Monster Energy Company v TM Storage Place Pty Ltd
[2025] ATMO 173
•1 September 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-001103
[2025] NZHC 173
BETWEEN LINZHEN WU
Plaintiff
AND
JUN CHEN
First Defendant
YANG CAO
Second Defendant
Hearing: 12 February 2025 Appearances:
J Taylor for the Plaintiff
A V Shinkarenko for the Defendants
Judgment:
18 February 2025
JUDGMENT OF ASSOCIATE JUDGE COGSWELL
This judgment was delivered by me on 18 February 2025 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Bylatus Legal, Auckland Forest Harrison, Auckland
A Shinkarenko, Auckland
WU v CHEN [2025] NZHC 173 [18 February 2025]
Introduction
[1]The plaintiff seeks summary judgment against the first and second defendants.
[2]The first defendant opposes summary judgment.
[3] The second defendant has been served by substituted service. An affidavit of service of the proceedings on the second defendant has been filed. I am satisfied that service was affected on the second defendant in terms of the order for substituted service. The second defendant has taken no steps.
The claim
[4]The plaintiff’s claim is straightforward.
[5] The plaintiff seeks judgment for an advance (Advance) made to the first defendant which he has failed to repay. The terms of the Advance are set out in a deed of acknowledgement of debt (Deed) between the plaintiff, the first defendant and the first defendant’s wife.
[6]The relevant terms of the Deed are:
(a)the Advance was $1.5 million;
(b)the borrowers were the first named defendant and his wife, Ping Zhu;
(c)the repayment date was 7 June 2022;
(d)interest was payable at the rate of 25 per cent per annum; and
(e)the first defendant and his wife’s family home was offered as security for the Advance.
[7]The Advance was not repaid on the repayment date.
[8] The terms of the Deed were then varied by a deed of variation (Variation Deed). The Variation Deed is between the plaintiff, the first defendant and his wife and Cao Yang, the second defendant.
[9]The relevant terms of the Variation Deed are:
(a)the first defendant’s wife was released from liability as a borrower— clause 2.1.2;
(b)the first defendant and his wife’s family home was released as security for the advance;
(c)the second defendant became a joint obligor with the first defendant;
(d)the date for repayment of the Advance was extended to 7 June 2023;
(e)the applicable interest rate was changed to 15 per cent per annum from the date of the Variation Deed to the date of actual repayment; and
(f)the new borrower provided his shares in Binary Group Limited (Binary) and granted a right to purchase properties owned by Binary as security for the Advance.
[10] The first and second defendants did not repay the Advance on the new repayment date.
[11] Demand was made on both defendants to repay the Advance on 30 October 2023.
[12]Neither defendant has repaid the Advance.
Approach to summary judgment
[13] The Court may grant summary judgment under r 12.2 of the High Court Rules 2016 if the plaintiff satisfies the Court that the defendant has no defence to any cause of action in the statement of claim.
[14] That expression was examined in the Court of Appeal in Pemberton v Chappell, where the Court held:1
At the end of the day, r [12.2] requires that the plaintiff “satisfies the Court that a defendant has no real defence”. In this context the words “no defence” have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence…
[15] The Court is able to take a robust approach to conflicts of evidence, but in this case the plaintiff’s claim against the first defendant falls to be determined by reference to the contractual framework under which the Advance was made.
The Deed and the Variation Deed
[16] The plain wording of the Deed and the Variation Deed make it apparent that the first defendant was and remains liable to the plaintiff for repayment of the Advance.
[17] The parties turned their minds to who was being released under the Variation Deed and that was set out at cl 2.1.2 of the Variation Deed:
Ping Zhu is to be replaced by Cao Yang as a Borrower (“New Borrower”).
[18] The effect of the Variation Deed was simply to remove the first defendant’s wife as an obligor and add a new obligor, the second defendant. All parties agreed to that. Had the parties intended to release the first defendant from liability, they would have recorded that in the Variation Deed, as was done with Ping Zhu.
1 Pemberton v Chappell [1987] 1 NZLR 1 at 3.
[19] The intention of the parties is clear and is expressed in the Deed and the Variation Deed, with no ambiguity.
[20] There is no need to refer to surrounding circumstances or extraneous evidence in order to interpret the meaning of the Deed and the Variation Deed. They are clear on their face.
[21] Without more, therefore, the plaintiff is entitled to judgment against the first defendant.
The first defendant’s position
[22] The first defendant raises four grounds of opposition to the plaintiff’s application for summary judgment. They are:
(a)the Variation Deed released the first defendant from liability;
(b)the plaintiff’s conduct in the “Sunlight transaction” supports the submission that the first defendant was released under the Variation Deed;
(c)the existence of parallel proceedings brought by the plaintiff in China is an abuse of process which should result in this Court staying the current proceeding; and
(d)the Variation Deed was a novation which released the first defendant from liability.
Did the Variation Deed release the first defendant?
[23] As set out above, on a plain reading of both documents, it is apparent that Variation Deed did not release the first defendant from liability. It did release the first defendant’s wife and their property from the security that had been granted to the plaintiff for the Advance.
[24] The first defendant’s submissions make several references to the first defendant’s subjective view as to what he understood or believed had occurred. It also makes reference to an argument that Mr Yang was in reality the “actual borrower”.
[25] The first defendant’s statements as to what he thought the Deed and the Variation Deed meant are not relevant.2 The Court does not need to seek assistance from extraneous documents or the parties’ subjective understanding in order to interpret what the documents mean.
[26] I also note that in a WeChat exchange on 29 June 2022 with the second defendant3, the exchange records:
Cao Yang: Boss please review. I added a variation to the original loan contract. I will become the borrower and you will be the guarantor…
Jun Chen: Ok thank you
[27] Although the Variation Deed does not record that, this exchange evidences the first defendant’s understanding that his liability for the Advance under the Variation Deed was to continue and was not being extinguished.
[28] The grant by the second defendant of security is evidence of nothing more than the plaintiff’s agreement to release the first defendant’s home from security and take security from him instead. This conduct is not consistent with the plaintiff releasing the first defendant from liability under the Deed. That liability continued. All that happened is that the first defendant became an unsecured creditor of the plaintiff. The plaintiff elected to take security from the new borrower.
[29] The first defendant’s submission that the second defendant was the “actual borrower” is also without merit. The first defendant signed the Deed as the borrower and the Advance was made to the first defendant.
[30] To the extent it is required, the later conduct of the plaintiff is consistent with her position that the first defendant had not been released.
2 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [68].
3 Affidavit of Jun Chen affirmed 14 July 2024, exhibit “D”
[31] Her lawyers’ demand letter was addressed to both the first and second defendants.
[32] It follows that the first defendant was not released from liability as a result of the Variation Deed.
What is the relevance of the “Sunlight” transaction?
[33] Following the failure of the first and second defendants to repay the Advance, the plaintiff and second defendant, through their respective companies, entered into a series of transactions under which the plaintiff ultimately became a mortgagee of properties owned by Binary. This is referred to as the “Sunlight transaction”.
[34]The Sunlight transaction had a number of steps, namely:
(a)The plaintiff, through her company, agreed to purchase the Binary properties for $3.16 million. This was thought to give the plaintiff sufficient equity in the properties to recoup the Advance.
(b)The plaintiff’s company and Binary entered into a side agreement under which the plaintiff’s company paid $2.8 million to Binary’s mortgagee, Sunlight Group Limited (Sunlight) The “side agreement” says that should OIA consent not be granted to the proposed purchase of property by the plaintiff’s company, then the sums advanced in relation to the “Sunlight” transaction would be added to the amounts already outstanding from the first and second defendants to the plaintiff. The first defendant was not a party to the side agreement and so cannot be bound by its terms.
(c)The plaintiff’s company also paid $100,000 as a deposit to purchase Binary’s properties.
(d)OIA consent for the purchase was not achieved and Binary declared the agreement at an end.
(e)The plaintiff’s company then sought to recover the $2.9 million from Sunlight to be told that it would not be returned as it had been paid to Sunlight on behalf of Binary in reduction of Sunlight’s mortgage and so Binary should repay it to the plaintiff’s company.
(f)In order to then acquire Sunlight’s mortgage over Binary’s properties, the plaintiff’s company paid an additional $352,000, which was the balance owing under Sunlight’s mortgage.
(g)The plaintiff’s company was then advised that its mortgage over Binary’s properties only secured that last payment of $352,000, not the full amount that the plaintiff’s company had paid to or on behalf of Binary of $3,152,000.
(h)The plaintiff then purchased Binary’s loan from Sunlight. The plaintiff became the mortgagee of Binary’s properties.
(i)The plaintiff’s company then appointed a receiver to Binary under a general security agreement to recover the secured debt of
$3,292,889.74.
(j)No recovery has been made. The plaintiff says that her security is valueless.
[35] Whilst it appears that the Sunlight transaction was an attempt to recoup the Advance from the second defendant, the position is that notwithstanding those attempts, no repayment has been made and the Advance remains outstanding.
[36] The mortgage over Binary’s property does not secure the debt owed by the first defendant. It secures a debt independent of the Advance, namely the $3,292,889.74. That is a separate transaction. The plaintiff has made no recovery, despite her attempts to recover the Advance from the second defendant.
[37] None of this conduct is consistent with the plaintiff having released the first defendant from liability under the Variation Deed.
The proceedings in China
[38] The plaintiff commenced proceedings against the first defendant in China to recover the Advance. The Chinese court has accepted jurisdiction for the claim and issued holding orders over a property owned by the first defendant.
[39] The first defendant submits that this is an abuse of process and that the Court should stay this proceeding pending the outcome of the parallel proceedings in China.
[40] The appropriate step to have taken in relation to the commencement of proceedings in China would have been a challenge to the jurisdiction of this Court to determine the plaintiff’s claim. No such challenge has been made. This Court has jurisdiction to determine this proceeding against the first defendant.
[41] Judgment on the plaintiff’s claim in this Court may give rise to an issue estoppel in the other proceedings, but that is not a matter that impacts on this Court’s ability to determine the plaintiff’s claim now.
[42] The plaintiff will not be entitled to a double recovery of the Advance. Currently, however, in the absence of any recovery, both the first and second defendants remain indebted to the plaintiff for the Advance.
Was there a novation?
[43] The first defendant submits that the Variation Deed novated the obligation between the plaintiff and the second defendant, which had the effect that he was released from liability to the plaintiff.
[44] Counsel for the defendants suggests that the Variation Deed is a novation. It is not.
[45] Novation acts to transfer rights and obligations under a contract from one obligor to another and to release the original obligor. This is not what occurred when the Variation Deed was entered into.
[46]Novation is described in Hela Pharma AB v Hela Pharma Australasia Ltd
citing Chitty on Contracts:4
There is no doubt that with the consent of both contracting parties all contracts of any kind may be transferred… Novation takes place where the two contracting parties agree that a third, who also agrees, shall stand in the relation of either of them to the other. There is a new contract and it is therefore essential that the consent of all parties shall be obtained; in this necessity for consent lies the most important difference between novation and assignment.
[47] The arrangement between the parties recorded in the Variation Deed is not the transferral of rights and obligations to a third party and the release of the original party. The first defendant is and remained liable under the terms of the Deed, which terms the parties to the Variation Deed specifically confirmed at [3.1] of the Variation Deed.
[48] All that occurred was that in addition to confirming the terms of the Deed (including the obligation contained in it to repay the Advance), a new obligor was added. This was not a novation.
The other matters
[49] The first defendant submitted that further evidence is required, including an examination of the second defendant’s solicitor’s file, to interpret the meaning and effect of the Deed and the Variation Deed. That is not accepted.
[50] The meaning of the documents are clear, without the need for extraneous evidence. What the parties thought the documents mean is not relevant.
[51] For completeness, the defendant also raised in his submissions, but did not advance at hearing, a claim of equitable set-off. There is no evidence at all of any claim that the first defendant may hold against the plaintiff. Accordingly that ground of opposition is rejected.
4 Hela Pharma AB v Hela Pharma Australasia Ltd CA165/03, 17 February 2005 at [56]; citing A.S. Burrows “Assignment” in H.G. Beale (ed) Chitty on Contracts (29th ed, Sweet & Maxwell, London, 2004) at [19–085].
Conclusion
[52] The first defendant was an obligor who entered into the Deed and remained an obligor when he entered into the Variation Deed.
[53] The plaintiff’s later attempts to recover amounts owing by attempting to enforce security granted to her by the new borrower, the second defendant, do not affect or release the first defendant from his obligation to repay the Advance to the plaintiff.
[54] The defences raised by the first defendant do not give the first defendant an arguable defence to the plaintiff’s claim, and it is appropriate for the Court to enter summary judgment against the first defendant on the plaintiff’s claim as set out in the statement of claim.
[55]Accordingly, as against the first defendant, there is:
(a)judgment in the amount of $1,500,000.
(b)interest at the contracted rate of 25 per cent per annum to 7 June 2022.
(c)interest at the contracted rate of 15 per cent per annum from 8 June 2022 to the date of judgment.
(d)costs.
[56] As against the second defendant, I am satisfied that the second defendant does not have an arguable defence to the claim. He became a primary obligor under the Variation Deed and has not repaid the Advance to the plaintiff on demand.
[57]There will be judgment against the second defendant as follows:
(a)judgment in the amount of $1,500,000.
(b)interest at the contracted rate of 25 per cent per annum to 7 June 2022.
(c)interest at the contracted rate of 15 per cent per annum from 8 June 2022 to the date of judgment.
(d)costs.
Costs
[58] The plaintiff is entitled to costs. If the parties are unable to agree they may file sequential memoranda of no more than five pages seeking costs, with the first defendant’s memorandum to be filed and served five working days after receipt of the plaintiff’s memorandum as to costs. Costs will be determined on the papers.
Associate Judge Cogswell
0
2
0