Chinese property investor Zhong Li was duped by business associate York Yu who fraudulently used Li’s power of attorney to steal four properties from him. With Yu bankrupt, Mr Li sued in the High Court to chase down available assets, recovering a Whangarei property and getting a court order for $658,100 owed by a Yu-controlled company.
In 2005, Mr Li deposited one million dollars with a New Zealand bank in what was initially an unsuccessful bid to qualify for a visa. He left the funds in New Zealand, later signing a co-operation agreement with Mr Yu for development of residential apartments in Schnapper Rock Road on Auckland’s North Shore. Mr Li was promised a $400,000 return on his investment plus a share of development profits. He signed a power of attorney in favour of Mr Yu, allowing him to get on with the job during Mr Li’s absence back in China. The High Court was told Mr Yu dishonestly used the power of attorney to borrow against the development in Mr Li’s name, with funds going to a company controlled by Mr Yu’s wife. Also without Mr Li’s knowledge, Mr Yu used Mr Li’s money to buy a property in Tauroa Street, Whangarei. Concerned about Mr Yu’s failure to disclose details of their joint investment, Mr Li revoked the power of attorney. He alleged Mr Yu later used the revoked power of attorney to transfer three Schnapper Rock apartments and Tauroa Street to a company called Harv Properties Ltd and had Mr Li’s name dishonestly added as an additional ‘covenantor’ to a Harv Properties’ guarantee. Around this time, Mr Yu transferred his shares in Harv Properties to his personal assistant Ke Cheng. She signed an acknowledgement of trust, stating she held the company on Mr Yu’s behalf and would act according to his instructions.
Justice van Bohemen ordered Tauroa Street be re-registered in Mr Li’s name. Harv Properties became registered owner by fraud. Ownership had to be surrendered. Ownership of the three Schnapper Rock apartments could not be recovered. In the interim, Harv Properties had on-sold the apartments to purchasers acting in good faith with no knowledge of the prior fraud. Title to land cannot be impeached against buyers acting in good faith. Harv Properties was ordered to pay $658,100 damages; Mr Li’s equity in the three apartments at the date sold. Harv Properties did not defend the case. Companies Office records show it is about to be struck off for failing to file an annual return.
Li v. Yu – High Court (11.12.18)
19.021