TAI YUAN MA, SHUJUAN ZHANG AND YING MA (ALSO KNOWN AS LINDA MA) V MING SHAN HOLDINGS LIMITED CA53/2010

TAI YUAN MA, SHUJUAN ZHANG AND YING MA (ALSO KNOWN AS LINDA MA) V MING SHAN HOLDINGS LIMITED CA53/2010 28 July 2010IN THE COURT OF APPEAL OF NEW ZEALAND CA53/2010 [2010] NZCA 325BETWEEN TAI YUAN MA, SHUJUAN ZHANG AND YING MA (ALSO KNOWN AS LINDA MA) Appellants AND MING SHAN HOLDINGS LIMITED Respondent Hearing: 23 June 2010 Court: Glazebrook, Heath and Allan JJ Counsel: A D Banbrook for Appellants J G Ussher for Respondent Judgment: 28 July 2010 at 4.00 pmJUDGMENT OF THE COURTA The appeal is dismissed. B For the reasons set out at [63] and [73], the orders made by the High Court are set aside and substituted with the following: (a) A declaration that the property at 15 Claremont Way, Howick is held by Ying Ma and Shujuan Zhang on trust for Ming Shan Holdings Ltd. (b) An order requiring Ying Ma and Shujuan Zhang to transfer the property at 15 Claremont Way, Howick to Ming Shan Holdings Ltd, subject to the existing mortgage in favour of the Bank of New Zealand. (c) Leave is reserved for Ming Shan Holdings Ltd to apply to the High Court to seek any further order or direction that may be required to give effect to these orders.C Costs are awarded in favour of Ming Shan Holdings Ltd against the appellants on a joint and several basis. Those costs are fixed at a Band A basis for a standard appeal, with an uplift of 50 per cent, plus usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Heath J)The appeal[1] Tai Yua Ma (Mr Ma), Shujuan Zhang (Ms Zhang) and Ying Ma (Linda) appeal against a judgment of Associate Judge Robinson, delivered in the High Court at Auckland on 18 December 2009, by which Ming Shan Holdings Ltd (Ming Shan) obtained a declaration that a house property in Auckland was held on trust for it.Introduction[2] Mr Ma and Ms Zhang are husband and wife. Linda is their daughter. Ming Shan is a company owned and operated by Mr Ma's brother, Weinan Ma (Weinan). [3] In 1999 and 2000, Weinan was detained by Chinese authorities on charges that were subsequently withdrawn. Mr Ma was asked to control Ming Shan's affairs. During that time, Mr Ma acknowledges having stolen the sum of $1,421,312.01 from Ming Shan. Of that sum, $40,000 found its way into Linda's hands and was used to pay a deposit on the purchase of a property at 15 Claremont Way, Howick, Auckland. [4] On 19 December 2005, Ming Shan obtained judgment on admissions against Mr Ma and Ms Zhang in the sum of $1,421,312.01. At the same time, judgment was entered against Linda in the sum of $40,000. 1 Execution of that judgment was1 Ming Shan Holdings Ltd v Ma and Zhang HC Auckland CIV-2000-404-1597, 31 July 2008 at [16].stayed pending determination of a counterclaim brought by Mr Ma and Mr Zhang against Weinan, in which judgment was sought in the sum of $5,630,000. [5] After a lengthy hearing before Lang J, the counterclaim was dismissed. Lang J took the view that the claim was fictitious. 2 Prior to delivery of judgment in those proceedings, Ming Shan brought a separate claim against Mr Ma, Ms Zhang and Linda. A declaration was sought that the Claremont Way property was held on trust for Ming Shan, together with an order for an accounting of any of Ming Shan's funds used to meet mortgage debts. The possibility of a constructive trust claim had been signalled as long ago as September 2000, when a caveat was lodged against the property by Ming Shan. [6] Associate Judge Robinson granted summary judgment by making "the declarations" sought by Ming Shan, together with costs and disbursements to be fixed by the Registrar. 3[7] Mr Ma, Ms Zhang and Linda appeal against that judgment, on two grounds. They assert that the Associate Judge erred in entering summary judgment because factual issues were raised by the affidavits filed in opposition to the application that could not be considered appropriately before a trial. They also contend that the delay in issuing the proceeding ought to have led the Associate Judge to decline to exercise his discretion to enter summary judgment. The second point was not advanced in the High Court. [8] As a preliminary point, Mr Ma, Ms Zhang and Linda objected to the introduction of "new evidence" on appeal, in the form of a Minute issued by Master Kennedy-Grant in the proceeding ultimately resolved by Lang J. That Minute, issued on 5 December 2001, recorded an admission made on behalf of Mr Ma, Ms Zhang and Linda that is relevant to the present claim. 4 We deal with that issue separately.2 Ibid, at [471].3 Ming Shan Holdings Ltd v Ma HC Auckland CIV-2008-404-6692, 18 December 2009 at [35]. The Statement of Claim sought an order declaring that the whole of Ming Shan's share of the equity in the property was held on trust for Ming Shan and an order requiring Mr Ma, Ms Zhang and Linda to account for any of Ming Shan's funds used to pay the mortgage.4 See [31] below.The facts in outline[9] On 29 August 1999, Linda entered into an agreement for sale and purchase of the Claremont Way property. The vendor was Fletcher Residential Ltd. The purchase price was $400,450. A deposit representing 10 per cent of the purchase price was paid. The agreement was subject to finance being arranged by 10 September 1999. Settlement was scheduled for 28 September 1999. [10] Linda was born on 14 April 1981 in Tianjin, China. She arrived in New Zealand with her family in 1995, at the age of 13 or 14 years. At the time she entered into the agreement for sale and purchase of the Claremont Way property, she was 18 years old, working part-time and a student at Auckland University. [11] On 30 August 1999, Linda and her mother entered into a "Nominal House Purchase Agreement". It provided:Party of the Agreement [Linda] is the purchaser of the house at 15 Claremont Way, Howick, Auckland. The two parties have reached the following agreement through voluntary negotiations: 1. [Linda] and [Ms Zhang] shall jointly manage the house. 2. [Linda] shall add [Ms Zhang's] name when applying for the title deed, but [Ms Zhang] is only nominal. [Ms Zhang] does not have any shares in the joint ownership of the property right of the house. 3. 100% of the ownership shares of the property right of the house are [Linda's]. 4. The agreement becomes valid upon its signing by both parties. 5. The agreement has two identical copies with the two parties each keeping one copy. Party of the Agreement: [Linda] [Signature] Party of the Agreement: [Ms Zhang] [Signature] Date: 30 August 1999[12] Linda deposes that while her mother was nominated as a co-purchaser of the property it, "was never intended that [her mother] would have any legal or equitable interest in the property". [13] On 9 September 1999, $40,000 of Ming Shan's funds was paid by Mr Ma to Linda. This sum was paid so that Linda could meet her obligation to pay the deposit for the Claremont Way property. Linda explains the circumstances in which she received the sum of $40,000 as follows:Before deposit was paid a cheque for the sum of $40,000.00 was given to me by my father Tai Yuan Ma personally. Later on, not until the law suit between Ming Shan Holdings Limited and Tai Yuan Ma, I then find out there is a cheque requisition authorised by Yan Hon Ma on 9 September 1999. The cheque requisition shows Ming Shan Holdings Limited lent me $40,000.00 in the purchase of my house at 15 Claremont Way Howick. I have no knowledge of such cheque requisition and never received any money from Ming Shan Holdings Limited. There isn't any of my signatures on the cheque requisition.[14] In her affidavit of 14 February 2009, Linda denied any knowledge of the misappropriation of Ming Shan's funds. However, that denial does not square with her admission of judgment for $40,000, 5 on 19 December 2005. We proceed on the basis that Linda was aware of that misappropriation from, at the latest, 19 December 2005. [15] Settlement was effected on 24 September 1999. From the solicitor's ledger records, it appears that the purchase price was satisfied as follows: a) Deposit paid on or about 9 September 1999: $40,000 b) Additional cash contributed on 20 September 1999: $41,723 c) Mortgage advance from BNZ at Pakuranga 21 September 1999: $320,000 [16] The total amount available from those sources was $401,723. Pursuant to the terms of the Nominal House Purchase Agreement, 6 title to the Claremont Way property was registered in the joint names of Linda and her mother.5 See [4] above.6 See [11] above.[17] The value of the property was confirmed by a registered valuation obtained for mortgage purposes. The valuer assessed the current market value (excluding chattels) at $400,000. The Bank of New Zealand subsequently agreed to advance the sum of $320,000, on first mortgage, even though the valuer recommended a maximum allowance, on a security of that type, of $266,500. There is no evidence of any discussions, involving Mr Ma, Ms Zhang or Linda, with the bank about the amount advanced. [18] By 14 December 2001, the mortgage debt had been reduced to $99,683. That meant that, in just over two years, principal totalling $220,317 had been paid off the mortgage. [19] By 14 November 2008, a debt of $89,294 was owing to the bank. At that time, Linda also had an overdraft of $12,802. [20] Linda's evidence is that her sources of income, from 1999 until 2009, were sufficient to enable her to pay off that portion of the mortgage debt, to make a significant loan to her parents to assist with legal costs in relation to the proceedings determined by Lang J and to meet her general living needs. The central issue, on the summary judgment application, was whether Ming Shan could prove that Linda did not have the means to pay the mortgage debt, without recourse to the stolen moneys.The Associate Judge's decision[21] The Associate Judge correctly summarised the competing contentions. Ming Shan's case was that Linda acquired the Claremont Way property when she was an 18 year old student, with no assets and limited or no income. Consequently, Ming Shan asked the Court to draw an inference that the misappropriated funds were used both to acquire the property and to service the mortgage. If that were the case, the property should be subject to a constructive trust in favour of Ming Shan. 7 On the other hand, Linda claimed that, apart from the sum of $40,000 used as a deposit, she7 Ming Shan Holdings Ltd v Ma and Zhang at [8].had met all mortgage payments. She contended that all Ming Shan was entitled to was a sum of $40,000 plus costs to discharge the caveat. 8[22] Having examined the evidence, Associate Judge Robinson considered whether Ming Shan had proved that there was no arguable defence to its claim.9 The Judge opined that there was no reliable evidence on which he could find any genuine disputed fact to go to trial. In doing so, the Judge applied the well-known principle in Eng Mee Yong v Letchumanan.10 In that case, the Privy Council made it clear that critical analysis of affidavit evidence is required to determine whether factual allegations are sufficiently plausible to justify a trial. While those observations were made in the context of an application to remove a caveat, they are equally applicable to, and have often been applied in, the summary judgment context.11[23] The factors that influenced Associate Judge Robinson in reaching that conclusion were: a) Affidavit evidence from Mr Ma about the way in which he misapplied the company's funds. In an affidavit sworn on 8 February 2005, in support of an application to discharge a preservation order in relation to certain assets, Mr Ma said that $400,000 was used to purchase the Howick property. Inferentially, the Judge regarded Mr Ma's later statements that tended to cast doubt on that assertion as self-serving and unreliable, particularly in light of Linda's youth and financial inability to reduce the mortgage significantly, from her own funds, by December 2001. 12b) Linda's explanation that she received substantial moneys from family in China. That was rejected on the grounds that there was no independent documentary evidence to confirm her claim about the8 Ibid, at [9] and [12].9 Rule 12.2(1) of the High Court Rules and Pemberton v Chappell [1987] 1 NZLR 1 (CA).10 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.11 For example, see Pemberton v Chappelland Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).12 At [32].source of the funds she alleged were used to discharge the mortgage. The Judge regarded her account as "inherently improbable". 13The law: approach to summary judgment applications[24] Rule 12.2 of the High Court Rules provides:12.2 Judgment when there is no defence or when no cause of action can succeed(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action. (2) 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.[25] The summary judgment procedure was introduced by the High Court Rules 1985. 14 Early decisions of this Court emphasised the need for a plaintiff to demonstrate clearly that a defendant had no defence to the claim. The onus lay on the plaintiff, in that regard. Other than the need to raise an evidential foundation for a defence in respect of matters within the exclusive knowledge of the defendant, 15 no onus lies on that party when the Court determines whether a fairly arguable defence exists. [26] In Pemberton v Chappell, Somers J, delivering the principal judgment of this Court, said: 16At the end of the day [r 12.2(1)] requires that the plaintiff "satisfies the Court that a defendant has no defence". In this context the words "no defence" have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence. See egWallingford v Mutual Society;17 Fancourt v Mercantile Credits Ltd;18 Orme13 Ibid at [33] and [34].14 Rule 136 was to the same effect as the present r 12.2.15 See, for example, Blatch v Archer (1774) 1 Cowp 63 at 65; Snell v Farrell [1990] 2 SCR 311 at 328; and Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 (HL).16 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3-4. See also Hillyer J at 8. Casey J's judgment deals more with the residual discretion to refuse summary judgment, based on that Judge's view that the issue raised was one of counterclaim rather than defence.17 Wallingford v Mutual Society (1880) 5 App Cas 685 (HL) at 693.18 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99.v De Boyette.19 On this the plaintiff is to satisfy the Court; he has the persuasive burden. Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty. ... Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment. There may however be cases in which the Court can be confident — that is to say, satisfied — that the defendant's statements as to matters of fact are baseless. The need to scrutinise affidavits, to see that they pass the threshold of credibility, is referred to in Eng Mee Yong v Letchumanan20 and in the judgment of Greig J in Attorney-General v Rakiura Holdings Ltd.21[27] Somers J's references to the possibility of a defendant's statements of fact being "baseless" was enlarged upon in Bilbie Dymock Corporation Ltd v Patel.22Delivering the judgment of the Court in that case, Cooke P said:23... Although in our opinion [the Judge] erred, he did so for the understandable reason of an inclination to lean towards judicial caution and a concern to ensure that there was no conceivable prejudice to the defendants. But the need for judicial caution has to be balanced, when considering a summary judgment application, with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. In the end it can only be a matter of judgment on the particular facts. Counsel for the appellant cited the familiar words of Lord Diplock in Eng Mee Yong v Letchumanan:24"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 on an affidavit however unequivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be. " ....[28] By 1998, there were growing suspicions that summary judgment applications were being determined too robustly. The pendulum swung back a little. The need19 Orme v De Boyette [1981] 1 NZLR 576 (CA).20 At 341.21 Attorney-General v Rakiura Holdings Ltd HC Wellington CP 23/86, 8 April 1986.22 Bilbie Dymock Corporation Ltd v Patel, (1987) 1 PRNZ 84 (CA).23 Ibid, at 85-86.24 At 341.for caution was again emphasised. For example, in Lindale Financial Services Ltd v Colonial Mutual Life Insurance Society Ltd, Tipping J, for this Court, said: 25... Summary judgment proceedings are designed for cases where it is clear there is no defence to the plaintiff's claim. While it is entirely proper for the Court to take a robust approach when ascertaining whether proffered defences have any arguable validity or are simply a smokescreen, there are limits. Defendants should not be deprived of the opportunity of a full trial, unless the plaintiff clearly demonstrates that there is no reasonable possibility of the defence succeeding. While summary judgment proceedings are a valuable and desirable short cut in clear cases, care must be taken not to allow excessive robustness to work an injustice to the defendant.[29] Those cases reveal a simple truth. While the Court should not be too ready to accept uncritically allegations of fact made in affidavits, care must be taken to ensure a fair trial is not foreclosed by making premature findings of fact on affidavit evidence, without the benefit of cross-examination. [30] In a case like the present, where dishonest application of a company's money has been admitted, it would be wrong for a Court not to examine carefully assertions of fact on which reliance is placed in an endeavour to resist a claim to recover property allegedly acquired with stolen funds. A different approach might encourage defendants in such circumstances to give false evidence to avoid the entry of summary judgment; if only as a delaying mechanism. After a careful examination of the facts, the Judge should stand back and ask himself or herself whether there is any realistic prospect that the defence could succeed if the proceeding were allowed to go to trial. That is the approach Associate Judge Robinson took in the present case. In our view, he was right to determine the application in that way.Admission of "new evidence"[31] Mr Ma, Ms Zhang and Linda object to our considering the Minute of Master Kennedy-Grant of 5 December 2001. 26 That Minute, prepared following a case management conference in relation to the proceeding determined by Lang J, recorded a concession by counsel then acting for Mr Ma that, in addition to the sum25 Lindale Financial Services Ltd v Colonial Mutual Life Insurance Society Ltd (1998) 12 PRNZ 320 (CA) at 324.26 See [8] above.of $40,000, a sum of $120,000 had been applied to Linda's credit for the purpose of enabling her to purchase the Claremont Way property. Mr Banbrook, for Mr Ma, Ms Zhang and Linda, submits that we should not consider that material. [32] Plainly, the information is relevant. It was an admission made by counsel in the course of litigation between the same parties involved in the current proceeding. The admission was plainly designed to act for the benefit of Ming Shan. As a matter of law, parties in the position of Mr Ma, Ms Zhang and Linda are bound by admissions made by their counsel, on their behalf. 27[33] However, there is no need for the Minute to be considered as "new evidence". A Minute issued by the High Court is a public document. In the context of the proceeding in which the Minute was issued, it is now part of a proceeding that has been determined and is available for public search. 28 It is not evidence in the strict sense of that term. No leave is required to put it before us. We are prepared to consider it without the necessity for any order being made.Has Ming Shan proved there is no defence to its claim?(a) Introductory comment[34] Like Associate Judge Robinson, we consider the case turns on whether there is any realistic prospect that, following trial, a Judge could conclude that the mortgage was repaid out of Linda's personal financial resources. We examine that question by reference to the primary evidence of both Linda and Mr Ma.(b) Reduction of the mortgage up to 14 December 2001[35] Linda says that she travelled to China in 1999 and 2000. "Due to the high interest rate at that time", she deposes that she brought back to New Zealand "money which [she] had saved in China and money which [she] borrowed from other members of the family in Tanjian". She believes that she would have transferred to27 See, for example, Carrell v Carrell [1975] 2 NZLR 441 (SC), Thompson v Howley [1977] 1 NZLR 16 (SC) at 23-24 and Waitemata City Council v MacKenzie [1988] 2 NZLR 242 (CA).28 Rules 3.7(1) and 3.12 of the High Court Rules.New Zealand about $US150,000. That is said to equate, at prevailing exchange rates, to $NZ280,000. Linda deposes that those "funds were ultimately used in the reduction of the mortgage debt owed to the Bank of New Zealand in relation to the Claremont Way property". [36] Extracts from Linda's passport indicate that she travelled to China in January and February 1999 and in July 2000. The 1999 visit to China is confirmed by her aunt, Xiu Ying Wang, a resident of Tanjian. She refers to Linda visiting Tanjian in "January 1999 .... for a family visit". She says that, during that visit, Linda told her "that she was about to buy a house in New Zealand". She added:6. As her deposit in China was not enough to buy the house she wanted to borrow some money from me. Therefore I lent her $100,000US in cash and agreed that [Linda] would repay that amount to me personally in the future.At the time she visited Tanjian in January/February 1999, Linda was aged 17 years. If Ms Wang's evidence were accepted, the conversation about the house occurred over eight months before the purchase of the Claremont Way property. [37] It is common ground that Linda came to New Zealand in 1995, with her family. Therefore, her reference to accessing "savings", in China, in 1999 is problematic. The use of the word "savings" seems deliberate. Linda refers to "savings" on other occasions, to support her contention that money from China was used to reduce the Bank of New Zealand mortgage. [38] For example, in her first affidavit, Linda refers expressly to three sources from which the bank debt was reduced: savings in China, loans from family members and salary. Nevertheless, there is no specific evidence as to the amount of the savings in China or salary earned prior to a period commencing 1 April 2002. The notion that Linda had any savings of significance in China is inherently implausible given that, at the time she left China, she was either 13 or 14 years old. 29In those circumstances, we work on the basis that Linda's best case revolves around using the $US100,000 acquired from her aunt to reduce the Bank of New Zealand mortgage in the period between September 1999 and December 2001.29 See also [48](d) below.[39] Assuming, for the moment, that Linda was given $US100,000, in cash, in China in February 1999 to repatriate to New Zealand, the only possible evidence of any investment in respect of those funds is a sum of $50,000 deposited on 4 August 2000 for 90 days with WestpacTrust Bank in Auckland and a bank cheque for $80,164.03 paid to Linda by WestpacTrust on 8 September 2000. Even then, there is no evidence of the source of those funds. [40] There is also sparse evidence about the timing of payments made to the Bank of New Zealand to reduce the mortgage. In a second affidavit, filed after written submissions had been received with the leave of the Associate Judge, Linda reiterated that the mortgage had been reduced to $99,683 by 14 December 2001 from "savings and from funds transferred from China", but did not provide any information as to the times at which payments were made. There is, however, a schedule of changes in monthly instalments between 14 December 2001 and 14 November 2008, at which time Linda deposes that the amount owing to the bank was $85,294.29. [41] In contrast to Linda's deposition, are affidavits made by her father, Mr Ma, endeavouring to explain what happened to the money he stole from Ming Shan. The evidence to which we refer should be read against the backdrop of the admission made by counsel to Master Kennedy-Grant on 5 December 2001 in which it was acknowledged that a sum of at least $160,000 was used in respect of the acquisition of the Howick property. 30[42] In an affidavit sworn on 8 February 2005, Mr Ma said:28. In 1999 I made a conscious decision to retrieve some of my money from Ming Shan Holdings Limited in Auckland. The money was transferred openly over a period of time and was spent or invested in the following way: Purchase of Howick property $400,000.00 Funds injected into Ming Shan International Finance Services Limited (Third Defendant) $350,000.00 Funds placed in term deposit with ANZ30 See [31] above.Bank $400,000.00 Funds injected into Ming Shan International Publishing Limited $30,000.00 Investment and Foreign Exchange trading $93,000.00 Investment in shares $12,000.00 Deposit in bank $50,000.00This is the affidavit on which Associate Judge Robinson placed much weight.31[43] Both Linda and Mr Ma attempted to explain away this reference to $400,000, as a "misprint". They say it should have been a reference to the sum of $40,000 advanced to meet the deposit. Linda deposed:6. The reference to $400,000 in that breakdown is a misprint. Because of language difficulties it appears that Tai Yuan Ma has not detected and corrected this misstatement in his affidavit dated 8 February 2005. In fact the payment made towards the cost of the property at 15 Claremont Way, Howick, Auckland from funds drawn from the Plaintiff Company Ming Shan Holdings Limited should be correctly stated as $40,000.00 which is the amount of the initial deposit. 7. The following further points should be made: (i) Tai Yuan Ma will make his own affidavit correcting the mistake made in his earlier affidavit of 8 February 2005 as to the amount of this payment. He will confirm that the payment should correctly be stated as $40,000.00 not $400,000.00; (ii) That there is a mistake is clear from the contradiction between the statement and contemporary records which prove that it was $40,000 that was paid as a part deposit on the purchase of the property at Claremont Way, Howick, Auckland.[44] The problem with Linda's explanation is that, at the conclusion of his affidavit of 8 February 2005, Mr Ma, referring to the need for his affidavit to be translated into English, said:63. I am not fluent in English. Before signing this affidavit I had the contents of the affidavit translated for me and explained to me by my daughter Ying Ma also known as Linda Ma. She is a university graduate who is fluent in the English language.31 See [23](a) above.Linda offers no explanation as to how it was that she failed to pick up this error, when translating her father's 2005 affidavit. [45] There are two further documents, both produced by Mr Ma, that shed some light on the way in which the misappropriated funds were used. [46] In his first affidavit in the summary judgment proceeding, Mr Ma produced a schedule explaining how the money were used: $30,000 Pays Ming Shan International Publisher $350,000 Pays Ming Shan International Financial Services $460,000 Pays Plaintiff $608,360 $300,000 Pays Boon B Toh lawyer fees between 2000-2005 $170,000 Lost on current exchange market with Australian Finance company $120,000 Living expense $2,000 a month between year 2000-2005 Total $1,430,000 It appears that this schedule was first prepared by Mr Ma on or about 19 November 2008. [47] In his second affidavit in the summary judgment proceeding, Mr Ma produced a schedule showing the payees and dates in respect of which misappropriated funds were removed from Ming Shan's accounts.Ming Shan Holdings Ltd [Linda] 9/9/99 $40,000 Taiyuan Ma 20/10/99 $120,000 13/12/99 120,000 30/12/99 120,000 13/01/00 200,000 13/04/00 300,000 17/04/00 200,000 18/05/00 150,000 30/05/00 70,000 29/06/00 28,000 30/06/00 73,312.01 Total $1,421,312.01[48] In our view, there is no plausible narrative to support Linda's case. We consider that the following factors are determinative on that issue:a) No evidence was proffered to explain how Ms Wang came to have the sum of $US100,000 in cash, to provide to Linda. Nor was there any evidence about the source from which that cash was derived. b) There is nothing to explain how Linda was able to take that amount of cash out of China and to bring it into New Zealand without detection. It is difficult to believe that cash in that sum would have escaped the attention of those operating x-ray facilities at an international airport. Further, there is no evidence as to what happened to any such money when it was brought back to New Zealand, other than Linda's unsubstantiated assertion that it was used to pay off the Bank of New Zealand mortgage. c) The absence of evidence of any deposit of the cash into a New Zealand bank account (which would have triggered the reporting provisions of the Financial Transactions Reporting Act 1996)32strongly suggests that Linda did not have access to that amount of money from relatives in China. d) An additional point, albeit a makeweight in this context, is that while Linda says that she brought $US150,000 into New Zealand, there is no evidence of the source of the sum of $US50,000 or the time at which it was brought into New Zealand. The suggestion that the money might have come from Linda's "savings" in China is farcical, given her age at the time she left that country. She does not suggest that the money came from savings derived from moneys deposited on her behalf by family members, so that possibility can be discounted. As well, there is no explanation of why it was necessary to obtain such a large mortgage from the Bank of New Zealand if Linda had available to her, in September 1999, foreign currency to the value of $NZ280,000, as asserted in her first affidavit on the summary judgment application.32 Financial Transactions Reporting Act 1996, s 15; see also the definitions of "cash" and "transaction" in s 2(1) of that Act and the definition of "financial institution" in s 3. See also s 4 of that Act in respect of amounts not in New Zealand currency.[49] In our view, evidence of the funds brought from China is no more than an inherently improbable assertion of fact. We are minded, like the Associate Judge, to place greater weight on the affidavit sworn by Mr Ma in February 2005. It is entirely plausible that his reference to $400,000 having been used to purchase the Howick property is directly linked to the whole purchase price and includes payments made to meet the Bank of New Zealand debt. [50] The moneys that Mr Ma took from Ming Shan during 1999 and 2000 were sufficient to reduce the mortgage significantly. In particular: a) The fact that there were three cheques drawn in the sum of $120,000 in October and December 1999 33 supports the limited admission made before Master Kennedy-Grant that $160,000 had been contributed towards the Claremont Way property out of misappropriated money. b) In the breakdown prepared in November 2008, 34 there is no reference to any money being paid to Linda; contrary to what is now accepted fact. 35 In addition, the $300,000 identified in that breakdown as having been paid for legal fees between 2000 and 200536 is not reflected either in the February 2005 affidavit 37 or in the breakdown set out in Mr Ma's later affidavit.38[51] We conclude that the Associate Judge was right to find that there was no arguable defence in relation to the reduction of the Bank of New Zealand mortgage in the period to 14 December 2001.33 See [47] above.34 See [46] above.35 See [14] above.36 In fact, there is no evidence of the actual amount paid for legal fees during this period.37 See [42] above.38 See [47] above.(c) Payment of principal and interest from 14 December 2001 to November 2008[52] Evidence of Linda's earnings between 2002 and 2008 become relevant to whether she could have paid interest and principal on the Bank of New Zealand mortgage from her own resources during that period. [53] The starting point is Linda's evidence of her earnings from 2000 to March 2009. We are satisfied that there is sufficient supporting evidence to justify reliance on a total amount of $117,000 being received through legitimate banking channels from China, along with salaries from her employment with Ming Shan International Financial Services Ltd, Express Pacific (New Zealand) Ltd and Enterprise Recruitment Auckland Ltd. In addition, we accept (for summary judgment purposes) her assertion that a relatively modest amount was received from Work and Income benefits. [54] A sum of approximately $142,500 is said to have been received from rentals in respect of the property at Claremont Way. Our understanding is that, at various times, the property is said to have been rented out to foreign students, as well as to her parents. The difficulty is that there is no detail of the number of people occupying the premises at various times, or the amounts they were paying. There is no independent support for this source of income. [55] On that basis, we assess funds available to Linda, in the period between 1 April 2002 and 31 March 2009, as follows: a) Salaries $231,390.00 b) Legitimate foreign exchange transactions $117,000.00 Total $348,390.00 The salary component of those calculations is a gross sum, from which tax must be deducted.[56] As at 14 November 2008, the mortgage debt stood at $89,294. This amounts to a reduction of approximately $10,000 in the principal since December 2001. In addition, interest was paid on the loan. Linda also says that, to assist her father with legal bills, she lent a sum of $314,065.88 to him during this period. Further, she asserts that ordinary household expenses were met from these earnings. [57] We attempt to recalculate Linda's disposable income from the figures she has provided, making (where necessary) conservative assessments in respect of deductions required from her gross salaries:Gross income available for period between April 2002 and March 2009 $348,390.98 Less loans to Mr Ma $314,065.88 Subtotal $34,325.10 Less principal reduction on mortgage between 14 December 2001 and 14 November 2008 $10,389.95 Subtotal $23,935.15 Less household expenses as per Linda's second affidavit $3,726.45 Subtotal $20,209.70 Less estimated interest payments from December 2001 $60,000.00 Total (-$56,273.55)Those calculations do not take account of tax that Linda would have paid on her earnings. [58] On the basis of those calculations, which we accept may not be wholly accurate, Linda would have ended up at least $56,000 in debt, had she made all the payments she asserts. And, that is before any living expenses are allowed for a period of some years. [59] Linda's explanations are wholly untenable. They are of the inherently improbable type that the Eng Mee Yong approach is intended to address. We are not prepared to accept Linda's assertion that she paid off the balance of the mortgagewithout reference to misappropriated funds. It seems, to us, an irresistible inference that misappropriated moneys were used, directly or indirectly, to meet mortgage repayments. [60] In common with the Associate Judge, we are satisfied that there is no arguable defence to this aspect of the claim.(d) Outcome[61] Our conclusion that Linda's explanations cannot be accepted means that Associate Judge Robinson's decision to impose a constructive trust is upheld. Nevertheless, a difficulty arises in relation to the second order, for an accounting in respect of moneys owing on the mortgage. [62] The Bank of New Zealand, as the holder of a registered first mortgage over the Claremont Way dwelling, is entitled to be paid in full out of the proceeds of sale of the property. However, an order requiring an account, in relation to the amount owing on the mortgage, is unnecessary given our conclusion that the misappropriated moneys were used to meet all payments to the Bank. [63] In those circumstances, we shall set aside the order for account and substitute an order requiring Linda and Ms Zhang to transfer the property to Ming Shan and reserving leave to Ming Shan to apply to the High Court for any directions that may be necessary to give effect to those orders.The "discretionary" ground for appeal[64] This point has no merit and can be dealt with briefly. [65] In 2000, a caveat was lodged against the Claremont Way property to protect any interest Ming Shan may have, if successful in its claims against Mr Ma, Ms Zhang and Linda. The caveat remained in place while the proceedings wound their tortuous path to determination by Lang J in 2008. The present proceeding was issued in 2008, after judgment had been delivered in that substantive proceeding.[66] There is no limitation period in respect of a constructive trust claim. No suggestion has been made that the doctrine of laches applies. Counsel for Mr Ma, Ms Zhang and Linda submitted that the argument was limited to the summary judgment application accepting it could not provide a defence to the substantive claim. Plainly, summary judgment should not be denied on discretionary grounds when the basis for doing so is not also a substantive reason to prevent judgment being entered. [67] It is difficult to understand how any delay in filing the claim could have caused prejudice to the present appellants. Mr Ma, Ms Zhang and Linda knew full well of the documents that were needed for the proceeding with which Lang J was dealing and were aware that the caveat remained in existence. Steps could easily have been taken by them to procure and preserve relevant documents, after the caveat first came to their attention. [68] This ground of appeal fails.Costs[69] Mr Ussher, for Ming Shan, submitted that if the appeal was dismissed increased costs should be ordered. There is no doubt that breaches of time limits for the filing of submissions and the excessive material that the appellants placed before the Court on appeal put counsel for Ming Shan to a significant amount of extra work. [70] Ordinarily, costs on the present appeal would be fixed on a Band A basis for a standard appeal. Jurisdiction to award increased costs stems from r 53E(2) of the Court of Appeal (Civil) Rules 2005:53E Increased costs and indemnity costs... (2) The Court may order a party to pay increased costs if— (a) the nature of the appeal or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band B; or(b) the party opposing costs has contributed unnecessarily to the time or expense of the appeal or step in it by— (i) failing to comply with these rules or a direction of the Court; or (ii) taking or pursuing an unnecessary step or an argument that lacks merit; or (iii) failing, without reasonable justification, to accept a legal argument; or (iv) failing, without reasonable justification, to accept an offer to settle or dispose of the appeal; or (c) the appeal concerned a matter of public interest and it was reasonably necessary for the party claiming costs to bring the appeal or participate in the appeal in the interests of the public or a section of the public; or (d) some other reason exists which justifies the Court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious. ....[71] We are satisfied that this is a case in which Mr Ma, Ms Zhang and Linda have "contributed unnecessarily to the time and expense of the appeal" by failing to comply with directions of the Court, and pursuing arguments that lacked merit.39 By way of example, the appellants' submissions were filed and served very late, with no application for an extension of time being made beforehand. The lateness of the submission meant that counsel for Ming Shan, in order to retain the hearing date, was required to prepare, file and serve two sets of submissions, one in anticipation of what the appellants might say and one responding specifically, very close to the hearing date. In short, Ming Shan was put to additional cost and was deprived of an opportunity to file succinct and focussed submissions in response to those of the appellants, on the specific appeal points being pursued. In our view, the appellants have acted unreasonably in the conduct of their appeal and that should be reflected by an award of increased costs.4039 Court of Appeal Civil Rules 2005 r 53E(2)(b).40 See Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) and Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [27].[72] In our view, costs should be awarded on a Band A basis for a standard appeal, with an uplift of 50 per cent. In addition, usual disbursements are awarded.Result[73] While Mr Ma, Ms Zhang and Linda have failed to persuade us that summary judgment ought not to have been granted, we consider it is necessary to set aside the orders made by Associate Judge Robinson and to substitute orders that will more appropriately identify the relief granted. The appeal will be dismissed, with the orders made by Associate Judge Robinson 41 being set aside and replaced with the following: a) A declaration that the property at 15 Claremont Way, Howick is held by Linda and Ms Zhang on trust for Ming Shan. b) An order requiring Linda and Ms Zhang to transfer the property at 15 Claremont Way, Howick to Ming Shan, subject to the existing mortgage in favour of the Bank of New Zealand. c) Leave is reserved for Ming Shan to apply to the High Court to seek any further order or direction that may be required to give effect to these orders. [74] Costs on the appeal are awarded in favour of Ming Shan against Mr Ma, Ms Zhang and Linda, on a joint and several basis. Those costs are fixed at a Band A basis for a standard appeal, with an uplift of 50 per cent, plus usual disbursements.Solicitors: Boon B Toh, Auckland for Appellants41 See [6] and footnote 3 above.