Wang v Han

[2024] NZHC 566

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-2246

[2024] NZHC 566

BETWEEN

YANG WANG and KEKE TANG

First Plaintiffs

CR21 INVESTMENTS LIMITED
Second Plaintiff

AND

YANGFENG HAN
First Defendant

CYS LIMITED

Second Defendant

Hearing:

13 March 2024

Counsel:

K H Morrison / J Siu for the First and Second Plaintiffs J A Frampton for the First Defendant

No appearance (excused) for the Second Defendant

Judgment:

15 March 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

This judgment was delivered by me on 15 March 2024 at 4 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:

Lane Neave, Christchurch, Morrison Kent, Auckland MC. Auckland

WANG v HAN [2024] NZHC 566 [15 March 2024]

Introduction

[1]    The parties have completed the first round of discovery in this proceeding. The plaintiffs seek further discovery from the first defendant, and the first defendant seeks further discovery from the plaintiffs. The applications for further discovery are determined in this judgment.

Background

[2]    The first named first plaintiff, Mr Wang, and the first defendant, Mr Han, were friends. Mr Han is a real estate salesperson. In 2021, dealings between Mr Wang and Mr Han ultimately resulted in two agreements for sale and purchase of real estate:

(a)In respect of 10A John Brian Drive, an unconditional agreement between Mr Han as vendor and  the  second  named  first  plaintiff, Ms Tang, as purchaser (John Brian  Drive  agreement).  Ms Tang  is Mr Wang’s wife.

(b)In respect of 13 Edgerton Road, an unconditional agreement between CYS Ltd (CYS) as vendor and the second plaintiff, CR21 Investments Ltd (CR21), as purchaser (Edgerton Road agreement). CYS is not related to Mr Wang  or Mr Han.  CR21 is a company controlled by  Mr Wang.

[3]    Ms Tang and CR21 paid deposits under the agreements. They did not settle the agreements, cancelled the agreements, and now sue for the return of the deposits.

[4]    Mr Wang and Ms Tang say that Ms Tang was entitled to cancel the John Brian Drive agreement on the following grounds:

(a)Ms Tang entered into the agreement in reliance on misrepresentations made by Mr Han to Mr Wang:

(i)that Mr Wang and Ms Tang would not be required to settle the purchase  until  they  had   sold   their   existing  property   at 11 Bankside Road and obtained finance; and

(ii)regarding the ability of Mr Wang and Ms Tang to obtain finance to complete the purchase.

(b)Alternatively, the agreement is an illegal contract.

[5]    Mr Wang says that CR21 is entitled to cancel the Edgerton Road agreement on the following grounds:

(a)CR21 entered into the agreement in reliance on misrepresentations made by Mr Han, as the agent of CYS, to Mr Wang regarding the status of resource and building consents for the property and the corresponding development potential and saleability of the property.

(b)Alternatively, the Edgerton Road agreement included an implied term that certain resource and building consents would be in place before settlement, and that term was not fulfilled.

[6]It is common ground that:

(a)Mr Han introduced Mr Wang to CYS’ director, Mr Zhang; and

(b)Mr Han introduced Mr Wang to a banker, Lei Chen (Mr Chen), and an accountant, Kelly Zhou (Ms Zhou), to assist Mr Wang and Ms Tang in obtaining finance to complete the purchases.

[7]    Mr Han denies making any misrepresentations and the alleged illegality of the John Brian Drive agreement. Mr Han denies that he was acting as the agent of CYS. The alleged implied term in the Edgerton Road agreement is disputed.

[8]    Mr Han counterclaims for loss of bargain damages for wrongful cancellation of the John Brian Drive agreement.

Legal principles

[9]    There is a presumption that the affidavits of documents already filed are conclusive and the party seeking further discovery has the onus of establishing that the existing affidavit of documents is incomplete.1

[10]There are four matters to consider on an application for further discovery:2

(a)Are the documents sought relevant and, if so, how important will they be?

(b)Are there grounds to believe the documents exist? This will often be a matter of inference. How strong is the evidence?

(c)Is the discovery sought proportionate, balancing the time and cost of discovery against its potential value?

(d)Weighing and balancing these matters, should the Court exercise its discretion under r 8.19 of the High Court Rules 2016 and order further discovery?

The further discovery sought from the plaintiffs

[11]   By the time of the hearing, Mr Han had narrowed the scope of the further discovery sought from the plaintiffs, to documents relevant to the financial position of the plaintiffs for the period from 19 October 2021 until 10 June 2022.

[12]   Counsel for Mr Han argued that the financial ability of the plaintiffs to settle the agreements for sale and purchase is relevant to the issue of whether the plaintiffs relied on any misrepresentations established at trial.

[13]   Counsel for Mr Han explained that Mr Han’s defence may include an argument that the plaintiffs were never in a financial position to settle the agreements, and the

1      McCullagh v Robt Jones Holdings Ltd [2015] NZHC 1462, (2015) 22 PRNZ 615 at [7].

2      Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].

plaintiffs’ reasons for cancelling were late inventions so that the plaintiffs could avoid their obligations to settle.

[14]   In response to the discovery application, Mr Wang has filed an affidavit confirming that the plaintiffs never had the required funds to settle either purchase, explaining the plaintiffs’ intentions at the time of the transactions:

(a)The purchase of John Brian Drive would be funded from:

(i)the proceeds of sale from the plaintiffs’ existing property at   11 Bankside Road; and

(ii)finance obtained in New Zealand but serviced from income from China.

(b)CR21 intended to on-sell 13 Edgerton Road before CR21 was required to settle.

[15]   I do not accept that the broad category of documents relating to the plaintiffs’ financial position in New Zealand and China from October 2021 to June 2022 is relevant, or that discovery of  those  documents  is  necessary,  particularly  given  Mr Wang’s averments summarised above.

[16]   The plaintiffs should have already discovered their own documents and records relevant to the transactions, including documents prepared for their own use regarding the proposed funding of the transactions. However, counsel for the plaintiffs offered no objection to a targeted further discovery order to ensure that no such documents have been omitted from the plaintiffs’ discovery.

[17]   After discussion with counsel, it was agreed that the substance of the order should relate to:

(a)any documents that record how the plaintiffs intended to fund the payments due on settlement of the agreements; and

(b)documents that evidence any advances that were secured against the plaintiffs’ property at 11 Bankside Road:

(i)on the date that the agreements for sale and purchase were entered into; and

(ii)immediately following settlement of the transfer of 11 Bankside Road from the plaintiffs to a company they control, Rockburgh Trustees (No. 15) Ltd, on or about 4 April 2022.

The further discovery sought from Mr Han

[18]By the time of the hearing, the further discovery sought was refined to:

(a)WeChat message chains between Mr Han and Mr Wang (but no other participants) between January 2020 and June 2022;

(b)WeChat message chains between Mr Han and Mr Zhang of CYS (but no other participants) relating to 13 Edgerton Road;

(c)WeChat message chains between Mr Han and Mr Chen (but no other participants) relating to 10A John Brian Drive or 13 Edgerton Road;

(d)WeChat message chains between Mr Han and Ms Zhou (but no other participants) relating to 10A John Brian Drive or 13 Edgerton Road; and

(e)WeChat group message chains involving any three or more of the following people: Mr Wang; Mr  Han;  Mr  Zhang;  Mr  Chen;  and Ms Zhou.

[19]   For the plaintiffs, Ms Morrison referred to examples of WeChat message chains discovered by Mr Han, including WeChat message chains provided to him by third parties, which  confirm  that  the  message  chains  are  incomplete.  For  Mr  Han, Ms Frampton explained that this has occurred because Mr Han uses different devices

to conduct WeChat conversations, and the different devices do not necessarily capture all prior messages in a chain where those prior messages were on a different device.

[20]   To date, Mr Han has provided screen shots of WeChat message chains, rather than copies of the chains in native electronic format.

[21]   Ascertaining whether Mr Han has already provided all relevant WeChat messages is hampered by the combination in one discovered document of different WeChat message chains between different parties.

[22]   This is an appropriate case for orders for particular discovery of the WeChat message chains in native file format, with each chain discovered as a separate document with a separate identifier.

Orders

[23]   The plaintiffs shall provide further discovery of all documents in their possession, power or control, either at present or at any time in the past, that in any way relate to their proposed funding of the purchase price  for  the  properties  at 10A John Brian Drive and/or 13 Edgerton Road.

[24]   The plaintiffs shall provide a supplementary affidavit of documents and open documents by 12 April 2024. The affidavit shall particularise any claims for privilege, with each privileged document separately described and allocated a document identifier. The affidavit shall provide a full explanation of what has become of any documents that were, but are no longer, in the possession, power or control of the plaintiffs.

[25]   The first defendant shall provide further discovery of the following classes of documents:

(a)All WeChat message chains between Mr Han and Mr Wang (but no other participants) between January 2020 and June 2022.

(b)All WeChat message chains between Mr Han and Mr Zhang of CYS (but no other participants) relating to 13 Edgerton Road.

(c)All WeChat message chains between Mr Han and Mr Chen (but no other participants) relating to 10A John Brian Drive or 13 Edgerton Road.

(d)All WeChat message chains between Mr Han and Ms Zhou (but no other participants) relating to 10A John Brian Drive or 13 Edgerton Road.

(e)All WeChat group messages involving any three or more of the following people: Mr Wang; Mr  Han;  Mr  Zhang;  Mr  Chen;  and Ms Zhou.

[26]   The first defendant shall provide a supplementary affidavit of documents and open documents by 12 April 2024.

[27]   Each WeChat message chain shall be discovered as a separate document in native file format and not as a screenshot.

[28]   If a WeChat message chain exists in native file format on more than one device, and those message chains differ between devices, then all copies shall be discovered. Each version shall be given a separate document identifier.

[29]Any claims of privilege shall be specified in the affidavit of documents.

[30]   If a WeChat message chain is incomplete or no longer available, then that should be explained in the affidavit of documents.

[31]Costs are reserved until discovery has been completed.

Associate Judge Brittain