Li v 110 Formosa (NZ) Ltd

JurisdictionNew Zealand
JudgeCooper J
Judgment Date16 October 2020
Neutral Citation[2020] NZCA 492
CourtCourt of Appeal
Docket NumberCA44/2019
Date16 October 2020
Between
Jun Li
Appellant
and
110 FORMOSA (NZ) LIMITED
First Respondent
Meng Wang
Second Respondent
Golden Beachlands Holdings Limited
Third Respondent
Jenny and Eamon Holdings Limited
Fourth Respondent
Arthur Loo and Fui Loong Chan, Trading as Loo & Koo Barristers, Solicitors, Notary Public
Fifth Respondent

[2020] NZCA 492

Court:

Cooper, Brown and Collins JJ

CA44/2019

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Commercial, Contract, Equity, Trusts — appeal against a High Court decision which dismissed the appellant's claims for a proprietary interest in a property on the basis of breach of fiduciary duty, and dishonest assistance and money had and received — the Court held that shares in the company formed to purchase the property were subject to a resulting trust in the appellant's favour — institutional constructive trust — Quistclose trust

Counsel:

N R Campbell QC for Appellant

D W Grove for First Respondent

J W A Johnson and W L Porter for Second Respondent

No appearance for Third, Fourth and Fifth Respondents

  • A The appeal is dismissed.

  • B The order at [267(a)] of the High Court judgment is quashed, and substituted with an order that Mr Wang holds that proportion of his shareholding in 110 Formosa which represents an original contribution of $4.8 million on constructive trust for Mr Li.

  • C The cross-appeal is dismissed.

  • D In the circumstances, we make no order as to costs between Mr Li and Mr Wang.

  • E 110 Formosa is entitled to costs in respect of both the appeal and the cross-appeal on a band A basis and usual disbursements. Those costs are to be paid one half by Mr Li and one half by Mr Wang.

JUDGMENT OF THE COURT
REASONS OF THE COURT

(Given by Cooper J)

Table of Contents

Para No

Introduction

[1]

The facts

[5]

The proceeding in the High Court

[54]

First cause of action

[55]

Second cause of action

[57]

Third cause of action

[62]

Fourth cause of action

[66]

Fifth cause of action

[68]

Sixth cause of action

[69]

Seventh cause of action

[70]

Eighth cause of action

[72]

Summary

[73]

The appeal

[77]

Breach of fiduciary duties and dishonest assistance

[81]

The argument for Mr Li

[81]

The argument for Mr Wang

[91]

The argument for 110 Formosa

[95]

Analysis

[97]

Resulting trust and proprietary remedy in respect of the Formosa property

[119]

Money had and received

[165]

Cross-appeal

[167]

Result

[182]

Introduction
1

This appeal arises out of a dispute between parties who had joined in arrangements for the purchase, subdivision and development of land in Beachlands, on which the Formosa golf course is located (the Formosa property). They decided it should be purchased by a company in which the shareholding would reflect the capital contributions made to fund the purchase and development.

2

In circumstances that we set out, the appellant, Jun Li, claimed that he provided $4.8 million towards the purchase of the land but received neither an interest in the property nor in the company that purchased it, that company being the first respondent, 110 Formosa (NZ) Ltd (110 Formosa). The second respondent, Meng (Eamon) Wang claimed in the High Court that the money Mr Li provided was not his, alleging that Mr Li had merely been a conduit for investment monies arranged by Mr Wang's mother, Yanqin Zhao. 1 But Mr Wang was unable to sustain those claims. At the hearing his counsel conceded that the evidence did not establish the allegations about the source of funds, but he claimed that Mr Li had not proved that the money in fact belonged to him. Fitzgerald J rejected that claim. 2 The issues concerning the ownership of the $4.8 million investment are the principal subject of Mr Wang's cross-appeal.

3

The Judge held that Mr Wang's use of the $4.8 million provided by Mr Li was in breach of a “Cooperation Agreement” to which Mr Li, Mr Wang and others were parties. 3 Further, as Mr Li deposited money but never received his commensurate interest in the company that eventually purchased the Formosa property, the Judge held that the shares which Mr Wang held in 110 Formosa representing Mr Li's contribution were subject to a resulting trust in favour of Mr Li. 4

4

Mr Li appeals against the Judge's rejection of claims for a proprietary interest in the Formosa property on the basis of breach of fiduciary duty by Mr Wang and the third respondent, Golden Beachlands Holdings Ltd (GBHL, a company formed to

purchase the Formosa property), and dishonest assistance by 110 Formosa. The fiduciary relationship is said to have arisen because Mr Wang became a Quistclose trustee on receipt of the $4.8 million, or alternatively because of the trust and confidence Mr Li was entitled to and did repose in Mr Wang. Mr Li also appeals against the Judge's rejection of a cause of action based on money had and received
The facts
5

Dingzhi (Jenny) Huang, described in evidence as a mortgage broker, assisted Mr Li and his mother Na Li to identify land for them to purchase in New Zealand and to arrange finance for that purpose. In June 2013, there was a meeting at the Formosa property to discuss other properties of possible interest in the Flat Bush area. During the meeting Ms Huang told Mr Li that the owners of the Formosa property were considering selling it.

6

Mr Li was interested in buying the Formosa property. He was employed as a sales manager at the time and could not afford to purchase the property himself, but gave evidence that his mother was also interested in purchasing the property and offered to lend him the money for that purpose, suggesting that he also try to find other investors.

7

Mrs Li had a prior business relationship with Weidong Jiang and thought he could be a potential co-investor. In September 2013, Mr Li, Mrs Li and Mr Jiang visited the Formosa property. They confirmed their interest in purchasing it. Mr Li then introduced Mr Jiang to Ms Huang. He also instructed Harrison Grierson (a multidisciplinary advisory and design consultancy firm) to provide subdivision advice. In February 2014, Harrison Grierson advised that, subject to obtaining the necessary resource consents, the Formosa property could be subdivided into about 40 separate lots.

8

In March 2014, Mr Li entered into an agreement to purchase the Formosa property. The agreement was conditional on finance. The finance condition was not met, and the vendors cancelled the agreement.

9

Independently, in April 2014, Mr Wang's mother, Mrs Zhao, was looking to purchase a commercial property in Auckland. She enlisted the services of a local real estate agent, Daniel Huang. When meeting with Mr Huang in a coffee shop at Bucklands Beach she was seen by and spoke with Jenny Huang, whom she had met before. It was Ms Huang who suggested that Mrs Zhao should purchase the Formosa property, which was being marketed for $36 million.

10

Mrs Zhao told Ms Huang that she did not have sufficient funds to purchase and develop the Formosa property. Ms Huang told Mrs Zhao that she knew another person who wished to purchase the property and suggested that they purchase it together. The other interested purchaser was Mr Jiang. Subsequently, Ms Huang introduced Mrs Zhao to Mr Jiang. Mrs Zhao said in evidence that Ms Huang had told her that Mr Jiang was very wealthy.

11

On 20 April 2014, Mr Wang, Mr Jiang and Ms Huang entered into an agreement which provided for the acquisition and ownership of the Formosa property in the respective shares of 30 per cent, 40 per cent and 30 per cent. It was agreed that Mr Wang and Ms Huang would enter into the agreement for sale and purchase, but Mr Wang would hold Mr Jiang's share on his behalf.

12

A second agreement was made in the form of a letter of undertaking dated 21 April 2014, in which Mr Jiang promised as follows:

It is hereby promised that, I, Weidong JIANG … on the basis of Madam Yanqin ZHAO's … need to arrange funds for the project of purchasing the Formosa Golf Resort in Auckland, New Zealand, will personally undertake to assist Madam Yanqin ZHAO in arranging RMB fifty million … of funds from China, to be remitted into a receiving account in Auckland, New Zealand specified by Madam Yanqin ZHAO, as investment funds for the project, which are definitely not to be diverted for any other purpose.

13

Against that background, an agreement for sale and purchase of the Formosa property was entered into on 23 April 2014 (the April Agreement). Mr Wang was shown as the purchaser, although Ms Huang's name was later added. The purchase price under the agreement was $36 million, with a $2 million deposit required to be paid on 30 April 2014. Settlement was to take place on 29 August 2014. Mr Wang and Ms Huang engaged a firm of solicitors, Loo & Koo, to act on the purchase. The $2 million deposit was paid by Mrs Zhao as required by the April Agreement. She delivered three separate cheques totalling that amount to Loo & Koo, who delivered them by courier to the vendors' solicitors, Forrest Harrison.

14

Mr Wang and Ms Huang engaged Deloitte to arrange for the formation of a company through which the Formosa property would be held, which was incorporated as Jenny and Eamon Holdings Ltd (JEHL).

15

Mrs Zhao gave evidence that Mr Jiang told her around the beginning of August 2014 that he would not be able to invest because he was having financial difficulties. According to Mrs Zhao, Mr Jiang told her that he knew of someone who might be interested in joining in the purchase of the Formosa property. This was Mrs Li. Mrs Zhao said she spoke with Mrs Li by telephone, and that the latter expressed interest and asked her to get in touch with Mr Li about the property. In August 2014, Mr Li and Mrs Zhao met. The Judge noted there was a dispute as to whether Mr Wang was also present at...

To continue reading

Request your trial
2 cases
  • TPD 2018 Ltd v Godfrey and Company Ltd
    • New Zealand
    • High Court
    • 9 March 2021
    ...(20th ed, Sweet & Maxwell, London, 2017) at [2–15]. 15 Partnership Law Act 2019, s 6 and sch 1, cl 1. 16 Li v 110 Formosa (NZ) Ltd [2020] NZCA 492 at 17 The claimed adjustment is for the period from 22 February 2011 to late April 2012 (the date of Mr Godfrey's heart attack). 18 As in Chirn......
  • Li v 110 Formosa (nz) Limited
    • New Zealand
    • Court of Appeal
    • 16 October 2020
    ...COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA CA44/2019 [2020] NZCA 492 BETWEEN JUN LI Appellant AND 110 FORMOSA (NZ) LIMITED First Respondent MENG WANG Second Respondent GOLDEN BEACHLANDS HOLDINGS LIMITED Third Respondent JENNY AND EAMON HOLDINGS LIMITED Fourth Respondent ARTHUR......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT