Tian v Zhang
[2019] NZHC 2231
•9 September 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-001204
[2019] NZHC 2231
BETWEEN LINGBI TIAN
Plaintiff
AND
JIE ZHANG
First Defendant
AND
NAIQIAO GU
Second Defendant
AND
NAIQIAO GU and KTT Trustee Limited as trustees of the KTT FAMILY TRUST
Third Defendants
AND
E-JOY LIMITED
Fourth Defendant
Hearing: 10 June 2019 Appearances:
R Reed and M Tan for Plaintiff T-C Wu for Defendants
Judgment:
9 September 2019
JUDGMENT OF TOOGOOD J
This judgment was delivered by me on 9 September 2019 at 10.30 am Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
TIAN v ZHANG & ORS [2019] NZHC 2231 [9 September 2019]
Introduction
[1] Ms Kelly Lingbi Tian and Mr Anson Jie Zhang were engaged to be married. Four properties were acquired. Both Ms Tian and Mr Zhang contributed to the amounts paid for the deposits; some of the funds required to settle the purchases were borrowed from third parties, including banks which secured their advances by registered mortgages. Two of the properties were registered in Ms Tian’s name; the other two were registered in the name of Ms Tian’s mother, Naiqiao Gu,1 who was one of the lenders of funds. There were other transfers of money between Ms Tian and Mr Zhang before their personal relationship ended. Ms Tian, Ms Gu and Mr Zhang did not set out the terms of their property and financial arrangements in any helpful record.
[2] The couple never married and there is no evidence that they discussed, let alone agreed, what the financial position between them would be in that event. Perhaps unsurprisingly, they have different views about the nature of the transfers of money each made to the other from time to time, and about the consequences in terms of property interests and indebtedness. Ms Tian claims that Mr Zhang has no legal or other interest in the properties and seeks a declaration to that effect. She also says Mr Zhang, or his company E-Joy Limited, owes her money for mortgage broking services she provided, and that Mr Zhang has also failed to fully repay personal loans she advanced to him during the relationship. Mr Zhang says he paid money towards the purchase of the properties and asks the Court to make orders that recognise his interest. He denies that he owes any other money to his former fiancée.
[3] The Court is required to resolve these matters, which involve many hundreds of thousands of dollars. In another time and place, it might be sufficient for a wise, knowledgeable and independent person to decide the dispute simply by determining what seems fair in the circumstances. But in this proceeding, a fair outcome may not be readily susceptible to objective assessment without more. The Court must resort to applying recognised legal principles, including the requirement that plaintiffs in civil proceedings must prove their claims on a balance of probabilities.
1 In respect of one property, at 7 Red Oak Place, Schnapper Rock, in her capacity as a co-trustee of the beneficial owner, KTT Family Trust.
Ms Tian’s case summarised
[4]Before turning to the pleadings, I summarise Ms Tian’s allegations briefly.
[5] Ms Tian says she began a relationship with Mr Zhang in May 2014. In February 2015, she says, Mr Zhang and she formed plans to marry. It is her case that, following what her mother and she say is Chinese custom, Mr Zhang promised to provide Ms Tian with a dowry, a gift in the form of real estate, by giving her money to purchase property.
[6] Ms Tian says that, relying on this promise and with his concurrence, she entered into sale and purchase agreements for the following properties (the properties):
(a)35 Corunna Road, Milford, Auckland;
(b)58 English Oak Drive, Schnapper Rock, Auckland;
(c)7 Red Oak Place, Schnapper Rock; and
(d)31 Scarlet Oak Drive, Schnapper Rock.
[7] Ms Tian claims Mr Zhang then informed her that he needed more time to arrange funding. He said he would do so by selling some property of his own. Ms Tian says she then paid parts of the deposits for the properties on the basis that her fiancé would pay her back when he could do so. Ms Tian borrowed money from her mother and paid various amounts towards the deposits, totalling $518,235.00
[8] Ms Tian acknowledges that Mr Zhang paid a total of $550,696.00 towards the deposits but she says that, shortly before the settlement date for the Corunna Road property, 17 July 2015, Mr Zhang told her that he would not be able to raise the finance required for the balance of the purchase price of the properties. By that time, however, he had contributed to the deposits for the properties. Ms Tian urgently arranged finance to make up the shortfall.
[9] The titles for Corunna Road and English Oak were registered in Ms Tian’s name. Ms Gu asked to be the registered proprietor of the other properties as a form of security for the monies she had lent her daughter. Title for Red Oak was therefore registered in Ms Gu’s name along with KTT Trustee Ltd, both in their capacities as trustees for the KTT Family Trust (the Trust). The title for Scarlet Oak was registered solely in Ms Gu’s name. The finance for Red Oak and Scarlet Oak was arranged under Ms Gu’s name.
[10] In the ensuing months, Ms Tian took care of the mortgage payments and other costs incurred in relation to the properties. When she was unable to meet any payment that became due, she borrowed from Ms Gu and other family members.
[11] English Oak and Red Oak have been tenanted, with the rental going to Ms Tian. Scarlet Oak was tenanted until January 2019, but it was then vacated due to weathertightness issues. Corunna Road is an empty section. To date, and after subtracting the income received from the rentals, Ms Tian says she has paid over
$900,000 on the properties in mortgage payments and other costs.
[12] It is common ground that, from March 2015, Mr Zhang paid Ms Tian various amounts (the subsequent payments). Mr Zhang says these were contributions towards the mortgage. Ms Tian disagrees and says the payments were, first, the repayment of various sums she lent to Mr Zhang when he was short of money. Second, $50,200.00 of the sums paid were part payment of invoices totalling $174,328.00 that she submitted, as agreed with Mr Zhang, for assistance she provided to Mr Zhang’s mortgage broking company E-Joy, to increase its mortgage settlement volume. Ms Tian asserts that E-Joy owes her $124,128 for the unpaid invoices.
[13] The relationship between the betrothed couple came to an end in November 2016. Mr Zhang ceased making the subsequent payments in August 2017. In October 2017, Mr Zhang lodged caveats on the titles to each of the properties. Ms Tian issued the proceeding in June 2018.
The pleadings
[14] Ms Tian alleges, in an Amended Statement of Claim dated 12 March 2019, that Mr Zhang’s contributions to the deposits for the properties that were purchased were gifts. On this basis, she seeks a declaration that Mr Zhang has no beneficial interest in the properties and orders under s 142 of the Land Transfer Act 2017 (LTA) that his caveats be removed. She also seeks declarations that Red Oak and Scarlet Oak are held on resulting trust for her, by Ms Gu and the Trust and Ms Gu respectively. Those orders are not opposed.
[15] Ms Tian recognises that the Court may determine that Mr Zhang did not intend that his contributions to the deposits were absolute gifts to her. In that alternative event, she seeks the following:
(a)Declarations that she and Mr Zhang are co-owners of those properties in shares proportionate to their contributions to the purchase price or, in the case of Red Oak and Scarlet Oak, that they are held on resulting trust for them in the same proportion.
(b)Orders under the s 142 of the LTA removing Mr Zhang’s caveats.
(c)Orders under s 339 of the Property Law Act 2007 (PLA) for the sale of those properties with the proceeds from such sales to be distributed between Mr Zhang and her in proportion to their contributions to the purchase price.
[16] Alternatively, if the Court finds that Red Oak and Scarlet Oak were not held on resulting trusts, Ms Tian argues that those properties were held on constructive trusts. She repeats the description of the relief sought at [14] and [15] with all necessary modifications.
[17] Ms Tian also seeks judgment for the amounts outstanding under the alleged personal loan and the referral agreement, along with interest and costs.
[18] Mr Zhang does not counterclaim, but he argues in his pleading that he is entitled to a declaration that his contributions to the properties should be recognised and that the properties are held for him by the registered proprietors upon constructive or resulting trusts.
Legal principles
[19] The starting point is the making of gifts. Whether a gift is made turns largely on intention. As Brewer J said in Hurlimann v Noland:2
[47] The law allows a person to make a gift of money to another person. No consideration is required. If a person voluntarily, and for reasons of [their] own, makes a gift of property or money to another person, intending by doing so to part with ownership of the property or money, then that is what [they] achieve….
[20] But in certain situations, the law will presume that one person transferring valuable property to another will do so on the basis that they do not intend to part with the beneficial value of that property. There is a presumption of a resulting trust. Often cited is the following passage in Lord Browne-Wilkinson’s speech in Westdeutsche Landesbank Girozentrale v Islington London Borough Council:3
Where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in 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 a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter-presumption of advancement or by direct evidence of A’s intention to make an outright transfer….
[21]The rationale for a resulting trust was explained by the Court of Appeal in
Chang v Lee:4
[20] 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 price of a property. 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
2 Hurlimann v Noland [2018] NZHC 2251.
3 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 (HL) at 708, cited in Crampton-Smith v Crampton-Smith [2011] NZCA 308, [2012] 1 NZLR 5 at [35].
4 Chang v Lee [2017] NZCA 308, [2017] NZAR 1223.
contribution. Evidence which might contradict or rebut the presumption is traditionally of an intention to gift or of consideration in the nature of satisfaction of independent indebtedness.…
[22] In order to displace the presumption of a resulting trust, satisfactory evidence of a contrary intention must be produced to rebut it.5 The nature of the evidence required will differ according to the circumstances of the case, although evidence as to the intention of the transferor will be highly relevant.6 The acts and declarations of each party involved in the transaction are examinable.7 In Chang v Lee, the question was said to be whether, in the absence of an agreement between the parties as to the terms of the transfer, the transferor “intended to part with beneficial ownership through payment of the funds”.8
[23] Since Ms Tian and Mr Zhang were not in a de facto relationship for the purposes of the Property (Relationships) Act 1976,9 the ownership of the properties, beneficial or otherwise, falls to be determined by recourse to the legal principles I have outlined.
[24] An illustration of the principles in action may be seen in the decision of the New South Wales Supreme Court in Jobson v Beckingham.10 In that case, the plaintiff and the defendant were intending to be married. They purchased a house together. It was transferred to them in equal shares as tenants in common. However, the whole of the purchase price was provided by the plaintiff.
[25] Several months after the property was purchased (but before the parties were married), the relationship deteriorated. The wedding was subsequently called off. McLelland J noted that since the plaintiff had provided the whole of the purchase money, there was a presumption of a resulting trust in his favour in respect of the interest transferred to the defendant. In other words, there was a rebuttable presumption that it was intended that she was to hold her interest in trust for him. The
5 Bateman Television Ltd (in liq) v Bateman [1971] NZLR 453 (CA) at 463; see also Westdeutsche Landesbank Girozentrale v Islington London Borough Council at 708.
6 Crampton-Smith v Crampton-Smith at [41] and [43].
7 Bateman Television Ltd (in liq) v Bateman at 463.
8 At [21].
9 See s 2D.
10 Jobson v Beckingham 9 Fam LR 169 (NSWSC).
question then became whether, and if so to what extent, the presumption had been rebutted. This depended primarily on the intention of the plaintiff at the time of the purchase.
[26]McLelland J held:11
In my opinion the evidence shows that the plaintiff intended that the defendant should have a beneficial interest commensurate with her legal interest, but that this was in contemplation of, and conditional upon, their subsequent marriage.
…
It is quite clear that a presumption of a resulting trust may be partially rebutted and otherwise remain operative… Similarly such a presumption may be rebutted conditionally, and the resulting trust have operation upon failure of the condition. This is the present case.
…
Since the condition subject to which it was intended that the defendant have a beneficial interest in the property was not fulfilled the resulting trust in favour of the plaintiff prevails.
(Emphasis added)
[27] In reaching this conclusion, the Judge focussed on the plaintiff’s unilateral intention. This was to be assessed by reference to the circumstances, contemporary acts and declarations and by his own direct evidence. After hearing evidence on a discussion between the parties and their solicitor about the purchase of the house (where the question of the defendant becoming a half-owner despite the plaintiff providing the whole of the money was canvassed), the Judge considered the most likely story was that the plaintiff explained to the defendant the proposed benefit to be conferred on her “on the basis that they were getting married soon”.12
[28]I agree with and adopt that approach.
11 At 170 and 172-173.
12 At 172.
The evidence
[29] Ms Tian says that, when she began her relationship with Mr Zhang in May 2014, she was aged around 24 years and he was around 37. He projected to her the image of a very capable and successful businessman. Ms Tian says that, in February 2015, Mr Zhang presented her with a ring and flowers in what she viewed as an underwhelming proposal. Nevertheless, it seems to be the case that, by March 2015, the couple had made plans to marry and, when Mr Zhang proposed again in October of that year, she accepted.
[30] It is not disputed that, in the period between March 2015 and October 2015, Ms Tian and Mr Zhang intended to marry. Agreements for the purchase of the properties were entered into, and the transactions were settled, on these dates and for the prices indicated:
(a)35 Corunna Road, Milford, Auckland
Agreement – 29 April 2015
Settlement – 17 July 2015 Price – $1.68 million
(b)58 English Oak Drive, Schnapper Rock, Auckland Agreement – 22 May 2015
Settlement – 23 July 2015 Price – $1.26 million
(c)7 Red Oak Place, Schnapper Rock (Red Oak) Agreement – 25 June 2015 Settlement – 28 August 2015 Price – $1.0 million
(d)31 Scarlet Oak Drive, Schnapper Rock (Scarlet Oak) Agreement – 3 July 2015
Settlement – 30 September 2015 Price – $1.2 million
[31] The dispute about the dowry assumed some prominence in the parties’ evidence and submissions. Ms Tian says that in or around March 2015, Mr Zhang met her mother and told her about his plans to marry her daughter. It is alleged that he initially said that he would give a dowry of around $500,000 and could provide more from his family. Ms Tian says her mother, Mr Zhang and she discussed and considered
it better for the dowry to take the form of real estate. Ms Tian maintains that it is common practice in Chinese families for the man to give the woman a gift before the wedding; she and Mr Zhang had multiple discussions throughout 2015 about a dowry and the form it would take. She asserts that a joint venture would not make sense given the nature of her relationship with Mr Zhang and their differences in commercial nous and experience:
I was only 24 years old at that time and just started working. I did not have experience to start any joint investment. Mr Zhang presented himself to me as a successful mortgage broker who drove a Porsche, there was every reason for me at that time to believe he would make good his promise of a dowry to me.
[32] Mr Zhang promised that he would be able to fund and finance the purchase of real estate by selling his investment properties. Ms Tian says the three of them agreed that this was a good idea as the real estate market in Auckland at that time was good and prices would increase quickly in a short span of time. She said the practice of providing a dowry is common in Chinese culture where the bridegroom-to-be pays something to the bride-to-be to express his commitment to her.
[33] Ms Tian says that Mr Zhang was very much involved in the purchase of the properties and that they visited each of them before they were purchased. She says Mr Zhang was particularly interested in the Corunna Property since it was an empty section and could be expected to increase in value quickly.
[34] Ms Tian further says that she was initially comfortable with providing the deposits for the properties and borrowing money from her mother to do so. That is because she expected those loans to be temporary since Mr Zhang would soon have money from selling his investment properties. Ms Tian’s evidence in this respect is largely corroborated by her mother.
[35] Ms Tian says she then paid parts of the deposits for the properties on the basis that her fiancé would pay her back when he could do so. Ms Tian borrowed money from her mother and paid the following amounts towards the deposits:
(a)$168,000 towards Corunna Road;
(b)$126,800 towards English Oak;
(c)$103,435 towards Red Oak; and
(d) $120,000 towards Scarlet Oak; a total of $518,235.
[36] Ms Tian acknowledges that Mr Zhang paid the following amounts towards the deposits:
(a)$203,109 towards Corunna Road;
(b)$126,349 towards English Oak;
(c)$100,000 towards Red Oak; and
(d) $121,238 towards Scarlet Oak; a total of $550,696.
[37] Ms Tian said that, around two weeks before the settlement of the Corunna Road property on 17 July 2015, Mr Zhang told her that he would not be able to pay her back quickly for the initial deposits she paid towards the properties and that he was not able to raise loans in time. She claims he said he could only pay up when his financial situation improved but that his financial difficulties were only temporary. Ms Tian says though she argued with Mr Zhang about this, she was naïve and trusted him to eventually keep to his promise. After all, they were about to get married.
[38] After this, Ms Tian says she was worried and urgently requested loans to be organised in her name for the purchase of Corunna and English Oak and in her mother’s name for Red Oak and Scarlet Oak. As Mr Zhang’s financial difficulties continued, she still believed he would pay her back for the deposits, although she now
considers that she was “silly” to do trust him to do so. She says she had to pay for the loan repayments and other costs for the properties whenever there was a shortfall, borrowing money from her mother, brother and uncle as necessary. These costs included:
(a)repairing damage to the carpet, wall and toilet after a tenant moved out of the Red Oak Property;
(b)fixing the blocked drainpipes at the English Oak Property in 2016 and 2017;
(c)applying for resource consents for the Corunna Property; and
(d)meeting loan repayments, water bills, rates and other maintenance costs.
[39] She alleges that Mr Zhang made no contributions to the mortgage payments or the outgoings at all, apart from the sums he paid towards the deposits. She also says Mr Zhang was able to pay her back only part of the debts he owed her for the advances she had made to him and for her services to his company as a mortgage broker. As to the former she says:
Mr Zhang started to borrow money from me around September 2014. He knew that I had some savings and borrowed money from me for a number of reasons. For example, he had to pay his car loans, credit card debt, office rent and operations expenses of his mortgage broking business… I lent him money to help him out. Every time he borrowed money from me, he said that he would pay [me] back within a period of time. His explanation usually was that he had a temporary cashflow problem and he would be able to settle it soon enough…
I started to ask him to pay back the money he owed me around the end of 2014. At time, he only repays part of it or repays in instalments. He often delays paying back with excuses… While he paid me back for previous loans, he also continued to borrow money [from] me. He repaid me the money from time to time. But he still owes me an amount.
[40]And about the mortgage broking services, Ms Tian gives the following details:
Mr Zhang and I were mortgage brokers. From 2015 to the end of 2016, Mr Zhang and I shared an office… Apart from this and around September
2014, Mr Zhang asked me to help him with increasing his mortgage settlement volume… Other mortgage brokers who were at the office could see his settlement volume online and he did not want others to think that he had a low settlement volume.
I helped to increase his settlement volume by helping clients to apply for loans, communicating with clients, set up a plan for them to obtain their loans, and advising them on their loan application. I did the paperwork and tidied up the information provided by the clients. I would usually pass the loan applications to Mr Zhang’s assistant, Ms Xiaoxia Zhao to check and Mr Zhang would subsequently submit the loan applications under the name of E-Joy to the banks. Since we worked in the same office, I would not long after completing my work hand Mr Zhang the invoices personally.
[41] Ms Tian says she helped Mr Zhang with 13 clients between September 2015 and June 2016, but most of the invoices remained unpaid. Again, Mr Zhang would offer excuses about temporary cashflow problems.
Ms Xiaoxia Zhao’s evidence
[42] Ms Tian’s account about the mortgage broking arrangements is largely corroborated by Ms Xiaoxia Zhao, a former university friend of Ms Tian. She began working for E-Joy in August 2015 but resigned in December 2017 because of the company’s cashflow problems. She says Mr Zhang often had problems paying for rent and internet. As to the nature of Ms Tian and Mr Zhang’s working arrangement, Ms Zhao says:
… From August 2015 until mid-2016, Ms Tian often referred clients to Mr Zhang. Ms Tian met with clients regarding their loan applications, obtained relevant information from them, did the relevant paperwork, but these applications were submitted to the banks in Mr Zhang’s name. Mr Zhang did not know these clients before Ms Tian assisted them. I know this because I was the one that completed the checks on the paperwork completed by Ms Tian. After which I would hand the completed loan application paperwork to the banks. I understand that Mr Zhang did this to increase his settlement volume. His settlement volume was not as high as the other directors at the office. So he needed these clients to increase his settlement volume. The mortgage brokers at the office talk about each other’s settlement volume a lot and this is why I roughly know each of their settlement volumes including Mr Zhang.
[43] Ms Zhao provided the names of the 13 clients whom Ms Tian is said to have assisted. She confirmed that Ms Tian provided Mr Zhang with invoices and that Ms Tian often told her that she had not been paid by Mr Zhang.
Ms Naiqiao Gu’s evidence
[44] Ms Naiqiao Gu, Ms Tian’s mother, generally corroborated her daughter’s evidence.
Mr Zhang’s evidence
[45] Mr Zhang accepts that Ms Tian and he agreed in February 2015 that they would marry, and that she accepted his proposal in October 2015. However, he denies that there is a dowry culture in China:
Dowry was not discussed during our marriage plans. There was no expectation or agreement to have such an arrangement in place between Kelly and I. The idea of dowry was [n]ever raised.
[46] Mr Zhang says that when his relationship with Ms Tian became “more serious” in early 2015, they began to plan their future together as a family. To that end, Mr Zhang decided to sell two of his investment properties and reinvest the money in the property market for their joint benefit. He says Ms Tian agreed with this proposal. She told him that her mother would be able to fund her contribution to the investment.
[47] But, according to Mr Zhang, the investment proposal met with some resistance from Ms Gu. She harboured some suspicions towards Mr Zhang and questioned his devotion to her daughter. It was for that reason that Mr Zhang suggested that the properties be acquired solely in Ms Tian’s name rather than in their joint names:
Initially, Naiqiao did not approve of Kelly and me investing in property together. Kelly told me that Naiqiao did not approve of our relationship because I was 11 years older than Kelly and I had been married before.
Naiqiao was concerned that I would take Kelly’s money. Kelly was also feeling insecure in our relationship in that I may one day leave her. I loved Kelly very much and saw my future with her.
As a result, I thought it was important that we began investing in our future together. I also wanted to prove to Kelly and Naiqiao that I was serious about our relationship.
It was also for that reason that I decided to give Kelly a tangible gesture of my love. As a result, I suggested, that the Properties be put in Kelly’s sole name. Kelly agreed with this suggestion and appreciated it at the time.
As it turned out Naiqiao and the KTT Trust eventually became the owners of the Red Oak and Scarlet Oak properties. This was because Kelly was not able to raise the loans required to complete the purchase of these two properties in her sole capacity.
I did not tell any of my friends or family that I had agreed to have Kelly’s sole name as the owner of the two Properties because I knew that they would not agree with this approach and would tell me that it is a bad idea. However, I did not see this as an issue at the time as, in my mind, Kelly and I will, in the very near future, become a family.
[48] Mr Zhang says that after he agreed to registering the properties solely in Ms Tian’s name, she was able to persuade her mother to advance her the funds to cover her contribution to the deposits.
[49] As for the purchase itself, Mr Zhang says it was agreed that he and Ms Tian would contribute equally to the deposits and that the mortgagor would be the registered proprietor of each property. And despite not being involved in the arrangement or negotiation of the bank loans, Mr Zhang would contribute equally to the mortgage payments. Further, he would pay a sizeable chunk of his contribution in advance to demonstrate to the mortgagee that Ms Tian, as the mortgagor, received regular income:
Kelly and I agreed that I would to pay her a regular sum of money during March to September 2015 from E-Joy Limited’s Bank Account. The reason for this is to demonstrate to the bank that there is a regular and sustained increase the amount of funds that Kelly received during this period. This was done specifically to help Kelly to apply for and obtain a loan from the bank. It was specifically agreed between Kelly and I that the sums of money that I have paid Kelly would be calculated as part of my contribution to the properties.
[50] Although the rental received from English Oak, Red Oak and Scarlet Oak covered most of the mortgage repayment obligations, Mr Zhang and Ms Tian topped up the remainder, as well as the obligations in respect of Corunna, from their own funds. He says there was no “specific arrangement” for how frequently they would contribute to the mortgage payments. Rather, he says it was entirely flexible:
The reality is that I would periodically deposit sums of between about $3,000 and $12,000 into Kelly’s account as my contribution to the share of expenses associated with the Properties. These expenses included mortgage repayments, maintenance, insurance, water and, in the case of Corunna, development costs to the property.
After receiving my contributions, it was for Kelly to decide and allocate the funds as needed. Sometimes I would insert the specific address of the property
as a reference, if I am aware that certain expenses for a specific property would become due in the near future.
There were occasions where I was running low on cash, Kelly would pay my share of the mortgage repayments or other expenses. At other times when Kelly would be running low on cash, I would pay Kelly’s share of the expenses.
[51] Mr Zhang says his understanding was that the contributions ended up being more or less equal despite the give-and-take nature of the arrangement. He says that it was always his understanding that the investment in the properties was “like a joint venture” between Ms Tian and him, but “not in the strict legal sense of the term”:
There was no understanding or arrangement whatsoever regarding Kelly or my interest in the Properties being decreased on the basis that one or other of us failed to make contributions to the Properties at a certain time.
The purchase of the Properties was closely connected with our relationship, despite the short duration and nature of our relationship.
I have continued to contribute to the mortgages secured against the Properties up until August [2017]. I do not owe Kelly $107,340 in respect of the Properties or in relation to any interest.
[52] Mr Zhang also denies that he ever had a personal loan agreement with Ms Tian, but he does not go into detail. The existence of the alleged referral agreement is also denied. Mr Zhang admits that, on occasion, Ms Tian had referred mortgage applications to him. But that was for her own benefit. Ms Tian does not have a formal brokerage relationship with some of the banks and so, in the past, had asked Mr Zhang to assist her clients to obtain the necessary finance to purchase property. He says that she rarely came into his office but when she did, Ms Zhao would help her complete the paperwork required for her clients’ loan applications. Mr Zhang concludes:
There was never a referral agreement whatsoever between Kelly and I for any of the services that we have rendered in assisting her clients in obtaining the optimal terms and conditions of the loans.
[53] Mr Zhang has reviewed the invoices “allegedly issued” by Ms Tian, but says that he is not in possession of the corresponding commission statements from this period since he no longer has access to his email account. In spite of that, he says the invoices Ms Tian allegedly issued to him do not correspond to the clients that he has received commissions for, from the banks, during that same period. He alleges that a
significant number of the invoices that Ms Tian issued do not correspond with clients for whom he provided services during that period.
[54] Given that there was no referral agreement, Mr Zhang says he is not required to pay any part of the commissions that were received for work undertaken by him. In addition, he denies receiving any invoices from Ms Tian at any time.
The deposit contributions
[55] I address first the nature of the payments that Mr Zhang undoubtedly made towards the deposits paid for the purchase of the four properties.
[56] Although Mr Tian and Ms Gu maintained throughout that Mr Zhang undertook to provide a dowry in return for Ms Tian’s agreement to the marriage, with her mother’s approval, they provided no independent evidence that there was any customary practice in Chinese culture for the payment of a dowry by an intended husband to his intended wife or her family. Ms Gu gave evidence that her family had paid a dowry on behalf of her son in respect of his marriage, but Mr Zhang denied the existence of custom that would make it more likely than not that his contributions to the purchase price of the properties was in the form of a gift by way of dowry. Moreover, no evidence was led to explain whether, if a dowry payment was made according to custom, the payment would be refundable if the couple did not marry. The dispute about the existence of such a custom as is alleged might have been easily resolved by evidence from an independent expert, but there was none. Ms Tian suggested in evidence that evidence of the custom would be found on the internet, but the Court is not disposed to “Google” its way past the inadequacies of the plaintiff’s proof to find the answer.
[57] The real question is whether Mr Zhang intended, as the donor of the funds, to make an outright and irrevocable gift or one that was conditional upon the marriage taking place.
[58] It is not disputed that Ms Tian and Mr Zhang formed an intention to marry in about February or March 2015. I am satisfied that the purchases of the properties between 29 April 2015, when they entered into the sale and purchase agreement for
the Corunna Road property, and 30 September 2015, when they settled the purchase of the Scarlet Oak property, were undertaken in contemplation that they would marry. As Mr Zhang said, and as was accepted by Ms Reed on behalf of Ms Tian, Mr Zhang wanted to prove to Ms Tian and his mother that he was serious about the relationship and that he wanted to make a tangible gesture of his love. I am satisfied that is why he was content to contribute to the deposits without insisting that the properties should be placed in his name jointly with Ms Tian or that his interests should be otherwise secured. Despite Mr Zhang’s claim that it was agreed that Ms Tian and he would contribute equally to the deposits and to the mortgage and other property-related payments, I accept Ms Tian’s evidence that Mr Zhang undertook to use the proceeds of the sale of his two investment properties to meet the deposits on the four properties that Ms Tian and he agreed, with Ms Gu’s concurrence, should be acquired.
[59] While Mr Zhang may have promised much in terms of his prospects as a successful businessman, Ms Tian and her mother were likely to be disappointed by his inability to deliver. It is clear that both Ms Tian and Ms Gu responded astutely and with a very careful eye to the protection of their interests by ensuring that Mr Zhang’s interest in those properties, such as it may have been, was not recognised on the titles or by way of any other form of security. But any concerns about Mr Zhang’s ability to meet a share of the outgoings on the properties did not prevent the engagement of Mr Zhang and Ms Tian in the month after the purchase of the fourth of the properties was settled. That event confirms that the transactions, including the payment of Mr Zhang’s contributions to the deposits, was predicated on the eventual marriage.
[60] Mr Wu, counsel for Mr Zhang, placed some emphasis on the statement of claim that was filed at the time the proceeding was commenced in which Ms Tian pleaded that Mr Zhang and she had “entered into a verbal agreement to invest in real estate” by which they would make direct contributions to the purchase price and other payments regarding the properties entitling them to shares “proportionate to their direct and indirect contributions to the properties”. He says, moreover, that at the time the parties were discussing settlement of their differences over these matters, Ms Tian’s solicitor prepared a draft settlement agreement that referred to a joint venture. Nowhere in the original pleading or the draft settlement deed is there any reference to a gift or dowry.
[61] Ms Tian’s response to that proposition was to say that at the time she issued the proceeding and endeavoured to settle it, she was simply concerned to get the matter resolved as quickly as possible because of the breakup of her relationship with Mr Zhang. I did not find that a particularly credible response, but I do not need to rely on the way the case was pleaded initially or the way the arrangements over the purchase of the properties were referred to in the draft settlement agreement in reaching my view that the deposit payments are impressed with a resulting trust. Those factors, however, tend to confirm my view of the evidence as a whole which is that there was never any intention of an outright gift and that the payments were made because the parties contemplated a marriage that never occurred.
[62] It follows, therefore, that in the absence of evidence that Mr Zhang had a clearly expressed intention to gift the deposit payments to Ms Tian or, in respect of the properties owned by Ms Gu and the Trust, to those parties, the law requires that the funds be regarded as having been held by the beneficiaries of the payments by way of a resulting trust.
[63] In those circumstances, Mr Zhang is entitled to claim an equitable interest in the properties. On the pleadings, it is not suggested that he is entitled to interest on the funds so held but it is not disputed that the sums paid by Mr Zhang as part of the deposits paid on the properties must be returned to him.
[64] Because of the conclusions I have reached in respect of the deposits, I decline to make the declaration sought to the effect that Mr Zhang has no beneficial interest in the funds he provided for the purchase price of the properties. It follows also that he is entitled to maintain the caveats against the titles to the properties to secure the beneficial interests so far as they reflect his contributions to the deposits.
[65] The evidence intended to prove what payments were made by Ms Tian and Mr Zhang respectively towards the deposits for the purchase of each property is voluminous but unhelpful and counsel’s submissions lacked precision and failed to illuminate. It ought to have been possible for counsel to trace the payments made in respect of each transaction from their source to ultimate disposition, by reference to documentary exhibits. At best, however, the court was provided with little more than
general assertions. For example, Mr Zhang claims that he made a contribution of
$150,000 to the purchase of the English Oak property by making ten payments of
$5,000 each, which were transferred to Ms Tian’s account on 19 August 2015, and a further $100,000 payment transferred to Ms Tian’s account on 21 August 2015. The English Oak property, however, was purchased by way of an agreement dated 22 May 2015 and settlement took place on 23 July 2015. Mr Zhang gave no evidence about how the August payments related to that property. Mr Wu’s closing submissions did not refer to relevant entries in the voluminous bank statements produced by the parties in order to address what was an obvious conflict between the parties as to the precise amount or amounts that had been paid. Although there is some support for Ms Tian’s position in evidence given by Mr T W Downes, a chartered accountant who examined bank records exchanged by the parties in discovery, Mr Downes was substantially reliant upon information obtained from Ms Tian as to the nature of the payments and receipts.
[66] The result is that there is an unexplained discrepancy between Ms Tian’s acknowledgement that Mr Zhang made initial payments totalling $550,696.00 towards the purchase price of the properties and Mr Zhang’s claim that the sum contributed in that way by him was $586,349.04. I am not in a position to resolve the discrepancy, even if I had been inclined to do so, by poring through the multitudinous bank entries revealed by the exhibits. I am left to take a broad approach. The difference between the two amounts is $35,653.04. I split the difference; add the sum of $17,826.52 to the amounts Ms Tian acknowledges were paid by Mr Zhang; and conclude on the balance of probabilities that his contributions to the properties overall by way of deposit payments before borrowings was $568,522.52.
[67] It is appropriate to apportion that sum between each of the properties. I do so by taking the amounts of Mr Zhang’s contributions alleged by Ms Tian and adding to each an equal share of the $17,826.52. On that basis, I find on the balance of probabilities that Mr Zhang contributed the following amounts towards the payment of the deposits on the respective properties:
(a)Corunna Road – $207,565.63.
(b) English Oak – $130,805.63.
(c) Red Oak – $104,456.63
(d) Scarlet Oak – $125,694.63.
[68] It follows from my findings that Mr Zhang has a beneficial interest in each of those properties equivalent to the amounts stated, and that he is entitled to maintain the caveats in respect of each of the properties until the repayment of each sum respectively.
The personal loan claim
[69] I turn to the allegation by Ms Tian that she made personal loan advances to Mr Zhang totalling $358,900.00, and that she also paid $37,000.00 for renovations to his Sunnybrook property prior to its sale. Ms Tian also alleges that Ms Gu made an advance of $30,000.00 to Mr Zhang but I cannot see how that advance, if that is what it was, can be taken into account in a claim by Ms Tian in this proceeding. The total advances which are arguably recoverable, therefore, amount to $395,900.00.
[70] Ms Tian says these sums were paid by her from time to time from her own resources or out of her borrowings in order to assist Mr Zhang, whom she intended to marry, through his financial difficulties at times when his mortgage brokering business was in decline. She said that she made the payments periodically and that Mr Zhang made periodic repayments as and when his financial position allowed it. Mr Downes’ analysis of the bank statements suggests that a sum of $406,800.00 was contributed by Mr Zhang to Ms Tian’s accounts. It is not clear to me, therefore, on what basis Ms Tian asserts that only $356,600.00 was repaid to her by Mr Zhang as justification for her claim for an outstanding balance of $69,300.00.
[71] Mr Zhang’s evidence is that the payments made to him by Ms Tian were in part made by contribute an equal share to the costs of activities such as dinners, travel and holiday accommodation. Even allowing for the possibility that they holidayed
expensively, that does not account adequately for the sum of approximately
$360,000.00 identified as having been paid to Mr Zhang by Ms Tian in Mr Downes’ analysis. I find it to be more probable than not that most of the payments were made were, as Ms Tian says, advances by her to assist Mr Zhang financially.
[72] Mr Zhang attributes almost all of the sums paid by him to Ms Tian as his contributions to the interest payments due on the borrowings for the properties and development and maintenance costs. He claimed in his evidence that this sum (including payments made on his behalf by E-Joy Limited) totalled $230,984.80.
[73] The unsatisfactory state of the evidence adduced by the parties does not satisfy me on the balance of probabilities that a sum of $63,900.00 is owed by Mr Zhang for personal loans which have not been repaid and I dismiss that claim.
Claim against E-Joy Limited for unpaid commission
[74] I turn next to Ms Tian’s claim that there was an agreement by which she provided mortgage brokering services intended to enhance Mr Zhang’s practice. It is her position that he would take the credit for the activity in order to maintain his credibility with his business associates, but on the basis that Ms Tian would be reimbursed for the commission earned in respect of the brokering services. The evidence does not establish that the terms of what Ms Tian claims was a “referral agreement” were ever agreed, let alone recorded, insofar as the rate of commission and the timing of commission payments were concerned. It might be inferred that Ms Tian would be entitled to receive the equivalent of the commission payments received by Mr Zhang or his company from the relevant lending institutions, when they were received. The evidence of Ms Tian’s entitlement to the commissions upon which she relies is comprised solely in invoices purportedly rendered by her showing simply the name or names of borrowing client and a unit price for the commission without any reference to the basis upon which the price was calculated. The 13 invoices are dated between 17 September 2015 and 30 June 2016. They total
$174,328.00 and were rendered to the fourth defendant, E-Joy Limited, which was the trading entity for Mr Zhang’s business. Ms Tian claims that a balance of $124,128 is due to her.
[75] Ms Tian says the amount invoiced was based on the rate of commission the bank would pay when she brokered mortgaged loans for the clients. Referring to the discrepancy between the invoices and the commissions suggested by Mr Zhang on the basis of printouts generated by the software system related to commission payments, Ms Tian says:
The invoice dates and the date when commissions were received from the banks can be different. I did not know when exactly would E-Joy Limited receive the commissions but it would usually not be far off from either the date when the loan is approved by the bank or when the loan is drawn down on settlement date. This was the basis of my invoicing of E-Joy Limited on those dates.
However, I have not seen E-Joy Limited’s commission statements from the banks. As such, I have no idea as to whether some of the mortgage broking work that I did for the company was affected by any clawbacks from the banks or that he just did not pay me for the work that I had done…
[76] Although Mr Zhang refers to the invoices having “allegedly” been rendered by Ms Tian, he does not deny having received them. On the other hand, Ms Tian has not produced any evidence supporting the bare invoices such as might adequately enable the Court to determine whether there is any merit in Mr Zhang’s assertion that the invoices do not appear to relate to any commission payments received by him. Much of Mr Zhang’s evidence of commission receipts, which he acknowledges is incomplete, is incomprehensible. I accept that there is evidence of transactions that are not reflected in the commission statements produced by Mr Zhang. I also accept that the discrepancy between the parties’ views as to what sums are owing may be attributed in part to “clawbacks” by the lending institutions; that is, to deductions from commission entitlements made when borrower clients defaulted on their loan payments. The prospect of clawbacks, which must have been known to Ms Tian, suggests to me that her rendering of invoices for the full amount of commissions payable upon the securing of the loan is artificial.
[77] Ms Tian sought to support her claim to the commission payments by evidence from her friend and former colleague, Xiaoxia Zhou, an accountant formerly employed by E-Joy as Mr Zhang’s personal assistant. Ms Zhou said she was employed by E-Joy Limited from August 2015 to December 2017. She referred to Mr Zhang and his business having cashflow problems and difficulties paying their bills. She also said that from August 2015 until mid-2016, Ms Tian often referred
clients to Mr Zhang. She said that Ms Tian met the clients, obtained relevant information from them, and did the relevant paperwork but that the applications were submitted to the banks in Mr Zhang’s name. This was done, according to Ms Zhou, to increase Mr Zhang’s settlement volumes. Ms Zhou listed the names of the clients with whose applications Ms Tian had assisted, but she did not explain how she could remember the details despite having ceased to work for E-Joy in December 2017 and having now returned to live and work in China. I infer she simply repeated information provided to her by Ms Tian. Ms Zhou also asserted that Mr Zhang had told her that the commission received from the banks for work done by Ms Tian was around $160,000.00. She said that she had been told that around the third quarter of 2017 but could not remember the date. I did not find that evidence to be reliable. Ms Zhou said she had seen one invoice issued by Ms Tian to E-Joy.
[78] I am prepared to accept as probable the proposition that Ms Tian carried out mortgage brokering work which was, for the purposes of E-Joy’s business, attributed to Mr Zhang so as to boost a record of his apparent activity. But I am unable to be satisfied to the required standard that the commission amounts claimed were payable by E-Joy. There is no underlying evidence to support the claims the amounts set out in the purported invoices. Moreover, I am not able to say what, if any, payments were made by Mr Tian or E-Joy in response to the invoices. It is possible, but on the evidence I cannot say it is probable, that some of the payments which Mr Downes has identified as having been made by Mr Zhang to Ms Tian were intended to meet at least some of the invoices. Ms Tian pleads that between 15 January 2016 and 31 July 2017, Mr Zhang “as director” of E-Joy Limited, partially performed E-Joy’s obligation to pay the commissions by paying sums totalling $50,200, leaving an unpaid balance of
$124,128. That is not reflected in Mr Downes’ analysis.
[79] Being left in a state of doubt as to what the position may be, I am not prepared to speculate. I am unable to uphold the claim based on the invoices and it is dismissed.
Result
[80] The end result is that I have found that the registered proprietors of the four properties hold Mr Zhang’s beneficial interest in them under resulting trusts in the
sums set out at [67] and that, until those amounts are repaid, Mr Zhang is entitled to maintain the caveats lodged in respect of the properties.
[81] Unless the parties can resolve the basis upon which Mr Zhang should be repaid, it will be necessary for the Court to make appropriate orders under the Property Law Act. I am reluctant, however, to make orders directing the sale of the properties if Mr Zhang’s interests can be satisfied in some other way. In the absence of further assistance from the parties, I would be prepared to make orders in terms of the relief sought in the amended statement of claim, but the parties may prefer to resolve the matters themselves.
[82] I am also prepared to make consent orders regarding Ms Tian’s beneficial interests in the properties held by Ms Gu and the Trust, but the evidence does not establish the extent or value of her interests.
[83] Accordingly, I direct the parties to confer and, having done so, to file a joint memorandum informing the Court of what relief, if any, is required to be granted in the proceeding to reflect the findings that have been made. Such memorandum shall be filed no later than Friday, 27 September 2019. If the parties cannot agree, their respective positions shall be recorded in the memorandum and I shall make further directions.
Costs
[84] I reserve the question of costs for the exchange of memoranda. Any application for costs shall be made by way of a memorandum filed and served on the opposing party or parties no later than Friday, 27 September 2019. Any memorandum in reply should be filed and served no later than Friday, 11 October 2019. Costs shall then be determined on the papers unless the Court directs otherwise.
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Toogood J
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