Zhong v Ong

[2017] NZHC 1537

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-002996 [2017] NZHC 1537

BETWEEN

TING LONG ZHONG

Plaintiff

AND

MICHAEL ONG First Defendant

STANLEY SHING LOO Second Defendant

Hearing:	27-28 April 2017
Appearances:	R Reed and R P Kaur for Plaintiff No appearance for First Defendant D K Wilson for Second Defendant
Judgment:	5 July 2017

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 5 July 2017 at 2.30 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date……………………….

ZHONG v ONG & OR [2017] NZHC 1537 [5 July 2017]

Introduction

[1]      Between 2008 and 2014 the plaintiff, Ting Long Zhong, and the second defendant, Stanley Loo, owned an investment property in Godley Lane, Paremoremo as tenants in common.   The purchase had been arranged by the first defendant, Michael Ong, a trusted friend of Mr Zhong and the father-in-law of Mr Loo. Unfortunately Mr Ong was not honest with either of them and both have suffered loss as a result.  Mr Zhong asserts that Mr Loo is liable to meet his loss on the basis that Mr Ong was acting as Mr Loo’s agent at the relevant times.

[2]      Mr Zhong pleaded five causes of action against Mr Loo but at trial advanced only one, breach of contract.   He alleged that he and Mr Loo, as an undisclosed principal,  were  parties  to  a  joint  venture  agreement  and  that  Mr  Ong  acted  as Mr Loo’s agent.  He says that Mr Ong failed to apply money that Mr Zhong paid him to the purchase and seeks damages of not less than $120,000.  He says, further, that he agreed with Mr Ong that he (Mr Zhong) would be liable for only 25% of the bank borrowing and seeks damages of $55,660.07 that he says was an overpayment of the bank loan.  He also seeks an order that he be paid $676,201.01 being his share of the gross sale proceeds calculated by reference to his limited liability for the bank loan.

[3]      Mr Loo says that although Mr Ong held a power of attorney for him during some of the relevant period, he is not liable for Mr Ong’s failure to account for any money and is not bound by any agreement to cap Mr Zhong’s liability for the bank borrowing.  On Mr Loo’s calculation he and Mr Zhong have contributed very similar amounts to the holding costs of the property, with the result that the net sale proceeds (about $970,000), which are held on trust pending the outcome of this proceeding, should be more or less split evenly.

[4]      The following issues arise:

(a)       What was the relationship between Mr Zhong and Mr Loo?

(b)How much money did Mr Zhong give to Mr Ong in 2007 to apply to the purchase and did Mr Ong receive it as Mr Loo’s agent?

(c)       In 2008 did Mr Ong receive more money from Mr Zhong to apply to

the purchase and, if so, did he receive it as Mr Loo’s agent?

(d)Was  there  an  agreement  between  Mr  Zhong  and  Mr  Ong  that Mr Zhong would be liable for only 25% of the mortgage debt and, if so, was that agreement binding on Mr Loo?

(e)       How should the net proceeds of sale be divided?

[5]      Although Mr Ong is named as a defendant, Mr Zhong did not seek relief against him.   At an earlier stage in the proceeding Mr Zhong obtained summary judgment against Mr Ong in relation to two other investments.1   The claim relating to Godley Lane was left for trial.   However, Mr Ong is now bankrupt and in his second amended statement of claim Mr Zhong sought relief only against Mr Loo.

The parties

[6]      Mr Zhong came to New Zealand from China in 1988.  He runs a bakery in Whangarei.  He does not speak or read English.  He relies on the assistance of his family in managing documents relating to his business.

[7]      Mr Ong also comes from China.  At the relevant time he ran a restaurant in

Albany.  Mr Ong speaks more English than Mr Zhong, though is not fluent.

[8]      Mr Zhong and Mr Ong met in 1991.  They became friends and invested in several properties together.  Mr Zhong described Mr Ong as the driving force behind these investments, the one in charge of purchasing and managing the properties while Mr Zhong provided the capital contribution.  Sometimes these purchases were made with, or in the names of, associates.

[9]      Two of the investments that Mr Zhong and Mr Ong made in 2005 ended badly – Mr Ong either misappropriated or failed to account to Mr Zhong for a substantial amount of money.  Mr Zhong did not know this in 2007 when the events

the subject of this proceeding occurred.

1      Zhong v Ong [2016] NZHC 1142.

[10]     Mr Loo is Mr Ong’s son-in-law.  He is New Zealand-born Chinese, a medical doctor and a fluent English speaker.   However, he does not speak Mandarin so conversations with his father-in-law of any complexity require his wife’s assistance. In 2007 Mr Loo did not know Mr Zhong; although Mr Zhong had attended Mr Loo’s wedding in 2005 as a friend of Mr Ong, Mr Loo did not recall that.

March – November 2007: the agreement to buy the Godley Lane property

Mr Ong puts a proposal to Mr Zhong and Mr Loo

[11]     Mr Zhong’s case is based on the assertion that at the relevant times he and Mr Ong were parties to a joint venture agreement in which Mr Ong was acting as agent for Mr Loo, who was an undisclosed principal either under general agency principles or by virtue of a power of attorney granted by Mr Loo in November 2007.

[12]     Mr Wilson, for Mr Loo, did not object to the proposition that a joint venture could be created in which one of the parties was an undisclosed principal.  I have reservations about whether that is possible but I do not need to consider the issue because, in my view, no joint venture existed between Mr Zhong and Mr Loo prior to November 2007.

[13]     On 26 March 2007 the then owners of 23 Godley Lane, Paremoremo signed a sale and purchase agreement in favour of Chong Keow Sun and/or nominee.  The purchase price was $1.2m.   A deposit of $120,000 was required.   Settlement was

24 April 2008.  From the totality of the evidence I infer that Mr Ong was involved in obtaining the sale and purchase agreement and intended to participate in the purchase as one of the nominees.

[14]     Sometime around March 2007 Mr Ong approached Mr Loo and Mr Zhong separately and invited each to participate in the purchase of Godley Lane as an investment with a view to profiting on the eventual resale.   Mr Ong’s proposal to Mr Zhong was that Mr Zhong would take a 20% share and contribute the 20% equity required ($240,000) while Mr Ong would take an 80% share and be responsible for

80% of the purchase price ($960,000) which would be borrowed.  This proposal was in keeping with the pattern of their previous investments.

[15]     To Mr Loo, however, Mr Ong proposed a three-way split: that the purchasers would be Mr Zhong as to 20%, Mr Loo as to 30% and Mr Ong as to 50%, with the purchasers contributing 20% equity in their respective shares and borrowing 80% of the purchase price ($960,000).

[16]     I find that Mr Ong did not tell Mr Zhong about Mr Loo’s involvement.  With the benefit of hindsight, and knowledge of Mr Ong’s subsequent proven dishonesty, it seems likely that this was deliberate; if both Mr Zhong and Mr Loo paid what they believed was required of them there would have been $312,000 available for equity, which exceeded the 20% on which the project was based and Mr Ong could take the difference for himself.   He used this modus operandi at the time of settlement to secure further money for himself at Mr Loo’s expense.

[17]     The fact that Mr Zhong and Mr Loo each agreed to participate on different terms precludes a finding that a joint venture between them came into existence at all. A fundamental plank of the respective proposals i.e. how much money the equity partners were to provide, was irreconcilably different.  In these circumstances, there was no basis for consensus and therefore no basis on which to find that a single joint venture agreement was reached to which both Mr Zhong and Mr Loo were a party.  I consider that Mr Ong reached separate agreements with Mr Zhong and Mr Loo.  The fact that he could not have performed both agreements does not affect this finding.

How much did Mr Zhong pay to Mr Ong and did Mr Ong receive the money as

Mr Loo’s agent?

[18]     In a letter dated 15 April 2007 the named purchaser, Chong Keow Sun, advised the law firm Brookfields that the nominated purchasers would be Stanley Shing Loo as to 80% and Ting Long Zhong as to 20%.  This did not reflect either agreement that Mr Ong had reached.  Brookfields prepared a nomination agreement. It was dated 16 April 2007 but not signed until later in the year.

[19]     Mr Loo provided a cheque made out to the estate agent for $72,000.  This equated to 30% of the intended equity and he assumed that it discharged his obligation in respect of his equity contribution.  Mr Zhong did not know about this

payment.  He provided a cheque for $48,000 made out to the estate agent.  These payments covered the deposit.

[20]     Mr Zhong’s payment of $48,000 equated to 20% of the intended equity and, in accordance with the agreement he had reached with Mr Ong, Mr Zhong was still liable to provide $192,000.  He says that he made further cash payments to Mr Ong of $52,000, $80,000 and $60,000, totalling $192,000.  As far as Mr Zhong knew, therefore, he had  contributed the equity component in full and  it would be for Mr Ong to arrange (and take responsibility for) the necessary bank borrowing of

$960,000.

[21]     The only evidence of these cash payments is an undated document signed by Mr Ong as vendor and Mr Zhong as purchaser.   Mr Wilson, for Mr Loo, made something of the inaptness of these descriptions, given that the only real “purchase” was between the owners of Godley Lane on the one hand and Mr Loo and Mr Zhong on the other.  I do not agree; I think that the document reflects the fact that, from a lay perspective, the parties were addressing the terms being agreed as between the purchasers themselves.   I am not certain who prepared the document, but it was clearly prepared on the basis that it reflected the intentions of the parties who were not fluent in English.

[22]     The document recorded:

Purchaser: Ting Long Zhong

Mr Zhong purchase 20% share of 2.7616 ha Lot 1, No 23 Godley Lane, Paremoremo Road, Albany.

1st payment:               18th March 2007

Cash NZ $ 52,000/=

Cheque NZ $48,000 (for agent)

Total amount payment NZ $100,000/=

2nd payment:              21st May 2007

Cash NZ $80,000/=

Final payment:           21st July 2007

Cash NZ $60,000/=

All Bank mortgage belong to Michael Ong paid on this property.

[23]   Mr Ong gave evidence about these payments under subpoena.   He acknowledged that Mr Zhong had made large cash payments to him in 2007 but said that they were not made in relation to Godley Lane.  However, he did not identify any other transaction for which they might have been intended and the fact that they amount to the exact figure needed to make up 20% of the equity component of the purchase is unlikely to be mere coincidence.   I found Mr Ong an unsatisfactory witness, though it is difficult to say whether he was deliberately evasive or was confused as a result of the effluxion of time and his relatively poor English.  I was, however, satisfied that he recognised the document recording the payments and had understood its contents when he signed it.

[24]     It is not credible to think that Mr Ong, by then an experienced property investor, would have given a written acknowledgement of cash payments had they not been made.  I am satisfied that, in addition to the cheque for $48,000 which was applied to the deposit, Mr Zhong made cash payments totalling $192,000 to Mr Ong for the purpose of the Godley Lane purchase.  Mr Zhong said that the payments were made before the document was signed.   I accept that evidence and find that the payments were made before 21 July 2007.

[25]     Mr Zhong alleges that Mr Ong received the payments as Mr Loo’s agent. However,  given  my  finding  that  there  was  no  contractual  relationship  between Mr Zhong and Mr Loo, Mr Ong can only have received the money from Mr Zhong in relation to the joint venture between him and Mr Zhong.  Mr Zhong therefore paid the money under the terms of the agreement that he had reached with Mr Ong to which Mr Loo was not party.  It is clear from subsequent events that Mr Ong did not apply these amounts to Godley Lane.  But there is no basis on which Mr Loo could be liable for Mr Ong’s failings in this regard.

November 2007: a joint venture between Mr Zhong and Mr Loo

The Nomination Agreement

[26]     Later in 2007 Mr Ong told Mr Loo that he did not have sufficient money to participate in the purchase.  Mr Loo agreed to take over Mr Ong’s share.  This meant that he would hold 80% of the property.  In November 2007 Mr Loo and Mr Ong

went  to  Brookfields’ offices  where  they signed  the  Nomination Agreement  that Brookfields had prepared in April 2007.  The terms of the Nomination Agreement provided that Mr Loo and Mr Zhong both agreed to assume the obligations of purchasers under the original sale and purchase agreement and that Mr Zhong would take a 20% share of the property and Mr Loo an 80% share.   At the same time Mr Loo, who was going overseas for a year to study and work, executed a power of attorney in favour of Mr Ong.

[27]     At some point Mr Zhong also signed the Nomination Agreement.  Although Mr Zhong’s recollection was that he did so before anyone else had signed it, I find that  he is  mistaken  and  he actually signed  after Mr  Loo.   This  is  because the document was held by Brookfields and Mr Loo was clear that he went to Brookfields with Mr Ong to sign that document and the power of attorney.  More likely than not, Mr Ong  then  took  the  partially  executed  document  with  him  for  Mr  Zhong  to execute and Mr Zhong did so at Mr Ong’s restaurant in Albany, with Mr Ong witnessing his signature.

[28]     Mr Zhong could not read the document.  He said that he had understood the Nomination Agreement to be a record of him being one of the purchasers and that Mr Ong signing it meant that he, too, was a purchaser.  He denied understanding at the time that Mr Loo was a party to the agreement to purchase the property.  Since Mr Zhong does not speak or read English he could not have read clause 6 of the agreement,  which  specifically  identified  the  nominees  as  Mr  Loo  for  80%  and Mr Zhong for 20%.   In cross-examination, Mr Zhong agreed that he could read Mr Loo’s name at the top of the document, along with his own name but I was not satisfied from this cross-examination that he had realised at the time that Mr Loo was party to the agreement.   Had Mr Zhong looked at the other signatures on the document he would have seen Mr Loo’s signature.  But Mr Zhong’s signature is the only one on the last page of the document; it was possible for him to have signed it without seeing Mr Loo’s signature.

[29]     For  these  reasons,  and  for  other  reasons  I  come  to  shortly,  I  find  that Mr Zhong did not know that the other party to the document was Mr Loo.  However, because he correctly understood the nature of the document, and the effect of signing

would have been the same whether the other party was Mr Ong (as he thought) or

Mr Loo, Mr Zhong was bound by that agreement.2

[30]     I find that the Nomination Agreement created a new contractual arrangement, this time between Mr Loo and Mr Zhong.  It was not a partnership; at that stage all that had been done was the payment of a deposit on a sale and purchase agreement that would not settle for another five months.  This would not amount to carrying on a business for the purposes of s 4(1) of the Partnership Act 1908.  Instead, I find that there was a joint venture between Mr Loo and Mr Zhong, though the only specific terms agreed were that the two of them would purchase the property on the shares recorded in the agreement.   Any other terms would fall to be determined by implication.

[31]     The Nomination Agreement was entered into by Mr Loo in his own name as principal.  Mr Ong was not acting as his agent at that point.  The fact that Mr Loo entered into the agreement does not render him liable for Mr Ong’s previous conduct in relation to Mr Zhong’s previous cash payments.

[32]     Nor does the fact that Mr Ong obtained a power of attorney for Mr Loo. There was a suggestion in Ms Reed’s submissions that the terms of the power of attorney rendered Mr Loo liable for Mr Ong’s actions prior to it being conferred, which cannot be right. The power of attorney conferred on Mr Ong the power:

(a)       to act in the name, on the behalf and in the interests of the Appointer in connection with all matters prior to and after the purchase of the Appointer’s 80% (4/5th) share of the property at 23 Godley Lane, Paremoremo, comprised in certificate of title NA 96D/144 described as Lot 1 on Deposited Plan 160996 (Property) including but not limited to purchasing, financing, managing, leasing, development, selling and other associated matters of the Property (Specified Purpose), as full and effectually as the Appointer could;

(b)       to use the name of the Appointer in any manner in any deed or other written instrument in connection with the Specified Purpose.

2      Saunders v Anglia Building Society [1971] AC 1004 (HL) at 1026 per Lord Wilberforce, at

1022–1023  per  Viscount  Dilhorne,  at  1016–1017  per  Lord  Reid;  Bradley  West  Solicitors
Nominee Co Ltd v Keeman [1994] 2 NZLR 111 (HC) at 120–121.

[33]     The power of attorney was executed as a deed and, on the usual principles, is to be construed strictly.3     Given the timing of the purchase, which would not be completed until April  2008,  some  five months  after  the power of  attorney was executed, it is plain that the words “prior to … the purchase” were directed towards that intervening period.   There is no basis on which to find that the deed was intended to somehow confer any retrospective power on Mr Ong or adopt or ratify

his previous conduct.

April 2008: changes in the terms of the joint venture

[34]     Settlement of the purchase was due on 24 April 2008.  On that day a sum of around $120,000 was paid to Brookfields (apparently by Mr Ong) for the purposes of settlement.4   When Mr Loo returned to New Zealand in November 2008 Mr Ong told him that he, Mr Ong, had paid this sum for the settlement and that Mr Loo had to repay him, which Mr Loo did.  Mr Zhong, however, claims that he was the source of  these  funds,  having  paid  $120,000  in  cash  to  Mr  Ong  around  the  time  of

settlement.  At trial Mr Loo accepted that the money paid to Brookfields probably came from Mr Zhong and that Mr Ong had deceived him.  On the evidence I accept that this is correct.

[35]     Mr Zhong’s payment of the $120,000 came about as follows.   Not long before the purchase was due to settle Mr Ong told Mr Zhong that he (Mr Ong) could not afford his share of the purchase price.  He invited Mr Zhong to increase his share to 50%.   This was a lie of course; Mr Ong had already relinquished his share to Mr Loo, which was reflected in the Nomination Agreement.  Mr Loo (who was still overseas) did not know that his share was to be reduced to 50% and there was no need for Mr Ong to seek the change.  However, the fact of this conversation confirms my view that Mr Zhong still did not know that the other joint venture party was

Mr Loo.  It is clear that he still believed it to be Mr Ong.

3      Reckitt v Barnett, Pembroke and Slater Ltd [1928] 2 KB 244 (CA) at 265; Bryant, Powis and

Bryant Ltd v La Banque du Peuple [1893] AC 170 (PC) at 177.

4      The Brookfields’ trust account record was not produced.  There was reference in the evidence to the amount being $121,738.  Mr Loo’s expert witness, Mr Maitland, referred to it as $123,000. Mr Zhong, however, said that he paid $120,000.

[36]     On Mr Zhong’s account the increase in his share from 20% to 50% was to be

achieved in part by increasing his cash contribution by a further $120,000 (i.e. to

$360,000, being 30% of the purchase price) and in part by taking responsibility for borrowing 20% of the purchase price ($240,000).  Because of his increased equity contribution Mr Zhong assumed that the mortgage required would be only $840,000.

[37]     Mr Zhong and Mr Ong went to Brookfields’ offices on 21 April 2008.  They executed an agreement varying the Nomination Agreement to change Mr Zhong’s and Mr Loo’s respective shares to 50/50.  They also signed the bank loan documents. The amount being borrowed was $960,000 for which Mr Zhong and Mr Loo were jointly and severally liable.   Angela Wong, a legal executive employed by Brookfields, was acting on this transaction.  Mr Zhong said that Ms Wong did not explain the documents to him.

[38]     Ms Wong appeared under subpoena with her file but had no recollection of the meeting.  She said that her standard practice was to explain such documents to clients before they signed.  If the client spoke Mandarin then she would speak in that language.   Explaining the documents would involve going through the document, explaining who the borrowers were, their obligations under the loan agreement and the extent of their liability, namely that they were jointly liable until the loan was fully repaid.

[39]     I am satisfied that when Mr Zhong and Mr Ong went to Brookfields’ offices on 21 April 2008 Ms Wong did explain the nature and effect of the documents that they signed that day, including the housing term loan under which Mr Loo and Mr Zhong were named as the borrowers. As a result, it was then that Mr Zhong must first have learned that Mr Loo was the other purchaser.  He would also have known the amount being borrowed.

[40]     The documents that were signed at Brookfields’ offices made no mention of the additional money that Mr Zhong had agreed to advance or of Mr Zhong capping his liability under the bank loan.   Ms Wong said that had she been told of any arrangement between the borrowers to vary the extent of the respective liabilities as

between themselves she would have made a file note to that effect. There was no file note on her file.  But that does not mean that no such agreement had been reached.

[41]     Two days later Mr Zhong and Mr Ong both signed a document described as a “purchase agreement” dated 23 April 2008 in which they are respectively described as “purchaser” and “witness”.  I do not know who prepared it; Mr Zhong says that Mr Ong prepared it and Mr Ong says that Mr Zhong’s accountant prepared it.  That is not an important point.  The “purchase agreement” purports to record the change in the shares and funding arrangements as between the parties.

[42]     It was unnecessary for a side agreement to record the mere change in the shares from 80/20 to 50/50 because that was already recorded in the agreement varying the Nomination Agreement.  The clear, and only explicable, purpose of this document was to record the basis on which that change was to be effected i.e. it supplemented the formal variation of the Nomination Agreement.   The “purchase agreement” provided for the agreed increase in Mr Zhong’s cash contribution and the cap on his exposure for the bank loan as between him and Mr Loo; he would of course remain liable to the BNZ on a joint and several basis.

[43]     The “purchase agreement” provided that:

This agreement is dated the 23 day of 4, 2008

Stated as follows:

T L Zhong purchased 23 Godley Lane, Paremoremo, Albany. The purchase covers a total of 50% shares

Paid in cash 30% Borrowed from BNZ 20%

[44]     This agreement is consistent with Mr Zhong’s claim that he paid Mr Ong a further $120,000.  Under the agreement Mr Zhong undertook to “purchase” a 50% share in the property.  The total purchase price was $1,200,000.  Mr Zhong’s share was therefore $600,000.  He “funded” the “purchase agreement” by providing cash to the equivalent of 30% of the total purchase price ($360,000) and taking responsibility for the borrowing up to 20% ($240,000).  If Mr Zhong’s acquisition of

the additional 30% was to be reflected only in a further amount paid as equity there would have been no need for any mention of the bank borrowing.

[45]     Mr Zhong could not recall exactly when he paid the $120,000 and thought it was in 2007.  That would be inconsistent with his description of the agreement being reached shortly before settlement, which occurred in April 2008.   However, the essential elements of his narrative are corroborated by the other evidence so that the inconsistency in this aspect of his evidence is not material.  I find that he made this payment around 23 April 2008, when the “purchase agreement” was signed and in time for it to be paid to Brookfields for the settlement on 24 April 2008.

[46]     Mr  Wilson  submitted  that  if  the  agreement  did  involve  payment  of  the additional amount, the level of borrowing ($960,000) was inconsistent with it and Mr Zhong must have known that.  I do not ascribe significance to this point because it is unclear what Mr Ong, who was plainly unreliable, had said to Mr Zhong in explanation.  I accept the possibility, suggested by Ms Reed, that the intention was to reduce the mortgage using the funds that Mr Zhong had provided, particularly since the payment was likely made after Mr Zhong had signed the bank loan on 21 April

2008.  Mr Zhong had no reason to think that Mr Zhong had not applied the funds he had paid him in 2007 to the purchase at settlement; to the contrary, the bank loan of

$960,000 was consistent with Mr Zhong having contributed a total of $240,000 to that point.

[47]     Mr Ong was holding Mr Loo’s power of attorney at this time.  But he did not have the authority to negotiate that change, much less on the terms that Mr Ong had agreed with Mr Zhong.   The terms of the power of attorney were clear that the “Specified Purpose” for which the power was granted was to act in connection with Mr Loo’s 80% share and in his best interests.  Changing Mr Loo’s share to 50% was not within the scope of Mr Ong’s authority and not in his interests.

[48]     When Mr Loo learned of the change in his and Mr Zhong’s respective shares upon his return to New Zealand in late 2008, he was agreeable to it.  By continuing to act in accordance with the change, including maintaining in this litigation that his share was 50%, he ratified the change in the shares recorded in  the agreement

varying the Nomination Agreement.  But he did not know and did not agree to the separate “purchase agreement”.  I am not satisfied that Mr Loo ratified the “purchase agreement”.   The  terms  of  that  agreement,  particularly the  cap  on  Mr  Zhong’s liability for the bank loan, were not a necessary consequence of the change in the respective shares and not in Mr Loo’s interests.  I am satisfied he knew nothing of it until much later and that he never said or did anything to indicate an intention to be bound by it. As a result, Mr Zhong cannot rely on the “purchase agreement” to limit his liability for the amounts paid to the BNZ.

[49]     The parties’ respective rights and obligations are therefore limited to the express and implied rights arising under the joint venture created by the Nomination Agreement as varied by the agreement dated 21 April 2008.  They held equal shares and in my view it was implied that they would be joint and severally liable for the expenses, including the bank loan, entitled to share equally in the rental income, entitled to receive their respective equity contributions (Mr Zhong $168,000 and Mr Loo $72,000) from the proceeds of sale and would be equally entitled to the remaining balance.

Summary and result

[50]     Mr Zhong and Mr Loo were parties to a joint venture in which they held equal shares but to which they contributed unequal equity.  Mr Zhong suffered loss as a result of Mr Ong’s dishonesty but Mr Loo is not responsible for that.   In summary:

(a)      In 2007 Mr Zhong paid Mr Ong $192,000 in cash for the purchase of Godley Lane but Mr Ong failed to apply it for that purpose and has failed to account to Mr Zhong for it.   However, Mr Ong was not acting as Mr Loo’s agent at the time and Mr Loo is not liable for that loss.

(b)Mr Ong was acting outside the scope of his authority as Mr Loo’s agent when he persuaded Mr Zhong to increase his share in the joint venture to 50% by entering into the agreement to vary the Nomination

Agreement dated 21 April 2008.  However Mr Loo later ratified that agreement by his acceptance of the new share arrangement.

(c)       Mr Ong was acting outside the scope of his authority when he entered

into  the  “purchase  agreement”  under  which  he  obtained  a  further

$120,000 from Mr Zhong and agreed that Mr Zhong’s liability for the bank loan would be capped.  But Mr Loo did not ratify that agreement so Mr Zhong cannot rely on the “purchase agreement” to limit his liability under the bank loan.   Further, because Mr Ong applied the additional $120,000 to the purchase Mr Zhong did not suffer any loss as a result of that payment.

[51]     On the basis of these findings Mr Zhong’s claim must fail.  There is judgment for Mr Loo.

[52]    This outcome leaves the division of the net proceeds without a specific determination.  I would expect, however, that the findings I have made will enable the parties to reach agreement.   The analysis undertaken by Mr Loo’s accountant, Mr Maitland, of the parties’ respective contributions gives a helpful indication as to how the division might be undertaken.  If parties cannot agree then I am prepared to receive further submissions on that issue.   Leave is reserved to the parties to seek further directions in that regard within 30 days.

[53]     Parties may address the issue of costs by memoranda filed on behalf of

Mr Loo within 14 days, Mr Zhong within 21 days and Mr Loo in reply within 28 days.

P Courtney J