Learning that fellow investor Annie Shiu had fraudulently claimed real estate commissions were levied on their joint venture purchases, Robert Luo and Ang Yip upped the ante claiming this dishonesty extended to her failure to include them in a neighbouring development. There was no evidence they were to share, the Court of Appeal ruled, reversing a High Court order that Ms Shiu pay $2.6 million damages.
Ms Shiu, also known as Annie Chen, started in 2016 assiduously buying up undeveloped land at Pokeno on Auckland City’s southern boundary with plans for residential subdivision.
She entered into separate joint venture agreements with different individuals for the purchase of contiguous blocks of land, having these individuals stump up cash for the various purchase prices in return for interest payable on the risk capital advanced and a promised share in profits on subdivision. Mr Luo and Ms Yip were attracted to these proposals. Unknown to each other, they separately entered into joint venture arrangements with Ms Shiu to buy land at separate addresses on Henslee Road.
Ms Shiu lied to both of them, taking several hundred thousand dollars from funds advanced as supposed reimbursement of real estate commissions paid. No commission had been charged. Their complaint to the Serious Fraud Office in late 2018 led to Ms Shiu’s conviction for obtaining money by deception. She repaid the money stolen.
Subsequently, Mr Luo and Ms Yip sued alleging they had been cut out of potential profits from Ms Shiu’s overarching subdivision plans.
The Court of Appeal was told Ms Shiu had paid extravagantly to assemble a portfolio of undeveloped land, all contiguous but yet to receive subdivision consent. Some purchases were funded with family money, others by joint venture investors such as Mr Luo and Ms Yip. All were aware it was a long-term project, risky in that subdivision consent might not be granted.
In the High Court, Mr Luo was awarded $1.04 million damages; Ms Yip’s investment company $1.6 million: damages for their potential share in expected development profits. The trial judge ruled Ms Shiu misrepresented that the two would share in overall development profits.
The Court of Appeal said there was no proof of a promise to pool profits.
There was no third party evidence of Ms Shiu making such promises. Mr Luo’s and Ms Yip’s extensive joint venture documentation made no mention of pooling profits from the whole development, only profit shares on development of the single purchase each had separately funded. It was not plausible, the court said, that Mr Luo and Ms Yip would have entertained a pooling arrangement having them share risk with others over whom they had no control, particularly without detailed written documentation.
There was no causal link between Ms Shiu’s lack of honesty in lying about commission payments and any suggestion she had lied about pooling profits, the Court of Appeal ruled. This single lack of honesty was not reflected in terms of the joint venture relationships actually entered into.
The court indicated Mr Luo and Ms Yip had assumed they were intended to share in overall project profits only after a local real estate agent highlighted Ms Shiu’s foresight in combining adjacent properties to her economic advantage. This real estate agent had no knowledge of any conversations Ms Shiu may have had with her fellow investors.
The fact that it was two years after court action was underway before Mr Luo first raised the question of pooling profits, further raised doubts whether any such promise had been made, the court said.
Shiu v. Luo & Yip – Court of Appeal (7.03.24)
24.071