Wu v Liu
[2025] NZCA 560
•22 October 2025 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA723/2024 |
| BETWEEN | HUA WU ALSO KNOWN AS DANNY WU |
| AND | JINXING LIU |
| Hearing: | 27 August 2025 |
Court: | Cooke, Brewer and Harvey JJ |
Counsel: | S W B Foote KC, A E Simkiss and F X Xie For Appellant |
Judgment: | 22 October 2025 at 10.30 am |
JUDGMENT OF THE COURT
AThe appellant’s application to further amend his statement of claim is declined.
BThe appeal is allowed.
CThe High Court judgment is set aside. Judgment is entered for the appellant against the respondent for the following:
(a)$1.2 million; and
(b)interest under the Interest on Money Claims Act 2016 from the dates of the respective transfers.
DThe High Court costs award is set aside, and the respondent must pay costs to the appellant in the High Court on a 2B basis together with reasonable disbursements to be fixed by the High Court Registrar if not agreed.
EThe respondent must pay the appellant costs in this Court for a standard appeal on a band A basis together with usual disbursements. We certify for two counsel.
____________________________________________________________________
REASONS OF THE COURT
(Given by Cooke J)
Table of Contents
Para No
The facts [4]
The issues [14]
Illegal contract [15]
(a) Amendment to pleadings [17]
(b) Requirements for the claim [30]
Was blackmail established? [36]
(a)Argument [37]
(b)Assessment [39]
Duress [45]
Illegality or duress? [46]
Affirmation [51]
Quantification [55]
Correct plaintiff [56]
Value [58]
Conclusion[61]
The appellant, Mr Hua Wu, appeals from the decision of the High Court dismissing his claim for restitution arising from transfers he made to the respondent in 2018.[1] The value of the transfers was $1.2 million. Lang J accepted that Mr Wu had made these transfers under duress because of the respondent’s blackmail — namely his threats to report Mr Wu’s misconduct to the police and immigration authorities if he did not make them.[2] But the Judge held that Mr Wu could not recover the amounts paid under duress as he had later affirmed the contract under which the transfers were made.[3]
[1]Wu v Liu [2024] NZHC 2903 [judgment under appeal].
[2]At [70] and [78].
[3]At [89].
On appeal Mr Wu’s argument has changed. He now says that the agreement under which the transfers were made was an illegal contract under subpt 5 of the Contract and Commercial Law Act 2017 (the CCLA), that no relevant question of affirmation arises, and that his claim for restitution should accordingly succeed. Alternatively, he argues that the High Court erred in finding he had affirmed the contract.
For his part, the respondent, Mr Jinxing Liu, challenges some of the findings of the High Court Judge, but otherwise seeks to uphold the judgment.
The facts
Whilst there is a challenge to some of the factual findings of the Judge, we first summarise his core conclusions.
Mr Wu was employed as the general manager of Timber King Ltd, a building and construction materials company. Mr Liu’s son, Mr Yong (Jackie) Liu, was one of the two shareholders and directors of that company, along with another family member.[4]
[4]At [2].
In February 2018, Mr Liu’s son confronted Mr Liu about apparent irregularities in the company’s accounting and payment systems. A short time later Mr Wu arranged for the sum of $400,000 to be paid by him to Timber King Ltd.[5] Although it was not expressly found by the Judge, the natural inference is that this at least encompassed repayment of money Mr Wu had improperly taken from the company.
[5]At [3].
There were then further negotiations between Mr Liu and his son with Mr Wu. Solicitors were subsequently instructed on each side. Ultimately, an agreement described as a Deed of Full and Final Settlement dated 4 July 2018 was signed (the Deed). The Deed purported to record an earlier loan from Mr Liu to Mr Wu. It required Mr Wu to repay the sum of $1.2 million in two instalments. The first, to the value of $600,000, was to be accomplished by transferring a property in Māngere to Mr Liu. That property had been part of a subdivision undertaken by Mr Wu with some associates. It was to be transferred by 27 July 2018. The second instalment, involving the payment of cash of $600,000, was to be paid on or before 29 November 2018.[6]
[6]At [4]–[5].
Mr Wu’s now ex-wife, Ms Xuan (Crystal) Wang, guaranteed Mr Wu’s obligations under the Deed. She subsequently sold property that she owned to fund the $600,000 cash payment which was then made to Mr Liu on 7 November 2018. The Māngere property was transferred to Mr Liu on 28 November 2018 after titles for the new subdivision were issued. These transfers apparently satisfied Mr Wu’s obligations under the Deed to repay the loan the Deed recorded.[7]
[7]At [5]–[6].
Lang J found that there was never any loan and that the Deed was a sham. At the time when the loan of $1.2 million was said to have been made, Mr Wu was a full-time student in New Zealand and he held it was inconceivable that he would want a short-term loan in that amount. Mr Liu was in China at this time and the Judge considered it would equally have been inconceivable that he would make a shortterm loan in that amount to a person located in another country who he had never met. The Judge also found that it “stretche[d] credibility” to contend that, wholly by coincidence, Mr Liu would then discover that Mr Wu, who had failed to repay the suggested loan, was working for his son when he visited New Zealand seven years later.[8]
[8]At [40]–[42].
Having found that there was no loan and the Deed was a sham, the Judge then assessed why Mr Wu had transferred $1.2 million to Mr Liu, concluding he had done so to resolve a dispute arising out of Mr Wu’s misconduct as an employee of Timber King Ltd. He found that Mr Liu and his son were not satisfied that the payment of $400,000 was adequate recompense, and that they wanted more. He found that they made threats to Mr Wu to pressure him to make the payments, and that the threats involved, at the least, threats to report thefts from Timber King Ltd to the police or immigration authorities. The Judge found that such threats carried significant reputational and criminal risk for Mr Wu.[9]
[9]At [66] and [70].
In short, he found that Mr Wu had made the payments as a result of the threats made by Mr Liu, and his son, after they discovered that Mr Wu had stolen money from Timber King Ltd, and that the transfer of $1.2 million involved blackmail.
The Judge applied the law in relation to duress and found that the transfers of $1.2 million were made under duress.[10] He then held, however, that the authorities required that a person seeking to avoid a contract entered into under duress must act in a “timeous” manner, citing the decision of this Court in Pharmacy Care Systems Ltd v Attorney-General (Pharmacy Care).[11] The delay of more than three years before Mr Wu brought the proceedings to seek recovery of the amounts, by statement of claim dated 24 March 2022, meant that Mr Wu’s attempt to avoid the Deed in this proceeding could not be regarded as timeous. Moreover, he considered that no explanation for the delay had been provided. He accordingly held that Mr Wu had affirmed the contract.[12]
[10]At [77].
[11]At [88], citing Pharmacy Care Systems Ltd v Attorney-General (2004) 2 NZCCLR 187 (CA).
[12]At [88]–[89].
For these reasons Mr Wu’s claims were dismissed.
The issues
The following issues are raised for determination:
(a)Whether Mr Wu can advance his claim for restitution on the basis that the contract between the parties was an illegal contract under the CCLA, and whether leave should be granted to allow a further amended statement of claim advancing that claim.
(b)Whether the High Court erred in finding that the transfers were induced by blackmail given the Court’s conclusion that Mr Wu’s evidence was unreliable.
(c)Whether the case is properly addressed by the principles of duress and not the principles in relation to illegal contracts.
(d)Whether the Court erred in concluding that Mr Wu affirmed the contract by failing to act in a timeous manner.
(e)Whether the High Court erred in finding that the claim was vested in Mr Wu, not his ex-wife, and in assessing the value of the claims.
Illegal contract
On appeal Mr Wu’s argument has changed. He says that the contract he entered with Mr Liu was an illegal contract and that to uphold it is contrary to public policy. He contends that the Deed is of no legal effect in accordance with s 73(1) of the CCLA which provides:
73 Illegal contracts have no effect
(1) Every illegal contract is of no effect.
(2)No person is entitled to any property under a disposition made by or under an illegal contract.
(3)This section and section 74 apply—
(a)despite any rule of law or equity to the contrary; but
(b)subject to the provisions of this subpart and of any other enactment.
Mr Wu says the blackmail agreement was illegal and that he should succeed in his claim for restitution, and that no question of affirmation arises given the effect of s 73(2).
(a) Amendment to pleadings
In order to advance this argument, Mr Wu has sought leave to file a third amended statement of claim which advances an additional cause of action under the CCLA. Mr Foote KC argued that r 48(2) of the Court of Appeal (Civil) Rules 2005 gives this Court the power of the first instance court, and the amendment should be permitted to enable the real controversy between the parties to be resolved, with the underlying test being what is in the interests of justice. It was further argued there is no prejudice to Mr Liu in allowing the amendment, and failure to do so would allow him to rely on a contract that was contrary to public policy. Further, the Court could — and should — raise the question of illegality of its own motion.[13]
[13]Citing Duncan v McDonald [1997] 3 NZLR 669 (CA) at 677; and Les Laboratoires Servier v Apotex Inc [2014] UKSC 55, [2015] AC 430 at [23] per Lord Sumption, Lord Neuberger and Lord Clarke.
Mr Liu opposed the grant of leave on the basis that doing so would cause him prejudice. Mr Grant argued that Mr Wu had decided how to advance his case at trial and did not advance it on the basis of the CCLA. The case now advanced on appeal was inconsistent with the one run at trial. The Deed could not be both void and voidable, and accordingly the case run at trial was inconsistent with the one sought to be advanced on appeal.[14] It would be unfair and improper to allow Mr Wu to now advance such a case.[15] Furthermore, any claim under the CCLA was now time barred. The act on which the proposed cause of action under the CCLA is based occurred in July 2018, and the interlocutory application to amend the pleadings was not made until February 2025, well outside six years, which was the relevant limitation period given that Mr Wu was seeking monetary relief.[16]
[14]Citing Blueskin Day Forest Heights Ltd v Paterson Pitts Partners Ltd [2014] NZCA 268 at [19]–[22].
[15]Citing Sports Zone Motorcycles (in liq) v Commerce Commission [2015] NZCA 78, [2015] 3 NZLR 191 at [106].
[16]Limitation Act 2010, s 11.
We do not consider that it is necessary for Mr Wu to further amend his statement of claim in order to advance his claim on the basis that the agreement under which the dispositions were made was an illegal contract. Had we thought it necessary for the pleadings to be amended in order for him to do so, we would have granted such leave, although the proposed third amended statement of claim would still have required some further adjustment.
Whether unjust enrichment is treated as an organising principle or a cause of action, the particular type of claim for restitution, and the relevant elements, should be pleaded.[17] There was always a degree of ambiguity about Mr Wu’s pleaded claim for unjust enrichment. The Judge recorded that Mr Wu’s trial counsel had indicated in submissions that this claim was advanced on the basis of duress, and that Mr Liu’s counsel objected to this because the statement of claim did not plead the elements required to establish unjust enrichment resulting from payments made under a contract entered under duress. The Judge found there was force in that criticism because the statement of claim was “sparse”.[18] He held, however:
[26] … I am satisfied they make it clear that Mr Wu alleges the dispositions contained in the Deed were procured by blackmail on the part of [Mr Liu] and [his son]. Blackmail is a criminal offence and an obvious example of duress.
[17]See discussion in Equiticorp Industries Group Ltd (in stat man) v The Crown (No 47) [1998] 2 NZLR 481 (HC) at 709–710.
[18]Judgment under appeal, above n 1, at [26].
We agree with the Judge that the allegations in the second amended statement of claim were ambiguous, and did not properly plead the actual basis for the claim of unjust enrichment to recover transfers made under a contract entered under duress. We also agree that the pleading was capable of supporting such a claim. But equally, it was capable of supporting a claim based on an illegal contract. Indeed, if anything, the allegations appeared more focused on illegality. It advanced allegations that:
(a)Mr Liu and his son had blackmailed Mr Wu by threatening to have Mr Wu’s family in China hurt if he did not comply with their demands, and that Mr Liu and his son also spread rumours that Mr Wu was a liar and had stolen their money in order to facilitate compliance with the threat; and
(b)the purported debt recorded in the Deed never existed, and that the transfers made by Mr Wu were simply payment to satisfy the blackmail demands.
In Mr Liu’s statement of defence, he denied the allegations, contending that the Deed recorded proper and enforceable contractual obligations. In his statement of reply, Mr Wu again pleaded that the loan did not exist, and that the Deed was a false document in order to justify implementation of the blackmail.
The allegations did not expressly allege that the blackmail was illegal. Neither did they refer to the CCLA. But we consider that illegality is encompassed by what was pleaded given that blackmail is a criminal offence — it was alleged that the transfers were made because of the blackmail, and it was alleged that the Deed was a sham. Given that illegal contracts are unenforceable, as reflected in s 73 of the CCLA, we accept that a claim for restitution based on payments made under a void contract is within the terms of this pleading.
We also accept Mr Foote’s argument that the effect of s 73 cannot be avoided. As this Court held in Duncan v McDonald with reference to the legislative predecessor in the Illegal Contracts Act 1970:[19]
… Furthermore, it is the duty of a Judge to take note of illegal conduct even if it is not pleaded. The Courts may decline to assist a plaintiff who has been guilty of illegal or immoral conduct of which the Court should take notice: Euro-Diam Ltd v Bathurst [1990] 1 QB 1 at p 35. When Anderson J concluded that the McDonalds had been dishonest participants in illegality it was proper for him to make such a finding even if the issue had not been directly raised by the pleadings or in argument.
[19]Duncan v McDonald, above n 13, at 677.
If issues of procedural fairness arise from the fact that the pleadings have not sufficiently identified such issues of illegality, the appropriate course is for the Court to raise the matter with the parties and, if necessary, grant adjournments. But the legislation cannot be ignored by the Court. Blackmail is a criminal offence, as the Judge noted.[20] Once it had been established that the transfers were the consequence of Mr Liu’s blackmail, s 73(2) of the CCLA had to be applied. We also do not consider there was any procedural unfairness in the present case because the pleadings did squarely allege that Mr Liu had blackmailed Mr Wu, and that the Deed was a sham to disguise this.
[20]Judgment under appeal, above n 1, at [26].
Had it been necessary, however, we would have granted the application for leave to amend the pleadings. That is because it would reflect the true controversy between the parties.[21] We do not accept Mr Liu’s arguments that prejudice would arise from granting the amendment precisely because the amendment reflected the true controversy at trial, and it was clear from Mr Wu’s pleading that he was alleging that Mr Liu had blackmailed him, albeit by threats of physical harm as well as statements that he had stolen from them. The only issue raised in relation to prejudice that has significance is Mr Grant’s argument that any fresh cause of action would be time barred so that it cannot be addressed by amendment in accordance with r 7.77(2)(a) of the High Court Rules 2016.
[21]Bi v Zhang [2024] NZCA 655 at [25]. See also Chilcott v Goss [1995] 1 NZLR 263 (CA) at 272– 273.
Had it been necessary to so advance a fresh cause of action, we accept Mr Foote’s argument that the position would be covered by s 50 of the Limitation Act 2010. The effect of this section was explained in Te Aka Matua o te Ture | the Law Commission’s report that led to the enactment of the Limitation Act. The Commission explained that it had been persuaded to adopt an approach advocated in Canada by Professor Garry Watson. He had argued that fresh causes of action should be able to be advanced notwithstanding apparent limitation defences, provided they were sufficiently related to claims already advanced.[22] The Commission said, with reference to what is now r 7.77(2) of the High Court Rules:[23]
[431] On the question of additional causes of action, we have been persuaded by the arguments in the Watson article to recommend that, provided they are properly related to the subject matter of the original claims (a question which must be left to courts to decide in the circumstances of individual cases), amendments to pleadings to add further causes of action should be permitted. That involves reversing the policy underlying R.187(2) of the High Court Rules, but we think the qualification of relationship back to the original subject matter achieves a more satisfactory result. To revert to our example, we see no harm in [a party] being able to add a claim in tort (perhaps resulting from recent case law changes) to an earlier claim in contract against [another party]. As Watson argues, this approach ensures that disputes are determined on the factual and legal merits, and not constrained by imperfect original pleadings.
[22]Garry D Watson “Amendment of Proceedings After Limitation Periods” (1975) 53 Can Bar Rev 237.
[23]Te Aka Matua o te Ture | Law Commission Limitation Defences in Civil Proceedings (NZLC R6, 1988).
This approach was adopted in the Limitation Act. An “ancillary claim” is defined in s 4 as being a claim “that relates to, or is connected with, the act or omission on which another claim … is based” of the types then listed, including a catch-all in paragraph (f). As Grice J said in PMT 20210 Ltd (in liq) v Mark, “[t]here is no reason to read down or unduly restrict” that meaning.[24] The Court then has a discretion whether to allow the amended pleading, which no doubt will focus on questions of fairness, including any prejudice to the other party. Here, had the claim not fallen within the existing cause of action for unjust enrichment, it would properly be treated as ancillary to such a claim under s 50, it would have been fair to grant leave, and appropriate to do so given the public policy involved in preventing parties relying on illegal conduct in proceedings before the Court, as reflected in s 73 of the CCLA.
[24]PMT 20210 Ltd (in liq) v Mark [2022] NZHC 169 at [100].
We would not have given leave on the proposed third amended statement of claim as formulated in Mr Wu’s application, however. That is because the proposed amended pleading continued to allege that the Deed was entered as a consequence of Mr Liu’s blackmail. But, as the High Court held, the Deed was a sham. There was never an agreement as its terms recorded. The true agreement between the parties was that, in return for the payment of $1.2 million (in cash and kind), Mr Liu and his son would agree not to report Mr Wu to police, immigration or other authorities (the true agreement). The amendment to the pleading, if it had been necessary, would have involved reformulating the relevant agreement in these terms.
(b) Requirements for the claim
Given that a claim based on the illegality of the true agreement is properly assessed as being within Mr Wu’s pleaded claims, we are satisfied that the claims were made out based on the findings of the Judge, subject to the further arguments we address later below.
Section 71 of the CCLA defines an illegal contract as one that is illegal under New Zealand law as a matter of law or equity, and s 73 provides that such an agreement has no legal effect. A payment made under such a contract would be a payment made under a void contract. Such a payment can be recovered by an action in restitution. That would be subject to Mr Liu being able to advance a claim for relief under s 76 of the CCLA, effectively as a defence to the restitution claim. It was not suggested that any basis for granting relief arises in the present case, however.
We have little hesitation in finding that the true agreement was an illegal agreement. As the Judge noted, blackmail is a criminal offence.[25] It is prohibited by s 237 of the Crimes Act 1961. On that basis alone this was plainly an illegal contract. Further, the threat Mr Liu made was to report Mr Wu to the authorities, given Mr Wu had stolen from his employer, which was a promise not to report an alleged crime to the authorities. This involved the additional dimension of an agreement to prevent the investigation and prosecution of crimes. As Elias CJ summarised in Osborne v Worksafe New Zealand:[26]
[70] Because of the public interest in prosecution of offences, it has long been held that private bargains to avoid prosecution through payment or provision of other benefit are unlawful. An unlawful bargain not to prosecute arises where there is an understanding or promise, express or implied, that a public offence (as opposed to a civil wrong) will not be prosecuted on condition of the receipt of money or other valuable consideration. The policy of the law is that a defendant who commits what is a public wrong cannot, by settling the private injury, be “entirely freed from the punishment due to a violation of public law”.
[25]Judgment under appeal, above n 1, at [26] and [77].
[26]Osborne v Worksafe New Zealand [2017] NZSC 175, [2018] 1 NZLR 447 at [70] (footnotes omitted).
Similarly, in Mall Finance & Investment Co Ltd v Slater, this Court observed that a contractual promise not to prosecute somebody would be founded on illegal consideration and therefore void.[27] Cooke J also noted that the Court would be able to reach the view that a contract was illegal with less reluctance given the discretion to grant relief from the consequences of the illegality conferred by the legislation.[28] We also note that an offence of obstructing the course of justice contrary to s 117(e) of the Crimes Act can arise from such a payment if a police investigation had begun or was sure to follow.[29]
[27]Mall Finance & Investment Co Ltd v Slater [1976] 2 NZLR 685 (CA) at 689 per Cooke J.
[28]At 689, approved by the High Court in Polymer Developments Group Ltd v Tilialo [2002] 3 NZLR 258 (HC) at [74].
[29]R v MPP [2017] NZCA 314, (2017) 28 CRNZ 204 at [36].
This case has similarities with that of Polymer Developments Group Ltd v Tilialo. There the defendant’s brother had stolen from his employer. A settlement deed was then entered which involved repayment of the funds that had been appropriated. The deed also included a term that the brother would not be prosecuted. Glazebrook J held that this was an illegal contract because of the term promising not to commence a private prosecution. But she granted relief by severing the reference to criminal proceedings from the deed and making a minor adjustment to the required repayments.[30] The difference in the present case is that Mr Wu has been required to pay $1.2 million in addition to his repayment of the $400,000 allegedly misappropriated from his employer, and there is no suggestion that Mr Liu should benefit from any relief.
[30]Polymer Developments Group Ltd v Tilialo, above n 28, at [77] and [104]–[105].
Given these conclusions we consider that, subject to the further matters we address below, including the argument for Mr Liu that this case is more properly addressed under the law of duress, Mr Wu’s claims based on illegality should succeed.
Was blackmail established?
In his memorandum to support the High Court judgment on alternative grounds, Mr Liu contends that the Judge erred in principle in finding that Mr Wu had proved that the payments were made as a consequence of Mr Liu’s threats to report Mr Wu to the authorities.
(a)Argument
Mr Grant argued that the Judge did not apply the correct approach when making factual findings in relation to the threats said to have been made by Mr Liu. He accepted that the civil standard of proof on the balance of probabilities applied, but argued that stronger and more coherent evidence was required with the allegations here as they were of the kind referred to by the Supreme Court in Z v Dental Complaints Assessment Committee.[31] The allegation here was of blackmail, which is a criminal offence. Given the nature of that allegation it was inappropriate for the Court to reach conclusions as a matter of inference, including by rejecting alternative explanations — a point that had been emphasised by the House of Lords in Rhesa Shipping Co SA v Edmunds (Rhesa Shipping).[32]
[31]Citing Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [112].
[32]Citing Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948 (HL) at 955–957.
Mr Grant argued there was no basis for the High Court Judge to find that Mr Liu had blackmailed Mr Wu. Lang J found that Mr Wu’s credibility had “been compromised to the extent that it would be unwise to accept anything he [had] said in evidence unless it was supported by independent evidence”.[33] There was then no independent evidence of the alleged blackmail threats. The Judge’s essential conclusion was because the Deed did not reflect a loan actually made, it must have been procured by threats, because there was no other rational alternative explanation.[34] This was the kind of impermissible inferential reasoning the House of Lords had rejected in Rhesa Shipping.
(b) Assessment
[33]Judgment under appeal, above n 1, at [64].
[34]At [65].
We do not accept Mr Grant’s arguments. First, although we accept that the approach in Z v Dental Complaints Assessment Committee applied here, it is clear that the High Court Judge was conscious of the required standard. He recorded that Mr Wu was effectively accusing Mr Liu and his son of fraud and that “such a serious allegation must obviously be proved to a high standard”.[35] Indeed, when he found that the Deed was recording a loan that never existed, he applied the criminal standard by saying that the evidence satisfied him “beyond reasonable doubt” that there was no loan.[36] Then when he found that the transfers were made to resolve issues arising from the dispute that Mr Wu had in relation to his employment with Timber King Ltd, he reached that conclusion because it had been established “beyond question”.[37] This similarly involved a high standard.
[35]At [47].
[36]At [47].
[37]At [66].
It is true that when finding that this involved Mr Liu threatening to report Mr Wu’s thefts from Timber King Ltd to police or immigration authorities, he expressed his factual findings on the basis that it involved “in all likelihood” such threats. We are nevertheless satisfied that he remained cognisant of the higher evidential expectations applicable to such serious allegations. We consider that the relevant uncertainty related to the extent of the threats. The Judge did not accept that they extended to physical violence to Mr Wu or his family in China. But he held that they likely extended “at the least” to reporting the theft to the authorities.[38] We consider that this approach complied with the evidential requirements for allegations of this kind.
[38]At [69]–[70].
We also consider that Lang J adopted a correct approach notwithstanding his conclusion that Mr Wu’s oral evidence was unreliable because his credibility had been compromised. He also found much the same could be said about Mr Liu and his son given his findings that they were prepared to invent a fictitious story about the loan, which “obviously calls into question their honesty and credibility as well”.[39] We accordingly consider the Judge was right not to accept Mr Wu’s evidence “unless it was supported by independent evidence”. But the fact that a party’s oral evidence is unreliable does not mean that allegations cannot be proved based on all the evidence. It may be that allegations are still established as a matter of logic, and contemporaneous documentary evidence, for example.
[39]At [64].
Here, we agree with the Judge’s conclusions based on all the evidence. Mr Grant did not seek to challenge the findings that the Deed was a sham. Given that, as the Judge said, there had to be some explanation for Mr Wu paying Mr Liu $1.2 million in cash and kind. We consider that the conclusion that the payment was made to prevent Mr Liu reporting Mr Wu’s earlier theft to the authorities was correctly drawn, particularly given the following factors:
(a)The payment was clearly associated with Mr Wu’s alleged theft from the company owned by Mr Liu’s son, and Mr Wu’s earlier payment to the company of $400,000. That was why Mr Liu and his son were further negotiating with Mr Wu, leading to the $1.2 million payment in cash and kind.
(b)The WeChat messages between the parties, and the audio recordings of discussions between Mr Wu, Ms Wang and Mr Liu, are contemporaneous evidence which make it clear that the payments related to preventing Mr Liu reporting Mr Wu’s misconduct. The recorded conversations are in somewhat broken English, and involve a degree of what appears to be deliberate ambiguity. But the meaning is nevertheless clear. They are more fully set out in the High Court judgment, but Ms Wang asks what would happen a few years later if Mr Liu was to “go after us again”. Mr Liu responds by saying that this was “impossible”, but this could not be recorded in writing because “[t]he law does not allow us to do this”. Mr Liu later makes the point that if there was a written agreement it could be used by Mr Wu and Ms Wang to say that “we are using it to blackmail you”.[40] We draw the same conclusions from these exchanges as did the Judge.
(c)These conversations also clearly suggest that Mr Liu had been advised, probably by the solicitor he had by then instructed, that it was unlawful to include what would be regarded as blackmail in a written agreement. Equally, Mr Wu’s solicitors had expressly provided similar advice. By email dated 20 April 2018 they had advised Mr Wu that the requirement for him to pay more than the $400,000 repayment under the guise of a loan, for not taking the matter to the police or other law enforcement agency, is “deemed to be blackmail and is a criminal offence of which you could lay a complaint with the police. This is something for you to consider”. So, the evidence shows that the solicitors for both sides advised that the parties could not agree to blackmail. That is very strong contemporaneous evidence that the parties’ proposed agreement involved exactly that.
[40]See at [59].
We do not think there is any comparison between the present case and the House of Lords decision in Rhesa Shipping. In that case the first instance Judge, very early in his distinguished judicial career, considered an insurance claim arising from the sinking of a vessel in the Mediterranean. Bingham J addressed two scenarios to explain why the vessel had sunk, both of which were regarded as improbable. The first was that the vessel had failed simply as a consequence of wear and tear, notwithstanding the sinking had occurred in the open ocean in calm seas. Alternatively, the vessel could have collided with an unknown submarine. Bingham J accepted the submarine theory, and upheld the claim.[41] The House of Lords overturned the decision, emphasising that it was for the plaintiffs to prove their claim, and if they could not establish the proximate cause of the ship’s loss, even on the balance of probabilities, then they had failed to satisfy the burden of proof which lay on them. The point is that it could not be established what had caused the sinking, so the plaintiff could not prove its case that the claim was covered by its insurance.[42]
[41]See Rhesa Shipping Co SA v Edmunds, above n 32, at 951–953.
[42]At 956.
We do not see any parallels with the present case. We do not accept that Lang J’s conclusion involved upholding an improbable conclusion which was not established on the evidence. On the contrary, we consider that his conclusion was strongly supported by the evidence.
Duress
As indicated, the High Court Judge addressed Mr Wu’s claims in accordance with the law of duress, as that was how it was advanced. On appeal, two issues are now raised by the parties:
(a)first, Mr Liu says that the case is properly addressed in accordance with the law of duress, rather than as an illegal contract under the CCLA; and
(b)Mr Wu says that the High Court Judge was wrong to dismiss his claim based on duress on the ground that he had affirmed the contract, and that if his claim based on illegality does not succeed, his claim based on duress should prevail.
Illegality or duress?
Mr Grant argues that the case was properly considered as one to be addressed under the law of duress. He submits there are two types of illegality covered by the CCLA, illegality in the creation of contracts, and illegality in the performance of contracts.[43] These categories do not cover the type of cases which concern induced entry of a contract. That is why cases involving similar allegations of contracts being induced by such pressure have applied the law of duress. In Pharmacy Care, this Court concluded that a claim for duress was rightly dismissed, notwithstanding that the contract effectively included a term that the plaintiff would not pursue an allegation of offending.[44] Similarly, in Haines v Carter, this Court dismissed a claim that a relationship property agreement was induced by duress because the plaintiff had threatened to report the defendant’s irregularities to Te Tari Taake | the Inland Revenue Department (IRD), on the basis that the defendant had affirmed the contract.[45] Neither case involved any consideration of illegality. That was appropriate given the difference between contracts induced by duress, and illegal contracts.
[43]Citing Anderson Ltd v Daniel [1924] 1 KB 138 (CA) at 149 per Atkin LJ, as cited in Carey v Hastie [1968] NZLR 276 (CA) at 279 per North P.
[44]Citing Pharmacy Care Systems Ltd v Attorney-General, above n 11.
[45]Citing Haines v Carter [2001] 2 NZLR 167 (CA).
We accept that claims based on duress have a different focus to claims based on illegal contracts. This is for two related reasons:
(a)illegal contracts under the CCLA arise when the agreement, or a term of the agreement, is illegal. It does not focus on the events that gave rise to the entry of the agreement; and
(b)with duress there is some agreement, normally in otherwise legitimate terms, to which the principles of duress are being applied in relation to its entry.
Haines v Carter involved a relationship property agreement. Significantly, there was no allegation that that agreement, or a term of the agreement, was illegal. But it was alleged that the agreement was entered under duress because of Ms Carter’s threats to report Mr Haines to the IRD and/or other parties. Given that there was no term of the agreement to reflect the threat, it was dealt with as a claim of duress and not a claim of an unlawful agreement.
We accept that the position is arguably different in Pharmacy Care as the terms of the agreement in that case involved a full and final settlement of all issues between the parties, and this might have been interpreted to be an agreement not to pursue alleged offending given that such offending had earlier been raised. It may be that that case could have been addressed as one of an illegal contract in those circumstances. That is particularly so given the legislation defines an illegal contract as including a contract that contains an illegal provision, whether that provision is severable or not.[46] But that was not how the case was presented, and neither was that potential addressed by the Court.
[46]Contract and Commercial Law Act 2017, s 71, formerly Illegal Contracts Act 1970, s 3.
But we do not consider the fact that this case can be addressed under the law of duress excludes the operation of the legislation concerning illegal agreements. As we have said, the effect of the CCLA cannot be ignored. This is a case where the true agreement between the parties was an illegal one. Mr Wu promised to transfer $1.2 million in return for Mr Liu promising not to report Mr Wu to the police or immigration authorities. It was an illegal contract as defined by the CCLA. There was no other agreement between the parties. For these reasons we do not accept Mr Grant’s arguments.
Affirmation
Given the conclusions we have reached, it is not necessary for us to address Mr Wu’s argument in the alternative that the High Court Judge erred in finding that he had affirmed the contract. We also consider there is a degree of awkwardness in viewing this case as one involving an agreement entered under duress, given that the true agreement itself embodied blackmail. Any affirmation would be impermissible given s 73 of the CCLA. But we nevertheless see there is force in his argument if the case is treated as one involving duress.
We consider that it would be necessary to demonstrate affirmation of the contract at a time when the duress was no longer operative.[47] The High Court Judge relied on Pharmacy Care.[48] But to the extent that Pharmacy Care might suggest that a plaintiff must act timeously to succeed in a claim based on duress, we note that these observations were obiter and that the Court did not expressly address the requirement that the duress no longer be operative at the time of affirmation.[49] We see timeliness as more appropriately addressed by the limitation period, although it would remain relevant to an affirmation assessment.
[47]Haines v Carter, above n 45, at [116].
[48]Judgment under appeal, above n 1, at [76] and [88].
[49]Indeed, the Court noted that the avoiding party no longer had the concern about being prosecuted: Pharmacy Care Systems Ltd v Attorney-General, above n 11, at [113].
We accept that affirmation might arise from inaction. But in the circumstances of this case, inaction by Mr Wu does not appear to demonstrate that he affirmed the contract. Mr Wu’s performance was complete on the transfer of cash and kind of $1.2 million. He then had no other contractual obligations, so his consequent inaction would not necessarily confirm performance of the agreement. What is also apparent is that Mr Wu saw the threat of being reported to authorities to be of real significance to him, given that he had paid $1.2 million in cash and kind to prevent Mr Liu doing so. The recorded conversations also evidence a concern that Mr Liu would “go after” Mr Wu in later years if the agreement was not documented (which it was not). So, the more natural conclusion is that he remained fearful of Mr Liu reporting him for a period of time after he made the transfers, even when he later met with Mr Liu in 2019, and that he took steps to get what he had transferred back only when the duress was no longer operative.
Given we have upheld Mr Wu’s claims and his appeal on the basis of illegality, we need not take these matters any further, however.
Quantification
There are two final issues to address arising from Mr Liu’s notice to support the judgment on alternative grounds which we are able to deal with more concisely:
(a)the argument that Ms Wang is, in fact, the correct plaintiff in relation to at least part of the claim, and that Mr Wu’s entitlement should be reduced accordingly; and
(b)the argument that the amount of Mr Wu’s claim has been wrongly assessed given the evidence concerning the value of the property transferred to Mr Liu.
Correct plaintiff
Mr Grant argues that unjust enrichment requires a defendant to be enriched at the expense of the plaintiff. But it was Mr Wu’s then wife, Ms Wang, who sold a property that she owned to arrange for the sum of $600,000 from sale proceeds to be paid to Mr Liu on 7 November 2018. So, the enrichment was at her expense, not Mr Wu’s. Any successful claim needs to be reduced accordingly.
We do not accept this argument. This may have been the source of the funds that Mr Wu then transferred, but it was Mr Wu who was transferring the funds to Mr Liu, because of Mr Liu’s blackmail of Mr Wu, arising from Mr Wu’s alleged misappropriation from Timber King Ltd and his risk of prosecution or other official action. The payments were to satisfy Mr Wu’s obligations under the true agreement between the parties. The arrangement between Mr Wu and Ms Wang is a matter between them. It was not her that was being blackmailed, even though the blackmail significantly affected her life as well. She merely funded Mr Wu’s performance. We do not consider that Ms Wang’s status as a guarantor of Mr Wu’s supposed loan under the Deed changes that reality. She did not make a payment under a guarantee of a loan.
Value
Mr Grant argued that the award of $600,000 sought in relation to the value of the property that was transferred is unsound. There was no expert evidence as to the house’s value at the time it was transferred, with Mr Wu relying solely on the value attributed to the property in the Deed. This was not a sufficient basis and, as the plaintiff, he ought to have provided valuation evidence.[50] Mr Liu subsequently sold the property to his brother at an estimated value of $500,000. Mr Liu explained that he gave his brother a $25,000 discount for not paying real estate agent fees on this transfer, resulting in a payment of only $475,000.
[50]Citing Mikro Holdings Ltd v Digga NZ Ltd [2024] NZHC 2281 at [67].
We agree it may have been preferable to have had expert evidence on the value of the property. But we do not accept that this prevents Mr Wu relying on the value given to the property in the Deed. Whilst the Deed was a sham, that is only because it was recording a loan that did not exist. In terms of the value of the consideration being exchanged, we see no reason to consider it to be inaccurate. If Mr Liu wished to advance an argument that the Deed did not correctly record the value of the property it was open for him to do so.
Although we have given consideration to confining Mr Wu’s claim to $500,000 given Mr Liu’s evidence, the fact that the sale was to his brother, was not at full value, and in circumstances where there was good reason to doubt the oral evidence of both of the parties, the most reliable evidence for the value is that given by the parties contemporaneously in their transaction documents.
Conclusion
The appellant’s application to further amend his statement of claim is declined.
The appeal is allowed.
The High Court judgment is set aside. Judgment is entered for the appellant against the respondent for the following:
(a)$1.2 million; and
(b)interest under the Interest of Money Claims Act 2016 from the date of the respective transfers.
The High Court costs award is set aside, and the respondent must pay costs to the appellant in the High Court on a 2B basis together with reasonable disbursements to be fixed by the High Court Registrar if not agreed.
The respondent must pay the appellant costs in this Court for a standard appeal on a band A basis together with usual disbursements. We certify for two counsel.
Solicitors:
MinterEllisonRuddWatts, Auckland for Appellant
PCW Law, Auckland for Respondent
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