Chen v Auckland Weihao Investment Limited
[2020] NZHC 2564
•30 September 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1236
[2020] NZHC 2564
BETWEEN LIYUN CHEN
Plaintiff
AND
AUCKLAND WEIHAO INVESTMENT LIMITED
Defendant
Hearing: 30 September 2020 Appearances:
The Plaintiff in person
J Wickes for the Defendant
Judgment:
30 September 2020
JUDGMENT OF HINTON J
This judgment was delivered by me on 30 September 2020 at 4:30 pm pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Solicitors/Counsel:
Loo & Koo, Auckland Wotton Kearney, Auckland
Party:
The Plaintiff
CHEN v AUCKLAND WEIHAO INVESTMENT LIMITED [2020] NZHC 2564 [30 September 2020]
[1] This matter relates to a property at Flat Bush, Auckland. More particularly, it relates to an agreement for the sale and purchase of that property between the plaintiff, Ms Chen, as purchaser and the defendant Auckland Weihao Investment Ltd as vendor, and a related term loan agreement between the parties. Ms Chen claims that Weihao Investment breached the term loan agreement.
[2] Ms Chen makes two interlocutory applications. The first is for orders for particular discovery against the defendant and seven non-parties including the Chinese Consulate Office in Auckland. The second is an “application to set aside settlement notice”.
Background
[3] On 16 October 2019, the parties entered into a sale and purchase agreement in respect of a property at Flat Bush for the sum of $10.8 million, with settlement to occur on 15 June 2020. Ms Chen paid a ten per cent deposit, namely $1,080,000. The agreement was not conditional on finance. On 11 June 2020, the defendant vendor agreed to delay the settlement date by one week without penalty to the purchaser.
[4] It seems the plaintiff had already secured a first mortgage advance but needed more to settle. It seems also that funds expected from her family were not available due to COVID-19 restrictions on travel. On 22 June 2020, the defendant offered to provide the plaintiff with short-term vendor finance of $3,000,000 by way of a second mortgage over the Flat Bush property and other properties. The principal was to be repaid in one sum on 23 September 2020, three months from the date of drawdown, with interest of $75,000 to be capitalised and paid in advance on 24 June 2020.
[5] On 22 June 2020 the plaintiff accepted the offer of vendor finance and nominated a company, LC1521319 Development Co Ltd, as purchaser.1
[6] On 24 June 2020, the plaintiff’s solicitor forwarded to the defendant’s solicitor the term loan agreement signed by her and her nominated purchaser.
1 There is a question mark over who should then be pursuing the proceeding.
[7] At 11.41 am on 25 June 2020, the defendant’s solicitor advised the plaintiff’s solicitor that the defendant had signed and certified its transfer of the e-dealing of the property and given its undertakings to Ms Chen’s solicitor.
[8] On the afternoon of 25 June 2020, the plaintiff’s solicitor forwarded a deed of priority and subordination, apparently prepared by the solicitors for the first mortgagee, asking the defendant to sign the deed in its capacity as second mortgagee. This specified a priority amount of $30,000,000 in respect of the first mortgage and provided that the defendant could not enforce its security until the first mortgage was fully repaid. The defendant, by its solicitors, refused to accept the terms of the deed.
[9] During the course of 25 and 26 June 2020, the solicitors for the plaintiff, the defendant, and first mortgagee conferred, but the first mortgagee remained unwilling to allow the defendant the right to enforce its security until after the first mortgage was paid.
[10] On 26 June 2020, the defendant offered to defer settlement on terms, and the defendant and plaintiff corresponded, but no agreement was reached.
[11]On 1 July 2020, the defendant served the plaintiff with a settlement notice.
[12] On 19 July 2020, the plaintiff filed and served a statement of claim in which she claims the defendant wrongfully repudiated the loan agreement by failing to provide the vendor finance of $3 million. She seeks as relief a refund of the deposit, interest and general and exemplary damages.
[13] On 21 July 2020, the defendant’s solicitors wrote to the plaintiff’s solicitor, advising that the defendant was cancelling the sale and purchase agreement on the grounds the plaintiff had failed to settle in terms of the settlement notice dated 1 July 2020.
[14] For completeness I note that, meanwhile, on 26 June 2020, the plaintiff had registered a caveat against the title of the Flat Bush property on the strength of the sale and purchase agreement dated 16 October 2019. On 21 July 2020, the defendant
applied to the Registrar for the caveat to lapse. The plaintiff applied for an order that the caveat not lapse and on 18 September 2020, Gardiner AJ dismissed that application saying the plaintiff had no equitable interest in the property sufficient to support the caveat, either as purchaser under the sale and purchase agreement or on the basis of an equitable lien over the property in the amount of her deposit.2
Preliminary Issues
[15] The plaintiff and defendant both filed submissions as timetabled for this interlocutory hearing but on 28 September 2020 the plaintiff filed further submissions and an affidavit in reply to the defendant’s submissions dated 23 September 2020. These were not timetabled by Downs J in his Minute of 26 August 2020 setting the applications down for hearing.
[16] The plaintiff being a self-represented litigant, I consider it appropriate to afford her a measure of indulgence and have read these further documents. Her reply submissions do not in fact contain any new material, but instead literally reproduce the contents of her earlier submissions and also, oddly, the defendant’s submissions. Her affidavit relates to her application for particular discovery and therefore, for the reasons I come to next, contains matters entirely outside the scope of this proceeding.
[17] Secondly, the defendant in its notice of opposition to the plaintiff’s interlocutory applications, relies on affidavits filed in relation to its opposition to the plaintiff’s originating application that her caveat not lapse. That is a separate proceeding. Consequently, r 7.32 of the High Court Rules 2016 applies, such that these affidavits can be used only on disposal of the plaintiff’s present applications in this proceeding if prior notice of the defendant’s intention to rely on them has been given to the other party. That notice can be given in the notice of opposition itself,3 which is what has been done here. However, the defendant has not, as it ought to have, formally sought leave to rely on the affidavits tendered in that proceeding. Nonetheless, absent any possible prejudice to the plaintiff, I consider it appropriate to grant leave.
2 Chen v Auckland Weihao Investments Ltd [2020] NZHC 2450.
3 High Court Rules 2016, r 7.32.
The Present Applications
Applications for particular discovery
[18] As noted, the first interlocutory application by the plaintiff that I am required to determine is an application for particular discovery against the defendant and seven non-parties including the Chinese Consulate in Auckland. She seeks orders requiring each of these eight parties to file and serve an affidavit stating whether each has in its possession documents relevant to qualification of Nengyi Chen, sole director of the defendant, to be a director under s 10 of the Companies Act 1993. That section provides that a company must have at least one New Zealand resident director. It seems by the discovery sought the plaintiff is hoping to establish that Nengyi Chen is not a New Zealand resident.
[19] The plaintiff says she is also seeking discovery to see if she can establish a breach by the defendant of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
[20] As counsel for the defendant notes, whether Ms Chen is qualified to be a director of the defendant pursuant to s 10 of the Companies Act 1993 is not an issue in these proceedings, nor is whether the defendant is in breach of the Anti-Money Laundering legislation. The issues arising for determination on the pleadings are whether the defendant repudiated its obligations under the loan agreement and whether the defendant was entitled to cancel the sale and purchase agreement.
[21] As follows, the documents described by the plaintiff would not, even if they exist, be relevant to the issues in this proceeding. It follows any such documents are not discoverable.
[22] Moreover, the plaintiff does not have standing to bring any claim in respect of Nengyi Chen’s disqualification (even if it arose), and nor could Nengyi Chen’s being removed as a director benefit the plaintiff in this proceeding. The same likely applies
in respect of the Anti-Money Laundering legislation. Even if there were relevant evidence the plaintiff does not appear to have an actionable claim.4
[23] For all these reasons, the plaintiff’s application for particular discovery is dismissed.
Application “to set aside the settlement notice”
[24] The plaintiff’s second application is, so far as it admits of understanding, for an order “to set aside” the defendant’s settlement notice dated 1 July 2020 pending either determination of the plaintiff’s statement of claim or a date three months after the date on which the plaintiff’s father and brother become lawfully able to enter New Zealand5 and therefore able to transfer her $3,000,000 so that she would have sufficient to pay the purchase price under the sale and purchase agreement.
[25] The Court has no power “to set aside” a settlement notice given by a party to a sale and purchase agreement.
[26] Doing my best to reinterpret the application it could be said that the plaintiff is in substance seeking some form of declaration that the settlement notice is not valid and she could still settle. In essence any such argument relates to the plaintiff’s substantive proceeding and it is not possible for it to be determined on an interim basis. It will have to be the subject of evidence and submission in the usual way. I would also point out that the nature of the argument on this application if I have in any way interpreted it correctly, is entirely inconsistent with my reading of the statement of claim which seeks return of the deposit, not specific performance of the agreement.
[27]For the above reasons this application is also dismissed.
4 I pointed out to the plaintiff that the only way she could seek discovery in respect of any potential claims is by application for pre-proceeding discovery but even then the claim has to be open to the plaintiff, which it seems these are not.
5 They are presently unable to do so, and have not been able to since 2 February 2020, owing to border restrictions imposed by the New Zealand Government in response to the COVID-19 pandemic.
Result
[28]Both of the plaintiff’s interlocutory applications are dismissed.
[29] The defendant having succeeded is seeking costs on a 2C basis. Counsel for the defendant is to file and serve a memorandum as to costs within three days from the date of this judgment, with the plaintiff having one week to reply.
Postscript
[30] There is a lot of money at stake in this proceeding and a desperate need for the plaintiff to engage counsel experienced in cases of this nature. She would be very well-advised to do so.
Hinton J
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