CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v CHOR LTD [2020] NZHC 1254

CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND v CHOR LTD [2020] NZHC 1254 [8 June2020]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2019-404-2768[2020] NZHC 1254UNDER the Overseas Investment Act 2005BETWEEN CHIEF EXECUTIVE OF LANDINFORMATION NEW ZEALANDPlaintiffAND CHOR LIMITED AS TRUSTEE OF CHORTRUSTDefendantHearing: 5 March 2020Appearances: K R Muirhead and B S Rorrison for PlaintiffJ G Ussher for DefendantJudgment: 8 June 2020JUDGMENT OF PETERS JThis judgment was delivered by Justice Peters on 8 June 2020 at 2 pmpursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate: ...................................Solicitors: Meredith Connell, AucklandPCW Law Ltd, Auckland[1] By statement of claim of 18 December 2019, the plaintiff seeks an orderrequiring the defendant Chor Ltd ("Chor") to pay a civil penalty to the Crown unders 48(1)(a) and (2)(b) Overseas Investment Act 2005 ("Act"). Chor does not disputethat I should make the order sought.Background[2] In 2013, Ms Xi Rong Zhou entered into an agreement to purchase a residentialproperty for NZ$2,550,000 ("property"). Ms Zhou subsequently nominated herhusband, Mr Bingyan Zhou, as purchaser of the property. Mr Zhou settled thepurchase in October 2013. It is common ground Ms Zhou and Mr Zhou requiredconsent under the Act to acquire their equitable and legal interests respectively; theydid not obtain those consents; and thereby contravened the Act.[3] Chor was incorporated on 22 September 2016 and is the trustee of theChor Trust which was settled on the same day. At all material times, Mr Zhou andMs Zhou have been Chor's directors and shareholders.[4] On 29 September 2016, Mr Zhou entered into an agreement to sell the propertyto Chor for $3.2 million, and that acquisition was subsequently settled. Chor alsorequired consent for its purchase. Having failed to obtain that consent, Chor also wasin contravention of the Act.[5] In about 2017, the Regulator was alerted to the possibility of the contraventionor contraventions. It transpired the Zhous and Chor had been poorly advised by theirformer solicitor and, since being informed of the position, have co-operated with theRegulator.[6] In late-2018, Chor sold the property to third party for $3.2 million.Remedy[7] Section 48(1) of the Act permits the Court to order a party who has contravenedthe Act to pay a civil penalty to the Crown. Chor admits such a contravention.[8] Section 48(2)(b) of the Act confers power on the Court to impose a penaltycalculated by reference to the "quantifiable gain" the party made on holding theproperty for which a consent was required. The plaintiff seeks such a penalty in thiscase.[9] On the face of it, Chor bought and sold the property at the same price and soderived no quantifiable gain. However, it appears from the parties' agreed statementof facts that, throughout, the beneficial interest in the property has been held forMs Zhou and the couple's son, that is from the acquisition of the property in 2013 untilits sale in late-2018. The (gross) quantifiable gain acquired, $650,000, is thuspresently held by Chor for its beneficiaries.[10] The plaintiff has proposed Chor pay a penalty of $539,914.47, being the (net)quantifiable gain by Chor in relation to the property — really the net quantifiable gainby the beneficiaries of the Chor Trust — of $650,000, less the costs of disposal andother disbursements.1 The plaintiff also seeks an order that Chor pay $15,000 towardsits costs.[11] Chor does not object to these orders, and as I understand it from Mr Ussherand the documents before me, there is no objection by the beneficiaries. I am satisfiedit is appropriate to make the orders.Result[12] The defendant is to pay the plaintiff:(a) $539,914.47 by way of penalty pursuant to s 48(1) and (2) of theOverseas Investment Act 2005;(b) $15,000 as a contribution to the plaintiff's costs.[13] I reserve leave to apply.Peters J1 Section 48(2).