Du v Gu [2012] NZHC 1536 (26 June 2012)

Last Updated: 20 August 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2009-404-5577 [2012] NZHC 1536

BETWEEN XING HUA (DAVID) DU Plaintiff

AND MING GU Defendant

Hearing: 21 June 2012

Counsel: W Grove for the Plaintiff

G Blanchard for the Defendant

Judgment: 26 June 2012

_{RESERVED JUDGMENT OF ELLIS J}

This judgment was delivered by me on 26 June 2012 at 4.30 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors: Ross Holmes Lawyers, PO Box 33009, Takapuna

Butelaw, PO Box 35563, Auckland

Counsel: G P Blanchard, PO Box 1235, Auckland

DU V GU HC AK CIV-2009-404-5577 [26 June 2012]

[1] In an earlier judgment I upheld the validity of what was termed a “joint venture” agreement entered into between Mr Du and Madam Gu in relation to the development of a property owned by Madam Gu.[1] In essence that agreement provided that in return for Mr Du contributing 50 percent of the mortgage (including arrears) and 50 percent of development costs, a 50 per cent share in the property would be transferred to Mr Du in the event that he asked for a transfer to be effected, and that the parties would have 50 per cent ownership of the land and 50 per cent of the benefits and related risks of the development on the land. I declined to order

specific performance but said that Mr Du was entitled to damages for Madam Gu’s

breach of the agreement.

[2] On 16 November 2011, the Court of Appeal held that I was wrong in that finding because at the time the agreement was entered Mr Du remained engaged as a real estate agent to sell the property on behalf of Madam Gu.[2] Because he had not complied with s 62 of the Real Estate Agents Act 1976, Madam Gu was entitled to avoid the agreement under s 63 of that Act. That issue turned on whether reasonable notice of termination of the agency agreement had been given by Mr Du. The Court of Appeal held that 14 days notice was required whereas Mr Du had given only

11 days notice.

[3] Leave to appeal to the Supreme Court was sought by Mr Du, but denied.[3]

[4] It has always been agreed by Madam Gu that, in the event that Mr Du was not successful in his claim, he should receive back the money that he had paid pursuant to the (avoided) contract, even though there was no pleading to that effect. However for the reasons set out in my earlier judgment it was not possible at trial to determine the amount of those payments.

[5] For these reasons the Court of Appeal said:

Ms Gu has voided the agreement and Mr Du will need to make a new claim for repayment of the amounts he contributed to the property. He will need to

file an amended pleading to that effect or make a fresh claim. Mr Blanchard made it clear that Ms Gu did not dispute Mr Du’s right to restitution of the amounts he paid under the joint venture agreement and interest.

[6] The matter comes before me again because Mr Du has now filed an amended statement of claim. It not only seeks repayment of his contributions but contains three new causes of action, namely:

(a) A claim for relief under the Illegal Contracts Act; (b) A claim for “equitable restitution”; and

(c) A claim for promissory estoppel.

[7] The intended effect of these new causes of action is plainly to provide a platform from which the Court could give Mr Du not only his contributions back but also a proportionate share of any increase in value to the house that can be attributed to those contributions.

[8] Madam Gu objects to the amendment which, it is agreed, goes beyond what was contemplated by the Court of Appeal. It was quite properly also agreed that (given the stage of the proceedings) leave to amend in this way was therefore required in terms of r 1.9(2).

[9] Although I necessarily have some sympathy for Mr Du’s position, I have formed the view that leave to amend in the way now proposed should be denied, largely for the reasons advanced by Mr Blanchard. I attempt to summarise these (with my own interpolations) below.

[10] First, there is the importance of finality in litigation and the related principle that a plaintiff cannot attempt to relitigate matters that should properly have been raised in an earlier proceeding. In that respect Mr Blanchard referred me in particular to the rule in Henderson v Henderson as more recently explained by the

_{House of Lords in Johnson v Gore Wood & Co.}[4] _{New Zealand cases such as Neylon}

v Dickens involve scenarios that are somewhat more extreme than the present.[5] But the reality here is that, had I felt able to determine the amount paid by Mr Du to Madam Gu on the basis of the evidence before me at trial, there would have been no possibility of Mr Du expanding his claim in this way.

[11] Secondly, there is the closely related point that Mr Du could, and should, have pleaded these new matters after Madam Gu’s pleading had been amended to include a positive defence that the joint venture agreement had been voided under s 63 of the Real Estate Agents Act 1976, namely in July 2011.

[12] Although the defence based on ss 62 and 63 was pleaded only shortly before trial, Mr Du had had earlier notice of it as a result of the issue being raised by the Associate Judge at the judicial settlement conference on 31 May 2010. Moreover as Mr Blanchard pointed out, Mr Du’s counsel turned his mind to the need to replead because a limited attempt to amend the statement of claim in response to that

defence was in fact made at the commencement of the trial.[6]

[13] Thirdly, the legal merits of the new causes of action now sought to be pleaded count against the grant of leave. In particular:

(a) The Illegal Contracts Act claim seems to me to be most unlikely to succeed. Conceptually it is difficult to see how a contract that is merely voidable could be said to be illegal. Moreover there is a risk that permitting a pleading which might permit Mr Du to have the benefit of an agreement that was voidable under the REA for important policy reasons would cut across the policy of that Act and Madam Gu’s rights under it.

(b) The equitable claims seem far from clear-cut and Mr Blanchard made it clear that not only would they be contested on their merits but also

that there were good grounds for doing so.[7] Inevitably, therefore, permitting a new pleading of this kind would:

(i) cause still further costs to be incurred by the parties in what is a comparatively low value claim; and

(ii) raise the possibility of further appeals;

(c) From a factual perspective the claims would also require further evidence that went beyond the invoices and payments made. In particular, issues about the relevant valuation of the property in question at the time of the agreement and the extent to which any increase in value can be attributed to Mr Du’s contributions are unlikely to be straightforward, and would require the enlisting of expert assistance.

[14] Leave to amend beyond the scope of the Court of Appeal’s direction is

therefore denied.

[15] An amended claim (which I assume would constitute a pleading of a claim for moneys had and received) is to be filed within 10 working days. The matter can then be placed in the next Duty Judge list to determine timetabling and other matters. Counsel are to file memoranda outlining what steps are then required to bring this

_{matter to a resolution.}

_{Rebecca Ellis J}

---

[1] Du v Gu HC _{Auckland CIV-2009-404-5577, 7 December 2010.}

[2] Gu v Du [_{2011] NZCA 577.}

[3] Du v Gu [2012] NZSC 13.

[4] Henderson v Henderson [1843] EngR 917; (1843) 3 Hare 100; Johnson v Gore Wood & Co [2001] 1 All ER 481 (HL).

[5] _{Neylon v Dickens [1987] 1 NZLR 402 (CA).}

[6] That amendment was different from the new proposed pleading. Leave to amend was ultimately denied for reasons unrelated to the issues now before me.

[7] Even putting to one side the difficulties associated with the particular claims themselves, it is necessarily doubtful whether equity should permit Mr Du effectively to receive the full benefit of a contract that has, for very specific policy reasons, been held to be voidable.