Chen v General Finance Limited - [2023] NZHC 1758

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-548

[2023] NZHC 1758

BETWEEN
LIYUN CHEN

First Applicant

AND

ROYALL FAMILY TRUST

Second Applicant

GENERAL FINANCE LIMITED

Respondent

Hearing: 4 July 2023

Appearances:

J Chen and D Tan for Applicants M G P Martin for Respondent

Judgment:

6 July 2023

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 6 July 2023 at 4pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Solicitors:
ACS Law, Auckland
Martelli McKegg, Auckland

CHEN v ROYALL FAMILY TRUST [2023] NZHC 1758 [6 July 2023]

Introduction

[1] By her judgment delivered on 31 May 2023 Gordon J declined an application by Liyun Chen and the Royall Family Trust (collectively “the applicants”) for leave to commence a proceeding by originating application.1 In their proposed originating application proceeding, the applicants were seeking an order setting aside three Property Law Act 2007 (PLA) notices (the PLA Notices) issued by General Finance Ltd (the respondent) to the applicants, until their claim in a separate proceeding against the respondent is determined (the “581” proceeding).2

[2] The respondent’s three PLA Notices dated 27 February 2023 relate to failure by the applicants to remedy defaults under a registered mortgage on the title of a property at 9 Sunderlands Road, Half Moon Bay, which the respondent proposes to sell by mortgagee sale scheduled to take place on 12 July 2023.

[3] The applicants have filed an application seeking leave to appeal from Gordon J’s judgment which is scheduled for a first call hearing on 10 July 2023. The grounds being that the Judge determined the matter on the basis of misleading information provided by the respondent regarding one of its shareholders.

[4]The applicants now apply:

(a)by interlocutory application for injunction orders:

(i)To stay or set aside the PLA notices issued by the respondent.

(ii)To stay the mortgagee sale process in respect of the property at 9 Sunderlands Road, Half Moon Bay pending determination of the applicants’ claim in the “581” proceeding.

(b)And for an order for stay of execution and or enforcement of the judgment of Gordon J dated 31 May 2023, on the grounds that an application for leave to appeal the judgment has been filed.

1 Chen v General Finance Ltd [2023] NZHC 1329.
2 CIV-2023-404-581

[5]The respondent opposes the applications.

Background

[6] The background to the applicants’ present applications is summarised in the judgment of Gordon J, but is set out again here for convenience.

[7] On 2 February 2022 the respondent sent the applicants a loan offer for a loan of $2,600,000.00. The loan offer named Liyun Chen as the borrower and mortgagee, as trustee for the Royall Family Trust, and also as guarantor. The term of the loan was 12 months. The loan offer provided that the loan would be at an interest rate of 9.25 per cent per annum, with monthly interest payments of $20,041.67, and a default interest rate…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 1758
Decision Date: 6 July 2023

CaseChat Overview and Summary

Liyun Chen and the Royall Family Trust applied for leave to commence a proceeding by originating application seeking an order setting aside three Property Law Act 2007 notices issued by General Finance Limited (GFL) and to stay the mortgagee sale of a property at 9 Sunderlands Road, Half Moon Bay. Gordon J declined the application, finding that the applicants did not have a legal or equitable right at issue which may be prejudiced by GFL exercising any one of the powers it was entitled to under the notices. The applicants appealed Gordon J’s decision. The court heard submissions from the applicants and GFL and considered the background to the dispute, which involved a loan of $2,600,000 offered by GFL to Ms Chen, which was accepted by Ms Chen on 3 February 2022. The applicants argued that the loan offer was accepted on the basis of misleading information provided by GFL regarding one of its shareholders. The applicants also submitted that GFL’s refusal to withdraw a caveat on a property at 92 Jeffs Road, Flat Bush prevented the applicants from refinancing the loan with a third-party lender. The court found that the applicants’ evidence regarding the Malaysian-based shareholder was not relevant to any of the issues relating to whether or not GFL was entitled to demand repayment of the loan and all accrued interest thereon, and to exercise its power to conduct a mortgagee sale of the Sunderlands Road property. The court also found that the applicants’ submission that GFL’s actions “triggered” the applicants’ default was not seriously arguable or tenable. The court concluded that there was no serious issue to be tried, and the balance of convenience was clearly in favour of GFL and maintaining the status quo to enable GFL’s mortgagee sale scheduled for 12 July 2023 to proceed. The court declined the applicants’ interlocutory application dated 22 June 2023 in which interim injunction orders were sought to stay or set aside the notices issued to the applicants by GFL in relation to the mortgage over the 9 Sunderlands Road property, and also declined the interlocutory application for an interim injunction to stay GFL’s mortgagee sale process in relation to the 9 Sunderlands Road property. Costs on the application were reserved.

This case highlights the importance of carefully considering the terms of a loan agreement and the rights and obligations of the parties under the agreement. The court found that GFL was entitled to register a mortgage on the title of the Sunderlands Road property, and also entitled to lodge caveats on the titles of other real property owned by the applicants. The court rejected the applicants’ submission that GFL did not have a caveatable interest in the applicants’ properties, and found that GFL was fully entitled to require repayment of the principal sum of the loan and to charge interest on the unpaid amount in accordance with the provisions of the Term Loan Agreement and mortgage. The court also found that the applicants’ evidence regarding a Malaysian-based shareholder in GFL was not relevant to any of the issues relating to whether or not GFL was entitled to demand repayment of the loan and all accrued interest thereon, and to exercise its power to conduct a mortgagee sale of the Sunderlands Road property. The court concluded that the applicants’ claim in the separate proceeding in which they sought relief by way of damages did not engage with any legal or equitable right pertaining to the Sunderlands Road property and GFL’s security, and enforcement of its security.

Orders