Chen v Goodmore Investments (New Zealand) Limited

[2023] NZHC 1942

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-000691

[2023] NZHC 1942

BETWEEN

LIYUN CHEN

First Plaintiff/First Counterclaim Defendant

LC1521319 DEVELOPMENT CO LIMITED

Second Plaintiff/Second Counterclaim Defendant

RHC PROPERTY INVESTMENT LIMITED

Third Counterclaim Defendant

LIYUN CHEN AS TRUSTEES OF THE ROYALL FAMILY TRUST

Fourth Counterclaim Defendant

AND

GOODMORE INVESTMENTS (NEW ZEALAND) LIMITED

Defendant/Counterclaim Plaintiff

Hearing:	24 July 2023
Appearances:	No appearance for Plaintiffs H Jaques for Defendants
Judgment:	24 July 2023

JUDGMENT OF VENNING J

This judgment was delivered by me on 24 July 2023 at 4.15 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           MinterEllisonRuddWatts, Auckland Copy to:  L Chen, Auckland

CHEN v GOODMORE INVESTMENTS (NEW ZEALAND) LIMITED [2023] NZHC 1942 [24 July 2023]

Application

[1]        This file came before me in the duty Judge list this morning. The following applications are before the Court:

(a)interlocutory application by plaintiffs for injunction orders;

(b)application by Goodmore Investments (New Zealand) Limited (Goodmore) for summary judgment.

[2]        Despite the Court’s advice to the parties of this morning’s hearing there was no appearance by Ms Chen or by LC1521319 Development Co Limited (the company) or on their behalf.

[3]Ms Jaques appeared for Goodmore.

[4]        There is some urgency about the matter as the injunction sought is to stay the mortgagee sale by Goodmore of 27 Umbria Lane, which is due for settlement this Friday, 28 July 2023.

[5]        As Ms Chen and the development company failed to appear, and given the urgency of the matter, I propose to deal with the application on the papers. Goodmore will have to seek a fixture on its application for summary judgment as a counterclaim plaintiff at a later date.

The application for injunction

[6]Ms Chen and the company seek the injunction on the grounds that:

(a)Goodmore did not comply under s 10, Companies Act 1993 so the Property Law Act (PLA) notices issued by Goodmore were not valid;

(b)the manager of Goodmore advised the plaintiff that Ms Zhang was not in New Zealand while Ms Chen and the company sought a without prejudice settlement meeting back in 2022. Ms Zhang was in China.

Ms Zhang has failed to provide her movements between January 2020 to date;

(c)Ms Zhang as “chapter accountant” filed all her company’s annual returns herself; and

(d)a general allegation that Ms Zhang and Goodmore are in breach of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act).

[7]        Ms Chen represents herself and apparently purports to represent the company as well.

Background

[8]        The background to this proceeding as appears from the material before the Court and an affidavit of Ms Zhang, dated 30 June 2023,1 is on or about 22 January 2021 Goodmore provided short-term refinancing of $4,540,000 to Ms Chen (personally), Ms Chen as trustees of Royall Family Trust, the company, and RHC Property Investment Ltd. The borrowers provided Goodmore with security for the term loan. They also provided cross-guarantees.

[9]        The term loan expired on 21 January 2022. Goodmore accepted partial repayments. The partial repayments were obtained through further refinancing. As a result, Goodmore discharged its mortgage securities over three of the four security properties, leaving a security over the Umbria Lane property.

[10]      As at 25 August 2022, $2,262,367 remained due and owing to Goodmore and secured by that mortgage.

[11]      Ms Chen and the company have made no further repayments. Goodmore issued and served notices under ss 118, 119 of the PLA notices which expired on 26

1      Leave is also granted to Goodmore to refer to an affidavit Ms Zhang had filed in related proceedings (CIV-2023-404-789). That proceeding was stayed by consent orders pending the outcome of this proceeding.

September 2022.2 Goodmore then undertook a mortgagee sale process for the Umbria Lane property.

[12]      The Umbria Lane property was marketed during March and April. On 15 June 2023 Goodmore entered a sale and purchase agreement for the Umbria Lane property. Settlement is due on 28 July 2023.

[13]      On 22 June 2023 Ms Chen and the company filed and served the current application for interim injunction. Ms Chen has not sought to pursue it. Goodmore has filed for summary judgment.

Principles

[14]The principles to apply on an application for injunction are settled.

[15]      An applicant such as Ms Chen and the development company must establish there is a serious question to be tried, or put another way, that the claim is not frivolous or vexatious.

[16]      Next, the balance of convenience must be considered, and finally, an assessment of overall justice is required as a check.3 In respect of the balancing exercise the issue is whether refusing the injunction would be harder on a plaintiff who is successful at trial than granting it would be on an ultimately successful defendant. Consideration such as adequacy of damage, preservation of status quo, uncompensatable disadvantages to either party, and the relative strengths of their cases are relevant.

Analysis

[17]      There are a number of issues with the current proceedings by Ms Chen and the company and the application for interim injunction.

2      The notices were served via the borrowers’ then solicitor who confirmed they had been passed on to Ms Chen.

3      NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90; and Klissers Farmhouse Bakers Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 142 (CA).

[18]      The first is that, while Ms Chen can represent herself if she chooses, she should not and cannot appear on behalf of the company. There is a clear conflict of interest given their position as joint debtors. There is an appropriate case to apply the Re Mannix4 principle that the company should be separately represented.

Serious question

[19]      More substantively, the basis of the application for injunction is at best confused. It appears to contain an allegation that Goodmore was somehow in breach of s 10 of the Companies Act 1993. Section 10 provides:

Essential requirements

A company must have—

(a)a name; and

(b)1 or more shares; and

(c)1 or more shareholders, having limited or unlimited liability for the obligations of the company; and

(d)1 or more directors, of whom at least 1 must—

(i)live in New Zealand; or

(ii)live in an enforcement country and be a director of a body corporate that is incorporated in that enforcement country under a law that is equivalent to this Act.

[20]      Goodmore has a name, Goodmore Investments Limited. It has issued 10,000 shares, all of which are held by Ms Zhang. Ms Zhang is its director, who on the information before the Court, lives in New Zealand. The fact that from time to time she travels to China does not affect that position. There is no admissible evidence to support the allegations that Goodmore is in breach of s 10 of the Companies Act.

[21]      In any event, a breach of s 10 of the Companies Act would not invalidate contracts entered into by Goodmore nor PLA notices issued by it.

[22]      As to the allegations that Goodmore is somehow in breach of the AML/CFT Act, Ms Chen and the company have no authorised role under that Act. They have no

4      Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).

standing to bring a claim against Goodmore in respect of any alleged breaches of the AML/CFT Act.

[23]      There is also a suggestion Goodmore has breached ss 118 or 120 of the Credit Contracts and Consumer Finance Act 2003 (CCFA). Again however there is no admissible evidence to support that broad assertion in the papers filed on behalf of Ms Chen and the company.

[24]      On the face of the information before the Court the PLA notices were served on Ms Chen and the company by their solicitor on 27 June 2022 in accordance with an agreement. They were received by Ms Chen in writing.

[25]      I conclude there is no serious question to be tried to support the injunction claimed.

Balance of convenience

[26]      As to the balance of convenience Ms Chen and the company are commercial entities engaged in the development of property. Damages would be an adequate remedy for them. There is no evidence or suggestion that Goodmore would not be able to meet a damages award.

[27]      On the other hand, Ms Chen and the company are currently in default of the loan. If it is unable to settle on Friday, Goodmore will incur liability to the purchaser. Ms Chen may not be able to meet any subsequent damages claim.

[28]      The balance of convenience favours allowing Goodmore to proceed with settlement of the sale on Friday.

Overall justice

[29]      The overall justice also favours a refusal of the injunction. There is a real issue as to the bona fides of Ms Chen and the company’s claims. There is a basis for suggesting the proceedings had been brought in bad faith with a view to simply frustrating the sale.

Result

[30]      For the above reasons the application for injunction is dismissed with costs to Goodmore on a 2B basis together with disbursements as fixed by the Registrar.

Venning J

Addendum

[31]      Ms Jaques noted that Goodmore also understood that caveats may have been lodged against the property. Goodmore intends to file an application to remove those caveats.

[32]      Provided the application to remove the caveats is filed this afternoon the application will be called before the Court and dealt with at 10.00 am on Wednesday, 26 July 2023.

Venning J