Zhou v Zhou

[2021] NZHC 1515

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-001695

[2021] NZHC 1515

BETWEEN

BINGYAN ZHOU

Plaintiff

AND

XINMING ZHOU

Defendant

Hearing:	10 May 2021
Appearances:	No appearance by or for Bingyan Zhou E Kuo for Xinming Zhou
Judgment:	24 June 2021

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 24 June 2021 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Psalms Law, Auckland R Parmenter, Auckland

ZHOU v ZHOU [2021] NZHC 1515 [24 June 2021]

Introduction

[1]    Bingyan Zhou and Xinming Zhou were business partners. Now Bingyan1 claims that Xinming created a fake settlement deed between them and forged Bingyan’s signature on the deed. Whether that is true or not lies at the heart of this case.

[2]    Bingyan and Xinming planned, with a third person, Tiejun Yi, to develop a property at 13 to 15 Domain Road, Panmure, through a company called Golden Lakes Development Ltd. Xinming was the sole shareholder and director. On 1 May 2013, Bingyan and Tiejun Yi advanced RMB 6,000,0002 (around $1,333,333.34,

$666,666.67 each) to Golden Lakes to purchase the property. They say that Xinming personally guaranteed this advance; and that he promised them a profit of $400,000. None of these arrangements were written down.

[3]    As planned, Golden Lakes purchased the property. It is unclear whether the property was developed, but on 25 September 2015 Bingyan and Tiejun Yi registered a caveat against the title of the property to prevent Golden Lakes from selling it to a third party before their advance was repaid. Negotiations between the parties’ lawyers ensued. On 12 April 2016, Xinming paid Bingyan and Tiejun Yi $435,000 each ($870,000 in total) and the caveat was removed.

[4]    Precisely what was agreed on 12 April 2016 is contested. Xinming claims that they entered into a formal Deed of Settlement (the Deed) by which Bingyan and Tiejun Yi settled any claims they might have against him or Golden Lakes relating to the Panmure property. Bingyan and Tiejun Yi dispute that. They say that the so-called Deed is a forgery and that the payment from Xinming was a part-payment only of the amounts owing to them under the “partnership” agreement. In exchange for the part-payment they removed the caveat lodged against the Panmure property.

1      As the parties share a surname I will refer to them by their first names. No disrespect is intended.

2      RMB or “Renminbi” is the official currency of the People’s Republic of China.

[5]    These proceedings began with a claim by Bingyan against Xinming for a declaration that the Deed is invalid and void, damages for the balance of the advance he made ($231,666.67) and the promised $400,000 profit, general and exemplary damages and costs. In response, Xinming filed a statement of defence and application for summary judgment, claiming that Bingyan is prevented from bringing the claim because he agreed a full and final settlement with Xinming in relation to the partnership agreement and the advance.

Issues

[6]    There are two issues I need to decide. First, as Xinming did not apply for summary judgment when he filed his statement of defence, whether to grant Xinming leave to apply for summary judgment. When setting down the summary judgment application, Gault J directed that the Judge hearing the application would decide the question of leave.3

[7]    If I grant leave, I need to decide the second, substantive, issue. That is whether Xinming has successfully established that Bingyan cannot succeed in any of his causes of action, because of the Deed. Bingyan claims that the Deed is a forgery. I do not need to resolve that claim; but must decide whether it presents an arguable answer to the defence raised.

Summary judgment – legal principles

[8]Rule 12.2(2) of the High Court Rules 2016 provides:

The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.

[9]    Master Venning summarised the effect of this rule in Ferrymead Tavern Ltd v Christchurch Press Co Ltd, drawing upon the commentary in McGechan on Procedure:4

3      Minute of Justice Gault, dated 23 February 2021.

4      Ferrymead Tavern Ltd v Christchurch Press Co Ltd (1999) 13 PRNZ 616, [1999] NZAR 529 (HC) at [11]. See also Webster Farm Management Ltd v Dargaville Farms Ltd (in liq) [2020] NZHC 1477 at [32]–[35].

…an application for summary judgment by a defendant is similar to a striking- out application except the defendant has to show that all of the plaintiff’s causes of action cannot succeed. The major difference between an application for summary judgment and a strike-out application is, of course, that a defendant making an application for summary judgment may put evidence before the Court by way of affidavit. If that evidence is disputed or is insufficient to satisfy the Court then the matter will have to proceed to a full hearing. The onus is on the defendant to satisfy the Court the plaintiff has no arguable answer to the defence raised.

[10]   More recently, the Supreme Court has emphasised that this is a heavy onus on the defendant, observing that a defendant should apply for summary judgment only “where there is a complete and incontrovertible answer on the facts (in which case summary judgment can be entered for the defendant)”.5

[11]However, as with plaintiff applications for summary judgment,6 this Court:7

…will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable…

[12]   An allegation of fraud, by its very nature, challenges the credibility of a deponent, manifesting a conflict of evidence. For this reason, the rules used to restrict the availability of the summary judgment procedure in respect of claims alleging fraud.8 The jurisdictional limitation has been removed. It may be typical for summary judgment applications involving allegations of fraud to involve clear disputes of material fact,9 however this is not always the case, and where, for example, there is no credible basis for the allegation of fraud,10 the mere fact of the allegation is not a bar to granting summary judgment.

5      Body Corporate 207624 v North Shore City Council [2012] NZSC 83 at [4], as cited in Webster Farm Management, above n 4, at [32].

6      Webster Farm Management, above n 4, at [35].

7      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].

8      McGechan on Procedure (online ed, Thomson Reuters) at [HR12.1.02].

9      Sim v Bale HC Whangarei CP34/95, 15 February 1996; Parberry v Parberry HC Christchurch CIV-2011-409-001678, 15 March 2012; Fisk v Fawcet [2013] NZHC 2811, [2014] NZCCLR 12.

10     Burmeister v O’Brien HC Tauranga CIV-2005-470-000396, 24 April 2007.

Application for leave to file summary judgment

[13]   By application, dated 30 January 2021, counsel for Xinming sought leave to file for summary judgment after the date on which the statement of defence was filed under r 12.4(3) of the High Court Rules 2016.

[14]In response, Bingyan opposed the application for leave, saying:

…plaintiff thru the representative of notary public at Xiangten City at Hunan Province to personally serve the statement of claim dated 18.9.2020 and the notice of proceeding to the hand of defendant Ximing Zhou at defendant’s office in Xiangtan City at Hunan Province as at 15.41 pm 9th of October 2020 as per document marked “S1” affidavit of X Zhou dated 14.10.2020 filed previously. Considering 25 working days from 9th of October 2020 or 12.10.2020 (as per document marked “S1” affidavit of X Zhou dated 14.10.2020 filed previously) will be 13th November 2020 or 16.11.2020. The delay   of   5   weeks   to   file   statement   of    defence   and   delay   of     10 weeks to file summary judgment application is not acceptable.

[15]   At the hearing I granted Xinming leave. I concluded that Xinming had a credible explanation for why the application was not filed with the statement of defence, including that it took time for Xinming, who resides in the Hunan Province of China, to find a New Zealand lawyer who would be able to communicate with him. I accepted that Xinming’s affidavit took longer to prepare because it had to be translated into English, affirmed by Xinming in China and then affirmed by the translator in Auckland. The holiday period between 2020 and 2021 also contributed to the delay.

[16]   Importantly, I did not consider that Bingyan had been materially prejudiced by the delay. I afforded Bingyan the same leniency by giving him leave to file his notice of opposition, evidence and submissions late.11

11 Bingyan filed a notice of opposition on 7 May 2021; affidavit of Xirong Zhou sworn on 6 May  2021 and filed on 7 May 2021; and further affidavit of Xirong Zhou sworn and filed on 10 May 2021. These documents were filed late, in breach of the direction given by Gault J on 23 February 2021 which required him to file and serve any notice of opposition to the application for leave or application for summary judgment, together with affidavits in support, by 22 March 2021. Further, Bingyan filed his submissions described as “memorandum in reply to defendant’s synopsis” on 10 May 2021, the morning of the hearing, in breach of Gault J’s direction that he files and serve his submissions five working days before the hearing. Bingyan did not appear at the hearing.

Does the allegation that the Deed is a forgery present an arguable answer to the defence raised?

[17]   Xinming put in evidence a copy of the Deed. It appears to have been signed by Xinming, in his personal capacity and as director of Golden Lake, and witnessed, in Hunan, China. It appears to bear the signatures of Bingyan, witnessed by Ms Weiping Zhong, and Tiejun Yi, witnessed by Ms Xiaohua Dong, both in Hunan, China.

[18]The relevant covenants of the Deed are:

1.[Bingyan] and Tiejun [Yi] will withdraw the caveat …currently registered on the titles of the [Panmure] Property.

…

3.The Company will pay [Bingyan] and Tiejun [Yi]  NZ$870,000.000   on settlement of the sale of the [Panmure] Property.

…

5.This will be the full and final settlement of all matters in relation to the Loan between [Golden Lake] and [Bingyan] and Tiejun [Yi]. [Bingyan] and Tiejun [Yi] agree that after receiving the payment provided in clause 3 above:

a.The Partnership Agreement will be terminated. [Bingyan] and Tiejun [Yi] have waived all their rights and obligations under the Partnership Agreement; and

b.[Bingyan] and Tiejun [Yi] have no claim against [Golden Lake] or [Xinming] in either New Zealand or in China in respect of all matters related to the Loan and financing of the [Panmure] Property or under the Partnership Agreement.

[19]   But Bingyan alleges that the Deed is false. He says that Xinming created it immediately upon payment of the $870,000,12 photoshopped the parties’ signatures into the Deed,13 and then bribed Bingyan’s manager, Mr Long, to forward the fake Deed to both parties’ lawyers.14 Bingyan also says that Mr Long did not disclose a conflict of interest, in that he is also Xinming’s project manager.15 Bingyan says that Xinming used unknown people as witnesses and falsified their signatures.16

12 Amended Statement of Claim dated 14 April 2021, at [4].

13 Statement of Claim dated 18 September 2020, at [5].

14 Amended Statement of Claim dated 14 April 2021, at [4].

15     Affidavit of Xirong Zhou affirmed 6 May 2021, at [4](d).

16 Statement of Claim dated 18 September 2020, at [6].

Elsewhere, Bingyan says that Mr Winston Wang, not Xinming, prepared the fake Deed. 17

[20]   To support these claims, Bingyan’s wife, Xirong Zhou, filed two affidavits. To an affidavit sworn on 6 May 2021, Ms Zhou annexes a document which is said to be a lawsuit from Bingyan against Xinming in China. It is in Mandarin. To an affidavit sworn on 10 May 2021, Ms Zhou attaches three “declarations”  from  each  of  Tiejun Yi, Xiaohua Dong, and Weiping Zhong. In these declarations they declare that they  did  not  sign  the  Deed  prepared  by  Winston  Wang   &  Associates   dated 12 April 2016.

[21]   Bingyan also relies on an affidavit of Tainan Dolly Chow which exhibits a report from the “Judicial Appraisal Centre of Hunan University”. The authors of the report appear to analyse the signatures on the Deed against other samples of the signatures of the individuals in question. The authors conclude that the signatures of Bingyan and Tiejun Yi in the Deed are copied from samples. Further, regarding the signature of one of the witnesses, Weiping Zhong, “it may be confirmed that the signature in the [Deed] and that in the sample were not written by the same person.”

[22]   Xinming rejects the allegation that he created the Deed and forged the signatures. He claims that his lawyers Winston Wang drafted the Deed and that he, and Bingyan and Tiejun Yi, executed the Deed in China on 12 April 2016 and that Bingyan emailed the signed Deed to his New Zealand-based lawyer, Mr Skeates, who then emailed it to Xinming’s New Zealand-based lawyers, Winston Wang & Associates.18

[23]   Ms Kuo for Xinming submitted that Bingyan’s allegations did not present an arguable answer to the defence raised by Xinming. She made four main submissions.

[24]   First, she submitted that the fact that $870,000, the amount referred to in the Deed, was paid to Skeates Law on 12 April 2016, and that Bingyan removed the caveat against  the property  that day,  is  evidence that Bingyan entered into the Deed.   The

17 See, for example, affidavit of Xirong Zhou affirmed 6 May 2021, at [2].

18     Affidavit of Xinming Zhou affirmed 28 January 2021 at [6] and [8].

solicitor’s undertaking and a copy of the transmission report confirming payment is said to be further evidence.19

[25]   Second, she submitted that Xinming could not have forged Bingyan’s signature on the Deed because Bingyan’s lawyer, Mr Skeates, was not communicating with Xinming directly, Mr Skeates would only accept instructions from Bingyan, and    Mr Wang would only accept a counter-signed Deed which came from Mr Skeates’ email.

[26]   Third, Ms Cindy Wu, licensed conveyancer of Winston Wang & Associates, has made a statutory declaration confirming that the parties entered into the Deed and the payment of $870,000 was made. Ms Wu also confirms that the Deed was certified by the Authentication Unit of the Department of Internal Affairs.

[27]   Fourth, Bingyan generally lacks credibility. Ms Kuo submitted Bingyan tampered with a document he filed in other proceedings, specifically, a letter written by Xinming’s original counsel, Mr Sun, to Bingyan. Xinming says the letter was written circa August 2019, when Mr Sun worked at Duthie Whyte. However, when Bingyan filed to debar Mr Sun in March 2021, annexure A1 to Bingyan’s affidavit was the email from Mr Sun attaching the letter. The email was dated 15 August 2019, but the attached letter dated 28 February 2021. Ms Kuo highlights the implausible time-travelling of the attached letter as well as Mr Sun having left Duthie Whyte some seven months prior to the date of the letter. She submitted Bingyan or his agent must have changed the date of the letter.

[28]   I will consider each of these submissions in turn. As I do so I am mindful that the onus is on Xinming to satisfy the Court that Bingyan has no arguable answer to the defence raised. So, Xinming must satisfy me that Bingyan’s claim that the Deed is a forgery is not arguable.

[29]   Ms Kuo’s first submission is not, on its own, persuasive because Bingyan has offered an alternative explanation: that the payment from Xinming was a part-payment

19     Affidavit of Xinming Zhou affirmed 28 January 2021, annexure D.

of the amounts owing under the partnership agreement, in exchange for which Bingyan and Tiejun Yi removed the caveat.

[30]    The second submission is persuasive but is not supported by evidence. At the hearing I invited Xinming to file further evidence comprising the email correspondence between the lawyers organising the signing of the Deed. I indicated that the Court would be assisted by the complete email chain, with attachments, as this would show the executed Deed being transmitted from Bingyan’s New Zealand-based lawyer Mr Skeates to Winston Wang; and from Xinming to Winston Wang.

[31]   Xinming’s supplementary affidavit attached further correspondence. But the chain of correspondence was still incomplete.

(a)On 11 April 2016, Ms Wu (lawyer for Xinming) emailed Mr Skeates (lawyer for Bingyan) at 12.28 pm, noting that Xinming required a settlement agreement to be signed before settlement would be completed.20

(b)On 12 April 2016, at 7.24 am, Ms Wu emailed Mr Skeates noting that “the deed has not been witnessed” and required amendment. Attached was an amended deed, which Ms Wu requested Mr Skeates arrange for his client to sign.21 Xinming did not put in evidence any correspondence between the 11 April 2016 email sent at 12.28 pm and the 12 April 2016 email sent at 7.24 am. One would have expected there to be correspondence between these emails, including an email from Mr Skeates to Ms Wu with a deed attached and signed by Bingyan and Mr Yi, but not witnessed.

(c)Mr Skeates replied to Ms Wu at 10.39 am, saying “Here is the documents signed by our clients in China”.22 However, the Court was not provided with a copy of the attachment.

20     Affidavit of Xinming Zhou affirmed 11 May 2021, annexure A.

21     Affidavit of Xinming Zhou affirmed 11 May 2021, annexure B.

22     Affidavit of Xinming Zhou affirmed 11 May 2021, annexure B.

(d)Ms Wu replied to Mr Skeates at 11.24 am, noting that she had attached a new final version of the Deed as the previous version misspelled Xinming’s name (as Xinmin).23

(e)Then at 2.53 pm, Ms Wu emailed Mr Skeates with a “fully signed deed of settlement attached.”24 In evidence is the attachment – the Deed with the correct spelling of Xinming’s name and signatures by all parties and witnesses. Xinming did not put in evidence any correspondence between the parties sent between Ms Wu’s emails of 11.24 am and

2.53 pm on 12 April 2016. However, one would have expected there to be correspondence between these emails, most importantly including an email from Mr Skeates to Ms Wu with a deed attached and signed by Bingyan and Mr Yi.

[32]   As to the third submission, the declaration of Ms Wu, Xinming purportedly signed the Deed in China. Ms Wu of Winston Wang is situated in New Zealand. At best, she can attest to having received a scanned copy of the executed Deed from Xinming. However, there is no evidence surrounding his execution of the Deed or its transmission to Winston Wang. As mentioned already, there is also no evidence showing transmission of the executed Deed from Bingyan to Mr Skeates and from Mr Skeates to Ms Wu.

[33]   Fourth, I do not consider there is much force in Xinming’s submission that Bingyan generally lacks credibility, by reason of the mismatch between the date of an email and the email attachment he provided in evidence for a previous application. Bingyan has provided an explanation for this mismatch,25 in that the date of the letter automatically updated to the date it was printed.26

[34]   Bingyan’s claim that the Deed is a forgery is inherently improbable and far from convincing. In that respect I note the following:

23     Affidavit of Xinming Zhou affirmed 11 May 2021, annexure C.

24     Affidavit of Xirong Zhou affirmed 6 May 2021, annexure F1.

25     Plaintiff’s memorandum in reply to defendant’s synopsis dated 23 April 2021.

26     Mr Sun, the author of the letter, being a software engineer and knowing how to configure his settings in this way.

(a)Bingyan has not himself sworn/affirmed an affidavit to the effect that his signature on the Deed is forged.

(b)The “declarations” from Mr Yi and the witnesses are unsworn.

(c)There are internal inconsistencies in Bingyan’s evidence. He says that Winston Wang  prepared the “fake” Deed and sent it to his lawyer,  Mr Skeates.27 However in his statement of claim he says that Xinming himself created the false Deed, after the $870,000 was paid; and then he bribed Mr Long to send it to both parties’ lawyers.28 This does not reconcile with the correspondence between the lawyers, which suggests that the first version of the Deed was in circulation on 11 April 2016 and the funds transferred on 12 April 2016.29

(d)Another inconsistency is that the witnesses’ statements say that they did not sign the Deed at all,30 whereas Ms Zhou’s statement says that they did not understand the Deed because they do not speak English,31 whereas Bingyan claims that the witnesses are “unknown”.

(e)The origin and  context  for  the  “judicial  appraisal”  from  the Hunan University is unclear and the appraisal’s conclusions are ambiguous. One possible answer for the signatures of Bingyan and Tiejun Yi matching the samples provided exactly could be that all the documents were signed by way of electronic signature. The “judicial appraisal” does not address that possibility.

[35]   However, the onus is on Xinming to persuade me that he has a complete and incontrovertible answer to Bingyan’s claim that the Deed is a forgery. Had there been a more fulsome record of the correspondence surrounding the purported execution of the Deed put to the Court, it might have been possible for me to confidently reach that

27     Affidavit of Xirong Zhou affirmed 6 May 2021 at [2] and [4].

28     Amended statement of claim 4 April 2021 at [4] to [7].

29     Affidavit of Xinming Zhou affirmed 11 May 2021, annexures A and D.

30     Affidavit of Xirong Zhou affirmed 10 May 2021.

31     Affidavit of Xirong Zhou affirmed 6 May 2021.

conclusion. But the record is incomplete. Critically, Xinming failed to put in evidence any correspondence showing receipt of the executed Deed by his lawyer (Ms Wu) from Bingyan’s lawyer (Mr Skeates). He also failed to file any evidence concerning the circumstances of his own execution of the Deed and transmission to Ms Wu. I am forced to conclude that full discovery, and probably oral evidence from Xinming and Bingyan, is necessary to determine if there is any substance to Bingyan’s claim that the Deed is a sham and the signatures on it are forged.

Result

[36]   Xinming’s application for summary  judgment  of  Bingyan’s  claim  dated  18 September 2020 is dismissed.

[37]   Xinming will pay Bingyan’s costs, on a 2B basis, and disbursements. If the parties cannot agree the quantum of those costs, Bingyan is to file a memorandum of not more than four pages within 20 working days and Xinming 10 working days thereafter.

Associate Judge Gardiner