Chinese investors disputing ownership of Auckland’s Formosa Golf Club were very guarded in the High Court when giving evidence both about their source of funds for the purchase and potential breaches of the Overseas Investment Act. The High Court ruled Jun Li, whose mother is a former governor at a branch of the Bank of China, is part-owner of Formosa. Fellow investor Meng Wang had tried to cut him out, saying Mr Li was only a conduit used to bring funds for purchase of Formosa into New Zealand for other investors.
Mr Li said he personally put $4.8 million into the 2014 purchase of Formosa; money borrowed from his mother, Na Li. Mr Wang said that money came from Wang family sources, co-ordinated by his mother, named as Mrs Zhou. Justice Fitzgerald commented neither Mr Li nor Mr Wang were the ‘main players’ in the golf club purchase. Rather, each were acting largely at the direction of their respective mothers.
The High Court was told of several false starts through 2014 as a consortium of Chinese investors looked to buy the Formosa Golf Club. It was intended to subdivide land around the golf course. A March 2014 agreement to buy at $38.9 million fell over; conditions as to finance were not satisfied. Mr Li was listed as one of the purchasers, as nominee for his mother. An April 2014 agreement to buy at $36 million, which did not include Mr Li as a purchaser, also collapsed. Mr Li was re-introduced to the consortium several months later following concerns some of the prospective investors might cause Overseas Investment Act complications. They had spent so much time outside New Zealand they might no longer satisfy residency requirements.
Evidence was given of Mr Li being offered a 32 per cent stake in the venture with profit shares and equity interests to be determined on the proportion each investor eventually put in. Purchase of Formosa was finally clinched in September 2014 at a price of $38 million; five million dollars upfront and the balance in instalments over the next twelve months. Cash totalling $4.8 million paid by Mr Li to Mr Wang’s lawyer at Mr Wang’s request was used to pay the deposit. Mr Li was to later discover he was not credited as a part-owner of Formosa and that Mr Wang claimed to ‘own’ the $4.8 million. Mr Wang’s mother said Mr Li was only added as an investor to cover any investigation by the Overseas Investment Office. It was claimed money was brought into New Zealand though Mr Li’s bank account to camouflage who was the actual investor, deflecting any Overseas Investment Act inquiry. Having to untangle over one month of evidence given in the High Court, Justice Fitzgerald said much of it was unsatisfactory on key issues, failing to comply with the Evidence Act and High Court rules.
Justice Fitzgerald said the evidentiary presumption is that the $4.8 million funded by Mr Li came from his own money, lent to him by his mother. Her Honour ruled that Mr Li was entitled to a choice of two remedies against Mr Wang: the return of his $4.8 million for breach of contract, or an equity stake in Formosa Golf Club based on his $4.8 million contribution to the purchase price. The High Court was told progress on golf club re-development has stalled, blocked by a caveat lodged against the title in 2015 to protect Mr Li’s claim for an equity interest in the property.
Jun Li v. 110 Formosa (NZ) Ltd – High Court (19.12.18)
19.029