|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of New Zealand Decisions |
Last Updated: 11 September 2019
|
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
|
|
CIV-2018-404-000848
[2019] NZHC 1859 |
|
UNDER
|
Part 32 of the High Court Rules
|
|
BETWEEN
|
MUSABAYOUFU FUATI
First Plaintiff/Applicant
|
|
AND
|
JUN JIN
Second Plaintiff/Applicant
|
|
AND
|
YUCHEN PENG
First Defendant/Respondent
|
|
AND
|
ZUORU JIN
Second Defendant/Respondent
|
|
Hearing:
|
27 February and 18 March 2019
|
|
Appearances:
|
N Scampion for Plaintiffs/Applicants D Zhang for
Defendants/Respondents
|
|
Judgment:
|
1 August 2019
|
JUDGMENT OF TOOGOOD J
This judgment was delivered by me on 1 August 2019 at 4.00 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
FUATI v JIN [2019] NZHC 1859 [1 August 2019]
Introduction
[1] The plaintiffs, Mr Musabayoufu Fuati and Mr Jun Jin, allege that the first defendant, Ms Yuchen Peng, borrowed a total of NZ$900,000 from them on the basis that she would repay that sum on or before 4 April 2018, together with interest at 18 per cent per annum. They say that Ms Peng repaid NZ$156,942.54 but the balance remains outstanding.
[2] Ms Peng does not admit the alleged debt. A second defendant, Zuoru Jin (referred to as Nick Jin), has been joined to the proceeding. He, too, denies he is liable to the plaintiffs. The matter goes to trial on 11 November 2019.
[3] This judgment reviews freezing orders made previously by this Court over the assets of Nick Jin.
Procedural background
[4] Wonder International Ltd (WIL) is a company of which Ms Peng is the sole director and shareholder.
[5] On 10 May 2018, Moore J made freezing orders in respect of Ms Peng’s and WIL’s assets and ordered ancillary disclosure by Ms Peng, WIL and four New Zealand banks to ascertain the existence, value, and whereabouts of assets falling within the scope of the freezing order. The banks complied with the disclosure order, but Ms Peng and WIL did not.
[6] The freezing order was due to expire on 20 June 2018 (having been extended twice). The plaintiffs applied for the continuation of the freezing order until further order of the Court. Courtney J granted that application on 17 August 2018.1
[7] The plaintiffs then sought freezing orders in relation to assets owned by Nick Jin. Broadly, this was on the basis that he was Ms Peng’s boyfriend and that she had transferred a total of $270,873.65 to him.
1 Fuati v Peng [2018] NZHC 2134.
[8] Lang J granted the orders on 23 October 2018. The Judge said:
[3] I am prepared to grant the application on a limited basis because I consider the applicants have established a good arguable case that Mr Jin may well be the recipient of monies transferred to him by Ms Peng. The freezing orders are not at this stage to extend beyond any bank account in Mr Jin’s name or in relation to which he may have signing authority. If the applicants acquire information suggesting that funds belonging to the applicants may have been channelled into other assets, they have leave to apply to extend the freezing orders to assets other than Mr Jin’s bank accounts.
[9] On 1 November 2018, Nick Jin filed an application opposing the renewal of the freezing order over his assets.
[10] On 9 November 2018, the parties agreed that the freezing order should continue pending a hearing for its review. On the same day Nick Jin was joined to the proceeding as a second defendant.
[11] Counsel appeared before me to argue the interlocutory application for the continuation of the freezing orders on 27 February 2019. I adjourned the application part-heard after receiving oral submissions; discovery was due to be completed in respect of the substantive proceeding by the end of the week. I was satisfied that the Court would be better informed if it allowed the parties an opportunity to reconsider the basis for the freezing orders, and whether they should be varied or set aside, in the light of any additional information provided by the discovery and inspection process.
[12] The application resumed on 18 March 2019 and I reserved my decision.
Relevant legal principles
[13] The Court’s power to make a freezing order is contained in r 32.2 of the High Court Rules 2016. There are three requirements:2
(a) the applicant must show that he or she has a good arguable case on their substantive claim;
(c) the applicant must show there is a real risk of dissipation.
[14] The Court of Appeal has stressed the importance of preserving the flexibility of the remedy and the need to consider the overall justice of the case, balancing the need to protect the applicant so as to ensure any judgment is not rendered nugatory against any prejudicial hardship to the respondent or third party.3
The application
[15] The plaintiffs allege that Nick Jin knew of the substantive claim against his girlfriend, Ms Peng, when Ms Peng transferred $270,873.65 to him between 28 March and 4 April 2018.
[16] On 5 April 2018, Nick Jin met the plaintiffs by chance on Queen Street. They made enquiries about the money owed to them by Ms Peng. He is said to have promised that the loan to Ms Peng would be repaid. Specifically he is recorded as saying:
We will definitely pay it back to you... within this week.
...
You really don’t have to worry about the money. I guarantee not a single cent will be retained.
[17] Further, the plaintiffs allege that, on 14 May 2018, Ms Peng transferred Nick Jin a further $200,000. This was on the day that Moore J’s freezing order was served on her.
[18] Finally, it is alleged that Ms Peng’s father transferred Nick Jin $64,480 on 30 July 2018.
[19] The plaintiffs say that Nick Jin received this money in the knowledge that it was owed to the plaintiffs. He provided no consideration for it and never had any entitlement to it. Further, they say, Nick Jin acknowledged to the plaintiffs that the money belonged to them. The plaintiffs say, therefore, that they have a good arguable case against Nick Jin for a claim of money had and received. In the alternative, they say he holds the money on trust for them and acknowledged as much on 5 April 2018.
[20] The plaintiffs say that Nick Jin’s bank accounts are clearly identifiable assets to which the freezing orders could attach. Their broad concerns in terms of dissipation is that Nick Jin will transfer the money that Ms Peng owes them to China, putting it beyond their reach.
[21] As for the overall justice of the case, they point out that, as trial is only a matter of months away, any prejudice suffered by Nick Jin will be short-lived.
Nick Jin’s defence
[22] Nick Jin advances a different narrative. He says the money received from Ms Peng actually came from his parents, to help him buy a house in Auckland. His parents advanced money to him through Ms Peng and WIL providing currency exchange services. The $200,000 sent through on 14 May 2018 is said to have been an urgent transfer in light of impending implementation of a government policy that would restrict foreign house-buyers. The $64,480 from Ms Peng’s father was said to be for tuition fees.
[23] Nick Jin denies having any knowledge of the loans between Ms Peng and the plaintiffs. His account of the interaction on 5 April 2018 is that he only made those assurances because he was intimidated by the plaintiffs, who made threatening remarks to him. Further, there was a discrepancy between the amount Nick Jin said had been repaid and the amount said by the plaintiffs to have been passed back to them. Nick Jin said that he and Ms Peng had already paid back $100,000. The actual amount is greater. It is argued that this demonstrates Nick Jin’s ignorance of the situation.
Do the plaintiffs have a good arguable case?
[24] I am not persuaded that the plaintiffs have a good arguable case against Nick Jin. Each of the plaintiffs’ claims against him appears to me to be factually flawed and misconstrued in law. What is, at best, a remote possibility of success is, in my view, fatal to the maintenance of the freezing order. I will go through each claim and explain the apparent deficiencies.
[25] An action for money had and received is a restitutionary remedy, which generally is “to correct normatively defective transfers of value, usually by restoring the parties to their pre-transfer positions”.4 The ‘defect’ on an action for money had and received is that “the money would not have been paid, but for a mistake of fact [which the payer] made”.5
[26] The action has long been recognised at common law. In the Court of Appeal’s decision in Thomas v Houston Corbett & Co, Turner J cited the following comments of Parke B in Kelly v Solari:6
I think that where money is paid to another under the influence of a mistake, that is, upon the supposition that a specific fact is true, which would entitle the other to the money, but which fact is untrue, and the money would not have been paid if it had been known to the payer that the fact was untrue, an action will lie to recover it back, and it is against conscience to retain it; though a demand may be necessary in those cases in which the party receiving may have been ignorant of the mistake.
[27] Turner J then put the nature of the cause of action succinctly, in these terms:7
All that appears to be laid down as necessary in this exposition of the cause of action is (1) the payment of money by A. to B.; (2) proof that the money would not have been paid, but for a mistake of fact which A. made.
6 At 166; Kelly v Solari [1841] EngR 1087; (1841) 9 M & W 54 (Exch of Pleas) at 58.
7 At 167.
[28] In Napier v Torbay Holdings Ltd,8 the Court of Appeal described three cases in which money had and received had arisen:
(a) Thomas v Houston Corbett & Co – where the plaintiff was held to have made a mistake of fact, leading it to make a payment of money to the defendant.
(b) Martin v Pont – where a principal entrusted money to an agent for a particular purpose and the agent did not carry out that purpose or misappropriated the funds.9
(c) Neate v Harding – where a person directly takes money from another’s home and misappropriates it.10
[29] Drawing together the threads of these cases, the Court concluded:
[21] ... The claim for money had and received is a personal claim, not a proprietary or in rem claim. It does not depend on proof of any wrongdoing or impropriety on the part of a recipient. It does not turn on the continued existence or retention of the money received...
[26] Like many restitutionary claims, this cause of action is about recovering money from a defendant who has received it from the plaintiff when there was no intention on the part of the owner of the money... to transfer it to the recipient. Alternatively, if such an intention could be construed, it was vitiated by [the defendant’s] wrongful actions. Money is the universal medium of exchange and while “money” can constitute notes and coins, it may also include a sum debited from the plaintiff’s account and debited to the defendant’s account.
...
[29] The ability to trace funds is important for a proprietary claim based on breach of trust where there is an ability to trace funds. In contrast, a claim based on money had and received is a personal action. It does not turn on the ability to trace funds.
(Citations omitted)
8 Napier v Torbay Holdings Ltd [2016] NZCA 608, [2017] NZAR 108 at [18]- [23].
9 Martin v Pont [1993] 3 NZLR 25 (CA) at 27.
10 Neate v Harding (1851) 6 EX 348.
[30] I have considered also the recent formulations of the cause of action by Dunningham J in Hansa Ltd (in liq) v Hibbs11 and by Fitzgerald J in Ellice v Stallard.12
[31] It is not difficult to spot a fatal difference between all of those cases and this: the plaintiffs did not pay any money to Nick Jin. The nub of the plaintiffs’ substantive case, put succinctly, is this:
Ms Peng had a loan from us. She repaid some of the loan. While she owed us the balance of the loan, she paid some money to Nick Jin. At that time, Nick Jin knew about the loan. Nick Jin now owes us that money.
[32] That is not a foundation for a claim of money had and received which, as the Court of Appeal said in Napier, is a personal action and not one that turns on the ability of a plaintiff to trace funds paid by mistake or allegedly misappropriated.13 In my view, that is sufficient to dispose of the plaintiffs’ first cause of action.
[33] Mr Scampion, who appeared for the plaintiffs, expressly disavowed any element of tracing in the plaintiffs’ claim against Nick Jin. Instead, he drew on the principles of unjust enrichment. In that, counsel referred to a recent decision of the United Kingdom Supreme Court, Investment Trust Companies v Revenue and Customs Commissioners, which described the elements of unjust enrichment.14 The questions to be asked, the Court agreed, are:15
(a) Has the defendant been benefited, in the sense of being enriched?
(b) Was the enrichment at the claimant’s expense?
(c) Was the enrichment unjust?
11 Hansa Ltd (in liq) v Hibbs [2018] NZHC 1036 at [41].
12 Ellice v Stallard [2019] NZHC 1739 at [26].
13 Napier v Torbay Holdings Ltd [2016] NZCA 608, [2017] NZAR 108 at [29].
15 At [24].
[34] As Fitzgerald J noted in Ellice v Stallard, unjust enrichment is not a recognised cause of action in its own right as the law in New Zealand stands at present.16 Responding to Mr Zhang’s reliance on that view, Mr Scampion sought to yoke the elements of unjust enrichment (as set out in Investment Trust Companies) to the action of money had and received, or otherwise use them to guide the Court in assessing whether that cause of action is made out. Assuming I am wrong in holding that the first cause of action is fundamentally misconceived, the focus would then shift somewhat to the connection between Nick Jin and Ms Peng, and whether Nick Jin’s receipt of funds from her could be held unjust or unconscionable from the point of view of the plaintiffs.
[35] Mr Scampion endeavoured to substantiate this approach by reference to the Court of Appeal’s comment in Napier that unjust enrichment may be seen as underpinning a claim for money had and received, but the Court immediately qualified that observation by saying there is no requirement of unjust enrichment in that cause of action.17
[36] I refer also to the recent decision in Li v 110 Formosa (NZ) Ltd.18 As to the recognition of unjust enrichment in New Zealand, Fitzgerald J said:19
- [26] A claim of “unjust enrichment” was pleaded as a free-standing cause of action. In his oral closing submissions, however, Mr Heaney did not press this cause of action to any real extent and his written closing submissions devoted scant attention to it.
[27] Mr Heaney was right not to press this cause of action separately to the other causes of action advanced. At least as the law in New Zealand presently stands, “unjust enrichment” is not a recognised cause of action.
(Citations omitted)
[37] The Judge noted Rod Milner Motors Ltd v Attorney-General,20 Villages of New Zealand (Pakuranga) Ltd v Ministry of Health21 and Real Cool Holdings Ltd v
16 At [62].
17 At [21].
18 Li v 110 Formosa (NZ) Ltd [2018] NZHC 3418.
20 Rod Milner Motors Ltd v Attorney-General [1992] 2 NZLR 568 (CA).
21 Villages of New Zealand (Pakuranga) Ltd v Ministry of Health (2006) 8 NZBLC 101,739 (HC).
Northpower Ltd as supporting her view. Later in the judgment, when Fitzgerald J considered a claim for money had and received,22 none of the elements of unjust enrichment filtered into the Judge’s analysis in any way.
[38] I do not accept Mr Scampion’s submission, therefore, that reliance on proof of the elements of unjust enrichment, as that cause of action is recognised in the United Kingdom, assists the plaintiffs’ claim that they have a claim against Nick Jin for money had and received. Nor am I prepared to assume that, after further investigation into the evidence prior to trial, Mr Scampion has any prospect of persuading the Court that reliance on unjust enrichment will enable the claim for money had and received to succeed. That is particularly so given the inherent uncertainty of the approach to be adopted in determining whether an enrichment was “at the expense of” the claimant, as discussed by Lord Reed in Investment Trust.23
[39] Given these findings, it is clear to me that the plaintiffs do not have an arguable case on their claim of money had and received. I now turn to address the pleaded breach of trust.
[40] In the alternative, Mr Scampion contended that Nick Jin made an express declaration of trust to the plaintiffs, when he encountered them, by giving them assurances that he would hold the unpaid ¥3 million on trust for them.
[41] The establishment of an express trust requires three certainties:24
(a) Certainty as to the intention of the person creating the trust.
(b) Certainty as to the subject-matter of the trust.
(c) Certainty as to the objects of the trust.
22 At [253]-[258].
23 At [37]-[45].
24 Thexton v Thexton [2001] 1 NZLR 237 (HC) at [48].
[42] A declaration of trust does not require a technical form of expression. It is a question of construction whether the words used, taking into account the surrounding circumstances, amount to a clear declaration of trust. What is needed is the manifestation of an intention to declare a trust.25 As for certainty of subject-matter, the property of a trust must be clearly ascertainable; it must also be in existence when the trust is declared.26
[43] Mr Scampion argued that the plaintiffs are able to establish the three certainties on the facts. Nick Jin’s intention to create a trust can be seen in his repeated assurances that he and Ms Peng, or he alone, would return the funds to the defendants. The certainty of subject-matter and objects is implicit in the conversation; the plaintiffs approached Nick Jin to demand the payment of a ¥3 million debt and Nick Jin assured them repayment would be made. The subject-matter, therefore, is the ¥3 million. The objects are the plaintiffs. Mr Scampion further points to the following comments in Napier:
[22] Although the primary cause of action was money had and received, it seems to us that it could have been breach of trust....
[44] However, Mr Zhang pointed out that Mr Scampion’s reliance on Napier is misguided because that case involved an established fiduciary relationship from which a trust could have arisen. I agree with him that Napier v Torbay Holdings Ltd is distinguishable from this case.
[45] Mr Zhang also submits that the evidence supporting the alleged establishment of an express trust is “extremely weak”. I agree the argument is highly speculative. The certainty of subject-matter is far from established. The plaintiffs did not know who had the funds at the time of the conversation: whether it was Ms Peng or Nick Jin. Moreover, my reading of the assurances is that they are open to the interpretation that Nick Jin was simply offering to see that the defendants were repaid the balance of the loan. There is nothing in the evidence to establish clearly that he was offering to do so out of his own pocket. There is certainly not enough evidence to demonstrate a clear intention to declare a trust in favour of the defendants. The context of the
25 Thexton v Thexton at [52].
26 Davis v White [2016] NZHC 1626, [2016] NZAR 985 at [70](b).
conversation is also relevant. This was a brief encounter on the street with somewhat hostile undertones. As Mr Zhang put it, confronted with such a situation, it is open to inference that Nick Jin was simply telling the plaintiffs what they wanted to hear.
[46] It follows that I am not satisfied the plaintiffs have shown, on the evidence before the Court, that they have a reasonably arguable case on the cause of action alleging a breach of trust.
The plaintiffs’ suspicions
[47] I accept that the transfer of $200,000 by Ms Peng to Nick Jin on 14 May 2018, the day she was served with a copy of the freezing order granted by Moore J, is highly suspicious. It may well be established that she divested herself of those funds to limit the ability of the plaintiffs to pursue her in execution of a judgment in their favour. But that is an insufficient foundation for either of the pleaded causes of action against Nick Jin.
[48] I acknowledge also that, as Mr Scampion said, further evidence may become available to the plaintiffs to undermine, if not disprove, the claims by Ms Peng and Nick Jin about the reasons for the transfers of funds out of Ms Peng’s bank account. But such speculation is an insufficient foundation for an order freezing funds in Nick Jin’s accounts pending trial and judgment. As Mr Scampion conceded, this is not a tracing case.
[49] In any event, in Napier v Torbay Holdings Ltd, the Court of Appeal observed that tracing is not a cause of action in its own right. It is the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can properly be regarded as representing his property.27
27 At [28], relying on Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 (HL) at 128.
Conclusion and result
[50] It follows that there is an insufficient foundation in law for the Court to maintain the freezing orders made previously by this Court without the benefit of full argument.
[51] I order that that the freezing orders over Nick Jin’s assets granted by Lang J on 23 October 2018 are set aside. I make clear that this order does not affect the freezing orders granted by Courtney J in respect of Ms Peng’s assets on 17 August 2018.
Costs
[52] The rules about payment of costs by one party to another are contained in Part 14 of the High Court Rules 2016. If costs are ordered in this case, they are to be calculated on a Category 2B basis. The general rule that the party that succeeds in a proceeding before the Court is entitled to costs applies.28 In this case, Nick Jin has succeeded.
[53] Any application for a costs order shall be way of a memorandum filed and served not later than Thursday, 15 August 2019. If the plaintiffs wish to oppose the application for costs, they shall file in the Court a memorandum setting out the grounds and serve a copy on the solicitors for Nick Jin not later than Thursday, 29 August 2019. Costs memoranda shall not exceed five pages in length. Unless the Court otherwise directs, costs shall be determined on the papers.
[54] As I will no longer be available to adjudicate on this matter by the time memoranda are received, any unresolved issues as to costs will be dealt with by another Judge.
................................
28 High Court Rules 2016, r 14.2(1)(a).
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZHC/2019/1859.html