Chen v Auckland Weihao Investment Limited
[2021] NZHC 2040
•9 August 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-001236
[2021] NZHC 2040
BETWEEN LIYUN CHEN
Plaintiff
AND
AUCKLAND WEIHAO INVESTMENT LIMITED
First Defendant
MOUNTFORT ESTATE AGENTS LIMITED
Second Defendant
NENGYI CHEN
Third Defendant.../intituling continued over
Hearing: 6 August 2021 Appearances:
Plaintiff in person
DK Wilson for First Defendant
Judgment:
9 August 2021
JUDGMENT OF DOWNS J
This judgment was delivered by me on Monday, 9 August 2021 at 11 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Raymond S Walker, Auckland. DK Wilson, Auckland.
Copy to: Plaintiff.
CHEN v AUCKLAND WEIHAO INVESTMENT LTD [2021] NZHC 2040 [9 August 2021]
IVY CHAOYUN CHEN
Fourth Defendant
ZUNLIN CHEN
Fifth Defendant
M & L ASSOCIATES
Sixth Defendant
LI WANG
Seventh Defendant
BIBIANA LEE
Eighth Defendant
LOO & KOO
Intended Ninth Defendant
DAVID WILSON
Intended Tenth Defendant
RAYMOND WALKER
Intended Eleventh Defendant
The application
[1] Liyun Chen seeks an interim injunction against Auckland Weihao Investment Ltd.1
[2] Bedrock fact is simple. Ms Chen entered an unconditional sale and purchase agreement with Weihao in relation to Auckland land; Ms Chen as purchaser, Weihao as vendor (seller). Ms Chen was represented by lawyers. So too Weihao. Ms Chen sought vendor finance—late. This did not come to pass. Weihao issued a settlement notice. Ms Chen did not comply with the notice. Weihao cancelled the sale and purchase agreement. Ms Chen lost her deposit of $1.08 million. Much litigation has followed. On 16 August 2021, the Court of Appeal will hear an appeal or appeals by Ms Chen.2 Ms Chen seeks the injunction to protect her position until the Court of Appeal determines the appeal(s).
[3]Ms Chen continues to self-represent.
Background
[4] The judgment of Associate Judge Gardiner contains a very helpful statement of the background. I adopt it:3
On 16 October 2019, the parties agreed to the sale and purchase of the Property, with AWIL as vendor and Ms Chen as purchaser (the SPA). Ms Chen was to pay a 10 per cent deposit. The SPA was not conditional on finance. The parties were legally represented. Settlement was to take place on 15 June 2020, but AWIL granted Ms Chen a one-week extension without penalty on 11 June 2020.
On 22 June 2020, AWIL, on Ms Chen’s request, agreed to provide vendor finance of $3 million on the condition that a second mortgage in its favour would be secured over the Property and other properties, and that the loan was to be repaid within three months. On that same date, Ms Chen agreed to AWIL’s terms of vendor finance. She nominated LC1521319 Development Co Ltd (the LC Company) to purchase the Property.
On 24 June 2020, Ms Chen’s solicitor forwarded to AWIL’s solicitor the term loan agreement signed by Ms Chen and the LC Company (the Loan Agreement). The Loan Agreement specified a principal sum of $3 million, repayable in one sum on the expiry date, three months from the date of
1 Weihao.
2 It is not clear whether the appeal in relation to a decision of Associate Judge Bell remains live.
3 Chen v Auckland Weihao Investments Ltd [2020] NZHC 2450 at [6]–[17].
drawdown (stated to be 23 September 2020). Interest of $75,000 was to be capitalised and paid in advance on 24 June 2020. The loan was secured by second mortgages over the Property and three other properties set out in a schedule to the Loan Agreement. Ms Chen’s solicitors also showed their e-dealing number.
On 25 June 2020 at 11.41 am, AWIL’s solicitor advised Ms Chen’s solicitor it had signed and certified its transfer on the e-dealing and gave undertakings to Ms Chen’s solicitor.
On 25 June 2020 at 3.23 pm, Ms Chen’s solicitor forwarded a Deed of Priority and Subordination (the Deed) to AWIL. The Deed prevented AWIL from being paid or enforcing its security until the first security-holder, Vincent Capital Ltd, was fully paid. AWIL’s solicitor responded by pointing out that AWIL’s loan was to be repaid within three months, which was shorter than the term of the first mortgage.
AWIL refused to agree to postpone receiving payment until Vincent Capital was paid. Accordingly, AWIL requested an amendment to the Deed such that AWIL would be repaid by the due date or otherwise able to enforce its security prior to Vincent Capital being fully repaid. Despite discussions from 25 to 26 June 2020, no agreement was reached between Ms Chen, AWIL and Vincent Capital.
On 26 June 2020, AWIL offered to defer settlement on certain terms. Discussions between AWIL and Ms Chen continued into July, but ultimately no agreement was reached.
On 26 June 2020, Ms Chen registered the Caveat.
On 1 July 2020, AWIL served Ms Chen with a settlement notice.
On 19 July 2020, Ms Chen served AWIL with a statement of claim seeking, first, a refund of the 10 per cent deposit she paid under the SPA, and secondly, damages for AWIL’s wrongful repudiation of the Loan Agreement.
On 21 July 2020, AWIL cancelled the SPA without prejudice to its rights under the SPA.
On 21 July 2020, AWIL applied to the Registrar for the Caveat to lapse.
[5] On 18 September 2020, the Associate Judge held Ms Chen had not demonstrated an equitable interest in the land, so, Ms Chen’s caveat should lapse. Ms Chen lodged a second caveat. On 10 February 2021, Associate Judge Bell held this caveat should also lapse.4 On 31 May 2021, Gordon J refused Ms Chen
4 Chen v Auckland Weihao Investment Ltd [2021] NZHC 156.
permission to lodge a third caveat.5 The Judge also made an order preventing Ms Chen from lodging any more caveats absent permission of the High Court.6
[6] Ms Chen lodged appeals in relation to the decisions of the Associate Judges. As observed, the Court of Appeal hearing is scheduled for 16 August.
[7] Ms Chen sought a stay of Associate Judge Bell’s decision from the Court of Appeal. Goddard J noted a stay could not revive a lapsed caveat. However, the Judge also said Ms Chen could seek other forms of interim relief, including “an … injunction restraining dealings in the land pending appeal”.7 This observation probably explains this application.
[8] Ms Chen has also filed a claim against Weihao and others. The claim has incrementally grown. It now encompasses 11 defendants. This application is based on that claim, albeit, as observed, pending the Court of Appeal’s determination of the caveat appeal(s).
Principle
[9]Attendant principle is well known:8
(a)An applicant for an interim injunction must establish there is a serious question to be tried. If this threshold is crossed, the Court considers the balance of convenience—an assessment of the impact following the grant, or refusal, of an interim injunction. Last, the Court considers the overall justice of the position.
5 Chen v Auckland Weihao Investment Ltd [2021] NZHC 1240. By then, Gault J had made an interim order preventing Ms Chen from lodging a caveat without the High Court’s permission.
6 At [34].
7 Minute of Goddard J dated 24 March 2021.
8 NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90, (2013) 13 TCLR 531 at [12]; and
Intellihub v Genesis Energy Ltd [2020] NZCA 344, [2020] NZCCLR 29 at [23].
Analysis
A serious question to be tried?
[10] In so far as Ms Chen seeks to prevent Weihao from selling, disposing or encumbering the land, the essential question is whether there is a reasonably arguable path to the remedy of specific performance.
[11] Ms Chen’s claim lies in her sixth amended statement of claim (dated 14 June 2021). The statement of claim appears to contain three causes of action. I say “appears” because the statement of claim, like its five antecedents, is not easy to follow.9
[12] The first cause of action is that Weihao breached s 10(d)(i) of the Companies Act 1993 as its director was not resident in New Zealand.10
[13] The second is that Weihao was obliged to provide Ms Chen vendor finance even though the first mortgagee sought incompatible terms. Ms Chen says:
Weihao is an experienced developer [and] should be familiar that as a second mortgagee there are some terms and conditions set by the first mortgagee which should be followed, the second mortgagee should not at the late stage refuse to follow the imposed terms by the first mortgagee.
Ms Chen describes this cause of action as misrepresentation under s 35 of the Contract and Commercial Law Act 2007.
[14] The third is that Weihao repudiated its obligations to provide vendor finance, in turn entitling Ms Chen to cancel the sale and purchase agreement, have her deposit returned, and claim related damages.
9 The copy on the Court file has annexures from other court documents, including submissions. Consequently, it is not entirely clear where the statement of claim ends.
10 This provides:
10 Essential requirements
A company must have—
...
(d)1 or more directors, of whom at least 1 must—
(i) live in New Zealand;
[15] Ms Chen argues these causes of action either entitle her to vendor finance from Weihao and specific performance of the sale and purchase agreement; or, a return of the deposit, plus damages, interest and costs.
[16]I make four points.
[17] First, it is unclear how a breach of s 10(d)(i) of the Companies Act could invalidate the sale and purchase agreement. Assuming it could does not assist Ms Chen, for, if it did, specific performance could not follow. This because the agreement would be invalid. Ms Chen appears to acknowledge as much when she says in the statement of claim, “the property by law [was] not eligible to be marketed”.
[18] Second, it is not arguable the alleged s 10(d)(i) breach invalidates only the settlement notice, a point Ms Chen makes too. Such a proposition is unsupported by authority and, frankly, fanciful.
[19] Third, the remaining causes of action do not help Ms Chen either. If established, these could not result in specific performance. Rather, they would sound in monetary relief only.
[20] Fourth, because Ms Chen is self-represented, I have considered whether her claim could be (again) amended to include a viable action leading to specific performance. I see none.
[21] I next consider whether there is a reasonably arguable path to monetary relief based on the statement of claim, including reasonable amendments. Misrepresentation could result in damages, at least in the abstract. And, on one version of Ms Chen’s case, the alleged s 10(d)(i) breach invalidates the transaction. However, this argument is without authority and at best, strained. Moreover, the constellation comprising:
(a) an unconditional sale and purchase agreement; (b) a legally represented purchaser;
(c) an apparently valid settlement notice; and (d) cancellation of the agreement following Ms Chen’s inability to settle leaves little room for a viable monetary claim.
[22] Put more simply, Ms Chen entered a legally binding sale and purchase agreement in relation to the land. She did so with the benefit of legal representation. Even if Ms Chen could establish some action, say, in relation to vendor finance, that would not entitle her a return of the deposit, for, the sale and purchase agreement was not conditional on finance. Indeed, that agreement was not conditional on anything. Therein lies the fundamental problem for Ms Chen—there is no serious issue to be tried.
[23] For these reasons, it is not necessary to address the balance of convenience or overall justice of the position (being points on which the parties offered no argument).
Result and orders
[24]The application for an interim injunction is dismissed.
[25]Ms Chen must pay 2B costs to Weihao.
……………………………..
Downs J
5
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