Chen v Auckland Weihao Investment Limited
[2025] NZHC 1584
•16 June 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1236
[2025] NZHC 1584
BETWEEN LIYUN CHEN
Plaintiff
AND
AUCKLAND WEIHAO INVESTMENT LIMITED
First Defendant
NENGYI CHEN
Third DefendantIVY CHAOYUN CHEN
Fourth Defendant
Hearing: 12 June 2025 Appearances:
B Han for the Plaintiff
D K Wilson for the First, Third and Fourth Defendants
E Tom for the Non-Parties, Mountfort Estate Agents Ltd and Liang DaiJudgment:
16 June 2025
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 16 June 2025 at 10 am.
Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Barristers/Counsel
Essence Law, Auckland D K Wilson, Auckland
CHEN v AUCKLAND WEIHAO INVESTMENT LTD [2025] NZHC 1584 [16 June 2025]
Introduction
[1]The plaintiff, Liyun Chen (Ms Chen), seeks:
(a)further discovery from the first defendant, Auckland Weihao Investment Ltd (AWIL), and the third and fourth defendants, who are or were directors/officers of AWIL; and
(b)non-party discovery from Mountfort Estate Agents Ltd (Mountfort) and one of its salespeople, Liang Dai (Mr Dai).
[2]The applications are opposed and determined in this judgment.
Background
[3] The background to this proceeding and the subject sale transaction (the transaction) was set out by Associate Judge Sussock in a judgment dated 8 November 2023.1
[6] On 16 October 2019, Ms Chen entered into a sale and purchase agreement (SPA) with Auckland Weihao Investment Ltd (AWIL) to purchase a property at 285 Murphys Road, Flat Bush, Auckland (the Property). The purchase price was $10.8 million. The settlement date was to be 15 June 2020. Ms Chen paid a 10 per cent deposit of $1.08 million.
[7] The parties were legally represented. Ms Bibiana Lee from Loo & Koo acted as AWIL’s solicitor.
[8] There was no finance condition in the SPA, but Ms Chen alleged that the vendor’s real estate agent, Mountford Estate Agents Limited, knew of the proposed involvement of Ms Chen’s father and the refinancing of a property in Takanini in order to fund the purchase.
[9] Due to COVID-19, Ms Chen’s father was unable to travel to New Zealand from China and therefore could not arrange financing.
[10] On 11 June 2020 the settlement date was extended by one week to 22 June 2020. In mid-June 2020 Ms Chen arranged finance of $7.5 million.
[11] On 22 June 2020 AWIL agreed to provide vendor finance of $3 million for three months on the condition that a second mortgage would be secured over the Property and other properties. Ms Chen nominated LC1521319 Development Co Ltd to purchase the Property.
1 Chen v Auckland Weihao Investment Ltd [2023] NZHC 3134.
[12] On 24 June 2020 AWIL’s solicitors sent Ms Chen’s solicitors documentation for settlement, and a loan agreement for the vendor finance to be signed (by the nominee as borrower and by another company and Ms Chen as guarantors). The same day Ms Chen’s solicitors returned the signed loan agreement. Ms Chen’s solicitors also provided their e-dealing number.
[13] On 25 June 2020 AWIL’s solicitors advised Ms Chen’s solicitors that they had signed and certified the transfer on the e-dealing and gave undertakings to Ms Chen’s solicitors.
[14] The same day Ms Chen’s solicitors forwarded a deed of priority and subordination to AWIL which would have prevented AWIL from being paid or enforcing its security until the first mortgagee was fully paid. AWIL refused to agree and requested an amendment to the deed. No agreement was reached.
[15]On 26 June 2020 Ms Chen lodged a caveat over the Property.
[16] AWIL was willing to agree to defer settlement on terms. Discussions followed but no agreement was reached. On 1 July 2020 AWIL served a settlement notice.
[17] On 17 July 2020 Ms Chen commenced proceedings against AWIL seeking a refund of her deposit and damages for wrongful repudiation of the loan agreement. The proceeding was served on AWIL on 19 July 2020.
[18] On 21 July 2020 AWIL gave notice of cancellation of the SPA. The SPA was cancelled either as a result of this notice or Ms Chen’s earlier service of the proceeding.
[19] On the same day AWIL also applied to lapse the caveat. Court proceedings in relation to that caveat, a further caveat, and leave to lodge a further caveat followed. Orders were made in the third decision preventing Ms Chen from lodging any further caveats without the permission of the High Court.
[20] Relevantly, in the second of the caveat decisions, the Court held that Ms Chen had not shown an arguable case for being able to cancel either the SPA or the loan agreement and that there was nothing to show an arguable case for either breach of contract by AWIL or any claim for misrepresentation.
[4] Ms Chen initially claimed against Mountfort as second defendant in this proceeding. That claim was struck out by Gault J on 31 August 2021.2
[5]Ms Chen’s remaining claims against the defendants focus on allegations that:
(a)the defendants unilaterally altered a clause in the SPA dealing with GST on the price, which required AWIL to raise additional finance to settle; and
2 Chen v Auckland Weihao Investment Ltd [2021] NZHC 2271.
(b)AWIL breached its obligation to provide vendor finance.
[6] During the hearing, counsel for Ms Chen advised that Ms Chen is contemplating amending her claim to include an allegation that the SPA was not signed by a person authorised to bind AWIL to the contract.
Legal principles
Further discovery by the defendants
[7] The application against the defendants relies on r 8.19 of the High Court Rules 2016 (HCR), which provides:
8.19 Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered
1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
(a)to file an affidavit stating—
(i)whether the documents are or have been in the party’s control; and
(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and
(b)to serve the affidavit on the other party or parties; and
(c)if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.
[8] There is a presumption that the affidavits of documents already filed are conclusive and the party seeking further discovery has the onus of establishing that the existing affidavit of documents is incomplete.3
3 McCullagh v Robt Jones Holdings Ltd [2015] NZHC 1462, (2015) 22 PRNZ 615 at [7].
[9]There are four matters to consider on an application for further discovery:4
(a)Are the documents sought relevant and, if so, how important will they be?
(b)Are there grounds to believe the documents exist? This will often be a matter of inference. How strong is the evidence?
(c)Is the discovery sought proportionate, balancing the time and cost of discovery against its potential value?
(d)Weighing and balancing these matters, should the Court exercise its discretion under r 8.19 of the HCR and order further discovery?
Non-party discovery by Mountfort and Mr Dai
[10] The application against Mountfort and Mr Dai relies on r 8.21 of the HCR, which provides:
8.21 Order for particular discovery against non-party after proceeding commenced
(1)This rule applies if it appears to a Judge that a person who is not a party to a proceeding may be or may have been in the control of 1 or more documents or a group of documents that the person would have had to discover if the person were a party to the proceeding.
(2)The Judge may, on application, order the person—
(a)to file an affidavit stating—
(i)whether the documents are or have been in the person’s control; and
(ii)if the documents have been but are no longer in the person’s control, the person’s best knowledge and belief as to when the documents ceased to be in the person’s control and who now has control of them; and
(b)to serve the affidavit on a party or parties specified in the order; and
4 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].
(c)if the documents are in the control of the person, to make those documents available for inspection, in accordance with rule 8.27, to the party or parties specified in the order.
…
The principles are not in dispute:5
(a)the power is discretionary;
(b)the Court should have regard to the test under r 8.7 for standard discovery, which is the adverse documents regime, although a broader
— “train of enquiry” approach can remain relevant; and
(c)a non-party discovery order must still be necessary, in the sense that “other sources of evidence are unlikely to be sufficient because they are materially incomplete or unreliable.”
[12] The Court has a discretion under r 8.22(3) to order an applicant to reimburse a non-party’s expenses, including indemnity costs, incurred in relation to the application and in complying with any order made on the application.6
[13] A non-party is usually entitled to its actual, reasonable costs incurred in complying with a non-party discovery order, unless there exists good reason for it not to be awarded costs.7
Discovery in the proceeding to date and the further discovery sought
Discovery to date
[14] Ms Chen filed and served an affidavit of documents dated 16 December 2024. The discovery provided by Ms Chen comprises eight documents, including two versions of the SPA. All documents are before the Court. The discovery does not
5 Vector Gas Contracts Ltd v Contact Energy Ltd [2014] NZHC 3171, [2015] 2 NZLR 670 at [28]–[31].
6 Smail v Restaurant Brand Properties Ltd [2020] NZHC 44.
7 Clear Communications Ltd v Telecom Corporation of NZ Ltd (1994) 8 PRNZ 200 (HC) at 201–202.
appear to contain the file of the solicitors that acted for Ms Chen in respect of the transaction, PCW Law Ltd.
[15] The defendants filed and served an affidavit of documents dated 12 December 2024. The discovery provided by the defendants comprises 46 documents. All documents are before the Court, including documents from the file of the solicitors acting for AWIL in respect of the transaction, Loo & Koo. The discovery does not include the file of Mountfort.
[16] In the lead-up up to the hearing, Mountfort collated its physical file in respect of the transaction and undertook searches for electronic communications relevant to the transaction. As a result, Mountfort provided the defendants with a copy of its file in the week before the hearing, comprising approximately 80 documents. Mountfort provided a copy of the file to the plaintiff’s counsel the day before the hearing, with the consent of the defendants.
Further discovery sought
[17] Ms Chen has not distinguished between the documents that she seeks from the defendants and the non-parties. In both cases, Ms Chen seeks:
1.All correspondence the defendants had with the plaintiff and/or the sales agent during the negotiation stage and provide all versions of the sale and purchase agreement for the property at 285 Murphys Road, Flat Bush, Auckland (“285 Murphys Rd”) that has ever been sent to the plaintiff.
2.All material used and information represented or communicated to the plaintiff during the contract negotiation stage, including but not limited to information relating to the transaction whereby the 1st defendant purchased the 285 Murphys Rd.
3.All correspondence between the defendants relating to the 3 million vendor finance.
Further discovery from the defendants
[18] The defendants’ position is that they have already discovered all relevant documents available to them. Counsel for the defendants explained the steps that he took to compile the defendants’ discovery that has already been provided, including searches for electronic documents. The defendants do not accept that the discovery
that they have provided is deficient in any respect. However, the defendants’ affidavit of documents did not set out the steps that had been taken to locate documents.
[19] The discovery already provided by the defendants includes the type and range of documents one would expect to see in respect of a conveyancing transaction of the type in issue in this proceeding.
[20] A pragmatic approach is required. It is appropriate for the defendants to provide a further affidavit, confirming the searches for electronic communications that have been undertaken. The affidavit should specifically confirm searches have been undertaken for the following categories of documents:
(a)any electronic communications, including but not limited to emails, WeChat messages or text messages, between the third and/or fourth defendant and Mr Dai and/or Mountfort;
(b)any electronic communications, including but not limited to emails, WeChat messages or text messages, between the third defendant and the fourth defendant relating to the transaction (including vendor finance and the authority of the person who signed the SPA); and
(c)any communications between the first defendant’s solicitors, Loo & Koo, and Chapman Tripp and/or Vincent Capital Ltd regarding a deed of priority and subordination.
[21] Obviously, the defendants will need to discover any documents that fall into these categories which have not already been discovered.
[22] The plaintiff also sought to include documents that relate to a power of attorney between the third defendant as appointor and Yan Chen as attorney. I am not prepared to make any orders relating to that power of attorney, or the relationship between the third defendant and Yan Chen, because there is no evidence that links Yan Chen to the transaction in any way.
Non-party discovery from Mountfort and Mr Dai
[23] The defendants’ consent to an order for non-party discovery from Mountfort on the basis that Mountfort’s file may contain documents not otherwise available to the parties.
[24] In its notice of opposition, Mountfort argued that the documents that Ms Chen seeks ought to be within her own possession or control, or in the possession or control of the defendants. Therefore, discovery from Mountfort and Mr Dai is unnecessary.
[25] Alternatively, Mountfort sought security for its costs, on the grounds that Ms Chen has failed to pay costs orders of $13,038 following Mountfort’s successful application to strike out the claim against it.
[26] Irrespective of the position Mountfort took in its notice of opposition, Mountfort elected to voluntarily provide informal discovery of its file. That was appropriate. The starting point is that Mountfort’s file in respect of the transaction, including any documents held by Mr Dai, is relevant. Mountfort and Mr Dai communicated with Ms Chen and the defendants regarding negotiation of the SPA and the transaction. Mountfort’s file may contain documents that are not in the possession of the parties or their solicitors.
[27] Mountfort and Mr Dai were the agents of AWIL. Now that AWIL has possession of Mountfort’s file, the defendants should provide formal discovery of those documents to Ms Chen.
[28] During the hearing, counsel for Mountfort explained the steps that had been taken to compile the file, including searches undertaken to locate electronic documents. Mountfort should verify those steps in an affidavit.
[29] Counsel for Mountfort submitted that it should not be required to take any further steps until Ms Chen pays the outstanding costs orders, and Mountfort’s costs in respect of the application for non-party discovery.
[30] Given that the vast bulk of the work required from Mountfort to provide non-party discovery has already been completed, the only outstanding matter is preparation of a simple verifying affidavit. The costs of that step will not be significant. On that basis:
(a)costs on the non-party discovery should be fixed in the usual way;
(b)security for future costs on the non-party discovery is not appropriate; and
(c)it is not appropriate to stay the application for non-party discovery until the old costs orders are paid.
[31] Ms Chen should pay Mountfort’s reasonable indemnity costs for the steps taken in respect of the application for non-party discovery, including:
(a)filing a notice of opposition;
[32] 3 June 2025, Mountfort Real Estate Ltd and Liang Dai shall file and serve an affidavit verifying the searches undertaken to compile the file of documents provided informally to the plaintiff and the defendants prior to the hearing on 12 June 2025.
[33] By 27 June 2025, the defendants shall file and serve a supplementary affidavit of documents, including:
(a)verification that the defendants have searched for any electronic communications, including but not limited to emails, WeChat messages or text messages, between the third and/or fourth defendant and Liang Dai and/or Mountfort Estate Agents Ltd;
(b)verification that the defendants have searched for any electronic communications, including but not limited to emails, WeChat messages or text messages, between the third defendant and the fourth defendant relating to the transaction (including vendor finance and the authority of the person who signed the SPA);
(c)verification that the defendants have searched for any communications between the first defendant’s solicitors, Loo & Koo, and Chapman Tripp and/or Vincent Capital Ltd regarding a deed of priority and subordination; and
(d)a list of the documents (including document identifiers):
(i)in the informal discovery provided to the defendants by Mountfort Estate Agents Ltd and Dai Liang; and
(ii)obtained as a result of orders (a) to (c).
[34] By 27 June 2025, the defendants shall provide discovery of the documents listed in the supplementary affidavit of documents.
[35] If the plaintiff considers that further discovery is required from the defendants or the non-parties after receiving the further discovery, then the plaintiff may file and serve a memorandum by 4 July 2025 setting out:
(a)the specific documents that the plaintiff considers have been omitted;
(b)why those documents are considered to be relevant, by reference to the pleadings (the plaintiff may attach a draft amended statement of claim to the memorandum if relevancy is to be determined by an amended pleading); and
(c)the grounds for believing that the documents exist.
[36]The defendants and non-parties may file and serve memoranda in reply by
11 July 2025.
[37] The plaintiff shall pay the costs of Mountfort Estate Agents Ltd and Liang Dai on the application for non-party discovery on a solicitor/client basis:
(a)Mountfort Estate Agents Ltd and Liang Dai shall file and serve a memorandum setting out the costs claimed by 20 June 2025;
(b)the plaintiff shall file and serve any memorandum in reply, of no more than three pages in length and confined to the issue of the reasonableness of the costs claimed, by 27 June 2025; and
(c)I will then fix costs on the papers.
[38]Costs on the application for further discovery from the defendants are reserved.
[39]The proceeding is adjourned for review in the Chambers List on 18 July 2025
at 2.15 pm.
[40]The close of pleadings date is enlarged to 1 August 2025.
Associate Judge Brittain
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