duly paid a deposit of $105,000. He
originally intended to build a house for himself on the property but says that following discussions with Ms Mo and Mr Huang he offered them the opportunity to invest in the property. A new Certificate of Title to the property was issued on 4 May 2017 and Ms Mo and Mr Huang provided a bank cheque for $656,334.08 on 20 May 2017 to enable settlement of the purchase of the property.
[179] On 22 May 2017, the purchase was settled, and the title transferred into the name of Mr Yang’s sister, Yan Yang. A dispute subsequently arose between the parties over the terms of the agreement by which Ms Mo and Mr Huang invested in the property and proceedings were issued. There has, however, been a measure of co- operation between the parties and Lot 4 was sold to a third party on 26 March 2021 for $1,015,000. The parties have subsequently had their capital contributions returned with the balance being held in trust pending the outcome of this proceeding, as follows:
$ Net sale proceeds 983,146.52 Repayment of deposit to Mr Law 105,000.00 Repayment of balance to Ms Mo and Mr Huang 654,906.58 Balance held on trust 223,239.94
[180]There are two causes of action in the statement of claim:
(a)Breach of contract in terms of which Mr Yang had agreed to register the property title in the name of Ms Ho and Mr Huang’s company, DH and PM Limited and instead registered it in his sister’s name as his nominee;
(b)Breach of a resulting trust in terms of which the second defendant, Ms Yang, held title to the property for the benefit of Ms Mo and Mr Huang to an extent in proportion with their contribution to its purchase price.
[181] Ms Mo and Mr Huang say that the oral agreement included the following terms:
(a)They or their company would receive formal nomination under the purchase agreement as purchasers of the property;
(b)They would acquire ownership of the property to the extent proportionate with their contribution to its purchase price under the purchase agreement; and
(c)They would obtain title to the property upon settlement.
They say that Mr Yang had approached them because, as he told them, Mr Yang was unable to access the funds to settle the purchase of the property and was at risk of losing his deposit of $105,000.
[182] In response, Mr Yang says in the interests of fostering a long term relationship with Ms Mo and Mr Huang and in the knowledge that the property had substantially increased in value since he had bought it, he offered them a one-third share in the property in exchange for providing the balance of the funds required for settlement. At the same time, he offered a one-third share to his business partner, Mr Law. The balance paid by Ms Mo over and above her agreed one-third share cost ($250,000) amounting to approximately $395,000 ($750,000 less deposit of $105,000 and Ms Mo’s share of $250,000) would be treated as loans to Mr Yang and Mr Law, which would be repaid upon completion of the Taurima Avenue project.
[183] Mr Yang and Mr Law also say it was agreed that the title to the property would be held by them or their nominee. Prior to settlement, they say that Ms Mo advised them that she needed a deed of nomination in order to obtain bank finance to settle the payment of the balance of the purchase price. A deed of nomination was duly prepared and signed. However, on the Friday before settlement (Friday, 19 May 2017), Ms Mo advised them that she had raised sufficient cash funds to settle the payment of the balance of the purchase price and had therefore declined the bank loan. Mr Yang and Mr Law say that the purchase was therefore settled in the name of Ms Yang with the knowledge and agreement of Ms Mo. They say that Ms Yang acknowledges holding the property on trust for Ms Mo and Mr Huang, Mr Yang and Mr Law in equal shares.
Issues
[184] The issues for the Court to determine in respect of Lot 4, 342 Bawden Road, Dairy Flat, are:
(a)What was the agreement reached, if any, between the parties in respect of the ownership of the property?
(b)If there was an agreement, should the proceeds of sale be divided in accordance with that agreement?
(c)If there was no agreement, on what basis should the proceeds of sale be divided?
Analysis
[185] There is a stark disagreement between the parties as to the basis on which Ms Mo and Mr Huang contributed the balance of the purchase price for Lot 4, 342 Bawden Road. There is no doubt that a deed of nomination was executed by Mr Yang nominating Ms Mo and Mr Huang’s company, DH and PM Limited, as purchaser. However, this factor is not conclusive. Mr Yang and Mr Law were quite flexible about the person or entity on the title. In the Huxley Place project, a minority investor, Ms Yong, took title. In the Ropata Avenue project, it was Mr Yang and Mr Law’s development company, Tamaki Homes Ltd, which took title. In the Union Road project, it was Ms Mo and Mr Huang’s development company, DH and PM Limited. In the Taurima Avenue project, it was Ms Mo and Mr Huang themselves, together with Mr Yang’s sister, Ms Yang (who had in reality nothing to do with the project) who took title. Again, in the Lot 4, 342 Bawden Road project, Ms Yang took title, this time by herself notwithstanding she again had nothing to do with the project.
[186] Similarly, Ms Mo cautions against attaching any weight to WeChat messages or emails between her and Mr Yang after their relationship had broken down in about June 2017 at a time when there was no paperwork to confirm their arrangements and her and Mr Huang’s money was at risk. She says she felt she had to agree with what Mr Yang and Mr Law wanted so they could get their money back. Any references to concluded agreements has to be seen in that light.
[187] As I say, the contrast between the parties’ positions is stark. There is no agreement as to whether Ms Mo and Mr Huang received a 33.3 per cent equitable
interest (as a one-third owner), or a 87.3 per cent equitable interest (as provider of the settlement funds) when the sale and purchase agreement settled on 22 May 2017.
[188] In all the circumstances, I prefer the evidence of Mr Yang, Mr Law and Ms Yang to that of Ms Mo. First, the property had substantially increased in value since Mr Yang had contracted to buy it for $750,000 in December 2014. Ms Mo was in possession of a valuation report dated 5 May 2017 relating to the neighbouring Lot 3, which valued that lot at $1.3 million. She had sold a half share of Lot 3 to Ms Lu for $600,000 prior to settlement on 22 May 2017.
[189] Assuming Lot 4 was of similar value,13 Ms Mo and Mr Huang would receive a huge windfall if they became equitable owners of 87.3 per cent of Lot 4 following settlement of the purchase. If it had immediately sold for $1.3 million, that would have been a profit of $480,150 (87.3 per cent of $550,000 increase in value). As it was, Lot 4 was subsequently sold for $1.015 million, an increase in value of $265,000. Ms Mo and Mr Huang say they are therefore entitled to $231,345 (87.3 per cent of
$265,000 increase in value), which is still a substantial windfall. If Ms Mo and Mr Huang are only entitled to a 33.3 per cent equitable share, their share of the
$265,000 increase in value still amounts to $88,333.
[190] Secondly, although initially Ms Mo and Mr Huang required a deed of nomination naming themselves as purchasers of the property to enable them to secure the bank loan required to settle the purchase, their position changed prior to settlement. On Friday, 19 May 2017, three days before settlement on Monday, 22 May 2017, Ms Mo messaged Mr Yang by way of WeChat:
The bank has approved [our loan] I said we don’t need it any more. Do you want me to talk to Ben [the solicitor acting on the purchase] about Emily? [Ms Yang].
Mr Yang then sent an audio message back to Ms Mo:
I have sent an email to him with my younger sister’s detail[s]. I asked him to prepare a Deed of Nomination. He said that he will send me a settlement figure later. Then we can make a bank draft.
13 The lots had sold in 2014 for $725,000 (Lot 3) and $750,000 (Lot 4).
[191] Ms Mo responded “Good”. Ms Mo, however, disputes the translation and says she used the Chinese word to mean “Ok”, rather than “Good”. She says she did not approve the solicitor’s preparation of a Deed of Nomination for Ms Yang. Rather, she acknowledged Mr Yang’s proposal, but did not specifically agree. She says she had to discuss the matter with Mr Huang and get back to Mr Yang. She says she still understood that the purchase would proceed in the name of DH and PM Limited because she had not been asked to waive the company’s rights to become the purchaser of the property. To my mind, however, the words “Good” and “OK” have the same meaning in the context in which the word was used. Ms Mo did not tell Mr Yang she needed to talk to Mr Huang or that she disagreed with what Mr Yang had proposed. Mr Yang was clearly reasonably able to think that Ms Mo agreed to a Deed of Nomination being prepared in the name of Ms Yang.
[192] Then, on 23 May 2017, the day after settlement, in a WeChat exchange with Mr Yang and Mr Law, Ms Mo confirmed that she paid cash to settle and then said:
Since after did da number,
Cash settle can help Emily [Ms Yang] increased her serving [servicing].
This comment recognises the fact that Ms Yang had an opportunity to increase her borrowing now that she had unencumbered title to Lot 4.
[193] Thirdly, Ms Mo and Mr Huang settled the purchases of Lot 3 and Lot 4 on the same day, 22 May 2017, having paid Mr Law almost $400,000 to be nominated as purchasers of Lot 3. Three weeks after the settlement of the purchase of both properties, Ms Mo sought to renegotiate the terms of the sale of Lot 3. In the course of an email dated 14 June 2017, Ms Mo confirmed the essential terms of the sale of Lot 4:
3. You said the other lot [Lot 4] was sold to me at cost price. I’m grateful for that. But I settled that lot with $650,000 in cash. Deducting the $250,000 I should pay [one-third of purchase price of $750,000]. I lent you $400,000 of which $200,000 you said you will pay me interest and the other $200,000, I didn’t ask anything for that. But I paid an interest rate of 5.6% to the bank myself.
[194] Further, during the course of settlement negotiations in February 2018, Ms Mo sent a WeChat message dated 11 February 2018 to Ms Yang as follows:
Fourthly, regarding the land on DF Lot 4 which is held by you on behalf of us, we need to prepare a Deed of Trust that proves your elder brother owns one third, I own one third and Jackson owns one third, and I lent two third of the money to them. We need to specify the date of repayment and the agreed interests. [We] also need to add a clause in the title that the [property] can only be sold when all three parties reach an agreement. In this case you will not be a developer. Your elder brother agreed to buy my third at market value in the future. After he completes the purchase, [we can] simply withdraw this Deed of Trust.
[195] Then in an email two days later, on 13 February 2018, to Mr Yang and Mr Law, Ms Mo says:
2.Regarding the investment project of Lot 4, 342 Bawden Road, Dairy Flat, Auckland.
We settled the land by paying cash on 20 May 2017. It is in Calvin and sister Emily’s name. Calvin owns 1/3 of the property; Jackson owns 1/3 of the property; and Pat’s Mother Mrs. Huang owns 1/3 of the property. When the land was purchased, the three parties agreed that Calvin and Jackson borrow money from Mrs. Huang to pay their 1/3 share of the property. Calvin and Jackson will repay the principal (the money for buying their 1/3 shares of the property) and the interest to Mrs Huang, when the 5 newly built houses of the first construction investment projects at 12 Ropata Ave, Point England, Auckland are sold. The estimated repayment date is around May 2018. If the repayment is delayed, both sides will negotiate a new date.
By the end of 2018, around October, Calvin and Jackson will purchase Mrs. Huang’s 1/3 share of the land at the market value.
In terms of ownership of property on this land and other relevant investment matters, we will find a lawyer to draw up a Deed of Declaration of Trust. Calvin, Jackson, Emily and Mrs. Huang will then sign it (the reason why we will ask Emily to sign the document is the land is in Emily’s name).
[196] Although Ms Mo says that in referring to a one-third share each, she was only repeating Mr Yang and Mr Law’s position, I am of the view that she has in this correspondence admitted the essential terms of the agreement. She is referring to historical fact, which is easily distinguished from the proposals she is putting forward for settlement of the dispute. Nowhere does she say to Mr Yang and Mr Law that she and Mr Huang are entitled to 87.3 per cent of the value of the property, as she now claims. The position she now adopts can be contrasted to the position she took at the time of the transaction. At that time, Ms Mo gave tacit approval to the nomination of
Ms Yang as purchaser of Lot 4 before settlement and soon after acknowledged the sum of $250,000 (one-third of the purchase price) to have been properly payable by her.
[197] Fourthly, the registered proprietor of the property, Ms Yang, acknowledged having held the property on trust for the three parties. She says the proposal that she take title to the land for her brother Mr Yang, Mr Law and Ms Mo, was put to her by her brother in October 2016. She says Ms Mo told her that because the land purchase was being settled in cash, she might later be able to use her income to refinance the land to obtain a further mortgage facility from the bank. Ms Yang categorically denies the assertion by Ms Mo that she did not know that the property would be settled in Ms Yang’s name. Further, in a lengthy WeChat message on 11 February 2018, Ms Mo said:
I did not put my name on the title because I trust you 100%, right? It proves my trust in you better than signing any kind of document does.
[198] I find established that the property was held on trust by Ms Yang for Mr Yang, Mr Law and Ms Mo and Mr Huang in one-third shares. Ms Mo and Mr Huang’s one- third share ($250,000) was intended to represent a proprietary interest, but the remainder of the settlement monies paid by Ms Mo and Mr Huang was clearly intended and acknowledged to be a loan to Mr Yang and Mr Law. The clearly stated acknowledgement of a loan is inconsistent and incompatible with a resulting trust for the full amount of the settlement monies paid by Ms Mo and Mr Huang. Counsel for Mr Yang and Mr Law strongly oppose the claim for 87.3 per cent, but responsibly concedes that a resulting trust to the extent of one-third of the purchase price is difficult to oppose.
Result on Bawden Road project
[199] As noted earlier, the property was sold by agreement of the parties with settlement of the purchase on 26 March 2021. The net sale proceeds were
$983,146.52. After repayment of the deposit paid by Mr Yang of $105,000 and the settlement monies paid by Ms Mo and Mr Huang of $654,906.58, a balance of
$223,249.44 is held in a solicitor’s trust account pending directions by this Court.
[200] There is no dispute that expenses totalling $14,577.30 should be reimbursed to Mr Yang and Mr Law, as follows. This reduces the balance available for distribution to $968,569.22.
Date $ 19 Sep 17 Council rates 565.85 28 Nov 17 Council rates 565.85 28 Feb 18 Council rates 565.85 14 Jun 18 Council rates 622.44 31 Aug 18 Council rates 965.54 27 Nov 18 Council rates 965.54 5 Feb 19 Council rates 965.54 29 May 19 Council rates 965.54 2 Sept 19 Council rates 987.90 29 Nov 19 Council rates 987.90 9 Mar 20 Council rates 987.90 23 Mar 20 Property listing ad 398.00 31 Aug 20 Council rates 2,010.68 13 Nov 20 Follies Way Management Ltd 2,000.00 30 Nov 20 Council rates 1,022.77 Total 14,577.30
[201]Counsel has helpfully put forward the following proposed distribution:
$ Ms Mo and Mr Huang one-third share 322,856.40 Plus loan repayment by Mr Law 250,000.00 Plus loan repayment by Mr Yang 145,000.00 Subtotal 717,856.40 Less interim payment 654,906.58 Balance payable to Ms Mo and Mr Huang 62,949.82 Mr Law one-third share 322,856.40 Less loan repayment to Ms Mo and Mr Huang 250,000.00 Balance payable to Mr Law 72,856.40 Mr Yang one-third share 322,856.40 Less loan repayment to Ms Mo and Mr Huang 145,000.00 Less repayment already made 105,000.00 Balance payable to Mr Yang 72,856.40
[202] There will accordingly be the following orders in CIV 2019-404-000997 in relation to the monies held in a solicitor’s trust account pending order of this Court:
(a)Mr Yang and Mr Law are to be reimbursed the sum of $14,577.30 in respect of Council rates from September 2017 to November 2020, a management fee and a property listing advertisement.
(b)Ms Mo and Mr Huang are to be paid the sum of $62,449.83 as their one-third share.
(c)Mr Yang is to be paid the sum of $72,856.40 as his one-third share.
(d)Mr Law is to be paid the sum of $72,856.40 as his one-third share.
(e)Proportional adjustments can be made to these amounts by the solicitor holding the monies to account for either expenses or interest properly and reasonably incurred.
Conclusion
[203] Leave is reserved generally for the parties to apply for or vary any orders in order to give effect to this judgment.
[204] If costs cannot be agreed, the parties are to file memoranda within two months after the date of this judgment.
Woolford J
Solicitors: DX Law Ltd, Auckland
Croftfield Law Limited, Auckland
Counsel:I Hutcheson, Auckland G D Wiles, Auckland R Kaur, Auckland