My Templar Limited v Parsons
[2022] NZHC 1189
•26 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-419-000253
[2022] NZHC 1189
UNDER Companies Act 1993 BETWEEN
MY TEMPLAR LIMITED
Applicant
AND
DENNIS CLIFFORD PARSONS
Respondent
Hearing: 8 April 2022 Appearances:
L A O’Gorman and A L Harlowe for Applicant P V Cornegé for Respondent
Judgment:
26 May 2022
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 26 May 2022 at 3.30 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date ……………………………
MY TEMPLAR LTD v PARSONS [2022] NZHC 1189 [26 May 2022]
Introduction
[1] The applicant, MY Templar Ltd,1 is one of a number of companies in the Templar group, incorporated in New Zealand by the Lu family of Taiwan to manage and diversify their wealth.
[2]Mr Parsons2 is the administrator of the estate of the late Mr Jihong Lu.3
[3] MY Templar seeks to set aside a statutory demand issued by Mr Parsons against it, pursuant to s 290(2) of the Companies Act 1993. Mr Parsons says that the demand, for the sum of $2,970,914.67, includes the proceeds of the sale by Jihong of a yacht, the MV Templar.4 He says that the yacht was owned by Jihong and sold to MY Templar. Those proceeds and cash advances made by Jihong to MY Templar are said to be a debt owing to Jihong’s estate.
[4] MY Templar contends that there is a genuine and substantial dispute as to the existence of the debt. It says that Jihong purchased the yacht on its behalf, using Templar group funds. It claims that Jihong did not have any wealth of his own or any obvious sources of income other than from his role with MY Templar and the Templar group. The yacht was never Jihong’s to sell.
[5] MY Templar contends for a resulting trust over the proceeds of the sale of the yacht.
[6] The critical issue I must determine is whether MY Templar has established a genuine and substantial dispute as to the existence of the debt; do MY Templar’s claims meet a threshold of credibility and plausibility when a number of the critical documents support Mr Parson’s position that Jihong owned the yacht, sold it to MY Templar and that MY Templar has never paid any consideration?
1 MY Templar.
2 Mr Parsons was appointed to administer Jihong’s estate pursuant to s 385(2)(b) of the Insolvency Act 2006 in the Auckland High Court on 29 April 2021.
3 Jihong.
4 The yacht.
Factual background
Family background
[7]Jihong passed away in Taiwan on 21 January 2020.
[8] The Lu family now consists of Mr Bin Lu5 and Weihua Zhang.6 Ms Zhang is Bin and Jihong’s mother. All members of the Lu family have resided in New Zealand from time to time. Jihong had management and control of the Templar group, including MY Templar, between 2015 and January 2020.
The Templar group of companies
[9] The companies owned by the Lu family in New Zealand (together the Templar group) are as follows:
(a)TCG Trust Limited,7 the ultimate holding company for Templar group. Ms Zhang is the sole shareholder of TCG Trust, and Bin is the sole director;
(b)Templar Fund Limited,8 a company through which the Templar group acquires and owns investments. It is a wholly owned subsidiary of TCG Trust. Bin has been the sole director of Templar Fund since 22 January 2020. Prior to that Jihong was a co-director;
(c)Templar Investments Ltd,9 another company through which the Templar group acquires and owns investments. It is wholly owned by TCG Trust. Bin has been the sole director since 22 January 2020. Jihong was previously a co-director. Of all the companies in the Templar group, Templar Investments has the most cash reserves;
5 Bin.
6 Ms Zhang.
7 TCG Trust.
8 Templar Fund.
9 Templar Investments.
(d)MY Templar, a company incorporated on 30 August 2017. It is wholly owned by Templar Funds. Bin is its current sole director and has been since 16 September 2020. Prior to his passing, Jihong was the sole director.
The yacht MV Templar
[10] The MV Templar is a 22.75 metre motor vessel. It was previously owned by Gym Properties Ltd and chartered by Decked Out Yachting Ltd. Its previous name was L’Affaire.
[11] On 30 July 2021, Mr Parsons filed an application for a freezing order against MY Templar to restrain the yacht, contending that it was the property of Jihong’s estate.10 The parties subsequently agreed to a sale of the yacht proceeding, but on the basis that the proceeds of sale were frozen.11 The purchase price was $800,000.
History of the sale of the vessel MV Templar
[12] Between June 2016 and November 2016, a total of $977,435.47 was paid from Jihong’s bank accounts to Gym Properties Ltd, and in varying instalment amounts over that period. Mr Parsons says that his review of Jihong’s bank accounts has not identified any payments from MY Templar for the purchase of the yacht.
[13] Over the period May 2016 until December 2017, Templar Investments paid Jihong $1,629,064.95 by way of cheques drawn down by Jihong. This includes a cheque from Templar Investments dated 10 May 2016 in the sum of $1,180,466.07. MY Templar says that these funds were used by Jihong to pay for the purchase of MV Templar “as it was a family decision”.
[14] Mr Parsons says that Jihong purchased a half-share of the yacht in August 2016. In August 2017, he then completed the purchase of the remaining interest for
$1,125,000.
10 HC Auckland, CIV-2021-404-1542.
11 Consent orders of Gordon J, HC Auckland, CIV-2021-404-1542, 2 September 2021.
[15] Mr Parsons has reviewed the filings of GST returns by Jihong for the periods ended 31 March 2017 through to 30 September 2018. Mr Parsons says these filings are consistent with Jihong operating the vessel as a charter vessel in his own name until transitioning the income and expenditure through the company, MY Templar. Mr Parsons also says that his enquiries establish that Jihong spent funds from his personal account refurbishing the yacht in 2016 and 2017.
[16] On 17 August 2017, Ka-Wing Lau, acting on behalf of Templar Fund Ltd, instructed the solicitors, DLA Piper, in relation to “Jihong’s boat – MV Templar”. Those instructions included incorporating MY Templar Ltd and transferring the yacht and its operations as a going concern.
[17] On 23 August 2017, DLA Piper sent a letter of engagement to Ka-Wing Lau, which stated, under Scope of Services, “you have instructed us to assist with the incorporation of MY Templar Ltd and the subsequent transfer of various assets to it, including the vessel known as “Templar” and ancillary advice and attendances related thereto”. Ka-Wing Lau signed the client agreement with DLA Piper on 29 August 2017.12
[18]MY Templar was subsequently incorporated on 30 August 2017.
[19] On 26 September 2017, Ka-Wing Lau confirmed instructions for the sale of the yacht from Jihong to MY Templar.
[20] On 22 November 2017, Jihong signed a declaration of ownership and nationality of transfer document under the Ship Registration Act 1992, declaring that MY Templar purchased all of the shares in the yacht (64/64) from Gym Properties Ltd on 16 August 2017.
[21] On 24 January 2018, the Registrar of Ships at Auckland entered into the New Zealand Register of Ships a bill of sale for the yacht recording a sale from Gym Properties to MY Templar on 16 August 2017, for the sale of all of the shares in the yacht (64/64) and in the sum of $1,125,000.
12 Although the document is dated “1987”, which appears to be an error.
[22] The Registrar of Ships accordingly records that as at 24 January 2018, MY Templar was the sole owner of the yacht. The address given for MY Templar is c/o DLA Piper, solicitors, Auckland.
[23] On 22 May 2018, Ka-Wing Lau sent a signed sale and purchase agreement for the yacht to DLA Piper. The agreement was signed by Jihong as the vendor of the yacht, and by Ms Wendy Chu, a director of MY Templar at the relevant time, on behalf of the purchaser. The agreement recorded:
(a)A purchase price of $2,600,000; and
(b)That the purchase price would not be paid in cash but would be left outstanding as a debt owed from MY Templar Ltd to the deceased.13
[24] MY Templar subsequently filed a GST return for the period 1 April 2018 to 30 September 2018. The accompanying audit report included an entry dated 1 April 2018 “to record purchase of vessel from Jihong Lu” for $2,600,000. An associated liability for this amount was recorded as “advance from Jihong”.
Additional cash advances
[25] Mr Parsons says that Jihong made additional cash advances to MY Templar in the sum of $370,914.67.
Related Disputes Tribunal proceedings
[26] In 2018, Decked Out Yachting Ltd brought a claim in the Disputes Tribunal against Gym Properties Ltd for an alleged commission it said it was owed on an agency agreement. The agreement related to the sale of the yacht to Jihong in August 2017.
[27] On 28 November 2018, Jihong made a statutory declaration for the Disputes Tribunal proceeding. The relevant parts of the declaration include:
I was introducing to the boat in question – then named L’Affaire by the broker Decked Out Yachting. This was understood by all three parties.
13 Clause 3.2.
At the meeting on board when negotiating the first part sale – I made it clear that my intention was to own the boat for 12 months alongside the existing owner – it would then likely purchase the second part of the boat.
Premature to these 12 months, and immediately after I personally financed an interior refurbish – DL requested a meeting at a viaduct restaurant to advise they wanted to sell a further part of the boat – to which he pointed out the ‘pre- emptive clause’. I agreed that I was interested in a further part of the boat if I could be ensured it would travel at 20 knots on a regular basis.
At no point in this meeting was a further agreement concluded. The two co- owners remained as 50/50 share.
I purchased into the boat as a charter operation, and I would only buy further into the boat if it could travel at 20 knots on a regular basis.
[28] In an order dated 4 November 2018, the Disputes Tribunal dismissed Decked Out Yachting’s claim against Gym Properties Ltd.14
[29]Paragraph [1] of the order reads:
[1] Decked Out Yachting Ltd (“DOY”) is suing Gym Properties Ltd (“GPL”) for a commission of $28,750 it says it is owed on an agency agreement it says it had with GPL. The agreement related to the sale of a 50% share in the vessel Templar (formerly L’Affaire) to Mr Jihong Lu in August 2017.
…
[5] This last point [exclusive agency agreement of 22 March 2016] is important because what happened was that DOY brokered a sale of 50 per cent of the vessel to Mr Lu in August 2016 …
…
[13] It is clear from my exchange with Mr and Mrs Mead [DOY] that they have little if any conception of the conflict that they were in at the time and for the extended period from August 2016 when the first 50% was sold and August 2017 when the second 50% was sold …
[14] The legal reality is that DOY was in breach of its agency contract with GPL as soon as Mr Lu became an owner and the company maintained its position as manager and (indirectly) captain of L’Affaire. An implied term of any agency is that the agent does not place themselves in a position of conflict of interest.
14 Order of the Disputes Tribunal at North Shore, CIV-2018-044-000788, dated 4 November 2018.
The will and the role of Mr Parsons
[30] In his will of 7 January 2020 (and executed shortly before his death), Jihong appointed Bin as his executor. The will provides, amongst other things:
(a)In paragraph 2, for assets including real estate, securities, a Stockton art collection, jewellery, shares in “Uxtrata”, property in Shanghai and Changsha (China), and a valuable yacht; and
(b)The yacht is referred to in paragraph 9, which provides that “the Templar yacht is now worth approximately NZ$3,000,000, disposal of which is entrusted to the executor to complete in an appropriate manner.
[31] On 29 April 2021, Moore J ordered that the estate of Jihong was to be administered under Part 6 of the Insolvency Act 2006. Mr Parsons was appointed as the administrator pursuant to s 385(2)(b) of the Act.
[32] In August 2021, Mr Parsons examined Mr David Mead, a director of Decked Out Yachting Ltd. Mr Mead deposed that Jihong purchased a half-share in the yacht in 2016 and the second half in August 2017. Mr Parsons has also examined other relevant witnesses under s 165 of the Insolvency Act 2006. They include Ms Wendy Chu and an interior designer engaged by Jihong in relation to two refurbishments of the yacht.
[33] Mr Parsons’ inquiries have revealed that Jihong advanced funds to and received funds from the Templar companies at his discretion. He was able to receive and use funds received into his personal bank accounts from related companies (including Templar Fund and Templar Investments) and from overseas investments as required. It appears that these funds enabled Jihong to have a lavish lifestyle.
[34] Templar Investments has filed a claim in Jihong’s estate for $5,687,399.02 for advances it made to Jihong.
The statutory demand
[35] The statutory demand is dated 6 October 2021. It sought payment in the sum of $2,970,914.67 “in relation to unpaid advances, as evidenced by the attached analysis”. The attached analysis is entitled “Deceased Estate of Jihong Lu Net Funds Advanced from Jihong Lu to MY Templar Ltd”. Under the heading “Summary Amount Owing to Jihong Lu” it is recorded:
Cash funds advanced (net of cash drawings) in schedule 1 in the sum of
$370,914.67 (i.e. $403,000 minus $32,085.33) and “transferred vessel by journal” in schedule 1 in the sum of $2,600,000.
Relevant legal principles
[36] The Court’s jurisdiction to set aside a statutory demand is contained in s 290(4) of the Companies Act 1993. That section reads:
Court may set aside statutory demand
…
(4)The court may grant an application to set aside a statutory demand if it is satisfied that –
(a)There is a substantial dispute whether or not the debt is owing or is due; or
(b)The company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross-demand is less than the prescribed amount; or
(c)The demand ought to be set aside on other grounds.
[37] The Court of Appeal has recently confirmed the principles the Court should apply in exercising this jurisdiction.15 The principles are:
(a)The applicant must show that there is arguably a genuine and substantial dispute as to the existence of the debt.
15 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq) [2015] NZCA 559, [2016] NZAR 1338 at [19]. See also Carroll Civil Ltd v Texco Drilling and Piling Ltd [2019] NZHC 260 at [19].
(b)The mere assertion that the dispute exists is not sufficient. Material short of proof is required to support the claim that the debt is disputed.
(c)If such material is available, the dispute should normally be resolved other than by means of proceedings in the Court’s Companies Act jurisdiction.
(d)It is not usually possible to resolve disputed questions of fact on affidavit evidence alone, particularly when issues of credibility arise.
[38]The Court also stated:16
[22] It is important to keep in mind the words of the statute. What the applicant must show is that the dispute it raises has substance; the applicant must explain to the Court what the dispute is; and the dispute so shown must be a real and not a fanciful or insubstantial dispute. The Court must bear in mind that it is operating in the summary jurisdiction, with the accompanying disadvantages that brings for any applicant. The Court must also keep in mind the requirement that what is intended to be a summary hearing should not be converted into a full-blown trial.
(footnotes omitted)
Analysis and decision
Issue – a genuine and substantial dispute?
[39] MY Templar submitted that it is reasonably arguable, and a matter for trial, that the yacht was purchased using the Templar group’s funds. It further contends:
(a)Significant cheques totalling $1,629,064.95 were drawn down by Jihong from Templar Investments between May 2016 and December 2017 for the benefit of MY Templar. The majority of those funds were then used by Jihong, on behalf of MY Templar, to complete the purchase of the yacht on 15 August 2017. The sale of the yacht from Gym Properties Ltd to MY Templar is clearly demonstrated by the bill of sale of 16 August 2017. Jihong did not have wealth of his own, or any other obvious source of income other than from his role with MY
16 AAI Ltd v 92 Lichfield Street Ltd (in rec and in liq), above n 15, at [22].
Templar and the Templar group. For instance, Jihong’s will records that the cost of his cancer treatment in Taiwan was paid for by Bin;
(b)By contrast, having management control of the Templar group gave Jihong access to cash funds of approximately $6,000,000 (the total asset holding was valued at far higher), held in Templar Investments. The Lu family directed that these funds be used to accumulate assets for the Templar group, including the yacht;
(c)As to the cash funds Jihong allegedly advanced to MY Templar ($370,914.67), Mr Parsons has not paid any regard to the fact that Jihong did not have any significant sources of wealth himself, but rather acted as a conduit between the Templar group of companies, which is demonstrated by the purchase of the yacht.
(d)It is accepted that the way in which Jihong operated the various Templar group companies was not in accordance with good management practices or in accordance with company law obligations. Whenever the Templar group purchased assets, rather than directly applying its funds from its bank accounts, Jihong withdrew funds of varying and often significant amounts from one of the companies’ bank accounts into his personal account, from which the outgoing payment was made, creating a confusing and circular trail of transactions. It seems likely that Jihong worked to keep up appearances despite his own declining financial situation. The series of transactions were not at all well documented, but all of the Lu family shared an understanding that Jihong was to act to benefit the Templar group and the Lu family;
(e)The ways in which Jihong acquired and disposed of various Templar group assets was confused. Some assets, purchased by the Templar group for Jihong, such as the yacht, were rightly registered or stated to be owned by the Templar group. However, for other assets purchased by the Templar group through Jihong, such as a number of valuable artworks, where the art dealer invoices are issued to Jihong but the
origins of payments for such assets can be traced to the Templar group, the thinking behind such “convoluted transactions” is unclear;
(f)The net result of the many conflicting factual accounts and confusing transactions is that a significant dispute exists as to whether the debt is owing by MY Templar to Jihong. In particular, there is a genuine dispute as to whether Jihong ever owned the yacht; he could not sell an asset he did not own. The issues are wholly unsuitable for summary determination and the demand should be set aside and all matters tested at trial.
[40] In her written legal submissions, Ms O’Gorman, for MY Templar, makes claims for a constructive trust and a resulting trust. MY Templar also relies on the doctrine of agency (i.e. Jihong acting as a conduit or agent for MY Templar). Ms O’Gorman submits that there is a genuine and substantial dispute whether the funds used by Jihong for the purchase of the yacht were those of Templar Investments, to be held and used beneficially for the Templar group. In her oral submissions, Ms O’Gorman placed particular emphasis on the claim of a resulting trust.
[41] There is some superficial attraction to those submissions. However, this is a case which calls for a robust and critical assessment of the credibility and plausibility of MY Templar’s claims, and in particular the evidence of Bin, on which it principally relies.
[42] Mr Parsons is a very experienced insolvency practitioner and chartered accountant. He is also a certified anti-money laundering specialist. As Mr Cornegé submitted on his behalf, he is an independent court-appointed expert who has conducted a significant and detailed analysis of the relevant documentation, namely the Templar group’s own documentation. It is of course commonplace and appropriate for equivalent court-appointed officers such as a liquidator or the Official Assignee to rely on the insolvent’s documentation.17 Where explanations are put forward that are
17 See Insolvency Act 2006, s 392, which provides that as the appointee, Mr Parsons has, in relation to Jihong’s estate, the same authority, powers and functions as the Assignee has in relation to the property of a bankrupt.
in conflict with the clear documentary record, the Court looks very critically at contrary claims that are made and the reasons for them. A similar approach is of course taken with other summary applications such as summary judgment and caveat proceedings.18
[43] One of the fundamental problems for MY Templar is that it seeks to have the Court disregard critical legal and commercial arrangements that it itself put in place in relation to the sale of the yacht from Jihong to itself. This is not a case where Jihong was “off on his own frolic” acting wholly independently of MY Templar, who was unaware of what he was doing. Furthermore, none of the trust or agency arrangements which MY Templar now contends for are recorded in writing. MY Templar asks the Court to accept what Bin now says in contradiction to many of the documents – and that, despite the careful and lengthy analysis of Mr Parsons based on a careful assessment of MY Templar’s own documents, there are somehow still critical issues that should go to trial.
[44] The MY Templar generated documentation clearly records that Jihong was the owner of the yacht. Following the incorporation of MY Templar Ltd, formal steps were undertaken to transfer the yacht from Jihong to MY Templar Ltd. This included the instructing of solicitors, the obtaining of GST advice and the entering into a formal agreement for sale and purchase for the sale of the yacht from Jihong to MY Templar. The sale of the yacht is then recorded in MY Templar’s company records as giving rise to a debt to the deceased. Bin, whose email address appears on the email correspondence from MY Templar to DLA Piper, and recording DLA Piper’s instructions, must have been aware of what was happening and the significance of the formal legal and commercial arrangements being recorded. No plausible explanation has been put forward by Bin as to why the Court should ignore the formal legal structures put in place. MY Templar simply seeks to take advantage of what it says is a confused situation, in circumstances where it cannot deny that it has played a role and has responsibility for some of that confusion. The claim that all of the Templar group assets should be treated as “family funds” is no more than an invitation for the Court to ignore the legal structures and transactions entered into between the parties.
18 Krukziener v Hanover Finance Ltd [2008] NZCA 187; [2010] NZAR 307, (2008) 19 PRNZ 162. See also Eng Mee Yong v Letchumanan [1980] AC 331, [1979] 3 WLR 373 (PC).
[45] The only document of significance that MY Templar can rely on to establish that Jihong did not own the yacht and it was transferred to MY Templar directly from Gym Properties, is the bill of sale. MY Templar seems to accept that Jihong initially had an equitable interest, namely from August 2016 to August 2017, but as at 16 August 2017 all of the shares in the yacht were transferred from Gym Properties to MY Templar. This is established, so MY Templar says, by the bill of sale. However, as stated in Garrow & Fenton Law of Personal Property in New Zealand,19 under the Ship Registration Act 1992, registration:
Mmay be evidence of title, but it is not necessarily conclusive, and the ownership of a ship, or a share of it, is a question of independent fact. Here lies a fundamental difference between the registration of ships and of land under the Land Transfer Act 1952. Whereas under the Torrens system it is registration itself that passes title, registration on the New Zealand Shipping Register does not, of itself, convey title.
[46] In any event, MY Templar cannot establish that it paid any funds for the yacht. On the contrary, the evidence establishes that it was Jihong who paid for the yacht from funds out of his own personal account.
[47] There is substantial contemporaneous evidence establishing that Jihong purchased the yacht in his own name. This includes the following:
(a)Jihong provided a statutory declaration confirming that he acquired a 50 per cent interest in the yacht, before completing its purchase within 12 months. The findings of the Disputes Tribunal referee in 2018 are squarely based on those facts;
(b)Jihong’s account has been confirmed by Mr Dave Mead, the broker involved in Jihong’s purchase of the yacht;
(c)Individuals close to the deceased at the relevant times have also deposed to Mr Parsons that Jihong owned the yacht and referred to it as his own;
19 Garrow & Fenton Law of Personal Property in New Zealand (7th ed, LexisNexis NZ, Wellington, 2010) at 756.
(d)Jihong filed GST returns reflecting the operation of the yacht in his own name;
(e)MY Templar was not incorporated until after Jihong had purchased the yacht and had been operating it in his own name.
[48] I accept in principle that Jihong, as an agent, could have entered into a pre- incorporation contract on behalf of MY Templar so that the sale was a novated one. However, MY Templar advances the agency argument at the same time as contending that the purchase was funded by Templar Investments, not MY Templar.
[49] Mr Parsons does not dispute that Jihong received funds from the Templar companies, including Templar Fund and Templar Investments. Similarly, it is not contested that Jihong paid funds from his personal accounts to those entities from time to time.
[50] I agree with the submission of Mr Cornegé that these transactions are no more than related party advances, which create accounting entries between the relevant entities. The legal and accounting evidence establishes that just as MY Templar is indebted to Jihong, Jihong is, on the available evidence, indebted to Templar Investments for the advances he received. Indeed, Templar Investments has filed a claim in Jihong’s estate for those advances.
[51] If the yacht was to be purchased, in the first instance, by Templar Investments, it could readily have been purchased in the name of that entity. Instead, Jihong accessed funds in his personal bank account, which included an advance from Templar Investments, to acquire the yacht in his own name. If some form of agency or trust arrangement was intended, this could readily have been completed. No explanation has been put forward as to why Templar Investments was not the novated party to the alleged contract directly between Gym Properties Ltd and MY Templar.
[52] I further note that the directors of Templar Investments at the relevant times were Jihong, Bin and Mr Bruce Davidson. Bin has deposed that he comes from an accounting background and has extensive experience, including in mergers and
acquisitions. It is not credible to suggest that he would not have been aware of the importance of ensuring that these transactions were appropriately documented if something else was intended. Furthermore, the cheques from Templar Investments to Jihong have been signed by two signatories. As noted above, this is not a situation where Jihong acted unilaterally. The other directors of Templar Investments would have had to have been aware of these transactions.
[53] Ms O’Gorman was critical of Mr Parson’s evidence and in particular his reliance on the agreement for sale and purchase of May 2018, recording the sale of the yacht from Jihong to MY Templar. She contended that there was a lack of commercial sense in the value of the yacht increasing by more than 100 per cent in the space of nine months, from $1.125m (the supposed purchase price by Jihong from Gym Properties Ltd) to $2.6m, being the price recorded in the agreement for sale and purchase of May 2018. However, as I have been emphasising, the agreement for sale and purchase was drafted at MY Templar’s instructions and its own documentation, including its own filing of a GST return for the period 1 April 2018 to 30 September 2018, records a purchase price of $2,600,000. As Mr Cornegé submitted, it was open to the parties to determine the value they attributed to the yacht and MY Templar did so. I also note that Jihong had undertaken two refurbishments of the yacht and that MY Templar elected to proceed with the purchase without getting the valuation it originally intended.
[54] I acknowledge that these are summary proceedings and that if there is material available, short of proof, to support a claim of a debt, then a proceeding ought not ordinarily be resolved in the Companies Act jurisdiction under s 290. There is also of course, a very short time period in which to challenge statutory demands. However, the mere assertion that a dispute exists is not sufficient – and evidence that is inherently lacking in credibility, that is inconsistent with undisputed contemporary documents or is inherently improbable, is not to be accepted uncritically by the Court.20 Here, MY Templar, with the benefit of an extensive analysis of its own documentation by Mr Parsons, has filed scant evidence in reply by Bin (i.e. a director of the relevant Templar companies at critical times). There is no evidence from Ms Wendy Chu, who
20 See Krukziener v Hanover Finance Ltd, above n 18, at [26].
signed a declaration of ownership for the yacht as a director of MY Templar (declaration dated 16 August 2017), no evidence from the co-signatory of the cheques paid by Templar Investments to Jihong (which might have shed light on the purpose of the funds paid), and no evidence from Ka-Wing Lau, who gave clear and unequivocal instructions to DLA Piper, solicitors, that Jihong owned the yacht. Those clear instructions formed the basis for MY Templar’s professional legal advisers to draft a sale and purchase agreement clearly recording that Jihong owned the yacht. Similar clear unequivocal instructions must have been given to Deloitte in relation to MY Templar’s GST returns. There is no suggestion that these potentially significant witnesses were not available.
[55] There is likewise no evidence from the solicitors, DLA Piper, or any suggestion that they might also provide evidence supporting MY Templar’s contention. The bill of sale of 16 August 2017, which MY Templar relies upon, records the purchaser’s address (MY Templar Ltd’s address) as “DLA Piper level 22, 205 Queen Street, Auckland”. DLA Piper were the solicitors instructed by MY Templar to draft the subsequent agreement for sale and purchase between Jihong and Gym Properties Ltd. There would of course have been no need for MY Templar to have entered into the agreement for sale and purchase with Jihong in May 2018 if they had already acquired all of the shares in the yacht directly from Gym Properties in August 2017. Again, despite having had the opportunity to do so, MY Templar has not put forward a plausible or valid explanation for reconciling the bill of sale with the other legal and commercial documents.
[56] It is not enough in the circumstances here for MY Templar merely to assert that there is some confusion. Professional legal and commercial services were obtained by MY Templar itself to record critical matters which MY Templar now disputes. It is for MY Templar to establish a genuine and substantial dispute; it cannot rely on obfuscation.
Resulting trust
[57] It is also necessary to critically evaluate MY Templar’s claim for a resulting trust.
[58] As the Court of Appeal held in Chang v Lee,21 the starting point for analysing a resulting trust is the principle explained by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council.22 A resulting trust arises in circumstances where:23
… A makes a voluntary payment to B or pays (wholly or in part) for the purchase of a property which is vested in either B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B; the money or property is held on trust for A (if he is the sole provider of the money) or in the case of the joint purchase by A and B in shares proportionate to their contribution. It is important to stress that this is only a presumption, which presumption can be easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer …
[59] In Chang v Lee, the Court held that the rationale for a resulting trust is that, absent evidence to the contrary, the law presumes a person intends to retain the beneficial ownership of funds which he or she advances towards the purchase of a property.24 The legal owner holds title to the property subject to the payer’s equitable interest. In this way a trust results to the payer to the extent of his or her contribution.
[60] Ms O’Gorman also relied upon the decision, Murphy v Quigg,25 where there was a purchase of a vessel funded by the respondents with the ownership placed into a company owned by the appellants. The Court held that despite holding legal ownership of the shares, the respondent held those shares on a resulting trust for the appellants as follows:
Where a claimant proves that he or she has made a substantial contribution to the acquisition or improvement of property in circumstances from which the Court may reasonably infer a common intention on the part of the legal owner of the property and the claimant that the claimant would have a beneficial interest in the property by reason of that contribution, the legal owner will be deemed to hold the property on an implied, constructive or resulting trust in favour of the claimant to the extent of the claimant’s contribution. Such a trust is established merely by proof of the substantial contribution and the common intention.
21 Chang v Lee [2017] NZCA 308 at [18].
22 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL).
23 Westdeutsche Landesbank Girozentrale v Islington London Borough Council, above n 22, at 708.
24 Chang v Lee, above n 21, at [20].
25 Murphy v Quigg [1996] 54 WIR 162.
[61] It is not in dispute that a fundamental requirement of a resulting trust is evidence of a common intention. One of the principal problems for MY Templar here is an absence of that necessary common intention. A claim of common intention might be more plausible if there was a linear connection between the funds advanced by the Templar group and/or Templar Investments and the purchase of the vessel. However, there is no such connection. There is a complete absence of any evidence to suggest that Templar Investments or the Templar group advanced funds to Jihong for the specific purpose of acquiring the yacht. I accept that the Jihong did receive funds from Templar Investments from time to time, but there is simply no evidence to suggest that they were advanced to acquire the yacht. Furthermore, MY Templar and Jihong had access to and used reputable solicitors and accountants. As I have already noted, had there been a genuine intention that Templar Investments or the Templar group was to retain a beneficial interest, there is no good reason advanced as to why this was never recorded.
[62] It is clear from the evidence that the Jihong received funds from Templar Investments and was free to apply those funds as he considered appropriate. The contention by MY Templar that all of the Templar group assets should be treated as “family funds” is nothing other than a mere assertion and ignores, as I have emphasised, the legal structures and the transactions entered into between them.
[63] For all these reasons I conclude that MY Templar has not established a credible or plausible resulting trust and/or agency arrangement in support of its claim that Jihong never owned the yacht. I find that there is no genuine and substantial dispute as to Jihong’s ownership of the yacht and Jihong’s estate maintains the right to call up the debt owed to it by MY Templar.
[64] I also find that MY Templar has not established a genuine and substantial dispute in relation to the cash funds of $370,914.67 referred to in the statutory demand. Those funds were not used to acquire the yacht and no credible or plausible basis has been put forward for challenging the clear and careful calculations made by Mr Parsons based on MY Templar’s own documentation. In any event, I note that the main focus of MY Templar’s challenge to the demand was in relation to the proceeds of sale of the yacht rather than the cash advance dimension.
Result
[65] The application by MY Templar Ltd to set aside the statutory demand is dismissed.
[66] As to costs, I am of the preliminary view that the respondent, Mr Parsons, having succeeded, is entitled to costs and on a 2B basis. If costs cannot be agreed, then brief submissions (no more than three pages) are to be filed and served within 14 days.
Associate Judge P J Andrew
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