Zhao v He
[2020] NZHC 550
•18 March 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1790
[2020] NZHC 550
UNDER the Property (Relationships) Act 1976 IN THE MATTER
of an appeal against a decision of Judge S J Maude dated 8 August 2019
BETWEEN
CHONGMING ZHAO
Appellant
AND
MU HE
Respondent
Hearing: 17 February 2020
Further submissions for the Respondent dated 28 February 2020
Appearances:
A Ashmore for the Appellant R Reed for the Respondent
Judgment:
18 March 2020
JUDGMENT OF HINTON J
This judgment was delivered by me on 18 March 2020 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Solicitors:
Alex Ashmore, Barrister, Ponsonby Prestige Lawyers Limited, Auckland
ZHAO v HE [2020] NZHC 550 [18 March 2020]
[1] This is an appeal against a lengthy reserved judgment of Judge S J Maude in the Family Court at Auckland dated 8 August 2019.1
[2] The case is under the Property (Relationships) Act 1976. It is factually dense, as illustrated by the thirteen bundles of the case on appeal, and the length of the Family Court judgment, which extends to 260 paragraphs.
[3] The parties began living together in China in 2006 or 2007 and subsequently married there. They came to New Zealand in June 2012 and shortly afterwards bought a house in Milford. They separated in February 2014.
Family Court Decision
[4]Judge Maude relevantly found:
(a)the relationship property comprised the mortgage-free Milford house, a debt owed to Mr Zhao by his sister Ms Zhao (and her husband Mr Ren) of $1,200,000,2 and a sum of $400,000 “received by Mr Zhao”;3 and
(b)Mr Zhao should get no credit for a post-relationship contribution in discharging a Westpac mortgage over the Milford house.4
Grounds of Appeal
[5] The three grounds of appeal are based on alleged factual errors or errors as to whether matters were at issue namely:
(a)the finding that there was a $1,200,000 debt owed to Mr Zhao is said to be inconsistent with the evidence and to not take into account alternative explanations as to the source of the funds;
1 Zhao v He [2019] NZFC 5849.
2 All amounts are in New Zealand dollars unless otherwise stated.
3 At [252].
4 At [237] and [252].
(b)the finding that there was a cash asset of $400,000 is said to be inconsistent with the evidence and not even at issue in the case; and
(c)the Judge’s refusal to give credit for discharge of the Westpac mortgage is said to have disregarded the agreed position of the parties prior to the hearing and as a result the issue was not properly put to relevant witnesses.
Test on Appeal
[6] This appeal is brought under s 39 of the Act. The High Court Rules 2016 and ss 126-130 of the District Court Act 2016 apply as if it is an appeal brought under the general right of appeal to this Court from District Court decisions.5
[7] The appeal therefore proceeds by way of rehearing.6 I must provide my own view of the merits, including as to matters of evaluation and degree, though the appellant bears the onus of satisfying me the decision under appeal is wrong and that I should depart from it on appeal.7 The amount of deference I should afford to the judgment under appeal is for me to consider.8 However, given the particular advantages enjoyed by the Family Court because of that Court’s expertise, and also the Judge’s having had the opportunity to assess the credibility of witnesses, I may “rightly hesitate to conclude that findings of fact or fact and degree are wrong.”9
[8]In this case I do not consider anything turns on the relevant test.
Was Mr Zhao owed $1,200,000 by his sister Ms Zhao?
[9] Not long after the parties separated, specifically in October 2014 and April 2015, two properties were purchased in Massey in the name of Ms Zhao for a total cash sum of $1,060,000.
5 Property (Relationships) Act 1976, s 39(3).
6 High Court Rules 2016, rr 20.1 and 20.18; and Austin, Nichols & Co Inc v Stichting Lodestar
[2007] NZSC 103, [2008] 2 NZLR 141 at [4] fn 6.
7 At [3]-[5] and [16].
8 At [5].
9 At [5].
[10] To complete the purchases, about $1,200,000 was transferred out of bank accounts in China that were in the names of Mr Ren and Ms Zhao, into Mr Zhao’s BNZ account in Auckland. The sum transferred was notably greater than the cost of the properties, the excess being said to be for renovations. There is no evidence that any renovations were subsequently carried out. The excess seems to have been retained in Mr Zhao’s bank account.
[11] The purchase money was transferred to a conveyancing solicitor Mr Lee who was also Mr Zhao’s solicitor. Mr Lee gave evidence, which the Judge accepted, that at all times he considered he was acting for Ms Zhao and Mr Ren on the purchases.
[12]Subsequent to the purchases Mr Zhao managed the properties.
[13] Mr Zhao said the cash received from China belonged to his sister and Mr Ren. Ms He said Mr Zhao was the true owner.
[14]The Judge found:
(a)he was “left with real doubt as to the veracity of Mr Zhao’s claims that funds transmitted to New Zealand for his sister, by Mr Ren to him in Hong Kong ……. were other than funds derived from business and share trading in China carried out by himself”;10
(b)that ownership of the funds in China by Mr Ren and Ms Zhao was “implausible”;11
(c)that the conveyancing transactions were consistent with legal ownership of the properties by Ms Zhao;12 and
(d)that the $1,200,000 was a debt owed by the sister to Mr Zhao, there being no evidence of gift.13
10 Above n 1 at [240] and earlier at [140]-[165].
11 At [241].
12 At [155].
13 At [252(b)].
[15] Those conclusions were clearly influenced by the Judge’s findings on credibility, both specifically and generally.
[16]For the appellant, Mr Ashmore does not challenge the finding that the
$1,200,000 sum was not the property of Mr Ren and Ms Zhao and it would be difficult to do so. However, he submits that the Judge’s findings on their own, even coupled with findings as to Mr Zhao’s credibility generally, are not sufficient to prove on the balance of probabilities that the moneys coming out of the China bank accounts were in fact Mr Zhao’s. He says there would need to be something more and the Judge does not make any further findings. The money could belong to someone else altogether, or a number of other people.
[17] However, it was not contended at the hearing that the $1,200,000 sum belonged to a third party. The Judge essentially had to rule between two alternative arguments
– on the one hand that the funds belonged to the sister and on the other that they belonged to Mr Zhao. Having ruled against the former, the second to a large extent applied by default. Admittedly the Judge does not make a clear finding of ownership by Mr Zhao and I note that he uses the inapt expression “left with real doubt” in connection with his finding as to Mr Zhao’s veracity. But it is clear from reading the relevant passages of the judgment that he was satisfied on the balance of probabilities that the $1,200,000 sum belonged to Mr Zhao.
[18] I consider Judge Maude was entitled to reach that conclusion especially given his findings as to credibility. Also a number of other factors are clearly relevant to the Judge’s conclusion. It would be odd, for example, that Mr Zhao appears to have retained part of the $1,200,000 sum if it belonged to his sister or an unidentified third party. I also note that as at July 2012, Mr Zhao and Ms He provided a statement of assets to ASB on the mortgage loan application for purchase of the Massey house.14 It recorded (clearly in approximate terms) cash in a bank in China of $1,000,000.15
14 It appears that ASB did not provide the form on which this information was supplied. Rather, it was prepared earlier by a mortgage broker, though it now forms part of the documents related to their loan from ASB.
15 I note that the Judge described this amount as CNY 1,000,000, as opposed to NZD 1,000,000: above n 1 at [195]. However, it is plain, given the manner in which the Judge dealt with this amount that he meant to say NZD 1,000,000. Furthermore, the original document is denominated in New Zealand Dollars, and refers to other amounts that could not plausibly be CNY.
The only obvious spending by the parties between then and separation was of
$260,000, being the cash contribution to the Milford house purchase. For that and other reasons referred to in the judgment it could reasonably be inferred there was a substantial amount of cash in China, available to Mr Zhao at separation.
[19] Given that the $1,200,000 sum surfaced after separation, it could have been argued that the funds were Mr Zhao’s separate property (as in acquired after the separation) but that would not have been consistent with his position that the money was not his at all.
[20] Having “found” that the sum of $1,200,000 belonged to Mr Zhao, the Judge treated it as a loan by Mr Zhao to his sister.16 Mr Ashmore makes the further point that there is no evidence of a loan, nor was that claimed by Ms He. (There was also no claim before the Court that the properties were held in trust for Mr Zhao.)
[21] However, even absent evidence of the existence of a loan agreement, the simple payment of money from one adult to another imports a prima facie obligation to repay that sum, either on demand or within a reasonable time of a request for repayment, subject to the presumption of advancement, or proof the amount was an absolute gift, both plainly inapplicable here.17 In other words, the payment is a loan, giving rise to a corresponding liability for the payee and asset in the hands of the payor.
[22] I therefore conclude there is no error in respect of the Judge’s finding as to a relationship property asset of $1,200,000.
Sum of $400,000 (CNY 2 million) received by Mr Zhao
[23] As noted earlier Judge Maude found that relationship property included a sum of $400,000 “received by Mr Zhao”.18
[24] I agree with Mr Ashmore this finding is in error. It flows from confusion over what was the matter at issue. Mr Zhao alleged that he owed a debt of $400,000 to
16 At [252(b)].
17 Seldon v Davidson [1968] 1 WLR 1083 (EWCA) at 1089.
18 Above n 1, at [252].
Mr Ren and it was repaid by a Mr Song such that he still owed a relationship debt but it was to Mr Song. The Judge found, against Mr Zhao, there was no debt owed to Mr Ren and therefore no debt owed to Mr Song. That is not contested, but the Judge then concluded that a sum of $400,000 existed as an asset of Mr Zhao’s and could be taken into account as relationship property. He referred to Mr Zhao saying he had received the funds from Mr Song.19 First, that was not a claim made in the case. Ms He’s general position was that there was a very large unaccounted for cash pool but that is a very different matter to asserting a specific asset of $400,000 sourced from or connected with Mr Song. Furthermore, neither counsel could point me to evidence to support receipt or ownership of such a $400,000 cash sum by Mr Zhao. The only evidence in this regard is of a $400,000 payment made by Mr Song to Mr Ren and even that was in November 2016.
[25] The Judge therefore erred in finding that there existed a further item of relationship property in terms of a $400,000 sum “received by Mr Zhao”. I might add that the confusion which led to that finding is understandable in a case like this.
Credit for Post-Separation Mortgage Repayment
[26] Mr Zhao repaid the mortgage on the family home in September 2016, some two and a half years after the separation. The amount outstanding under the mortgage was by that time about $432,000. Mr Zhao says he repaid the mortgage by borrowing from his second wife and so there is a post-separation adjustment required, either in his favour or (in effect) in favour of his second wife.
[27] The Judge found that the money used to repay the mortgage was in fact Mr Zhao’s and therefore no credit should be given. He treated the sum paid as relationship property.
[28] Mr Ashmore submits that the parties had agreed that the asset to be divided was the equity in the house after deducting debt at separation. He says that this point was therefore not, or should not have been, at issue in the Family Court.
19 At [208].
[29] While an earlier document on the file seemed to support that view, though it was ambiguous, it is clear from correspondence between counsel dated 2 and 3 July 2019, and both counsel’s written submissions in the Family Court, that the issue as to whether the funds used for the mortgage repayment were sourced from Mr Zhao, was live before the Family Court and that the apparent earlier agreement was really only as to the amount outstanding under the mortgage at the time it was repaid.
[30] I do note that the repayment was made two and a half years after separation, which could (again) have raised a question over whether, even if paid by Mr Zhao, it was nonetheless sourced out of his separate property. But that is not the way the case was run. Indeed it would have been difficult to contend that the sum involved belonged to the second wife while simultaneously contending that if the Judge did not believe that, then Mr Zhao had earned/acquired it since the separation.
[31] I therefore conclude there is no error in the Judge’s finding that the unencumbered Milford property was relationship property.
Result
[32] The appeal is allowed in respect of the finding that there was a relationship property asset of “$400,000 received by Mr Zhao” but is otherwise dismissed.
Costs
[33] The appellant has had success in bringing this appeal, albeit not on all grounds. Partial success still being success, and the other points having been reasonably pursued and not having unduly prolonged the matter, I consider the appellant is entitled to costs on a 2B basis.
[34] If the parties cannot agree costs on that basis, the appellant is to file and serve a memorandum within three weeks of the date of this judgment, with the respondent to have three weeks to reply. Memoranda are not to exceed four pages in length, exclusive of covering sheets and supporting material such as invoices.
Hinton J
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