YANG v JIA [2023] NZHC 639

YANG v JIA [2023] NZHC 639 [28 March 2023]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2022-404-1623[2023] NZHC 639BETWEEN YULING YANGFirst PlaintiffSEN GAOSecond PlaintiffAND XINHONG (VICTOR) JIADefendantXINHONG (VICTOR) JIA, YANG LIU andZHANG TRUSTEE COMPANY2021 LIMITED, as trustees of the JIA ANDLIU FAMILY TRUSTThird PartyHearing: 16 March 2023Appearances: S Moore for PlaintiffB J Norling and W M Alexander for DefendantJudgment: 28 March 2023JUDGMENT OF ASSOCIATE JUDGE LESTER(summary judgment)This Judgment was delivered by me on 28 March 2023 at 2:30 pmPursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarDate: .[1] Yuling Yang (Jenny) and Sen Gao (Jason), the first and second plaintiffs, area couple. Jason met Xinhong (Victor) Jia (Victor) via a mutual friend, Alan Gao.Jenny, Jason and Victor undertook a six-story apartment building project.[2] In early 2019, Victor approached Jason seeking a loan to repay a debt owed toanother member of the Chinese Community. Jason was prepared to help. Theassistance was to take the form of a property being sold to Victor with paymentdeferred until Victor received a dividend from the apartment building project. Thetransfer of the property would give Victor an unencumbered asset against which hecould borrow to pay the debt he wanted to clear.[3] The transaction did not proceed as I have outlined. The contract of sale is clearthat the purchase price was to be left unpaid. What in fact happened was that Victorraised the $3 million purchase price by borrowing the money which he paid to Jennyon settlement.1 The next day, Jenny advanced $3 million to Victor which Victor usedto repay his personal debt and a short-term loan he obtained to put the purchase pricetogether. This left Victor with ownership of the property with a mortgage registeredto a bank and his personal debt repaid.[4] Jenny and Jason say the $3 million advanced to Victor was just that, an advancerepayable upon demand. They say it was orally agreed that interest at 10 per centwould be payable. Jenny and Jason say Victor told them he did not need vendorfinance for the property purchase as he had raised the purchase price from elsewhere.Victor says that while settlement of the property purchase did not proceed as providedfor in the contract, the substance of the transaction remained the same, that is, the$3 million returned to him was the vendor finance.[5] Jenny and Jason seek summary judgment in respect of what they say was anadvance repayable upon demand. There is no issue they have demanded payment.Victor says that despite the way the transaction actually took place, the substance ofhis agreement with Jenny and Jason was that he would not have to repay the purchaseprice of the property, returned to him the day after he paid for it, until the apartmentbuilding project bore fruit.1 Jenny was the registered proprietor of the property but she held it on behalf of Jason.How Jenny and Jason's application is to be approached[6] Not surprisingly, counsel agreed as to the principles that apply to assessing anapplication for summary judgment.[7] Mr Norling, counsel for Victor, emphasised that the onus was on Jenny andJason to demonstrate there was no defence and that the outstanding feature of summaryjudgment is the onus is on the plaintiff to establish there is no defence.2 Somers Jdescribed it as the outstanding feature of the summary judgment regime as it requiresthe plaintiff to establish a negative. The plaintiff has to demonstrate there is really nodefence to the claim. The object of summary judgment is to put an end to the spectacleof a worthless defence being raised and pursued for the purposes of delay.[8] Mr Norling also referred to the well-known passage from Eng MeeYong v Letchumanan:3Although in the normal way it is not appropriate for a judge to resolve conflictsof evidence on affidavit, this does not mean that he is bound to acceptuncritically, as raising a dispute of fact which calls for further investigation,every statement in an affidavit however equivocal, lacking in precision,inconsistent with disputed contemporary documents or other statements by thesame deponent, or inherently probably in itself it may be.[9] As its most basic, Mr Norling's submission is that Jason and Jenny sue on anoral advance and the terms of that advance are disputed by Victor in his swornevidence. That dispute cannot be resolved in a summary judgment context andtherefore summary judgment is not appropriate.[10] Mr Moore, counsel for Jenny and Jason, submitted there was no real credibledispute of fact in this case as the contemporaneous documents support Jenny andJason's position.The property sale in more detail[11] The property in question is at Oban Road, Auckland (the property). Theagreement for sale and purchase is dated 8 May 2019 and is on the ADLS form2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3..3 Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341.(the contract). Jenny is the vendor and Victor is the purchaser. The sale price was$3 million and the settlement date was 21 May 2019. The contract provides for thepurchase price to be paid in cleared funds on the settlement date or in the mannerprescribed in the Further Terms of Sale. The key Further Term of Sale is cl 20, whichprovides:The parties agree that the transfer of title is to take place on 21 May 2019. Thesettlement funds will not be payable until at such time that the Victor Projectby Brownsbay Seaview Limited has been completed and the shareholderdividends are payable and paid to the shareholders.[12] Victor nominated his family trust, the Jia and Liu Family Trust (the Trust), thethird party, to settle. It seems clear that the parties agreed to defer settlement until25 June 2019. The solicitors acting for Jenny produced a settlement statement as atthat date addressed to Victor, care of his solicitors. The settlement statement calculatedthe amount at $3,000,065.84 which includes a rates apportionment.[13] Victor raised the $3 million by way of an advance from Westpac Bank(Westpac) for $1.5 million and a short-term advance of $1.45 million from a companycalled "Browns Bay Seaview Limited", of which Victor is the sole director. Jennyis an ultimate shareholder of 50 per cent of Browns Bay Seaview Ltd (BBSL). BBSLis involved in the apartment building project referred to in cl 20 above.[14] Accordingly, Victor borrowed all the funds paid on settlement. On26 June 2019, the day after settlement, Jenny paid to Victor $3 million. From thosefunds, Victor paid the debt to the third party as he had planned and he paid the$1.45 million back to BBSL. From Victor's point of view, the money that came fromWestpac was used to repay his personal debt. Victor considers that given the purchaseprice for the property was returned to him, cl 20 of the contract means the advance ofthe purchase price is not repayable on demand. In effect, the vendor finance was, onVictor's case, by way of what in the past would have been achieved by way of a chequeswap rather than the purchase price left owing as contemplated by cl 20.The plaintiffs' case[15] Jenny and Jason plead that the purchase price for the property was intended tobe funded by a loan advance by Jenny to Victor for $3 million. That is not what isprovided for by cl 20 of the contract. Clause 20 does not create an advance; it isa deferral of the obligation to pay the purchase price. It is the difference betweengranting time to pay as opposed to an advance. The statement of claim refers to theloan of the purchase price to permit settlement as the "intended advance".[16] Jenny and Jason plead that the intended advance was no longer required byVictor because he had raised alternative finance. However, Jenny and Jason pleadthat:8. The payment for the sale of Oban Road is yet to be finalised, pendingthe terms of the settlement of shareholders' dividends pursuant to thedevelopment [referred to in cl 20] [17] Jenny and Jason then plead under the heading "Loan to the Defendant" that:9. Whilst [Victor] received funding from Westpac Bank, he was awarethe [$3 million] was available. [Victor] made a subsequent request toborrow the [$3 million] in order to repay the Debts.[18] The pleading in para 9 of the statement of claim gives the impression that Jennyhad $3 million available to advance to Victor to fund his purchase of the property.There is no evidence of that. The timing of the $3 million payment to Victor givesthe strong impression that Jenny sourced the $3 million to advance to Victor from theamount he paid her the day before.[19] At some point and for unexplained reasons, settlement of the property was notcompleted pursuant to the deferred payment clause. Settlement occurred on25 June 2019 with cash being paid. Victor's evidence is:4.7 As per my understanding Jason, Jenny and Alan, on 19 June 2019,I transferred the sum of $1,470,000.00 from the bank account ofBBSL to my account to complete settlement. Alan and Jenny bothknew about this transaction. Further, I do believe that Alan or Jennywould have approved the transaction because Jason preferred that theydeal with transactions. However, I cannot be 100% certain andI would need to get the information from the bank to confirm, whichas at the date of this affidavit I have not been able to do. On the sameday, I transferred the sum of $20,000.00 back to BBSL. Attached atpages 055-057 of the Exhibit is a copy of my bank statements showingthese transactions.4.8 It was agreed between Jason, Jenny and I that the funds would beadvanced to Jenny on settlement and then returned to me for my useto repay both BBSL the funds advanced as explained above atparagraph 4.7 and to repay the Personal Loan owed to my friend.I was very grateful for this opportunity.[20] Mr Moore submitted that what occurred represented two discreet transactions;the first being Victor's settlement of the purchase of the property and the second beingthe advance. On Mr Moore's submission, settlement of the purchase drew a line underthe contract and its terms and in particular, cl 20 of the contract, on his submission,had no further life.[21] Mr Moore submitted that the 26 June 2019 advance was a standalonetransaction being an oral advance repayable upon demand. On Mr Moore'ssubmissions, there could be and was no cross-fertilisation between the two discreettransactions.[22] The issue for the Court is whether Jenny and Jason have demonstrated thatVictor does not have a defence to their view of the transactions as two unconnectedcontracts. I am satisfied that question is not suitable for summary judgment for thefollowing reasons:(a) Victor's evidence, as set out at [19] above, is not contradicted.(b) Victor's evidence is consistent with what the parties sought to achieveand what occurred. Victor had initially sought to withdraw some of hiscapital from BBSL to pay his debt but that was declined. BBSLagreeing to a short term (one week) advance to Victor to permit the cashswap to occur is consistent with it having been envisaged that thepurchase price would immediately come back to Victor so that BBSLcould be repaid.(c) It would not make commercial sense for Victor to substitute a deferredpayment option at zero interest for a loan at 10 per cent interest. Thatis all the more so when Victor's uncontradicted evidence is that thepurchase price of $3 million for the property was a significant premiumover its market value. Victor was prepared to pay over the odds becausehe was getting the property/money unsecured.(d) Victor did not want to buy the property; he wanted a loan. That thepurchase price would be advanced back to him is consistent withthe intent of the transaction.(e) Victor's case is also consistent with aspects of Jenny and Jason'spleadings and evidence.(i) Paragraph 6 of the statement of claim states:The purchase of Oban Road was intended to befunded by a loan advanced by the First Plaintiff to theDefendant in the amount of the Sum (the IntendedAdvance).(ii) A loan was envisaged by Jenny and Jason and that is whatoccurred when the purchase price was returned to Victor.Paragraph 8 of the statement of claim pleads:The payment for the sale of Oban Road is yet to befinalised, pending the terms of the settlement ofshareholders' dividends pursuant to the developmentreferred to above at [5].(emphasis added)(iii) Paragraph 8 is not consistent with the two transactions beingabsolutely separate. It could be said to be consistent with whatin fact occurred, that is repayment of the sale price returned toVictor "yet to be finalised".(iv) Jenny in her affidavit says:LoanProposed finance8. To help the Defendant, Sen agreed to sell30 Oban Road, Browns Bay, Auckland(Oban Road) to the Defendant for the sum of$3,000,000 (the Sum):(a) The purchase of Oban Road would befunded by a loan advanced by theFirst Plaintiff to the Defendant in theamount of the Sum (the ProposedFinance). The basis of the IntendedAdvance was not recorded in writingwhich is common in our culture.(v) The next sub-paragraph (b) refers to further term of sale 20 andso her own evidence mixes the idea of a loan advance and thedeferred settlement. Further, in her affidavit at para 10 Jennysays:10. The Defendant ended up obtaining alternative financefrom Westpac Bank secured against Oban Road (theWestpac Funding) prior to settlement under the S&P.The Intended Advance to complete the sale was nolonger required by the Defendant for that purpose.However, the terms of the S&P, including cl 20,remained active. This meant the Defendant would notneed to apply the Westpac Funding to the Purchaseuntil the completion of the Victor Project.(emphasis added)(vi) Parts of para 10 of Jenny's affidavit, in particular the lastsentence, I find hard to understand. The paragraph is under theheading "Alternative finance". How cl 20 remained "active"when, on Jenny and Victor's case, the terms of the 8 May 2019contract ceased to have any ongoing effect following is notexplained.[23] Mr Moore suggested care was needed with this evidence given it wasa translation from the original. As Mr Norling submitted, this submission does nothelp Jenny and Jason when the onus is on them to show there is no defence. Theevidence and pleading record that a loan was intended but with cl 20 of the contract toremain "active". The tenor of this evidence and the pleadings is against the submissionnow advanced that there were two separate standalone and discrete contracts; theagreement for sale and purchase and an advance.[24] The reality is that a plaintiff seeking summary judgment in respect of an oraladvance, when the terms of that advance are disputed, faces an uphill battle. This isnot a case where Victor's evidence, set out at [19] above, is inconsistent with thecontemporary documents or is implausible. The substance of Victor's defence was putto Jenny and Jason when repayment was demanded; it is not a recent invention.[25] The reality is that Jenny and Jason's evidence is skeletal and, as I have said, itproceeds on the basis that the original nature of Victor's purchase involved an advanceof the purchase price. Why the transaction did not proceed in accordance with cl 20of the contract is not really explained. In order to give effect to the underlying purposeof the transaction, that is, to get funds to Victor in order for him to pay a third party,there always had to be cash going to Victor in some way. Again, Victor did not wantto buy the property, the purchase of the property was a means for him to raise cash.As Victor's capital was tied up in BBSL he sought to raise money from his then friends,Jenny and Jason, on the basis that they would be paid when the BBSL project borefruit. As Jenny and Jason were familiar with the BBSL project, they were prepared toassist Victor. However, on the case Jenny and Jason now present, Victor agreed to anadvance that could be called up at any time when the essence of cl 20 was that thepurchase price of the property would not be repayable until the dividends fromthe BBSL project came through. The proposition now advanced by Jenny and Jasonis contrary to the entire rationale for the transaction and commercial common sense.[26] Jenny and Jason's application for summary judgment is dismissed.Costs[27] Costs are reserved.Observation[28] I make a brief observation in respect of one defence raised by Victor. Whenthe purchase of the property was settled, Victor nominated his Family Trust tocomplete the purchase. The Trust, in a Deed of Nomination, provided an indemnityto Victor in respect of the transaction. Victor has suggested that he is no longerpersonally liable to Jenny and Jason because of the Deed of Nomination. The law isagainst that proposition.4It is clear, however, that the only way in which the burden of a contract canpass to a third party is by novation (Savvy Vineyards 3552 Ltd v KakaraEstate Ltd [2014] NZSC 121, [2015] 1 NZLR 281). Tipping J in GibbstonValley Estates Ltd v Owen (1999) 4 NZ ConvC 193,024, CA, at [32] didrecognise that by the terms of the assignment between the purchaser and thenominee the burden of the contract could be assigned as between those parties,but this does not affect the status of either of those parties as against thevendor. Only the purchaser remains a contracting party with the vendor andonly the purchaser owes the performance of the burden of the contract to thevendor._________________________________Associate Judge LesterSolicitors:Capstone Law, Parnell, Auckland (for Applicants)Copy to counsel:S Moore and G Credo, Barristers, Auckland (for Applicants)4 Don McMorland "Does a Nominee Have an Equitable Interest Which Will Support a Caveat"(2016) 17 BCB 285 at 287.