Mo v Yang

[2019] NZHC 2447

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001927

[2019] NZHC 2447

BETWEEN

QINGHUA MO and YU HUANG

Plaintiffs

AND

ZHE YANG and JACKSON ING WEI LAW

Defendants

Hearing:

15 March 2019

Appearances:

G D Wiles for the Plaintiffs

I Hutcheson for the Defendants

Judgment:

27 September 2019

JUDGMENT OF ASSOCIATE JUDGE SARGISSON

This judgment was delivered by me on 27 September 2019 at 11.30 am pursuant to Rule 11.5 of the High Court Rules.

…………………………………

Deputy Registrar

Solicitors / Counsel:

Croftfield Law Ltd, Auckland DX Law Ltd, Auckland

G D Wiles, Auckland

I M Hutcheson, Auckland

MO v YANG [2019] NZHC 2447 [27 September 2019]

Introduction

[1]        In this proceeding the plaintiffs seek summary judgment on their statement of claim against the defendants in which they seek orders for:

(a)the return of $350,000 invested in the defendants’ intended subdivision and redevelopment of a residential property at Huxley Place,

Glen Innes; and

(b)a share of the profits made when the defendants abandoned the planned development and resold the property.

[2]        The statement of claim – filed on 7 September 2018 – relies on two causes of action: breach of an oral, partly performed, contract and, in the alternative, a resulting trust. The plaintiffs seek summary judgment on the first cause of action.1 In support they rely on a verifying affidavit setting out their belief that there is no defence to their claim. They also say there is nothing in the defendants’ evidence that raises an arguable defence or that is not completely answered by their own affidavit evidence in reply. They contend that the appropriate relief is an order requiring the return of their investment, along with a share of the profits on the resale of the property.

[3]        The application for summary judgment is opposed. At the hearing counsel for the defendants advised that the defendants’ opposition is founded essentially on two issues which he summarised as follows:

(a)The terms of the oral agreement are partially disputed and may have a bearing on quantum (assuming breach, which is denied);

(b)There was no breach arising from the resale as the parties agreed to transfer the investment to  another  development  property  at  Taurima Ave in Glen Innes.

1      This was the position taken by the plaintiffs at the hearing, on the basis that the second cause of action relies on an alternative factual finding that there was no agreement formed in November 2015.

[4]        These issues give rise to disputed matters of fact and, as is often the case with disputes relating to oral contracts, they are not readily determined summarily. But the plaintiffs contend that this is a case where a robust approach to liability is warranted even if the Court finds that quantum cannot be dealt with summarily; that on a proper analysis of the evidence there is no barrier to a finding on liability either because the defendants’ contentions are improbable or because the time for performance of disputed terms had not been reached. As with the defendants, they rely heavily on WeChat exchanges that took place in August 2017 and February 2018.

[5]        The plaintiffs appear at first blush to have a good case for relief. But this is a case where the terms of the parties’ agreement require closer scrutiny than is possible on a summary basis. I have reservations as to the overall terms of the agreement (and indeed whether there was sufficient certainty about those terms to result in a binding contract) and regarding the possible variation of that agreement; and I do not consider I can make a safe definitive finding about the alleged breach arising from the resale. The parties have been involved in several property projects and there seems to have been some “fluidity” in their dealings relating to them. The view I have reached is that this case is not suitable for summary judgment. The safe course is for the parties’ dispute to be dealt with by the ordinary trial process.

[6]        I will first set out the factual background of the proceedings. Then I will briefly address the statement of claim and the defences raised. I will then set out the legal standards for summary judgment before expanding on the reasons why the claim is not appropriate for summary judgment.

Background

[7]        In November 2015 the defendants entered into an agreement for sale and purchase with the owner of 3 Huxley Place, Glen Innes. The agreed price was

$860,000 with a settlement date of 19 February 2016. The intention was to subdivide and build four units on the property.

[8]        The parties agree that shortly after (still in November) they entered into an oral contract pursuant to which the plaintiffs invested $350,000 (on an unsecured basis) which the defendants applied as agreed towards the purchase price of the Huxley

property. In return, the defendants would obtain mortgage finance – at their cost – sufficient to complete the development and subdivision with a targeted completion time of not later than December 2017. On completion, the defendants (or their nominee) would convey an unencumbered title to the plaintiffs for a completed residential unit on proposed Lot 1 of the Huxley property.

[9]        The defendants in fact completed the purchase of the property on or  about  19 February 2016, in the name of their nominee and co-investor, Ms Yong (also known as Emily), who took title; and the plaintiffs fulfilled their obligation to pay their contribution. They did this by instalments – two lots of $50,000 in November 2015,

$160,000 in February 2016 and a final instalment of $90,000 in April 2016.

[10]      It is not in dispute that the defendants – instead of subdividing and developing the property as originally agreed – sold it to a third party, Formula Cruises Ltd, for

$1.2 million on 21 August 2017 without the plaintiffs’ knowledge. They then proceeded with settlement on 25 August 2017.2

The claim

[11]The plaintiffs’ claim relies on two causes of action relating to these facts.

[12]      The plaintiffs’ first cause of action pleads that, by selling the Huxley property to a third party in August 2017, the defendants breached the parties’ oral contract formed in November 2015.

[13]      The second and alternative cause of action assumes the parties failed to conclude an enforceable agreement and alleges the defendants were the trustees of a resulting trust. Given it relies on an alternative set of facts summary judgment on it was not pursued. The focus of the argument at the hearing was on the first cause of action.

2      In fact the purchase was settled on 21 August 2018 and merely registered 25 August 2018, but this is not determinative of anything.

The issues in dispute

[14]      I note that the two issues the defendants rely on in opposition to summary judgment are not spelt out in the notice of opposition (indeed there are no specific grounds in the notice of opposition). Rule 12.9 of the High Court Rules 2016 requires the grounds of opposition to be specified. The notice relies in a general and non-descriptive way on the affidavit evidence filed in support of the defendant’s opposition. That is not an appropriate way to respond to an application for summary judgment.

[15]      Notwithstanding this defect, at the hearing it became clear that the defendants rely principally on two grounds of defence:

(a)A dispute as to what the plaintiffs were actually entitled to receive under the original agreement. The plaintiffs’ claim is that they were entitled to receive title to a three-bedroom unit on the proposed Lot 1 of the Huxley property for their initial investment. The defendants contend the plaintiffs were actually only entitled to a two-bedroom unit, with the upgrade to three bedrooms being dependant on resource consent and the plaintiffs paying an extra $60,000. The defendants claim the plaintiffs breached that obligation.

(b)A claim that the parties formed an agreement in August 2017 to discharge their respective obligations under the contract, by transferring the plaintiffs’ investment to a similar redevelopment of another property in Glen Innes, at Taurima Ave, on broadly similar terms. The defendants say this left them free to on-sell the property later that month. I am not satisfied that the first issue can be properly resolved on the evidence that is presently before the Court. Both sides agree that for the plaintiff to succeed in establishing liability on the first cause of action, it does not matter whether the agreement was for a three bedroom unit (as the plaintiffs claim), or a two bedroom with a possible upgrade.

(c)The defendants further allege that the plaintiffs did not fully comply with the terms of the original contract – and nor have they complied with the substituted Taurima Street agreement – but that if the plaintiffs insist on taking their money out of the Taurima Street project, they may do so once the project has been finished.

[16]      Counsel for both sides clearly considered the second issue – specifically whether investment was transferred from the Huxley project to the Taurima project– the key issue at this juncture. The first and third issues pertain to details which this summary judgment application will not turn on.

[17]      Both sides accept that whether or not the agreement was discharged or changed is a question of fact. Each side relies on records of WeChat discussions – the defendants to demonstrate their contentions are arguable, and the plaintiffs to demonstrate the defendants’ position is wholly improbable and ought to be rejected on a robust and realistic approach to the evidence.

[18]      Before assessing that evidence I will set out the basic principles governing summary judgment.

Summary judgment

[19]      Summary judgment for a plaintiff is provided for in r 12.2(1) of the High Court Rules. The driving question is whether the defendant has no defence to the claim.3 The plaintiff has the onus, but where its evidence is sufficient to show there is no defence, beyond doubt, the defendant will have to respond to show why the application should be defeated.

[20]The Court of Appeal concisely summarised the relevant principles in

Krukziener v Hanover Finance Ltd:4

[26]   The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is

3      Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.

4      Krukziener v Hanover Finance Limited [2008] NZCA 187, [2010] NZAR 307.

sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated. The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.

[27]    Under r 141A of the High Court Rules the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.

(citations omitted)

[21]      The courts have consistently noted that summary judgment is not the appropriate procedure for the determination of issues of fact. In Westpac Banking Corporation v M M Kembla New Zealand Limited Elias CJ set out the following principles, subsequently endorsed by the Privy Council in Jones v Attorney General:5

[62]    Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear, novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.

[63]    Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the plaintiff’s claim ….

(citations omitted)

[22]The assessment of the evidence is in the end a matter of judgment.

5      Westpac Banking Corporation v M M Kembla New Zealand Limited [2001] 2 NZLR 298 (CA); cited in Jones v Attorney General [2004] 1 NZLR 433 (PC) at [5].

The evidence

[23]      As is naturally the case when dealing with comparatively informal negotiations which did not result in a single written contract, the evidentiary picture is somewhat complicated. The key issues for this hearing are also somewhat obscured by the fact that the parties were involved in a series of investments in property, beyond the two that are relevant at present.

[24]      The key documents in evidence are copies of screenshots and translations of two series of communications between the parties on WeChat. No significant issue arises in relation to the translation of these conversations.

[25]      The first series of communications took place on 7 August 2017. It concerns discussions between Ms Mo (the first-named plaintiff) and Mr Law (the second-named defendant). Both agree that the discussion took place in a tense atmosphere after the relationship between the two sides had begun to deteriorate in June 2017.

[26]      Ms Mo says in her evidence that she was concerned that nothing was documented to show what the position was between the parties in relation to several residential projects that the parties were involved in. She claims that through July and August she made requests for draft agreements for the various projects. She does not however mention in her evidence in support of summary judgment that there was a WeChat exchange in August 2017. The defendants refer in their evidence to that exchange. It is clear from the WeChat record that in June the parties were feeling some concern about the less than buoyant state of the housing market, and how long the market would take to recover from the perceived downturn.

[27]      In the August 2017 exchange Ms Mo and Mr Law discussed the possibility of a transfer:

Ms Mo:Firstly, we have lend u both about 580k which Calvin [Mr Yang] said he will give half of one house profit [to us] as return. Also he said will be end of this year

Mr Law:580k for Taurima is it? I gonna confirm w Calvin on this detail.

Ms Mo:Also I have paid another house cash to u. Both one and half year ago ,

Mr Law:         …

Another house for which lot?

Ms Mo:Haley [this appears to refer to 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

Mr Law:         I remember. U have half of Huxley

…

Ms Mo:Can u also please check with Calvin that the deal with 580k and also the haxley cash we paid, can we transfer to Trauma project n we can make the deal finish?

…

Mr Law:         Yes. Call u soon ten mins? Ms Mo:  Sure.

[28]      This series of messages clearly seems to establish at least some possibility of a transfer of investment from the Huxley project to the Taurima project.

[29]      There is also nothing in writing for this period that sets out the parties’ recollection of all of the terms of the parties’ November 2015 agreement.

[30]      Also in play are discussions which appear to have taken place in February 2018. Mr Hutcheson for the defendants concedes that the plaintiffs had no knowledge the Huxley property had been sold at this point.

[31]      Mr Law firmly states in his evidence that an agreement to transfer the plaintiffs’ interest in the Huxley project to the Taurima project was agreed. He says at paragraph 38 of his affidavit:

… Pat [Mo] again approached me to discuss transferring her interest from Huxley project to Taurima project in order to realise the return from her contribution sooner and it would provide a bigger return than charging interest over her contribution in Huxley project. …

[32]      He points to the WeChat discussions from August that I have largely set out above as evidence, then continues at paragraphs 39 and 40:

Again out of consideration of protecting the developments and to come to a settlement with Pat, I agreed on the transfer on the conditions that the further

$60,000.00 needs to be paid by Pat because the house in the Taurima project is a bigger three-bedroom lot than the one in the Huxley project, and that Pat would transfer the title for Taurima Avenue back to Calvin [Mr Yang] and me as soon as possible so that we could continue with the development on it. I later told Calvin about this arrangement with Pat and he conceded as I already agreed to this with Pat.

Pat agreed to the conditions and Huxley was sold because development had not begun and I believed an agreement with Pat was in force. However, Pat has not delivered on the agreed conditions.

[33]      Mr Law’s assertion that there was an agreement in August 2017 – on which the defendants’ principal ground of opposition relies – was not supported at the time by his co-defendant, Mr Yang. In her affidavit in reply Ms Mo points to a translation of her WeChat discussion with Mr Yang on 17 February 2018 (also attached as a screen shot) attached to the affidavit of a court-approved translator, in which Mr Yang says:

I have never discussed with you about transferring [your interest in] Huxley to Taurima. This is completely impracticable. If transferred to T, then T is done for nothing, and I am better off stopping now.

[34]      This stands in stark contrast to the defendants’ argument at present that there was an agreement to transfer the investment. It is not clear precisely when Mr Yang’s acquiescence to the proposed transfer occurred – though both Mr Law and Mr Yang claim that Mr Yand did accept the new state of affairs in their affidavit evidence.

[35]      The position is further complicated by the final piece of documentary evidence I consider relevant. It is a lengthy email sent by Ms Mo after the WeChat exchange of 13 February 2018. Two translations have been provided – the first by Mr Yang, and the second by Ms Mo, who took issue with certain aspects of the first translation. The subject line of the email translates as “Details of the investment project”. I set out the relevant portions of the email, as per the translation provided by Ms Mo, with significant discrepancies between the translations noted in the footnotes:

Hi Calvin & Jackson,

I talked with Calvin on the phone at around 4pm to 5pm yesterday. I also talked with Jackson at around 11pm. We talked about how to write down all of the investment cooperation projects. In this email, I list the approaches which were agreed by all participants yesterday.6 If I misunderstood anything, you can contact me at any time. Thank you again for your time.

…

The intentions in terms of how to deal with the projects as agreed by us, three parties during yesterday’s call are as follows:7

…

3.     Fund Invested by Ms Huang at 8 Taurima Ave, Point England, Auckland (Around $500,000, for which I will check the bank statements and give the accurate amount within a few days).

After Calvin and Jackson have completed and sold the construction project at 8 Taurima Ave, they will repay Ms Huang’s principal, as well as half of the profit derived from one of the new houses, in the form of cash, to Mrs Huang.

…

4.     Construction investment project at 8 Taurima Ave, Point England, Auckland

The house is now held under the names of my company and Emily [Yong] on behalf of both of you. In terms of the ownership of the property, we, three parties, will sign the Deed of Trust that is prepared by you.

…

At the end of 2015, we paid $350,000 in cash to you to purchase a new house in the construction project at 3 Huxley Place, Glen Innes, Auckland (The $350,000 figure is an approximation, which I will check the bank transfer records for the accurate amount within the next few days. It will take a bit longer because the transfers were from another person/other people’s personal account(s) to the personal accounts of either yours or someone else’). Because we, the three parties agree to transfer one of the new houses at 3 Huxley Place, Glen Innes, Auckland to the project at 8 Taurima Ave, Point English (sic), Auckland, once the construction and sale of the 5 new houses at 8 Taurima Ave, Point English, Auckland is completed, Calvin and Jackson will pay us the proceeds from the sale of one of the new houses, as well as our principal originally invested in the project at 3 Huxley Place, Glen Innes, Auckland, in the form of cash. The

6      In the translation provided by Mr Yang this phrasing was “I list the approaches which are agreed by all participants”.

7      In the translation provided by Mr Yang this phrasing was “the following matters are the intentions which are agreed by three parties regarding yesterday’s call”.

estimated repayment date is August of this year. If the project is delayed, both sides will further negotiate.

In terms of the details of our investment in the new house at 3 Huxley Place, Glen Innes, Auckland, we will prepare a Deed of Declaration of Trust recording the abovementioned matters for the four parties - Calvin, Jackson, Emily and our side – to sign (the reason for Emily to sign is that the land is jointly under Emily's name).

[36]      Ms Mo contends that the translation provided for the defendants effectively obscured that the purported agreement to transfer the plaintiffs’ interest from the Huxley project to the Taurima project only arose during the call the day before the email was sent. She suggests the correct inference to draw from the email (as correctly translated) is that no agreement, legitimate or otherwise, to transfer the Huxley investment arose until well after the defendants had already breached their obligations under the November 2015 agreement.

Discussion

[37]      At present I am left with the impression that the plaintiffs have not discharged their onus to the standard required for summary judgment. The evidence for the defence’s positive claim, that there was an agreement to transfer the plaintiffs’ investment in the Huxley project to the Taurima project, is mixed at best, though that may have been the unilateral intention of Mr Law. Notably, the two defendants appear to have had different views of what exactly was agreed in that period. This conflict goes somewhat to undermine their grounds of opposition. They also continued to discuss the Huxley project as an ongoing matter with Ms Mo for some six months after they had sold it. Concealing the sale is inconsistent with their version of events.

[38]      But the plaintiffs’ evidence is itself  not  sufficient  to  staunch  all  doubts. Ms Mo’s denial of any discussions regarding the Taurima property in June to August 2017 is inconsistent with the WeChat logs now before the Court. While the position as to her email of 13 February 2018 is mixed, I am not satisfied that even the translation she provides conclusively excludes the possibility of an agreement having been formed the previous August. The email covers a wide range of investment and property issues, and it does not seem beyond plausibility that the transfer of her investment from the Huxley project to the Taurima project could have been agreed to at an earlier point. That possibility finds some support in some of her own messages

in the 2017 WeChat conversations. I consider the position is rendered further ambiguous by the apparent fluidity of the parties’ dealings throughout their business, the wider context of concern about the state of the housing market in terms of its impact on their investments and the plaintiffs’ initial denials of any discussions of a transfer in August 2017.

[39]      While the plaintiffs appear on the papers to have a case, I am not satisfied the evidence from either side provides the Court with a suitable foundation on which to make factual findings about the August 2017 agreement. Quite simply, the claim in the statement of claim cannot be safely upheld without the Court hearing further from Ms Mo and the other parties. While the evidence for the defence is conflicted, the contemporaneous records also do not fully support the specific factual claims made by the plaintiffs. There remain grains of doubt about both the original terms of the November 2015 agreement and the status of those terms in the period leading up to the sale of the Huxley property in August 2017. Those doubts are sufficient to undermine the Court’s ability to safely enter summary judgment. I am not satisfied to the balance of probabilities that the plaintiff’s case is proven as pleaded and that no defence is arguable.

Result

[40]      For the above reasons, the plaintiffs’ application for summary judgment is declined.

[41]     Costs are reserved pending the outcome of the substantive proceeding in accordance with the Court of Appeal’s judgment in NZI Bank Ltd v Philpott.8

8      High Court Rules 2016, r 14.8(3); NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).

[42]      The Registrar is asked to allocate an initial case management conference for this proceeding.

Associate Judge Sargisson