Qian v Dong
[2022] NZHC 378
•8 March 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-132
[2022] NZHC 378
BETWEEN DONG QIAN
First Plaintiff
GRZ PROPERTIES LIMITED
Second PlaintiffAND
JIAQING DONG
First DefendantNAC INTERNATIONAL TRADING LIMITED
Second DefendantYU WEN
Third DefendantYU HOMES LIMITED
Fourth Defendant
Hearing: 16 February 2022 Appearances:
Tim Rea for Yu Wen, Third Defendant/Applicant
Greg Blanchard QC and Kerry Puddle for the Plaintiffs/ Respondents
Judgment:
8 March 2022
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 8 March 2022 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
DONG QIAN v JIAQING DONG [2022] NZHC 378 [8 March 2022]
Introduction
[1] The third defendant in this proceeding, Mr Yu Wen, applies for leave to pursue an application for summary judgment after filing a statement of defence, and an order for summary judgment against the plaintiffs. He also seeks an order for increased costs against the plaintiffs, and disbursements.
Background
[2] This proceeding concerns a dispute over a property at 39 Wicklam Lane, Greenhithe, Auckland. On 13 November 2020, Mr Wen purchased the property from the first defendant, Mr Jiaqing Dong, for its subsequent development and subdivision. In December 2020, Mr Wen agreed to on-sell eight (not yet subdivided) sections of the property to the fourth defendant, Yu Homes Group Ltd.
[3] Mr Wen says the subdivision of the property is incomplete and the sale to Yu Homes Group Ltd remains unsettled. He wishes to complete the subdivision and settlement but is prevented from doing so by a caveat that the first plaintiff, Mr Dong Qian, has lodged over the property.
[4] Mr Qian and Mr Dong met in April 2017. They were neighbours on Wicklam Lane. Mr Qian alleges that when Mr Dong first purchased 39 Wicklam Lane in August 2019, he had an oral agreement with Mr Qian that the purchase would be for both their benefit. Mr Dong, meanwhile, says he purchased the property alone and that Mr Qian’s interest was only that of a lender. In mid-2020, the two men had a falling out. Mr Dong then sold the property to Mr Wen.
[5] Mr Qian has commenced the present proceeding, alleging that Mr Wen holds the property as a constructive trustee for him and that Mr Wen acquired the property from Mr Dong while knowing, or being wilfully blind to, the alleged fact that the transfer constituted a breach of Mr Dong’s fiduciary duty to Mr Qian.
[6] That breach is said to arise out of the alleged agreement between Mr Qian and Mr Dong that they would develop the property together and share in any profits arising from its development and sale.
[7] Mr Qian’s claim appears to be that Mr Wen and Mr Dong are associated, and that the two colluded to deprive Mr Qian of his interest in the property, or that Mr Wen knew or ought to have known of Mr Dong’s breaches of duties owed to Mr Qian or the second plaintiff, QRZ Properties Ltd. He says the property’s transfer was a device to that end.
[8] Mr Wen denies the allegations. He says he had no knowledge of Mr Qian before he bought the property and that he bought the property in good faith as a bona fide purchaser for value.
Notice of interlocutory application for summary judgment and for leave to file summary judgment application
Application
[9]Mr Wen applies for orders:1
1.1That leave be granted to the third defendant to pursue his application for defendant’s summary judgment;
1.2An order for defendant’s summary judgment against the plaintiffs;
1.3An order for increased costs against the plaintiffs, and disbursements.
[10]The grounds on which the orders are sought are:2
Leave to pursue defendant’s summary judgment application
2.1It is in the interests of justice that the third defendant should be granted leave to pursue defendant’s summary judgment.
2.2Given the nature of the plaintiffs’ claims against the third defendant, it was appropriate to wait until completion of discovery by the parties to file the defendant’s summary judgment application.
2.3Until discovery was completed, it would have been premature for the third defendant to have filed an application for defendant’s summary judgment.
2.4A major ground of the third defendant’s summary judgment application is that there is no evidence to support the plaintiffs’ claims against the third defendant, and the plaintiffs’ allegations are contrary
1 Notice of interlocutory application for defendant’s summary judgment by third defendant and for leave to file summary judgment application dated 9 September 2021 at [1].
2 At [2].
to the documentary evidence. Discovery needed to be completed before this could be clearly established.
2.5The case is heavily fact-driven, and there is a substantial amount of documentary evidence. The third defendant requires evidence from the first defendant, including documentation discovered by the third defendant. Cooperation has been required between counsel for the first defendant and third defendant, as well as consideration of common interest issues and duties owed to, and individual interests of, respective clients.
2.6It would not have been reasonably practicable for the third defendant to have filed an application for defendant’s summary judgment within the time required to file a statement of defence, given the documentation that needed to be obtained and reviewed, and for necessary discussions between counsel to take place, that would have enabled an application for defendant’s summary judgment to have proceeded with the required detail of evidence and analysis.
Application for defendants’ summary judgment
2.7The plaintiffs have no reasonably arguable claim against the third defendant. The plaintiffs’ claims are based on suspicion and speculation, not evidence. There is no evidence to support the plaintiffs’ allegations, and the allegations are contrary to documentary evidence.
2.8Matters that have been raised in a memorandum and affirmation previously filed on behalf of the plaintiffs in this proceeding as demonstrating an alleged association between the first plaintiff and third defendant are without foundation and incorrect.
2.9The first-named plaintiff has referred in an affirmation to a valuation that he alleged was obtained by the third defendant, with the assistance of the first defendant, after the settlement of the sale of the property that is the subject of this proceeding. The valuation was, in fact, obtained over one month before the settlement, by the third defendant’s bank for the purposes of assisting the third defendant to obtain finance to purchase the property, and the first defendant was named as a “contact” to enable the bank’s valuer to access the property which was still owned by the first defendant at the time.
2.10The plaintiffs have submitted in a memorandum that there is evidence of a close association between the first and third defendants because the first defendant sought to rent a property which was also the registered office address of a company of the third defendant. The property was owned by a mutual friend of the first and third defendant. The mutual friend agreed for the third defendant to use the property for receipt of company correspondence while the third defendant was outside New Zealand, and the first defendant applied to rent the same property. The first and third defendants are part of the same social group. No other association exists.
2.11The third defendant has provided evidence of his source of funding to purchase the property, and of his payment of the full purchase price to
the first defendant. The third defendant has also provided full documentation of his dealings with contractors to develop the property, including his receipt and payment of invoices for development work, with no involvement in the property by the first defendant.
2.12Contrary to the plaintiffs’ allegations, the third defendant did not purchase the property from the first defendant for less than its market value. The purchase price was based on an independent registered valuer’s valuation obtained by the third defendant’s bank.
2.13The first defendant did not invoice the plaintiffs for costs incurred in relation to development work on the property after it was transferred to the third defendant, as alleged by the plaintiffs. The relevant invoices related to public drainage, which included work for other interests of the plaintiffs and first defendant relating to other development work on another property, or properties, on the same road, including other development work undertaken in partnership between the first defendant and first-named plaintiff.
2.14The third defendant had no knowledge of the existence of the plaintiffs, or of any issues between the plaintiffs and first defendant.
2.15Contrary to the plaintiff’s claims:
(i)The third defendant did not know, nor ought he to have known, of any alleged breach of duty by the first defendant to the plaintiffs;
(ii)The third defendant did not conspire in any way with the first defendant; and
(iii)The third defendant had no knowledge of, nor was he wilfully blind to, any alleged unregistered interest by the first-named plaintiff in the subject property.
2.16The third defendant holds the property entirely on behalf of himself, and the first defendant has no interest in the property, beneficial or otherwise, whatsoever. The third defendant’s purchase of the property was an arm’s-length transaction. The third defendant was a bona fide purchaser for value without notice of any issue concerning the plaintiffs
2.17The third defendant has taken steps in this proceeding, including but not limited to preparing and filing a statement of defence, preparing and completing discovery of documents, and preparing this application, and has incurred disbursements
2.18Further grounds for seeking increased costs will be provided in submissions on the issue of costs at the appropriate time.
Mr Wen’s affidavit of 9 September 2021
[11] In an affidavit filed with his interlocutory application, Mr Wen deposes to his belief that the plaintiffs have no arguable claim against him.3 He says Mr Dong was known to him only socially, and that the two are not associated. He says he purchased the property in good faith and for a fair market price. And he says Mr Dong has no continuing interest in the property or its development.4
[12] Mr Wen deposes that his reason for delay in bringing his application for summary judgment is that he believed it was appropriate until all documentary evidence had been produced through discovery to show there is no evidence to support the plaintiffs’ claims against him. He also says that due to time constraints, it would not have been possible or practical to have made his application at the same time as his statement of defence.5
[13] As to the allegations in the plaintiffs’ statement of claim, Mr Wen deposes he has no direct knowledge of the background relationship between the plaintiffs, Mr Dong and Mr Dong’s company, NAC International Trading Ltd (the second defendant). He reiterates he has no ties to Mr Dong other than as social acquaintances. He says he had never previously heard of Mr Qian and that he bought the property in good faith. Mr Wen confirms “unequivocally” that Mr Dong has nothing to do with the property after it was transferred to him.6
[14] Whatever the nature or truth of the plaintiff’s allegations against Mr Dong, Mr Wen deposes he had “absolutely no knowledge” of them or of any relationship between the plaintiffs and Mr Dong. He says there is no sham arrangement between him and Mr Dong, or any attempted collusion. And he says he had no knowledge of Mr Qian’s alleged interest in the property.7
[15] Summarising, Mr Wen deposes he believes the plaintiff’s claims against him cannot succeed. He says there is no evidence to support those claims, and that they
3 Affidavit of Yu Wen in support of interlocutory application dated 9 September 2021 at [1].
4 At [10]–[25].
5 At [26]–[32].
6 At [39]–[53].
7 At [61]–[81].
are contrary to the documentary evidence. He says he did not collude with Mr Dong and that he bought the property in good faith.8
Mr Dong’s affidavit of 14 October 2021
[16] Mr Dong has also filed an affidavit in support of Mr Wen’s interlocutory application. In it, he confirms that, among other things, he and Mr Wen are not associated; the two have not colluded; he believed the sale price for the property was fair; and he has no continuing interest in the property or its development.9
[17] Mr Dong deposes that he and Mr Wen have never conducted any business together. The two share a social circle, but otherwise have had no relationship aside from the sale transaction. He says that transaction was entirely legitimate, and that Mr Qian has no interest in the property. He deposes there is no wider conspiracy between the defendants and that he had never heard of Yu Homes Group Ltd before Mr Wen on-sold the property to it.10
[18] Next, Mr Dong deposes that he never mentioned Mr Qian to Mr Wen at the time of the sale transaction, as his did not think Mr Qian had a relevant interest in the property. He says he believed he was free to deal with the property as he wished. Further, he says the property was not sold at undervalue and that the sale price was fair. The sale was bona fide and negotiated in good faith.11
[19] Mr Dong says Mr Wen paid the purchase price in full and there was no complex secret arrangement to circulate funds back to Mr Wen. He deposes that he has never met nor corresponded with Mr Wen’s mother and that he has not engaged in any device or contrivance to create a false impression that Mr Wen paid more for the property than he really did.12
8 At [87]–[88].
9 Affidavit of Jiaqing Dong in support of interlocutory application dated 14 October 2021 at [1]– [3].
10 At [4]–[11].
11 At [12]–[17].
12 At [18]–[25].
[20] Mr Dong deposes that he has no continuing interest in the property and Mr Wen does not hold the property on his behalf in any way. He says he assigned no contracts to Mr Wen and none were in place when he sold the property to Mr Wen. He says he has had no continued involvement in the development of the property and has not provided funding for it. He insists that he has not charged the plaintiffs for any development work on the property after it was transferred to Mr Wen.13
Notice of opposition to interlocutory application by third defendant
[21]The plaintiffs oppose Mr Wen’s application:14
1.The respondents, Dong Qian and QRZ Properties Limited, intend to oppose the interlocutory application by the third defendant dated 9 September 2021.
2.The respondent is opposed to the making of the orders numbered 1.2 and 1.3 in the application.
3.The grounds on which the respondent opposes the making of the orders are as follows:
a.The third defendant is unable to satisfy the Court that none of the plaintiffs’ causes of action will succeed.
b.There are material disputes of fact which cannot be determined on the basis of the documents and affidavits alone.
c.The credibility of witnesses, and authenticity of documents will be a major issue in these proceedings.
d.Relevant documents, which may have a bearing on the resolution of disputed issues of fact, have not been disclosed by the first and second defendant.
e.The third defendant’s application relies on hearsay evidence.
f.The relationship that exists between the first and third defendants is expressed in vague and inconsistent terms.
g.There are material differences in the content of affidavits filed by the first defendant that have a bearing on the plaintiffs’ claims against the third defendant.
h.The plaintiffs have raised sufficient basic facts to support a prima facie claim against the third defendant, and these claims are not fanciful or not bona fide.
13 At [26]–[44].
14 Notice of opposition to interlocutory application for defendant’s summary judgment by third defendant dated 4 November 2021.
i.Material aspects of the defence of the first defendant and third defendant do not withstand even a cursory examination, and require further investigation.
j.The third defendant has not raised a clear and uncontradictable answer to the plaintiffs’ claims.
Mr Qian’s affidavit of 12 November 2021
[22] In an affidavit filed in support of the notice of opposition, Mr Qian deposes that a key issue in the dispute is the drainage connection that he paid for and installed at the property. He says that drainage connection would have substantially increased the value of the land.15
[23] Mr Qian deposes that he first met Mr Dong in April 2017. He says Mr Dong wished to connect his property to the drainage connection and thereby increase its subdivision potential. Mr Qian claims, however, that Mr Dong did not follow through on a promise to reimburse him for that connection.16
[24] Mr Qian says he and Mr Dong discussed partnering together on subdivisions and developments on Wicklam Lane. They purchased 39 Wicklam Lane in November 2019 and planned to subdivide it. Mr Qian says he and QRZ Properties Ltd contributed $821,884.76 to the development, of which Mr Dong does not dispute
$554,601.76.17
[25] Next, Mr Qian deposes that the property was transferred to Mr Wen without his knowledge or consent. He says he commenced a claim against Mr Wen and caveated the property because there was a lot about the circumstances of the acquisition that did not make sense. He says the $3,500,000 sale price was not a fair one, because the property had been originally purchased at $3,000,000 and there had been between $554,601.76 to $821,884.76 in subsequent development. As well, he says the drainage connection would have substantially increased the value of the property and the sale price did not take that into account.18
15 Affidavit of the first and second plaintiffs in support of notice of opposition dated 12 November 2021 at [7]–[14].
16 At [15]–[20].
17 At [22]–[32].
18 At [33]–[38].
[26] Mr Qian says it appears Mr Dong paid $3,000,000 for the property, spent 17 months and $550,000 obtaining resource consent and a drainage connection, only to sell it at undervalue. As well, it is suspicious that Mr Wen subsequently sold only half of the land for over $1,000,000 more than he paid for it.19
[27] Also suspicious, Mr Qian says, is that Mr Dong and Mr Wen both appear to have funded purchase and development costs of the property by way of gifts from their mothers, funds borrowed from third parties, bank loans and GST refunds. Neither has used their own funds and neither has previous experience in property development.
Mr Qian casts doubt on the actual source of Mr Dong and Mr Wen’s funds.20
[28] Mr Qian deposes that at no time before commencing these proceedings did Mr Wen correspond with him or his solicitors regarding removal of the caveat. He corresponded only with Mr Dong. He reiterates that he believes there are serious issues with Mr Dong and Mr Wen’s evidence that demonstrate the transfer of the property was not a bona fide purchase. He says he does not believe Mr Wen has a valid defence to the claims against him.21
Mr Dong’s reply affidavit of 19 November 2021
[29] In a reply affidavit, Mr Dong responds to two issues Mr Qian raised in his affidavit, being the level of profit he made on his sale of the property to Mr Wen and the timing of his application for building consent.22
[30] Mr Dong says, contrary to Mr Qian’s assertion, that he did not spent $550,00 on a resource consent and the drainage connection. He says the cost was only
$185,220.21. He says his total costs relating to the property were $318,220.21 — approximately $315,000 less than the sale price to Mr Wen. And he says selling the property to Mr Wen made sense to him given the profit he made on the transaction, the other benefits achieved from the public drainage work and other commitments he had at the time.23
19 At [39]–[40].
20 At [41]–[48].
21 At [52]–[54].
22 Reply affidavit of Jiaqing Dong dated 19 November 2021 at [1]–[3].
23 At [4]–[10].
[31] Mr Dong also confirms he has had no ongoing involvement with the property after its sale to Mr Wen. He lodged the building consent application on 9 November 2020 and had been working on it much earlier than that. He said the consent application has been prepared at a time when he intended to carry out development himself, but that intention changed when he decided to sell the property to Mr Wen. He deposes that, having done the background work for the consent application, he and Mr Wen simply agreed that he should submit the application. He did so while he still owned the property.24
Mr Wen’s submissions
[32] Mr Rea, for Mr Wen, submits that a defendant applying for summary judgment must show there is no real question to be tried.25 Summary judgment will not ordinarily be appropriate where issues of fact are disputed, but may be successful where the relevant allegations are “utterly baseless”.26
[33] Mr Rea submits that a judge is not bound to accept statements in affidavits “uncritically, as raising a dispute of fact which calls for further investigation [where it is] inconsistent with undisputed contemporary documents … or is inherently improbable”.27 He says further that the need for judicial caution in summary judgment applications needs to be balanced with a robust and realistic attitude when the facts of a given case call for it.28
[34] Further, Mr Rea submits that where a defendant supplies evidence that would satisfy the Court that the claim cannot succeed, the plaintiff will usually be required to respond with credible evidence.29 Where allegations are fanciful or not bona fide,
24 At [11]–[14].
25 Submissions of third defendant filed for interlocutory application for defendant’s summary judgment dated 3 February 2022 at [5], citing Andrew Beck and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [H12.2.06] and Pemberton v Chappell [1987] 1 NZLR 1 (CA).
26 At [6], citing Beck and others, above n 25, at [H12.2.03]; Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC); and Pemberton v Chappell, above n 25.
27 At [7], citing Attorney-General v Rakiura Holdings Ltd, above n 26, at 14.
28 At [8], citing Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
29 At [9], citing Sonsram Trustee Ltd v Harrison Grierson Consultants Ltd [2016] NZHC 581 and
Attorney-General v Jones (2001) 15 PRNZ 347 (CA).
an application will succeed.30 Allegations of fraud require careful scrutiny,31 and common sense, flexibility and a sense of justice are needed.32
[35] Of the application for leave to make the interlocutory application for summary judgment, Mr Rea submits that the overriding consideration is the interests of justice. He says other relevant factors will include whether the delay in filing the application can be satisfactorily explained; the merits of the applicant’s case; and any risk of miscarriage of justice.33
[36] Turning to the grounds for the applications, Mr Rea submits that the plaintiffs have no reasonable claim against Mr Wen. There is a lack of evidence corroborating the plaintiffs’ claims, which are inconsistent with extensive contemporaneous documentary evidence. The claims are based on suspicion and speculation and are inherently improbable. Common-sense and justice dictate that Mr Wen’s summary judgment application be granted.34
[37] Further, Mr Rea submits that it is in the interests of justice for Mr Wen’s leave application to be granted. The plaintiffs have suffered no prejudice in the timing and filing of the summary judgment application and Mr Wen has satisfactorily explained the reason for the delay in filing. The merits of the application warrant the grant of leave.35
[38] Mr Rea turns to analyse the evidence. He submits the property’s sale price was based on a registered valuer’s valuation and was therefore not undervalue. He says the evidence discloses no association, business relationship or collusion between Mr Dong and Mr Wen. The evidence is that Mr Wen paid Mr Dong in full for the property and Mr Dong has no continuing interest in it.36
30 At [10], citing Beck and others, above n 25, at [H12.2.06].
31 At [11], citing Regency Financial Services Ltd v ANZ Banking Group (NZ) Ltd HC Auckland CP 145/IM102, 18 September 2002.
32 At [12], citing Haines v Carter [2001] 2 NZLR 167 (CA).
33 At [13]–[16], citing Tip Top Ice Cream Co Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 (HC).
34 At [17]–[24].
35 At [25]–[31].
36 At [39]–[44].
[39] Next, Mr Rea says Mr Wen has provided documentary evidence for the source of his funding. There is no evidence capable of establishing diversion of funds back to Mr Wen or that Mr Wen did not make full payment. Nor is there any reasonable evidential basis to dispute the source of funds for the development works Mr Wen undertook on the property, or to establish that Mr Dong had any involvement in funding that development work after the property was transferred to Mr Wen.37
[40] The reason Mr Wen delayed in filing his leave application, Mr Rea explains, is that it was appropriate to wait until after discovery had been completed to show there is no evidence to support the plaintiffs’ claims. Mr Wen also needed time to locate and provide relevant documents.38
[41] Mr Rea submits that while Mr Wen and Mr Dong are part of the same social group, they have no other association. There is no evidence of collusion between them. Indeed, documentary evidence of their solicitors’ correspondence belies that claim. He says the plaintiffs’ serious and highly speculative allegations should not be permitted to proceed further.39
[42] Next, Mr Rea submits that Mr Dong’s affidavit evidence confirms and corroborates Mr Wen’s narrative. Materially, Mr Dong confirms he has no association with Mr Wen; he has not colluded with Mr Wen; Mr Wen was unaware of Mr Qian’s involvement with the property; the property was not sold at undervalue; Mr Wen paid the purchase price in full; Mr Dong has no ongoing interest in the property; and Mr Dong has had no involvement with developing the property or funding it after its transfer to Mr Wen.40
[43] Mr Rea says much of Mr Qian’s affidavit is irrelevant to the claims against Mr Wen. He says the drainage connection is not a key issue in the proceeding, and that much of the affidavit appears designed to cast doubt on Mr Dong’s character.41
37 At [45]–[51].
38 At [52]–[55].
39 At [61]–[75].
40 At [76]–[94].
41 At [95]–[119].
[44] Finally, Mr Rea submits that Mr Dong’s reply affidavit clarifies issues Mr Qian raised concerning the level of Mr Dong’s profit in his sale of the property to Mr Wen and the timing of Mr Dong’s building consent application.42
[45] Concluding, Mr Rea submits that there is no proper evidential basis for the plaintiffs’ claims against Mr Wen. The allegations are purely speculative, inconsistent with the documentary evidence, and inherently improbable. The Court should take a robust and realistic approach and grant Mr Wen’s summary judgment application.43
Plaintiffs’ submissions
[46] Mr Blanchard QC, for the plaintiffs, submits that Mr Dong sold the property at undervalue to Mr Wen to deprive Mr Qian of his interest or potential profits from the development. Mr Wen cannot satisfy the Court that the plaintiffs’ claims cannot succeed, and accordingly his summary judgment application should be declined. Mr Blanchard does not oppose Mr Wen’s application for leave to apply for summary judgment after filing his statement of defence.44
[47] Mr Blanchard submits that the plaintiffs’ principal claims are in knowing receipt and conspiracy to injure by unlawful means. The plaintiffs will bear the onus of showing the circumstances were such that Mr Wen was put on inquiry but need not show direct evidence of collusion to the standard expected of fraud.45
[48] Mr Blanchard points to contended discrepancies and gaps in the defendant’s evidence. In particular, he contends there are discrepancies in:46
a.How 39 Wicklam Lane was being developed, and by who;
b.The nature of the relationship between Mr Wen and Mr Dong and the circumstances leading to the transaction;
c.Mr Dong’s intended involvement in the Property after its sale to Mr Wen;
d.Where Mr Wen obtained the money from to purchase and develop the Property; and
42 At [120]–[129].
43 At [130]–[135].
44 Synopsis of submissions for the first and second plaintiffs dated 10 February 2022 at [1]–[6].
45 At [26]–[35].
46 At [36].
e.Whether the price for the sale of the Property was at market value, and whether Mr Dong sold it for a loss.
[49] Of the first, Mr Blanchard submits it is beyond doubt Mr Qian advanced Mr Dong substantial funds to acquire and develop the property. Disputes over the nature of that advance (whether a partnership contribution or an unsecured loan) are not amenable to determination on a summary basis. Mr Blanchard say the Court cannot be satisfied, on a summary basis, that Mr Qian did not have a fiduciary interest in the property.47
[50] Mr Blanchard submits the way Mr Wen and Mr Dong have described their relationship has changed over time. He says the two have variously described themselves as friends and as mere acquaintances. Their relationship is vague and the circumstances relating to the sale of the property are undetailed. Mr Blanchard submits, therefore, that the Court cannot be satisfied that no circumstance arose to put Mr Wen on notice that something was amiss with the transaction.48
[51] Next, Mr Blanchard submits that Mr Dong’s evidence discloses that during the sale transaction, and until at least February 2021, he could still be involved in the property’s development “if he wanted to”. Further, Mr Wen’s source of funds for the purchase and development of the property remain mysterious and there is a possibility of a $1,050,00 “money go round”, by which Mr Wen did not pay the full purchase price for the property. There were circumstances that would have put a reasonable person on inquiry that not all was legitimate with the transaction.49
[52] The plaintiffs dispute that Mr Wen purchased the property at fair market value. The facts are that Mr Dong purchased the property for $3,015,000, held it for 17 months while spending around $820,000 improving it, and obtained resource consent for subdivision into nine lots. He then sold it for $3,500,000, after inexplicably agreeing to reduce the value by $100,000. Mr Blanchard submits that, in the context of an unprecedented development and construction boom, the transaction is suspicious.50
47 At [37]–[40].
48 At [41]–[52].
49 At [53]–[66].
50 At [67]–[77].
[53] Finally, Mr Blanchard submits that it is unusual that Mr Wen’s solicitor wrote to Mr Dong instead of Mr Qian when responding the caveat. He suggests the instructions Mr Wen provided his solicitor give the impression the correspondence was designed to assist with Mr Dong’s freezing order opposition, rather than being a response to the caveat’s lodging.51
[54] Concluding, Mr Blanchard submits there are too many remaining questions for the Court properly to order summary judgment for Mr Wen. To succeed in his application, Mr Wen would need to prove to the Court that no circumstances existed that could possibly have put him on notice that something was amiss with the transaction. Mr Wen does not meet that burden. The facts illustrate that Mr Qian and Mr Dong were involved in the property’s development, fell out, and that Mr Dong then sold the property to a friend at a loss on a rising market. The only improbable claim is Mr Wen and Mr Dong’s claim that the transaction was bona fide.52
Legal principles
[55] As to the leave application, r 12.4(3) of the High Court Rules 2016 requires that a defendant may make an interlocutory application for summary judgment after serving its statement of defence on the plaintiff only with the leave of the Court. Leave is at the Court’s discretion.
[56] If the absence of a defence (or, inferentially, the absence of a valid claim) has only become apparent after discovery or the exchange of briefs, this may be an adequate reason for a grant of leave.53
[57] As to the substantive summary judgment application, r 12.2 of the High Court Rules 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
51 At [78]–[79].
52 At [80]–[84].
53 Beck and others, above n 25, at [HR12.4.01A].
action in the statement of claim or to a particular part of any such cause of action.
(2)The court may give judgment against the plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[58] As a general rule in determining summary judgment applications, the Court will refrain from attempting to resolve genuine conflicts of evidence or to assess the credibility of the parties’ statements in their affidavits. But that does not mean spurious defences or contrived factual conflicts are permitted to prevent judgment being obtained.54 A robust approach is to be taken, by which affidavits must have an aura of credibility.55
[59] The wording of r 12.2 (“may give judgment”) indicates a residual discretion in deciding whether to enter summary judgment. That approach applies equally to a defendant’s application under r 12.2(2).56
Analysis
Leave to file summary judgment application after filing statement of defence
[60] First, I consider the Court should grant Mr Wen leave to apply for summary judgment after filing his statement of defence. The plaintiffs do not oppose the leave application and Mr Wen has given a satisfactory explanation for the delay in filing the summary judgment application.
[61] Leave will therefore be granted to Mr Wen to apply for summary judgment after filing his statement of defence.
54 At [HR12.2.08], citing Attorney-General v Rakiura Holdings Ltd, above n 26, at 14 and
Pemberton v Chappell, above n 25.
55 At [HR12.2.08], citing Bilbie Dymock Corp Ltd v Patel, above n 28.
56 At [HR12.2.11].
Should Mr Wen’s summary judgment application be granted?
[62] In relation to Mr Wen’s application for summary judgment, Mr Rea has referred me to the S H Lock (NZ) Ltd decision, and in particular the passage from the judgment as follows:57
Clearly the onus of showing there is no defence lies with the plaintiff, but the discharge of that onus is not in my view to be frustrated by a defendant raising hypothetical possibilities in vague terms unsupported by positive assertions or corroborative documentation.
Mr Rea submits that the statement applies equally to a summary judgment application by a defendant against a plaintiff. He submits that the plaintiffs have no reasonably arguable claim against the third defendant and the plaintiffs’ claims are based on suspicion and speculation, not evidence. He submits there is no evidence to support the plaintiffs’ allegations and the allegations are contrary to the documentary evidence.
[63] Notwithstanding Mr Rea’s submissions, the onus under r 12.2(2) remains on the defendant to satisfy the court that none of the plaintiffs’ causes of action in the plaintiffs’ statement of claim can succeed. I do not consider the evidence is sufficiently unequivocal that this onus has been discharged. While Mr Wen and Mr Dong have given prima facie reasonable answers to Mr Qian’s allegations, I do not see that the substantial conflicts in the evidence are amenable to resolution by summary judgment.
[64] I do not think the plaintiffs’ allegations are entirely baseless or lacking in merit. I consider Mr Qian has at least a plausible, if not especially compelling, claim that Mr Wen and Mr Dong dealt with the property other than in total good faith.
[65] In my view, there are a number of circumstances which require further investigation and explanation, notwithstanding that prima facie documentary evidence has been provided by Mr Wen in relation to these matters. Issues that require further consideration are:
(a)The circumstances leading up to the sale by Mr Dong to Mr Wen of the property are not detailed. The sale of the property was a significant
57 S H Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986 at 11.
property sale and purchase between the parties, and no detail of the negotiation leading up to its sale has been provided.
(b)The exact nature of the relationship between Mr Dong and Mr Wen needs to be explored. The submissions on behalf of Mr Wen suggest that mere acquaintances entered into a substantial property transaction without any detail being provided as to how this came about.
(c)The sale price of the property to Mr Wen raises issues that require further explanation. There is conflict in the affidavit evidence as to the costs of the property to Mr Dong. Issues that arise from the affidavit evidence are:
(i)How much did Mr Dong spend while holding the property for 17 months?
(ii)How much of the cost of obtaining the wastewater connection should be allocated to the property?
(iii)Should normal holding costs such as rates have been taken into account in assessing the cost of the property?
(iv)Did Mr Dong forego a substantial development profit given the ability to subdivide the property into at least nine lots (eight residential lots and one super lot)? Potentially, the super lot was capable of being subdivided into a further seven lots. Mr Dong had spent time and, depending on whether any of the costs of the wastewater connection should be allocated to the property, significant sums of money, but these did not appear to be reflected in the value of sale to Mr Wen. Mr Wen then appeared to almost immediately potentially realise a significant amount of the development profit by on-sale of the eight residential lots to Yu Homes Ltd.
(d)Why has Mr Wen not disclosed more detail regarding the financing of the purchase of the property? For example:
(i)his loan application to Westpac Bank — the plaintiffs have raised the question why Westpac agreed to advance a significant loan to a person with little property development experience. Also, no detail has been provided of how Mr Wen planned to service the loan while the development was being undertaken; and
(ii)more detail of how the loan from his mother came about — it was for in excess of $1 million, but little detail has been provided of how the loan came into being, other than prima facie documentation recording the advance.
(e)Detail of the funding of the development by Mr Wen, and detail of the loan of a substantial sum from a close friend.
[66] Mr Rea submits there is documentary evidence dealing with all these issues. Mr Blanchard submits that the circumstances (listed at [65] above) as raised by the plaintiffs indicate further enquiry, through discovery and cross-examination, is required.
[67] My view is that proper determination of the issues in this proceeding will require cross-examination and credibility assessments. The issues are properly to be determined at trial. Therefore, I am not satisfied that none of the plaintiffs’ causes of action in its statement of claim can succeed.
[68] For those reasons, I consider the Court should grant Mr Wen’s leave application but decline his substantive summary judgment application.
Orders
[69] The third defendant’s application for leave to bring the summary judgment application after filing of his statement of defence against the plaintiffs is granted.
[70] The third defendant’s application for summary judgment against the plaintiffs is dismissed.
[71] As the plaintiffs have been the successful party, costs on a 2B basis are awarded to the plaintiffs.
…………………………….. Associate Judge Taylor
Solicitors:
K3 Legal Limited (J Nolen/K Puddle), Auckland, for the Plaintiffs/Respondents Tompkins Wake (C Jiang), Auckland, for the First and Second Defendants
McVeagh Fleming Lawyers (K L Chiu/C R Andrews), Auckland, for the Third Defendant Lane Neave (J Frampton/B Russell), Christchurch, for the Fourth Defendant
Copy for:
Greg Blanchard QC, Auckland, for the Plaintiffs/Respondents D Chisholm QC, Auckland,
T Rea, Barrister, Auckland, for the Third Defendant
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