B & Z Trades Company Limited v Bei

[2024] NZHC 2031

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-918

[2024] NZHC 2031

UNDER

Part 13 of the High Court Rules 2016

IN THE MATTER OF

An action for recovery of land

BETWEEN

B & Z TRADES COMPANY LIMITED

Plaintiff

AND

YONG SHENG BEI, YAN XIAN ZHONG and JORDAN BEI

Defendant

Hearing:	On the papers
Appearances:	E St John / S P Maloney for the Plaintiff M S P Pang for the First Named Defendant
Date of Judgment:	24 July 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

[Stay of Enforcement]

This judgment was delivered by me on 24 July 2024 at 2 pm Pursuant to r 11.5 of the High Court Rules.

…………………..

Registrar/Deputy Registrar

Solicitors:

Heritage Law, Auckland Integritas Law, Auckland

Counsel:
E St John

S P Maloney

B & Z TRADES COMPANY LTD v BEI [2024] NZHC 2031 [24 July 2024]

Introduction

[1]                On 6 June 2024, I granted summary judgment for the plaintiff, B & Z Trades Company Ltd (B & Z), requiring the defendants to provide vacant possession of the property at 59 Galway Street, Onehunga (the property), by 1 July 2024 (the judgment).1

[2]                On 20 June 2024, the first named defendant, Yong Sheng Bei (Yong Sheng) appealed the judgment to the Court of Appeal. Yong Sheng has applied for a stay of enforcement of the judgment pending determination of the appeal. Yong Sheng wishes to remain in the property until the appeal is determined.

[3]                On 1 July 2024, I ordered an interim stay of enforcement of the judgment pending final determination of Yong Sheng’s application for a stay in this judgment.

[4]                B & Z has owned the property since 2010. Yong Sheng and his wife have occupied the property since it was acquired by B & Z.

[5]                Yong Sheng’s son, Yao Ping Bei (Yao Ping) is a director and registered shareholder of B & Z. Yong Sheng says that he is a beneficial owner of shares in B & Z, and a shadow director. Yong Sheng claims that he should be the sole director and registered shareholder of B & Z, which he says is the corporate vehicle for a partnership between Yong Sheng and Yao Ping. Yao Ping denies that Yong Sheng has any interest in B & Z.

[6]                In October 2022, B & Z unsuccessfully applied to the Tenancy Tribunal for an order evicting Yong Sheng and his family. The parties now agree that the defendants are not tenants or lessees of the property.

The judgment

[7]In the judgment, I held that:

1      B & Z Trades Company Limited v Bei [2024] NZHC 1345.

(a)it is arguable that Yong Sheng contributed capital to B & Z, as the corporate vehicle for a joint venture or a partnership between Yong Sheng and Yao Ping;2 and

(b)Yong Sheng’s occupation of the property must have been pursuant to a bare licence to occupy granted by B & Z, whether acting for a joint venture or a partnership, or in its own right.3

[8]                Yong Sheng has commenced a substantive proceeding under the Partnership Law Act 2019, pleading that the partnership has been dissolved (the substantive proceeding). In the judgment, I held that if there was a joint venture it was terminated by the agreement of the parties, or alternatively, if there was a partnership it has been dissolved. In either case, the end of the joint venture or partnership was inconsistent with the continuation of any licence to occupy granted to Yong Sheng. Alternatively, if there was no joint venture or partnership, then B & Z was entitled to revoke the licence, which it did.4

Legal principles

[9]                The bringing of an appeal does not operate to stay the effect of any judgment being appealed. The general rule is that a successful party is entitled to enjoy the fruits of a judgment.

[10]            In deciding whether to grant a stay, the Court must balance the successful litigant’s rights to the fruits of the judgment and any need to preserve the unsuccessful litigant’s position should the appeal succeed.5 The relevant factors to consider are:6

(a)whether the appeal may be rendered nugatory by the lack of a stay;

(b)the bona fides of the applicant as to the prosecution of the appeal;

2 At [40].

3 At [43].

4      At [48]–[50].

5      Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 (CA) at 87.

6      Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11].

(c)whether the successful party will be injuriously affected by the stay;

(d)the effect on third parties;

(e)the novelty and importance of questions involved;

(f)the public interest in the proceeding;

(g)the overall balance of convenience; and

(h)the apparent strength of the appeal.

[11]            Rule 20.10(2)(c) of the High Court Rules 2016 provides the Court with a discretion to grant interim relief. The discretion is broad, and interim relief includes directions regarding what is to happen pending determination of an appeal.

Discussion

[12]            There are no novel or important questions involved in the appeal, and no public interest in the legal outcome. No third parties are affected by the outcome. I accept that Yong Sheng is bona fide in his prosecution of the appeal.

1. Whether a stay should be granted in this case requires a consideration of:

(a)the apparent strength of the appeal;

(b)whether the appeal may be rendered nugatory without a stay;

(c)the effect of a stay on the parties, and the balance of convenience.

The apparent strength of the appeal

[14]            Yong Sheng’s primary argument on appeal is that B & Z was unable to commence this proceeding or to take any steps to obtain possession of the property, because B & Z’s current directors were appointed by fraud.

[15]            Yong Sheng also challenges the finding that his licence to occupy, if there was one, was ended by the termination of any joint venture or partnership between Yong Sheng and Yao Ping.

[16]            Yong Sheng’s position is that he can withhold his consent to a termination of his   licence   to   occupy   the   property,   and   in   doing   so   effectively   stymie  B & Z and Yao Ping’s efforts to obtain vacant possession of the property for B & Z.

[17]            A licensor’s decision to revoke a licence can be communicated by doing an act inconsistent with the continuance of the licence. On Yong Sheng’s own case and evidence, his partnership with Yao Ping has been dissolved. I do not consider that it is strongly arguable that my finding that dissolution of the partnership terminated a bare licence to occupy was wrong. However, I accept that the Court of Appeal may take a different view of the legal consequences that result if Yao Ping was not validly appointed as a director of B & Z. I consider the merit of the appeal to be a neutral factor.

Whether the appeal may be rendered nugatory without a stay

[18]            In October 2022, Yong Sheng registered a caveat against the title to the property. B & Z, acting by its directors Yao Ping and Mr Wu, commenced the lapsing procedure under the Land Transfer Act 2017. Yong Sheng applied for an order sustaining his caveat (the caveat proceeding). The application was declined by Associate Judge Gardiner in a judgment dated 31 January 2024.7

[19]            Yong Sheng has appealed the judgment dated 31 January 2024, and that appeal is scheduled to be heard by the Court of Appeal on 7 October 2024. The judgment is stayed pending determination of the appeal. In the interim, the caveat remains registered against the title of the property, and B & Z is unable to sell the property.

[20]            If I decline to stay the judgment, it remains open to grant interim relief prohibiting B & Z from dealing with the property under the Land Transfer Act 2017, or granting a tenancy, until Yong Sheng’s appeal of the judgment in this proceeding is

7      Bei v B & Z Trades Co Ltd [2024] NZHC 20, (2024) 24 NZCPR 820.

determined  by  the  Court of Appeal.    That would enable Yong Sheng to resume possession if his appeal is successful, so the appeal would not be nugatory.

[21]            Therefore, the critical issue is determining where the balance of convenience lies in respect of possession in the interim.

The balance of convenience

[22]            The property comprises a residential dwelling at the front of the property, which is a villa style of dwelling. It appears to need immediate maintenance. The rear of the premises contained substantial commercial premises, until recently, when the commercial premises were destroyed by fire.

[23]            Yao Ping says that B & Z needs to undertake substantial reconstruction of the commercial premises, together with repairs and maintenance to the residential dwelling. The commercial premises included asbestos, and there is a dispute regarding the extent of remedial work required to remove asbestos contamination to the site and the residential dwelling (caused by dispersal of fire debris including asbestos).

[24]            There is insufficient evidence before the Court to determine the scope of the repair work that is needed, although some matters are obvious from the photographs supplied by both parties:

(a)the commercial premises were substantial, and reinstatement will involve a significant construction project;

(b)access to the commercial premises is gained down the side of the villa;

(c)the villa needs at least cosmetic repairs, and there may be asbestos residue on the site and on the outside of the dwelling.

[25]            If there was no joint venture or partnership between Yao Ping and Yong Sheng, then B & Z is undoubtedly entitled to possession of the property. B & Z has been endeavouring to gain possession of the property since 2022. B & Z wishes to complete the necessary remedial work immediately.

[26]            If there was a partnership or a joint venture, it has ended and the assets must be divided or sold. There is obvious prejudice to B & Z and Yao Ping if the remedial work required to the property is delayed.

[27]            As I discussed in the judgment,8 what is to happen with the property pending determination of the substantive proceeding would have been better dealt with by way of interim orders in the substantive proceeding. However, it is possible to strike a balance to protect B & Z’s interests and Yong Sheng’s interests by way of interim orders in this proceeding.

[28]            On 10 July 2024, I convened a telephone conference of counsel for the purpose of providing directions for the disposal of Yong Sheng’s application for a stay. During that conference, I outlined two possible scenarios for interim relief. In a subsequent minute dated 10 July 2024, I summarised what occurred during the conference:

[8]I outlined two possible scenarios that I am considering:

(a)granting a stay allowing the defendants to have possession of the property in the interim, but on terms including:

(i)regarding the use of the property in the interim;

(ii)regarding access for the plaintiff to the commercial part of the premises and the grounds, for remedial work;

(iii)requiring diligent prosecution of the appeal;

(b)if the stay is not granted, and B & Z has possession of the premises, then:

(i)prohibiting B & Z from selling or renting the property;

(ii)restricting any work that B & Z carries out on the residential dwelling to reinstatement and repair, and not altering the layout or configuration of that part of the property as a residential dwelling.

[9]        I suggested to Mr Pang that his client may wish to consider offering to pay rent if it is allowed back into possession, to be held on trust in the interim and to be released to the party that is successful on the appeal.

[10]      I made it clear to counsel that both of the above scenarios are currently in contemplation only, and other possible outcomes remain open.

[29]            I made directions for the filing of further written submissions. The parties complied with those directions.

8      B & Z Trades Company Limited v Bei, above n 1, at [52]–[61].

[30]            B & Z by its directors provided undertakings to the Court that it will not, pending determination of the appeal:

(a)rent or sell the property; or

(b)make changes to the layout or configuration of the dwelling.

[31]            Counsel for Yong Sheng proposed various interim orders if the defendants are entitled to possession pending determination of the appeal, including that:

(a)Yong Sheng would pay rent of $600 per week into a trust account, to be released to the successful party on the appeal, and

(b)a condition that Yong Sheng would not:

… prevent any re-construction of the industrial dwelling, so long as the construction works do not fetter the defendants’ access to and from the residential dwelling, and that the construction works will be performed in a professional and tradesperson-like matter in compliance with all laws, regulations, and by-laws…

[32]            I do not consider the latter proposed term to be practical. It is likely to give rise to further disputes between Yao Ping and Yong Sheng. It permits interference by Yong Sheng in the remedial work.

[33]            B & Z’s primary motivation at present is to complete the reinstatement and remedial work to the property, including any work related to asbestos contamination. The extent of this work and the breakdown of the relationship between Yao Ping and Yong Sheng weighs heavily in favour of allowing B & Z to have undisturbed possession of the property until the appeal is determined.

[34]            I accept that it will be inconvenient for Yong Sheng and his wife to vacate the property in the short term. However, Yong Sheng owns other residential properties. If his appeal is successful, he will be entitled to reoccupy the property. B & Z can be restrained from selling or renting the property until Yong Sheng’s appeal is determined.

[35]            Any inconvenience to Yong Sheng in the interim is outweighed by the potential prejudice to B & Z and Yao Ping if B & Z is frustrated in completing the remedial work.

Result and orders

[36]            The defendants shall provide vacant possession  of the property known  as   59 Galway Street, Onehunga by 4 pm on 16 August 2024.

[37]Pending determination of CA400/2024, the plaintiff shall not:

(a)dispose of the property at 59 Galway Street, Onehunga, Auckland (the property);

(b)grant a residential tenancy in respect of the property or otherwise grant any right of possession to any person;

(c)carry out any work to the residential dwelling on the property other than repair of damage or reinstatement following damage;

(d)make any changes to the layout or configuration of the residential dwelling on the property;

on the condition that the first named defendant pursues the appeal with diligence.

[38]            The first named defendant’s application for a stay of the judgment dated 6 June 2024 is otherwise dismissed.

[39]            Leave is reserved to the plaintiff to seek a variation or rescission of the orders in [37] if the first named defendant fails to comply with the condition in that order.

[40]            My preliminary view is that costs should lie where they fall. Although Yong Sheng has not obtained a stay, he has obtained interim orders in his favour. I consider this to be a case of relatively even mixed success.

[41]If the parties are unable to agree on costs on the application for a stay, then:

(a)the first named defendant may file and serve written submissions on costs, of no more than three pages by 2 August 2024;

(b)the plaintiff may file and serve written submissions on costs, of no more than three pages by 9 August 2024; and

(c)I will determine costs on the papers.

Associate Judge Brittain