Chen v General Finance Ltd - [2023] NZHC 1329

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-000548

[2023] NZHC 1329

BETWEEN
LIYUN CHEN

First Applicant

ROYALL FAMILY TRUST
Second Applicant

AND

GENERAL FINANCE LIMITED

Respondent

Hearing: 25 May 2023

Appearances:

Self-represented Applicants

A Johnson for the Respondent

Judgment:

31 May 2023

JUDGMENT OF GORDON J

This judgment was delivered by me on 31 May 2023 at 9 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:
Martelli McKegg, Auckland Copy to: the Applicants

CHEN v GENERAL FINANCE LTD [2023] NZHC 1329 [31 May 2023]

Introduction

[1] The first applicant, Liyun Chen, and the second applicant, the Royall Family Trust (the Trust),1 (together, the applicants) are seeking to set aside the notices issued under ss 119 and 122 of the Property Law Act 2007 (PLA) by the respondent, General Finance Ltd until the applicants’ claim in a separate proceeding (CIV-2023-404-581) is determined.

[2] The applicants apply under r 19.5 of the High Court Rules 2016 for leave to commence the proceeding by way of originating application. While there was no written application, given that Ms Chen is self-represented, the Court accepted that an oral application could be made. Mr Johnson, counsel for General Finance, had no issue with that.

Background

[3] By letter dated 2 February 2022 General Finance advised the Trust that it had approved its application for a loan of $2,600,000 for a term of 12 months with Ms Chen in her personal capacity as the guarantor of the loan.

[4] The Term Loan Agreement signed by Ms Chen as borrower and guarantor dated 4 February 2022 confirmed the loan of $2,600,000 for a term of 12 months and that Ms Chen was the guarantor. The Term Loan Agreement contained provisions as to the amount of monthly interest payments. Ms Chen also signed a deed of guarantee and indemnity.

[5] Pursuant to the Term Loan Agreement, a first mortgage was registered over 9 Sunderlands Road, Half Moon Bay.

[6] On 22 June 2022 General Finance placed a caveat on the title of a property owned by Ms Chen: 92 Jeffs Road, Flat Bush, Auckland. General Finance says its right to lodge the caveat was provided for first, in the acceptance of the loan offer which contained not only an agreement to mortgage the security property

1 More correctly, the second applicant should be the trustee of the Royall Family Trust (Ms Chen as sole trustee).

(9 Sunderlands Road, Half Moon Bay) owned by Ms Chen but also any other real property owned by the borrower and/or guarantor. That document further gave General Finance discretion to lodge and maintain a caveat against such certificate of title.

[7] General Finance also refers to the Mortgage Additional Clauses which repeats that General Finance is authorised to lodge and maintain a caveat against any of the Trust’s or Ms Chen’s interest in any land.

[8]The loan was not repaid on 4 February 2023.

[9] Accordingly, on…

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 1329
Decision Date: 31 May 2023

CaseChat Overview and Summary

Liyun Chen and the Royall Family Trust sought to set aside notices issued by General Finance Limited under sections 119 and 122 of the Property Law Act 2007 until their claim in a separate proceeding was determined. The applicants argued that General Finance’s actions in placing a caveat on Chen’s property and refusing to remove it deprived them of securing a loan from another lender, which would have allowed them to develop properties worth more than the amount owed to General Finance. General Finance defended its actions by asserting that it was entitled to caveat the property due to the loan being in default and that Chen did not provide the necessary information to release the caveat. The applicants also argued that General Finance's requests for partial repayments were oppressive, but General Finance maintained that it was not under any obligation to extend the loan and had attempted to negotiate varied terms.

The court found that it was not in the interests of justice for the applicants to commence their proceeding by an originating application, as there was no legal or equitable right at risk that would be prejudiced by General Finance exercising its rights under the Property Law Act notices. The applicants’ claim for damages in the substantive proceeding was unmeritorious and not genuinely arguable, and therefore, they did not meet the necessary threshold to obtain an interim injunction. The balance of convenience also favoured General Finance, as the applicants' substantive claim was one for damages, and there was no evidence that General Finance could not meet the damages if required. The court thus refused the application to commence the proceeding by an originating application.

The court also determined that even if permission had been granted for the applicants to commence their proceeding by an originating application, any such application would fail on the merits. The court did not hear from the parties on costs, so costs were reserved and the parties were instructed to attempt to agree on costs and file memoranda within specified timeframes. If the parties could not agree on costs, General Finance was to file and serve its memorandum first, followed by the applicants.

Orders