Wang v Yuan

[2024] NZHC 2526

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2024-409-124

[2024] NZHC 2526

IN THE MATTER OF

Alternative claims in equity for money advanced and unpaid and in debt

BETWEEN

KAITIAN WANG

Plaintiff

AND

WENJING YUAN

First Defendant

AND

BARRINGTON ELITE NAILS LIMITED

Second Defendant

Hearing:	11 June 2024
Appearances:	S F Gaines for Plaintiff First Defendant in Person
Judgment:	4 September 2024

JUDGMENT OF CULL J

[1]    Mr Wang seeks judgment against Ms Yuan for $350,000, which Ms Yuan used to purchase Barrington Elite Nails Limited (“Elite Nails”). Mr Wang initially advanced $370,000 to Ms Yuan, on condition that he would acquire a minority shareholding in a petrol station in Canterbury, which Ms Yuan was planning to purchase but did not do so. The moneys now owing to Mr Wang are $350,000.

Factual background

[2]    Mr Wang emigrated to New Zealand from China in March 2010. He bought a residential property in Christchurch with his wife in 2013. They have no immediate

WANG v YUAN and BARRINGTON NAILS LTD [2024] NZHC 2526 [4 September 2024]

family in New Zealand and a limited network of friends and associates. Mr Wang has limited proficiency in English and has minimal business experience.

[3]    Mr Wang was introduced to Ms Yuan and her then-husband, Mr Hong, through a mutual friend. Mr Wang was told that Ms Yuan is a successful businesswoman and that Ms Yuan and Mr Hong might be able to provide Mr Wang with a job.

[4]    Mr Wang and Ms Yuan met and Ms Yuan informed Mr Wang that she wanted to buy a petrol station in Ohoka, Canterbury. Ms Yuan invited Mr Wang to invest in the business. Mr Wang told Ms Yuan that he wanted to invest in a business where he could work for a regular income that would provide for his family and assist him in attaining residency in New Zealand.

[5]    Mr Hong owned a fish market. Mr Hong and Ms Yuan invited Mr Wang to work as a store manager at the fish market until the petrol station was purchased. It was planned that Mr Wang would then move to Ohoka to manage the day-to-day operations of the petrol station and receive a share of its profits. This agreement was not recorded in writing. In April 2018, Mr Wang paid Ms Yuan and Mr Hong $20,000 in cash for his work visa for the fish market. Mr Wang worked at the fish market from 20 April 2018 to 10 May 2019.

[6]    Ms Yuan and Mr Hong told Mr Wang that they were waiting for an environmental inspection report on the petrol station’s land. Mr Wang was not involved in obtaining the report as Ms Yuan and Mr Hong wanted to hold the land in their name. Mr Wang did not interact with the vendor of the petrol station and did not see a written agreement to buy the business.

[7]    In November 2017, Mr Wang sold his family home to raise funds to invest in the petrol station.

[8]    On 13 May 2018, Ms Yuan asked Mr Wang to loan her and Mr Hong $370,000 until the settlement of the petrol station so that they could purchase a beauty parlour. This was the first time a beauty parlour was mentioned to Mr Wang. Ms Yuan and Mr Hong proposed that they would use the $370,000 as a loan to bridge the purchase of

the parlour. Ms Yuan and Mr Hong would then settle the petrol station purchase, at which point the loan would be complete and Mr Wang would acquire a share in the petrol station.

[9]    Mr Wang agreed with the loan proposal and told Ms Yuan that he was not interested in investing in the parlour because he has no beautician skills and could not work in the salon. Mr Wang repeated this to Mr Hong on 14 May. Mr Wang transferred $370,000 to the nominated bank account on 14 May. This loan agreement was not recorded in writing.

[10]   On 19 June 2018, Ms Yuan incorporated Elite Nails, of which she is the sole director and shareholder. Ms Yuan settled the company’s purchase of the parlour on 6 July 2018 for a price of $605,942.01.

Demands for repayment

[11]   At around June/July 2018, Ms Yuan and Mr Hong informed Mr Wang that there were issues with the petrol station purchase and asked him to remain patient. In August/September, Ms Yuan and Mr Hong told Mr Wang that the purchase of the petrol station would not proceed. Mr Wang immediately told Ms Yuan and Mr Hong that he wanted his money returned. Ms Yuan and Mr Hong said they would sell one of their investment properties to repay Mr Wang’s loan but did not give a date as to when this would occur.

[12]   In November 2018, Ms Yuan and her partner paid Mr Wang $20,000 in cash. Mr Wang says that this was a refund of the $20,000 payment made in April 2018 for work visa costs. Ms Yuan says the visa costs are non-refundable and that the payment was a part repayment for the $370,000 transfer. Mr Wang accepts that he cannot prove the purpose of this payment and adopts Ms Yuan’s position, hence his claim for

$350,000.

[13]   In April 2019, Mr Wang learned that Ms Yuan and Mr Hong had separated. He asked them to repay his loan but they did not. Instead, they offered Mr Wang a minority shareholding in Elite Nails and the fish market. Mr Wang declined both offers and again asked for the loan to be repaid. Mr Wang made a specific request of

Mr Hong for at least a repayment of half of his money, but he was told that Mr Hong had no interest in Elite Nails, that he had not touched his money, and that the question of repayment was between Ms Yuan and himself.

[14]Neither Ms Yuan nor Elite Nails have repaid Mr Wang the remaining $350,000.

[15]   Mr Wang sought legal advice and by letter dated 30 August 2019, a formal demand was made for repayment from both Ms Yuan and Mr Hong. Mr Hong’s lawyer advised that Mr Wang had advanced his investment to Ms Yuan’s business for her sole benefit and Mr Hong had no part in it.

Procedural history

[16]   On 4 June 2020, Mr Wang began a summary judgment procedure to recover his investment but this was discontinued for want of prosecution. On 9 December 2023, Mr Wang’s new lawyers asked Ms Yuan to attend private mediation. Ms Yuan did not respond. On 15 December 2023, Mr Wang’s solicitor notified Ms Yuan of his intention to seek judgment in this Court for $350,000 plus interest and any Court awarded costs and there was no response. On 27 March 2024, these proceedings were served on Ms Yuan. It was set down as a formal proof hearing on 11 June 2024 as Ms Yuan did not file a statement of defence.

[17]   At the formal proof hearing Ms Yuan appeared. I permitted her to make informal oral statements despite her having taken no steps in the substantive proceeding.

Causes of action and the formal proof hearing

[18]In this proceeding, there are four causes of action pleaded against Ms Yuan:

(a)breach of fiduciary duty;

(b)money had and received;

(c)knowing receipt; and

(d)debt due and owing for unpaid loan.

[19]   There was one cause of action pleaded against Elite Nails of knowing assistance.

Formal proof hearing

[20]   Ms Yuan attended the formal proof hearing in person without representation, having not filed a statement of defence or any formal submissions. I permitted Ms Yuan to make informal oral statements, despite her lack of standing to defend the proceedings, in the absence of complying with the High Court Rules and the Court’s directions.

[21]   In essence, Ms Yuan said that she and Mr Wang agreed that the $370,000 transfer from Mr Wang was not a loan, but instead an investment in Elite Nails. Her view is that Mr Wang wanted to invest in a New Zealand business to enable him to stay here and knew that he was buying into Elite Nails. He then refused to take his shares in the nail business when it was offered to him. Ms Yuan said that Mr Wang was paid $20,000 in cash by Ms Yuan and her partner when he requested it, as a repayment of part of Mr Wang’s investment, because the $20,000 for the work visa is non-refundable.

[22]In addressing the Court, Ms Yuan made an offer that Mr Wang could be paid

$350,000 from the sale proceeds of the Elite Nail business, which she would put on the market. This offer was rejected by Mr Gaines on behalf of Mr Wang, as the offer was conditional on the sale of Elite Nails and its sale price. This was not an offer that could be enforced against Ms Yuan personally.

[23]   At the close of the hearing, Mr Gaines advised the Court that he was abandoning two causes of action, being the claim of knowing receipt against Ms Yuan and the claim of knowing assistance against Elite Nails. Mr Wang’s claim is advanced against Ms Yuan only. Mr Gaines has since confirmed this in writing.

[24]   There are three remaining causes of action against Ms Yuan, I deal first with the most applicable to these facts, in my view, and that is the claim for money had and received.

Money had and received

[25]   Mr Wang claims against Ms Yuan for money had and received on the basis that Ms Yuan received the sum of $370,000 but failed to give effect to the purpose for which it was transferred. The purpose was to secure Mr Wang an interest in the petrol station.

[26]   In Purucker v Huebler (No.3), Justice Isac gave an overview of the claim for money had and received as follows:1

[70]      The claim for money had and received is a personal claim, not a proprietary claim or claim in rem.2 It does not depend on proof of any wrongdoing or impropriety on the part of a recipient. Nor does it turn on the continued existence or retention of the money received. Although unjust enrichment may be seen as underpinning the cause of action, there is no actual requirement of unjust enrichment. The claim has been used in cases where money has been misappropriated,3 paid under mistake or duress,4 or obtained where there has been a total failure of consideration.5 In each instance, the law deems the recipient’s refusal to return the funds unconscionable.6 Simply put:7

An action for money had and received is based on the receipt of money by a defendant who no longer has the right to retain it or has improperly disposed of it.

[71]Similarly, in Martin v Pont , the Court of Appeal observed that:8

… if the principal has entrusted money to his agent for a particular purpose which the agent has not carried out, the principal can recover that money as had and received to his use.

[27]   In this case, the claim turns on money being obtained where there has been a total failure of consideration.9 The refusal by Ms Yuan to return the funds to Mr Wang is consequently unconscionable.10 I am satisfied from the evidence and the submissions, that Mr Wang’s funds, which were traced into the bank accounts operated

1      Purucker v Huebler (No 3) [2023] NZHC 2246, [2023] NZFLR 334.

2      Napier v Torbay Holdings [2016] NZCA 608, [2017] NZAR 108 at [21], citing Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL) at 572.

3      At [23], citing Neate v Harding (1851) 6 Exch 348.

4      Thomas v Houston Corbett & Co [1969] NZLR 151 (CA) at 166–167, citing Kelly v Solari (1841) 9 M & W 54 (Exch of Pleas) at 58.

5      Moses v Macferlan (1760) 2 Burr 1005, 97 ER 676 at 1012; Lipkin Gorman (a firm) v Karpnale Ltd, above n 2; and Goss v Chilcott [1996] 3 NZLR 385 (PC) at 391.

6      Napier v Torbay Holdings, above n 2, at [23].

7      Nimmo v Westpac Banking Corporation [1993] 3 NZLR 218 (HC) at 238.

8      Martin v Pont [1993] 3 NZLR 25 (CA) at 27, citing Bowstead on Agency (15th ed, 1985) at 197.

9      Goss v Chilcott, above n 5.

10     Napier v Torbay Holdings, above n 2.

by Ms Yuan and her business were received by Ms Yuan and used to purchase Elite Nails as her business and for her benefit. As Mr Gaines submits, there has been a total failure of consideration here. Mr Yuan transferred the initial $370,000 in exchange for eventually obtaining a share in the petrol station, where he could earn an income, which would allow him to support his family and assist his obtaining residency.

[28]   Mr Wang had made it clear to Ms Yuan and her partner that he was not interested in obtaining a shareholding in Elite Nails as he did not have the requisite beautician skills to work there. Although Mr Wang agreed that his money could be temporarily used to purchase the Elite Nails business, it was his purpose in advancing the funds and his intention that ultimately, the petrol station would be purchased as initially planned and agreed. In the absence of Ms Yuan fulfilling that purpose and intention of acquiring the petrol station, she has not applied the funds for the purpose that they were received.

[29]   I find that the sum of $370,000 transferred to Ms Yuan is recoverable as moneys had and received and this cause of action succeeds. The judgment is for

$350,000, given the acknowledgement that Mr Wang has received from Ms Yuan

$20,000.

Breach of fiduciary duty

[30]   Mr Wang alternatively claims that Ms Yuan owed him fiduciary obligations which she breached upon failing to purchase the petrol station and not refunding his investment money.

[31]   To succeed in a breach of fiduciary duty claim, Mr Wang must establish three elements:11

(a)Ms Yuan owed Mr Wang a fiduciary duty;

(b)Ms Yuan breached her fiduciary duty; and

(c)The breach of duty caused Mr Wang loss.

11     Everest v McEvedy [1996] 3 NZLR 348 (HC) at 355; Gilbert v Shanahan [1998] 3 NZLR 528 (CA) at 535.

[32]   There are two types of cases in which fiduciary duties arise. The first involves the recognised category of relationships which are fiduciary in nature, such as trustee and beneficiary or solicitor and client.12 The second type of case is where the fiduciary relationships are inferred from the circumstances, sometimes referred to as “special facts” fiduciary relationships.13

[33]There are three factors identified as indicative of a fiduciary relationship:14

(a)the fiduciary has powers which may affect the proprietary rights of a beneficiary;

(b)the fiduciary can unilaterally exercise the power and discretion to affect the beneficiary’s legal and practical interests; and

(c)the beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion of power.

[34]The third limb of the above test was articulated as follows:15

This vulnerability usually arises from the inability of the beneficiary to prevent the exercise of power or to access legal or practical remedies to redress the wrongful exercise.

[35]   This case differs from the plaintiff in Purucker v Huebler,16 in that Mr Wang had not entrusted Ms Yuan with complete access to or control over his financial affairs, nor did Ms Yuan hold herself out as protecting his financial interests in her control.

[36]   Mr Wang had the remedy of pursuing the money he had advanced to Ms Yuan and has ultimately done so. I consider that there was not a fiduciary relationship established here. The remedy of money had and received, as I have found above, is the more obvious remedy for Mr Wang, who is able to pursue his legal remedies without being subject to the fiduciary’s restraint.

12     Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [73].

13     Purucker v Huebler, above n 1, at [60].

14     Frame v Smith [1997] 42 CLR (4th) 81 (SCC) at 99; cited in DHL International (NZ) LTD v Richmond Ltd [1993] 3 NZLR 10 (CA) at 22.

15     Frame v Smith, above n 14, at 100.

16     Purucker v Huebler, above n 1.

Debt due and owing for unpaid loan

[37]   Mr Wang alternatively seeks to claim the funds on the basis that he loaned Ms Yuan the money that was repayable on the purchase of the petrol station. He submits that Ms Yuan in failing to purchase the petrol station is liable to repay the debt.

[38]   A contract of a loan of money, as Mr Gaines submits, is a contract where one person agrees to lend a sum of money to another in consideration of an express or implied promise to repay that sum on demand at a fixed or determinable time or conditional upon a particular event.17

[39]   Mr Wang consented to Ms Yuan treating his investment moneys as a loan to bridge the purchase of a beauty parlour. He did so on the basis that the petrol station purchase was to proceed.

[40]   Although it is submitted that the event for the repayment was the purchase of the petrol station, it is unclear whether the categorisation of Mr Wang’s advance is in effect a loan. Whether Mr Wang advanced the moneys as “a loan” for the purchase of Elite Nails and it was to be repaid to him in full on the purchase of a petrol station, or whether the moneys were advanced as an investment for the purchase of the petrol station with the return of shares to Mr Wang in the business in which he was to work, remains unclear. This matter may well be clarified if further evidence was given or was tested. However, it is not determinative, as I have found that Mr Wang’s claim succeeds under the claim for moneys had and received.

[41]   The next question is whether statutory interest is payable on $350,000 under the claim for money had and received.

Is statutory interest payable?

[42]There was no agreement by the parties that Ms Yuan would pay interest on the

$370,000 loan. As I indicated at the hearing, I did not accept the submissions for

17     Hugh G Beale (ed) Chitty on Contracts (35th ed, Thomson Reuters, London, 2023) vol 2 at [42- 271].

compound interest and those claims have now fallen away, given two were withdrawn and I have not upheld the claim in fiduciary duty.

[43]   Statutory interest however was pleaded and is available. Under ss 9 and 10 of the Interest on Money Claims Act 2016, interest is payable from the date of the creditor’s demand to the date it is repaid. As the facts reveal, Mr Wang made numerous oral requests for repayment but the date and detail of those oral requests are uncertain. No formal steps were taken until 30 August 2019, when a formal demand was made by Mr Wang’s solicitor from both Ms Yuan and Mr Hong.18 This made the creditor’s demand certain, both as to date and amount.

[44]   In this case, Mr Wang sold his house in order to make an investment for the future of himself and his family. Mr Wang has suffered financial deprivation, forcing him to beg for money from Ms Yuan when his daughter was sick and he had no money to assist her, given the rent he was paying. As a result of his impecuniosity, his wife and daughter returned to China.

[45]   I consider that the most appropriate statutory award of interest is from 30 August 2019, when the formal demand by Mr Wang’s solicitor was made in writing. There could be no misunderstanding by Ms Yuan that a formal demand was being made for repayment, despite the previous oral requests and pleading by Mr Wang.

[46]   Accordingly, the interest should be assessed under the Civil Debt Interest Calculator governed by the Interest on Moneys Claimed Act 2016,19 for the period of 30 August 2019 until final payment of the judgment sum.

[47]   Although the plaintiff abandoned the third and fourth causes of action against the first and second defendants respectively, I consider there are no cost implications against the plaintiff’s abandonment because neither the first defendant, Ms Yuan nor the second defendant, Elite Nails, took any steps in the proceedings.

18 See above at [15].

19     Interest on Money Claims Act 2016, s 13.

[48]   I consider that the plaintiff is entitled to costs on his successful claim. 2B costs, as sought, are appropriate.

Result

[49]Judgment is entered for the plaintiff against the first defendant in the sum of

$350,000 for money had and received.

[50]   Interest on the above sum of $350,000 is payable under ss 9 and 10 of the Interest on Money Claims Act 2016 from 30 August 2019 to the final payment of the judgment sum.

Costs

[51]Costs are awarded on a 2B basis in favour of the plaintiff.

[52]   No costs are payable on the plaintiff’s discontinuation of two of his causes of action.

Cull J

Solicitors:

Lundons Law, Blenheim, for Plaintiff