Yang v Jia
[2023] NZHC 639
•28 March 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1623
[2023] NZHC 639
BETWEEN YULING YANG
First Plaintiff
SEN GAO
Second PlaintiffAND
XINHONG (VICTOR) JIA
Defendant
XINHONG (VICTOR) JIA, YANG LIU and ZHANG TRUSTEE COMPANY
2021 LIMITED, as trustees of the JIA AND LIU FAMILY TRUSTThird Party
Hearing: 16 March 2023 Appearances:
S Moore for Plaintiff
B J Norling and W M Alexander for Defendant
Judgment:
28 March 2023
JUDGMENT OF ASSOCIATE JUDGE LESTER
(summary judgment)
This Judgment was delivered by me on 28 March 2023 at 2:30 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar Date: ……………………….
YANG v JIA [2023] NZHC 639 [28 March 2023]
[1] Yuling Yang (Jenny) and Sen Gao (Jason), the first and second plaintiffs, are a couple. Jason met Xinhong (Victor) Jia (Victor) via a mutual friend, Alan Gao. Jenny, Jason and Victor undertook a six-story apartment building project.
[2] In early 2019, Victor approached Jason seeking a loan to repay a debt owed to another member of the Chinese Community. Jason was prepared to help. The assistance was to take the form of a property being sold to Victor with payment deferred until Victor received a dividend from the apartment building project. The transfer of the property would give Victor an unencumbered asset against which he could borrow to pay the debt he wanted to clear.
[3] The transaction did not proceed as I have outlined. The contract of sale is clear that the purchase price was to be left unpaid. What in fact happened was that Victor raised the $3 million purchase price by borrowing the money which he paid to Jenny on settlement.1 The next day, Jenny advanced $3 million to Victor which Victor used to repay his personal debt and a short-term loan he obtained to put the purchase price together. This left Victor with ownership of the property with a mortgage registered to a bank and his personal debt repaid.
[4] Jenny and Jason say the $3 million advanced to Victor was just that, an advance repayable upon demand. They say it was orally agreed that interest at 10 per cent would be payable. Jenny and Jason say Victor told them he did not need vendor finance for the property purchase as he had raised the purchase price from elsewhere. Victor says that while settlement of the property purchase did not proceed as provided for in the contract, the substance of the transaction remained the same, that is, the
$3 million returned to him was the vendor finance.
[5] Jenny and Jason seek summary judgment in respect of what they say was an advance repayable upon demand. There is no issue they have demanded payment. Victor says that despite the way the transaction actually took place, the substance of his agreement with Jenny and Jason was that he would not have to repay the purchase price of the property, returned to him the day after he paid for it, until the apartment building project bore fruit.
1 Jenny was the registered proprietor of the property but she held it on behalf of Jason.
How Jenny and Jason’s application is to be approached
[6] Not surprisingly, counsel agreed as to the principles that apply to assessing an application for summary judgment.
[7] Mr Norling, counsel for Victor, emphasised that the onus was on Jenny and Jason to demonstrate there was no defence and that the outstanding feature of summary judgment is the onus is on the plaintiff to establish there is no defence.2 Somers J described it as the outstanding feature of the summary judgment regime as it requires the plaintiff to establish a negative. The plaintiff has to demonstrate there is really no defence to the claim. The object of summary judgment is to put an end to the spectacle of a worthless defence being raised and pursued for the purposes of delay.
[8] Mr Norling also referred to the well-known passage from Eng Mee Yong v Letchumanan:3
Although in the normal way it is not appropriate for a judge to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement in an affidavit however equivocal, lacking in precision, inconsistent with disputed contemporary documents or other statements by the same deponent, or inherently probably in itself it may be.
[9] As its most basic, Mr Norling’s submission is that Jason and Jenny sue on an oral advance and the terms of that advance are disputed by Victor in his sworn evidence. That dispute cannot be resolved in a summary judgment context and therefore summary judgment is not appropriate.
[10] Mr Moore, counsel for Jenny and Jason, submitted there was no real credible dispute of fact in this case as the contemporaneous documents support Jenny and Jason’s position.
The property sale in more detail
[11] The property in question is at Oban Road, Auckland (the property). The agreement for sale and purchase is dated 8 May 2019 and is on the ADLS form
2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3..
3 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.
(the contract). Jenny is the vendor and Victor is the purchaser. The sale price was
$3 million and the settlement date was 21 May 2019. The contract provides for the purchase price to be paid in cleared funds on the settlement date or in the manner prescribed in the Further Terms of Sale. The key Further Term of Sale is cl 20, which provides:
The parties agree that the transfer of title is to take place on 21 May 2019. The settlement funds will not be payable until at such time that the Victor Project by Brownsbay Seaview Limited has been completed and the shareholder dividends are payable and paid to the shareholders.
[12] Victor nominated his family trust, the Jia and Liu Family Trust (the Trust), the third party, to settle. It seems clear that the parties agreed to defer settlement until 25 June 2019. The solicitors acting for Jenny produced a settlement statement as at that date addressed to Victor, care of his solicitors. The settlement statement calculated the amount at $3,000,065.84 which includes a rates apportionment.
[13] Victor raised the $3 million by way of an advance from Westpac Bank (Westpac) for $1.5 million and a short-term advance of $1.45 million from a company called “Browns Bay Seaview Limited”, of which Victor is the sole director. Jenny is an ultimate shareholder of 50 per cent of Browns Bay Seaview Ltd (BBSL). BBSL is involved in the apartment building project referred to in cl 20 above.
[14] Accordingly, Victor borrowed all the funds paid on settlement. On 26 June 2019, the day after settlement, Jenny paid to Victor $3 million. From those funds, Victor paid the debt to the third party as he had planned and he paid the
$1.45 million back to BBSL. From Victor’s point of view, the money that came from Westpac was used to repay his personal debt. Victor considers that given the purchase price for the property was returned to him, cl 20 of the contract means the advance of the purchase price is not repayable on demand. In effect, the vendor finance was, on Victor’s case, by way of what in the past would have been achieved by way of a cheque swap rather than the purchase price left owing as contemplated by cl 20.
The plaintiffs’ case
[15] Jenny and Jason plead that the purchase price for the property was intended to be funded by a loan advance by Jenny to Victor for $3 million. That is not what is
provided for by cl 20 of the contract. Clause 20 does not create an advance; it is a deferral of the obligation to pay the purchase price. It is the difference between granting time to pay as opposed to an advance. The statement of claim refers to the loan of the purchase price to permit settlement as the “intended advance”.
[16] Jenny and Jason plead that the intended advance was no longer required by Victor because he had raised alternative finance. However, Jenny and Jason plead that:
8.The payment for the sale of Oban Road is yet to be finalised, pending the terms of the settlement of shareholders’ dividends pursuant to the development [referred to in cl 20] …
[17]Jenny and Jason then plead under the heading “Loan to the Defendant” that:
9.Whilst [Victor] received funding from Westpac Bank, he was aware the [$3 million] was available. [Victor] made a subsequent request to borrow the [$3 million] in order to repay the Debts.
[18] The pleading in para 9 of the statement of claim gives the impression that Jenny had $3 million available to advance to Victor to fund his purchase of the property. There is no evidence of that. The timing of the $3 million payment to Victor gives the strong impression that Jenny sourced the $3 million to advance to Victor from the amount he paid her the day before.
[19] At some point and for unexplained reasons, settlement of the property was not completed pursuant to the deferred payment clause. Settlement occurred on 25 June 2019 with cash being paid. Victor’s evidence is:
4.7As per my understanding Jason, Jenny and Alan, on 19 June 2019, I transferred the sum of $1,470,000.00 from the bank account of BBSL to my account to complete settlement. Alan and Jenny both knew about this transaction. Further, I do believe that Alan or Jenny would have approved the transaction because Jason preferred that they deal with transactions. However, I cannot be 100% certain and I would need to get the information from the bank to confirm, which as at the date of this affidavit I have not been able to do. On the same day, I transferred the sum of $20,000.00 back to BBSL. Attached at pages 055-057 of the Exhibit is a copy of my bank statements showing these transactions.
4.8It was agreed between Jason, Jenny and I that the funds would be advanced to Jenny on settlement and then returned to me for my use
to repay both BBSL the funds advanced as explained above at paragraph 4.7 and to repay the Personal Loan owed to my friend. I was very grateful for this opportunity.
[20] Mr Moore submitted that what occurred represented two discreet transactions; the first being Victor’s settlement of the purchase of the property and the second being the advance. On Mr Moore’s submission, settlement of the purchase drew a line under the contract and its terms and in particular, cl 20 of the contract, on his submission, had no further life.
[21] Mr Moore submitted that the 26 June 2019 advance was a standalone transaction being an oral advance repayable upon demand. On Mr Moore’s submissions, there could be and was no cross-fertilisation between the two discreet transactions.
[22] The issue for the Court is whether Jenny and Jason have demonstrated that Victor does not have a defence to their view of the transactions as two unconnected contracts. I am satisfied that question is not suitable for summary judgment for the following reasons:
(a)Victor’s evidence, as set out at [19] above, is not contradicted.
(b)Victor’s evidence is consistent with what the parties sought to achieve and what occurred. Victor had initially sought to withdraw some of his capital from BBSL to pay his debt but that was declined. BBSL agreeing to a short term (one week) advance to Victor to permit the cash swap to occur is consistent with it having been envisaged that the purchase price would immediately come back to Victor so that BBSL could be repaid.
(c)It would not make commercial sense for Victor to substitute a deferred payment option at zero interest for a loan at 10 per cent interest. That is all the more so when Victor’s uncontradicted evidence is that the purchase price of $3 million for the property was a significant premium
over its market value. Victor was prepared to pay over the odds because he was getting the property/money unsecured.
(d)Victor did not want to buy the property; he wanted a loan. That the purchase price would be advanced back to him is consistent with the intent of the transaction.
(e)Victor’s case is also consistent with aspects of Jenny and Jason’s pleadings and evidence.
(i)Paragraph 6 of the statement of claim states:
The purchase of Oban Road was intended to be funded by a loan advanced by the First Plaintiff to the Defendant in the amount of the Sum (the Intended Advance).
(ii)A loan was envisaged by Jenny and Jason and that is what occurred when the purchase price was returned to Victor. Paragraph 8 of the statement of claim pleads:
The payment for the sale of Oban Road is yet to be finalised, pending the terms of the settlement of shareholders’ dividends pursuant to the development referred to above at [5].
(emphasis added)
(iii)Paragraph 8 is not consistent with the two transactions being absolutely separate. It could be said to be consistent with what in fact occurred, that is repayment of the sale price returned to Victor “yet to be finalised”.
(iv)Jenny in her affidavit says:
Loan
Proposed finance
8.To help the Defendant, Sen agreed to sell 30 Oban Road, Browns Bay, Auckland
(Oban Road) to the Defendant for the sum of
$3,000,000 (the Sum):
(a)The purchase of Oban Road would be funded by a loan advanced by the First Plaintiff to the Defendant in the amount of the Sum (the Proposed Finance). The basis of the Intended Advance was not recorded in writing which is common in our culture.
(v)The next sub-paragraph (b) refers to further term of sale 20 and so her own evidence mixes the idea of a loan advance and the deferred settlement. Further, in her affidavit at para 10 Jenny says:
10. The Defendant ended up obtaining alternative finance from Westpac Bank secured against Oban Road (the Westpac Funding) prior to settlement under the S&P. The Intended Advance to complete the sale was no longer required by the Defendant for that purpose. However, the terms of the S&P, including cl 20, remained active. This meant the Defendant would not need to apply the Westpac Funding to the Purchase until the completion of the Victor Project.
(emphasis added)
(vi)Parts of para 10 of Jenny’s affidavit, in particular the last sentence, I find hard to understand. The paragraph is under the heading “Alternative finance”. How cl 20 remained “active” when, on Jenny and Victor’s case, the terms of the 8 May 2019 contract ceased to have any ongoing effect following is not explained.
[23] Mr Moore suggested care was needed with this evidence given it was a translation from the original. As Mr Norling submitted, this submission does not help Jenny and Jason when the onus is on them to show there is no defence. The evidence and pleading record that a loan was intended but with cl 20 of the contract to remain “active”. The tenor of this evidence and the pleadings is against the submission now advanced that there were two separate standalone and discrete contracts; the agreement for sale and purchase and an advance.
[24] The reality is that a plaintiff seeking summary judgment in respect of an oral advance, when the terms of that advance are disputed, faces an uphill battle. This is not a case where Victor’s evidence, set out at [19] above, is inconsistent with the contemporary documents or is implausible. The substance of Victor’s defence was put to Jenny and Jason when repayment was demanded; it is not a recent invention.
[25] The reality is that Jenny and Jason’s evidence is skeletal and, as I have said, it proceeds on the basis that the original nature of Victor’s purchase involved an advance of the purchase price. Why the transaction did not proceed in accordance with cl 20 of the contract is not really explained. In order to give effect to the underlying purpose of the transaction, that is, to get funds to Victor in order for him to pay a third party, there always had to be cash going to Victor in some way. Again, Victor did not want to buy the property, the purchase of the property was a means for him to raise cash. As Victor’s capital was tied up in BBSL he sought to raise money from his then friends, Jenny and Jason, on the basis that they would be paid when the BBSL project bore fruit. As Jenny and Jason were familiar with the BBSL project, they were prepared to assist Victor. However, on the case Jenny and Jason now present, Victor agreed to an advance that could be called up at any time when the essence of cl 20 was that the purchase price of the property would not be repayable until the dividends from the BBSL project came through. The proposition now advanced by Jenny and Jason is contrary to the entire rationale for the transaction and commercial common sense.
[26]Jenny and Jason’s application for summary judgment is dismissed.
Costs
[27]Costs are reserved.
Observation
[28] I make a brief observation in respect of one defence raised by Victor. When the purchase of the property was settled, Victor nominated his Family Trust to complete the purchase. The Trust, in a Deed of Nomination, provided an indemnity to Victor in respect of the transaction. Victor has suggested that he is no longer
personally liable to Jenny and Jason because of the Deed of Nomination. The law is against that proposition.4
It is clear, however, that the only way in which the burden of a contract can pass to a third party is by novation (Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2014] NZSC 121, [2015] 1 NZLR 281). Tipping J in Gibbston Valley Estates Ltd v Owen (1999) 4 NZ ConvC 193,024, CA, at [32] did recognise that by the terms of the assignment between the purchaser and the nominee the burden of the contract could be assigned as between those parties, but this does not affect the status of either of those parties as against the vendor. Only the purchaser remains a contracting party with the vendor and only the purchaser owes the performance of the burden of the contract to the vendor.
Associate Judge Lester
Solicitors:
Capstone Law, Parnell, Auckland (for Applicants)
Copy to counsel:
S Moore and G Credo, Barristers, Auckland (for Applicants)
4 Don McMorland “Does a Nominee Have an Equitable Interest Which Will Support a Caveat” (2016) 17 BCB 285 at 287.
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