The property deal did not go ahead, but lawyer Jesse Nguy still drew down $1.3 million bank finance supposedly to complete the purchase and then misappropriated the money. Despite never seeing the money, borrower New Dawn Holdings Ltd and guarantor Colin Chu were still liable to repay Westpac, the Court of Appeal ruled.
Liability for borrowings on the aborted Auckland property purchase turned on questions of agency law; who was bent lawyer Jesse Seang Ty Nguy acting for?
The court was told New Dawn Holdings committed to its purchase in late 2019. Paperwork for a Westpac home loan was signed, with approval given for $1.32 million mortgage finance; a thirty year secured loan. New Dawn and Mr Chu nominated as their lawyer Mr Nguy, a sole practitioner then operating out of Auckland’s central business district and trading as Jesse & Associates.
As is usual practice, Westpac sent instructions to the nominated lawyer to act as its agent in completing the paperwork, getting all legal documents signed and have the bank protected as first mortgagee with a mortgage registered against title to the property after settlement date.
Evidence was given that after receiving the lawyer’s signed certificates that all was ready to go, Westpac paid the loan finance into Mr Nguy trust account ready for settlement. Unbeknown to the Bank, the purchase never went ahead. The Bank continued to remain in the dark because interest was paid on the loan for some twelve months. When interest payments stopped, the Bank discovered its supposed secured home loan was an unsecured loan with the money misappropriated by Mr Nguy.
Westpac sued.
In High Court fast-track summary judgment proceedings, Mr Nguy was ordered to pay damages to Westpac. As agent for Westpac, he had failed to apply the mortgage funding as instructed.
The positions of borrower New Dawn Holdings and guarantor Mr Chu were less straightforward. New Dawn had never received any money. There was nothing to repay, they said.
The Court of Appeal ruled New Dawn as borrower and Mr Chu as guarantor were liable to make repayment to Westpac simply by terms of their Westpac loan contract. Any failure by Mr Nguy to pass on the money was a matter between Mr Nguy and them. Mr Nguy was acting as agent for New Dawn and Mr Chu at the time he misappropriated their money.
Mr Nguy was struck off the roll of solicitors in October 2021.
It came out in evidence that there was a close business relationship between Mr Chu and Mr Nguy at time of the aborted purchase.
While the loan application led Westpac to believe Mr Chu was sole shareholder of New Dawn Holdings, there was a side deal; Mr Chu held a 25 per cent stake only. He held 75 per cent of New Dawn’s shareholdings as trustee for Mr Nguy. The interest payments made to Westpac for just over a year were funded by both Mr Chu and Mr Nguy, the court was told.
Westpac v. New Dawn Holdings Ltd – Court of Appeal (14.02.24)
24.055