Zhong v Ong [2016] NZHC 1142 (30 May 2016)

High Court of New Zealand

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Zhong v Ong [2016] NZHC 1142 (30 May 2016)

Last Updated: 5 August 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-002996 [2016] NZHC 1142

BETWEEN	TING LONG ZHONG Plaintiff
AND	MICHAEL ONG First Defendant STANLEY SHING LOO Second Defendant

Hearing:	26 May 2016
Appearances:	Ms Manuson for Plaintiff No appearance for First Defendant D K Wilson for Second Defendant
Judgment:	30 May 2016

_{JUDGMENT OF COURTNEY J}

This judgment was delivered by Justice Courtney on 30 May 2016 at 3.00 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

_{Date..............................}

ZHONG v ONG & OR [2016] NZHC 1142 [30 May 2016]

Introduction

[1] This claim concerns three properties that the plaintiff, Mr Zhong, claims to have put money into as part of a joint venture between him and the first defendant, Mr Ong. Mr Zhong alleges that contrary to the terms of the joint ventures, Mr Ong either misappropriated Mr Zhong’s money or failed to account for it. Mr Ong took no steps to defend the proceedings and it came before me for formal proof.

[2] Mr Ong, however, is now bankrupt. This proceeding commenced in 2014 and Mr Ong’s was adjudicated bankrupt (on his own application) on 17 September

2015. Ms Manuson, for Mr Zhong, sought leave under s 76(2) of the Insolvency Act 2006 to continue the proceeding, tendering a letter from the Official Assignee confirming that he has no objection to the proceedings continuing. I accordingly grant leave for the proceedings to continue.

[3] The second defendant, Mr Loo, has taken steps to defend the proceedings. The matter will proceed to trial against him. He is only involved in the first cause of action and was represented at the formal proof hearing because any finding made could affect his defence.

23 Godley Lane

[4] On Mr Zhong’s account Mr Ong proposed that the two of them purchase this property at 23 Godley Lane, Lucas Heights jointly. The purchase price was $1.2m. Mr Zhong was to contribute 20 per cent of the purchase price ($120,000) and Mr Ong arrange for the remaining 80 per cent. Mr Zhong asserts that the terms of the joint venture were later amended so that he and Mr Ong would own the property equally with Mr Zhong contributing $360,000 in cash and borrowing the remainder.

[5] However, contrary to Mr Zhong’s understanding of the joint venture, the property was ultimately purchased in the names of him and Mr Loo (not Mr Ong). Mr Zhong and Mr Loo were registered as tenants in common. Although Mr Zhong denies any knowledge of Mr Loo being party to the joint venture there is in existence a nomination agreement dated 16 April 2007 between the original purchaser named

on the sale and purchase agreement for the property and Mr Loo and Mr Zhong named as nominees.

[6] Ms Manuson did not seek any relief in respect of this cause of action but, instead, factual findings that would assist in her client’s claim against Mr Loo. Mr Wilson, for Mr Loo, resisted any factual findings being made because of the risk that Mr Loo’s position at trial would be adversely affected.

[7] Mr Loo should have the benefit of being heard in the context of a trial and able to cross-examine Mr Zhong before any factual findings are made. Mr Wilson’s objection was entirely justified. Ms Manuson withdrew her application in relation to this cause of action.

320 Pine Valley Road, Dairy Flat

[8] In about August 2005 Mr Ong invited Mr Zhong to invest with him and others in 320 Pine Valley Road, Dairy Flat. Mr Ong and the other investors had already signed the sale and purchase agreement but could not raise all the finance required and so invited Mr Zhong to join. The other investors were Mr Boon Hear Sear, Mr Chwee Pin Tong and Mr Ong. It was proposed that these four would own the property in the following shares; Mr Zhong 30 per cent, Mr Boon Hear Sear 30 per cent, Mr Chwee Pin tong 20 per cent and Mr Ong 20 per cent.

[9] Mr Zhong purchased his share in his brother’s name using a power of attorney. His brother’s name is Teng Zhen Zhong. At Mr Ong’s suggestion the registered proprietors were limited to Teng Zhen Zhong and Mr Chwee Pin Tong. Mr Zhong paid a deposit of $147,500. Mr Sear made a contribution of the same amount. The balance was financed from a loan from the ASB. It was agreed that when the property was sold Mr Zhong and Mr Sear would be repaid their initial contributions and the balance of the sale proceeds distributed in accordance with the respective shares that had been agreed.

[10] The property was sold in June 2008. Mr Zhong does not know the exact purchase price but believes it was between $1.8m and $1.9m. After the ASB was repaid the balance of $834,625.46 were paid into a joint account held in the names of

the four investors. From this amount Mr Zhong should have received his initial contribution of $147,500 together with $161,887 being his share of the proceeds, a total of $309,387.62. However, before Mr Zhong could withdraw his share from the account Mr Ong did so, without his consent. There is a bank statement showing three cheques drawn on the account totalling $309,387.62 that Mr Zhong alleges were withdrawn by Mr Ong. He deposed that he confronted Mr Ong about the money and that, although Mr Ong would not tell him where the funds were, assured Mr Zhong that he would return the money. He has not done so.

[11] In these circumstances I am satisfied that Mr Ong misappropriated the sum of

$309,387.62 belonging to Mr Zhong and Mr Zhong is entitled to judgment against

Mr Ong in that amount.

Kahikatea Flat Road property

[12] Sometime in 2005 Mr Ong invited Mr Zhong and Mr Boon Hear Sear to invest in a property at 543 Kahikatea Flat Road. Mr Ong already owned the property and was offering to sell a 25 per cent share to each of Mr Sear and Mr Zhong for

$300,000 apiece. Mr Zhong paid for his contribution by way of cash of $260,000 and forgiveness of an unrelated loan of $40,000 that Mr Ong owed him. It was agreed that Mr Sear and Mr Zhong would be added as registered proprietors and when the property was sold later each would be entitled to 25 per cent of the sale proceeds. The property was already mortgaged and Mr Ong promised that he would apply the money to the existing mortgage and that this mortgage would be Mr Ong’s responsibility with the costs of the mortgage coming out of his share of any proceeds.

[13] Mr Ong did not register Mr Sear and Mr Zhong as part-owners of the property. Nor did he apply the money he received to the mortgage, but used it for other purposes. The property was eventually sold; Mr Zhong only discovered that it was for sale by seeing an advertisement for it on a property website in 2010. He does not know what the ultimate sale price was nor what the net proceeds were.

[14] Clearly Mr Zhong provided $260,000 cash and forgave a $40,000 debt as consideration for a 25 per cent share in the Kahikatea Flat Road property. Mr Ong

has failed to account for the cash and failed to use the cash and forgiven loan amount to obtain the 25 per cent share in the property. Mr Zhong is entitled to judgment for

$300,000.

Result

[15] There is to be judgment in favour of Mr Zhong against Mr Ong as follows: (a) In relation to the Pine Valley Road cause of action, for $309,387.62; (b) On the Kahikatea Flat Road cause of action $300,000;

(c) Interest on both sums from the date of judgment at the rate prescribed by the Judicature Act 1908.

[16] Mr Zhong is also entitled to costs on a 2B basis, together with reasonable disbursements.

[17] Mr Loo did not seek costs in relation to his appearance at the formal proof hearing and I make no order in that regard.

P Courtney J