Nelson Honey & Marketing (NZ) Ltd v Pureality Trading Company Limited
[2022] NZHC 2995
•16 November 2022
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2022-442-01
[2022] NZHC 2995
BETWEEN NELSON HONEY & MARKETING (NZ) LIMITED
PlaintiffAND
PUREALITY TRADING COMPANY LIMITED
First Defendant
GRACE GU
Second Defendant
Hearing: 28 September 2022 Appearances:
J T Burley for Plaintiff/Respondent
G D Pearson for First and Second Defendants/Applicants
Judgment:
16 November 2022
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction
[1] Nelson Honey & Marketing (NZ) Ltd (NHM) is suing Grace Gu and Pureality Trading Company Ltd (PTC), claiming damages of over $1.7 million, to which it says it is entitled, arising from the sale of its products into the People’s Republic of China. Ms Gu and PTC deny any liability.
[2] Before the Court for determination is an application by Ms Gu and PTC for summary judgment.
NELSON HONEY & MARKETING (NZ) LIMITED v PUREALITY TRADING COMPANY LIMITED [2022] NZHC 2995 [16 November 2022]
Background
[3] NHM is based in Nelson. It manufactures and markets a range of honey and honey-based products.
[4] In 2013, NHM was looking to market its products in China. Mr Paul Le Gros, a Nelson solicitor, who was then the company’s Chairman, made contact with Ms Gu. Ms Gu is a Chinese citizen with New Zealand residency. She is a business consultant who apparently holds herself out as able to provide assistance to New Zealand companies looking to do business in China. Mr Le Gros introduced NHM’s Managing Director, Mr Philip Cropp, to Ms Gu as someone who might be able to assist the company. This introduction resulted in the development of a business relationship between NHM and Ms Gu. I use that general terminology because the details of the relationship — or rather relationships — that emerged over the years that followed are complicated.
[5] It is common ground that at an early stage NHM engaged Ms Gu to provide it with advice on and assistance with entering the Chinese market. Ms Gu appears to have incorporated PTC, of which she is the shareholder and director, intending that it become the vehicle through which these services would be provided. The terms of this consultancy agreement were never formalised.
[6] Initially, the parties discussed the possibility of a joint venture for the marketing of NHM’s products into China, and, to this end, Ms Gu procured the incorporation of a company in China by the name of Beijing Kiwibird International Co Ltd. This proposal did not go very far. NHM never took a stake in this company as originally discussed, and the company does not appear ever to have traded.
[7] In due course, Ms Gu introduced NHM to a Mr Jack Wang and his China-based company, Horizon Company Ltd (Horizon). What eventually emerged from this was a proposal that NHM engage Horizon as its exclusive agent for the marketing and sale of its products in China. Lengthy negotiations followed. However, while these continued, NHM and Horizon put agency arrangements in place. In evidence, is what the parties both identify as the last iteration of a draft agency agreement originally prepared by NHM’s advisers. It will be necessary to come back to this.
[8] Pursuant to their agency agreement, Horizon marketed and sold NHM’s products in China through an internet-based trading platform called “VIPShop”. In her affidavit evidence Ms Gu explains that she permitted Horizon to use PTC’s account with VIPShop to sell products that Horizon had purchased from NHM. She says that all of the money from the sale of products through the VIPShop account was paid to Horizon.
[9] Between 2014 and 2018, orders were placed with NHM by Mr Wang and Horizon both directly and through Ms Gu and PTC. NHM received and filled orders for a substantial amount of product — as I understand the evidence, to the value of
$8,733,094.61. The invoices issued by NHM were addressed to Horizon.
[10] NHM says that by March 2018 Horizon owed $1,745,873.29 in respect of product ordered and delivered for which it had not received payment. This is disputed by Horizon. However, on the assumption that that amount is outstanding, the issue is whether one or either of Ms Gu or PTC is liable for the same.
Summary judgment proceedings
[11] Applications for summary judgment are governed by pt 12 of the High Court Rules 2016.
[12]Rules 12.2 provides:
12.2Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[13] Whilst summary judgment is available to both plaintiffs and defendants, the hurdles that they face are different. A plaintiff need only succeed on one cause of action. A defendant must succeed in relation to all causes of action pleaded against it.
[14] The leading case is the Court of Appeal’s judgment in Krukziener where the Court said:1
[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: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). 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 not consistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). 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: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[27] Under r 141A 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.
[15] Whilst that case was focussed on applications by a plaintiff, the same principles apply when it comes to an application by a defendant. So, a defendant has the burden of establishing that the plaintiffs’ case cannot succeed on any of the pleaded causes of action. In the end, the Court must be left with no serious doubt that the plaintiff’s case is unsound.
[16] On a summary judgment application the Court may determine legal issues, even complex issues. If there are disputes of fact which are incapable of being resolved, or cannot fairly be resolved, on affidavit evidence, then summary judgment will not be appropriate.2 However, the Court is not obliged to accept evidence that inherently lacks credibility, and is entitled to take a robust approach to such issues.3
The plaintiff’s claim
[17]On what basis or bases, then, does NHM contend that Ms Gu and PTC owe it
$1.7 million dollars?
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187.
2 See Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [62].
3 Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14 citing Eng Mee Yong v Letchumanan [1980] AC 331 at 341.
[18]There are six pleaded causes of action:
(a)breach of contract;
(b)breach of agency;
(c)money had and received;
(d)breach of obligations as a bare trustee of a constructive trust;
(e)unjust enrichment; and
(f)negligence.
[19]In my assessment, four of those causes of action (those identified in (b), (c),
(d) and (e)) effectively cover the same ground.
[20]Thus it appears to me that the claim is advanced on three essential bases:
(a)First, that there was a contract between NHM and Ms Gu, PTC or both, pursuant to which NHM is entitled to recover the $1.7 million from them.
(b)Second, that, even if there was no such contract, NHM has a restitutionary claim against Ms Gu and PTC so that they are obliged to account to it for the same amount.
(c)Third, NHM alleges that one or both of Ms Gu and PTC have acted negligently, thus entitling it to recover damages of the same amount.
Evidence
[21] In support of the summary judgment application, sworn affidavits were filed and served by Ms Gu, Mr Le Gros, Mr Wang, and Ms Helen McEwan. Ms Gu, Mr Le Gros and Mr Wang all provide detailed narrative evidence as to the background.
Ms McEwan is an accountant engaged by Ms Gu and PTC, who gives accounting evidence as to one aspect of the claim.
[22] In support of its notice of opposition, NHM filed and served affidavits sworn by Mr Cropp, Ms Marama Quinney (NHM’s administration manager) and Mr Matthew Gibson, an accountant who acts for NHM and who covers much the same ground as Ms McEwan.
[23] Reply affidavits sworn by Ms Gu and Mr Le Gros were filed and served, and NHM also sought and obtained leave to file a further affidavit sworn by Mr Gibson.
[24] Much of the detailed narrative, particularly that contained in the affidavits sworn by Ms Gu, Mr Le Gros and Mr Cropp, goes beyond the immediate issues that the Court needs to determine in dealing with this summary judgment application, and I propose only to refer to those aspects of the evidence that I regard as relevant.
Discussion
[25] The irreducible essence of NHM’s contractual cause of action is the contention that there existed a contract, written or oral, express or implied, between NHM and either or both of Ms Gu and PTC, pursuant to which the latter agreed to be liable for any debit balance of the Horizon account.
[26]Here is NHM’s pleading:
27.The principal contractual arrangement pleaded in paragraphs 4 to16 above [the contract between NHM and Horizon] was, in substance, between the Plaintiff and the Defendants … and comprised the following documents:
27.1The Horizon Supply Agreement between the plaintiff and the second defendant [the unexecuted agreement] to manage the Plaintiff’s business in China pleaded in paragraph 13.
27.2The First Defendant’s invoices for managing the Plaintiff’s business in China pleaded in paragraph 20.
27.3The emails from the Second Defendant to the Plaintiff in relation to the orders for products, delivery of those products to China and in relation to payment pleaded in paragraph 20.
27.4The VIPShop supply agreement pleaded in paragraphs 23 and 24 [an agreement between Pureality and VIP].
28.The salient provisions of the Contract included the following express terms:
28.1That the Plaintiff was to pay the First Defendant a monthly fee for managing its business in China.
28.2That the First Defendant would manage the Plaintiff’s business in China.
28.3That the second defendant would assist with the set up and management of the Plaintiff’s business in China.
29.The contract also included the implied term that payments received by VIPShop for the Plaintiff’s products sold/delivered on the VIPShop online platform would be paid to the Plaintiff by the First Defendant direct or through Horizon directly or on instruction of Horizon.
30.The Defendants have jointly/severally failed or refused to pay the invoice debt.
[27] Those paragraphs are not an especially coherent recitation of NHM’s contractual claim. The assertion at the outset in paragraph 27 that a contract between A and B was “in substance” between A and C does not take matters very far. Such a development would normally require novation or assignment. There is no evidence that would support either. NHM’s pleading then refers by way of particularisation to four categories of documentation. Paragraph 28 relates to the terms of the consultancy arrangement between NHM and Ms Gu and PTC, a different contract from the one identified in the previous paragraph. Then, in paragraph 29, the existence of an implied term is alleged — presumably in the contract between NHM and Horizon, though that is not expressly stated. Finally, in paragraph 30, there is an allegation of breach of that implied term.
[28] Having had the benefit of Mr Burley’s submissions, which assisted to clarify this confusing pleading, I proceed on the basis that NHM’s essential allegation is that in the course of the dealings between NHM on the one hand and Ms Gu and PTC on the other hand, the latter agreed to assume liability for any debt owed to NHM by Horizon arising under the agency agreement — essentially, to guarantee Horizon’s obligations.
[29] For Ms Gu and PTC, Mr Pearson submitted first that the documentation relied on by NHM in support of this claim does not support a contractual commitment of the sort alleged.
[30] Insofar as the agreement referred to in paragraph 27.1 of the statement of claim is concerned, not only is it common ground that this was never executed, the parties to the draft in evidence were NHM and Horizon, and I can discern no evidence suggesting that Ms Gu or PTC appear ever to have been intended to be parties. Furthermore, the draft appears on its face to have been created during 2018, which would suggest that its terms were still the subject of negotiation and unfinalised after the debt, or at least the bulk of the debt, which NHM seeks to recover in this proceeding was incurred. There are also aspects of the draft which indicate that, had it been executed, it would have excluded the possibility of a claim by NHM against Ms Gu or PTC, for example by conferring on NHM an entitlement to prevent Horizon from dealing with PTC in relation to the agreement.
[31] In my assessment, this draft agreement could not conceivably give rise to contractual arrangements of the sort contended for by NHM, so as to hold Ms Gu or PTC liable for Horizon’s debt.
[32] Turning to paragraph 27.2 of the statement of claim and NHM’s reliance on “invoices”, it turns out that there was only one invoice rendered by Ms Gu pursuant to the consultancy agreement covering her attendances pursuant to that agreement. This of course was a quite separate contract, only tangentially connected to the agency agreement between NHM, Mr Wang, and Horizon.
[33] I am unable to see anything in this invoice which would support NHM’s contractual claim.
[34] The pleading at paragraph 27.3 asserts that there is support for the alleged contract in correspondence between the parties. Mr Burley did not pursue this to any significant extent in argument. Nevertheless, I have reviewed such correspondence as is in evidence and am unable to identify any material that would support the existence of a contact as pleaded.
[35] Turning finally to the VIPShop agreement, that was an agreement between PTC and VIP. As Mr Pearson submits, it is very difficult to see how NHM can claim that agreement supports its allegation of the existence of a guarantee by Ms Gu or PTC, by reference to a document that it accepts it had no contemporary knowledge of.
[36] Earlier, I observed that the second to fifth causes of action were all restitutionary in their nature. In its second cause of action, NHM asserts that Ms Gu and PTC breached agency obligations owed to it by not on-paying money received through the sale of NHM product on PTC’s VIPShop account. The third cause of action is a claim in quasi contract for money had and received. The fourth cause of action is a claim that Ms Gu and PTC are trustees for the company in relation to those monies and must disgorge them. The fifth cause of action is a claim for unjust enrichment. All four causes of action seek restitution of the $1.7 million already referred to.
[37] The common thread that runs through all of these causes of action is the contention that, on behalf of NHM, Ms Gu and PTC received those funds in circumstances in which they were obliged to pay them to NHM.
[38]NHM’s pleading in relation to this is tentative at best:
It was the Plaintiff’s understanding that VIPShop paid money to Horizon for the product sold (less commission), who [sic] then forwarded the money to the First Defendant for payment to the Plaintiff. The Plaintiff was advised by Mr Wang that the transaction arrangement ...
[39] The difficulty for NHM is that there is no evidence that Ms Gu or PTC were entitled to or did receive those monies. There is evidence that Horizon did pay some money to Ms Gu or PTC for on-payment. But Mr Gu’s evidence, which I accept, is that, on the small number of occasions that this occurred, these funds were paid to NHM.
[40] NHM’s sixth and final cause of action alleges negligence (in fact the allegation is of “professional negligence”). As Mr Pearson submitted, NHM’s statement of claim contains no recognisable allegation as to the existence of a duty of care, which is of course the primary component of a claim in negligence. Nor does it include any
particularisation of the factual circumstances giving rise to such a duty, and that is reflected in an absence of any affidavit evidence going to such matters. In the end, the view I take is that this final cause of action is little more than a general criticism by NHM that Ms Gu and PTC behaved badly, which adds nothing to their claim.
[41] It is fair to say that in the narrative affidavit evidence relied on by NHM there are assertions of the existence of commitments by Ms Gu and PTC.
[42] However, I reject that evidence. The witnesses are describing events which occurred up to nine years ago, which raises the usual question of how much weight the Court can place on their recollections. As already indicated, to a degree, the case is not pleaded consistently with some of that evidence. But most critically, that evidence is not supported, and indeed is contradicted, by the contemporaneous documentation to which I have referred.
[43] There is a further aspect of this case which raises a question about the veracity of that evidence. On 31 August 2020, NHM’s then solicitors, Morrison Mallett, wrote to Horizon asserting a claim for the balance of the account that it is seeking to recover in this proceeding. It is to be presumed that Morrison Mallet were writing on instructions that reflected NHM’s then understanding of the position.
[44] Morrison Mallet’s description of the basis for NHM’s claim was careful and comprehensive. It acknowledged the roles played by Ms Gu and PTC. It drew on the contemporaneous material that the author obviously had available to him and which is discussed above. The thrust of the letter was to advance a contractually-based claim on NHM’s behalf against Horizon. There was no suggestion at all that Ms Gu and PTC were liable, jointly with Horizon or otherwise, for the alleged outstanding debit balance of the account.
[45] Morrison’s Mallett’s letter concluded with a demand for payment of the debit balance of the account (the $1.7 m) and an assertion on NHM’s behalf that it “… has engaged lawyers in China and if payment of the Debt is not made within 10 working days from the date of this letter, [NHL] will seek to enforce the Debt against Horizon
in China. Should that become necessary, [NHL] will also seek recovery of all costs incurred in relation to enforcement of the Debt, which may be significant”.
[46] As Mr Burley submits, it would be wrong for the Court to conclude that NHM is bound by the position articulated in Morrison Mallett’s letter, and I reach no such conclusion. The Court must be cognisant of the fact that parties may, and often do, articulate their position in different ways to different parties in pursuing claims. However, in this case, Morrison Mallett’s analysis of the situation appears to me to be entirely consistent with the contemporaneous documentation, and with the view I take of the matter. In short, it appears to me that this is a case in which NHM, having been unsuccessful in getting Horizon to engage, and facing the very real difficulties of litigating with a party in China, have turned their attention to Ms Gu and PTC, primarily because they are more accessible targets.
Conclusion
[47] In my judgment, Ms Gu and PTC have demonstrated to the necessary standard that none of the causes of action pleaded by NHM in this proceeding are reasonably arguable. Accordingly, I enter summary judgment in favour of the defendants against the plaintiff.
[48] Costs are reserved, as I have not heard from counsel in relation to these. I expect that counsel will be able to resolve costs issues. However, if not, they may file memoranda in the usual way. If it assists I add that my preliminary view is that the defendants are entitled to their costs on a 2B basis together with disbursements.
Associate Judge Johnston
Solicitors:
McVeaghFleming Lawyers, Auckland for Plaintiff/Respondent LegalFocus Ltd, Nelson for Defendants/Applicants
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