Chen v Tawa Trade Finance Limited
[2023] NZHC 2156
•10 August 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-492
[2023] NZHC 2156
BETWEEN LIYUN CHEN
First Applicant
LC1521319 DEVELOPMENT CO LIMITED
Second ApplicantAND
TAWA TRADE FINANCE LIMITED
Respondent
Hearing: 10 August 2023 Appearances:
Ms Chen in person with Mr Lau (McKenzie Friend) and Mr Chang (Interpreter)
DJ Chisholm KC for the Respondent
Judgment:
10 August 2023
ORAL JUDGMENT OF BECROFT J
[As to leave to appeal]
Solicitors/Counsel:
Turner Hopkins, Auckland D Chisholm KC, Auckland Copy to: Ms L Chen
CHEN v TAWA TRADE FINANCE LTD [2023] NZHC 2156 [10 August 2023]
The application
[1] Ms Liyun Chen applies for leave to appeal a judgment of Gordon J dated 31 May 2023. That judgment refused an application for leave to commence proceedings by way of an originating application under r 19.5 of the High Court Rules 2016.
[2] Ms Chen also applies to stay the execution of that judgment. Self-evidently, as the judgment refused the leave sought, with great respect, there is nothing to stay. More on that, later.
Background
[3] By way of short background, Ms Chen is the guarantor of two loans that were made by the respondent, Tawa Trade Finance Limited (Tawa), to LC1521319 Development Company Limited (the Company). The loans were not repaid when due. Neither the Company nor Ms Chen, who was the personal guarantor, have repaid, at this stage, a single dollar towards the outstanding principal and accruing interest.
[4] Tawa accordingly resolved to proceed by way of mortgagee sale. Eventually Property Law Act notices were served and they expired in May. Two of the three properties, the subject of the mortgage, are subject to unconditional sale agreements with settlements due 8 August 2023 and 16 August 2023. Settlement is presently dependent upon caveats, and a notice of claim lodged by Ms Chen’s former de facto partner, being removed from the titles.
[5] There is a long factual background to this. There is no need for me to go into all the facts for the purposes of this leave application – which is fundamentally to do with the right process to use in bringing Ms Chen’s proposed court actions and claims.
[6] In terms of Gordon J’s decision, the sole issue before her was whether there should be leave to commence an originating application under r 19.5 of the High Court Rules. In particular, Ms Chen wanted to use the originating application procedure to launch an attack on the Property Law Act notices and, effectively, obtain an injunction, restraining the mortgagee sale.
[7] The substantive claims that Ms Chen was seeking to raise by the originating application were, with great respect, misconceived legally. They also involved significant factual disputes which would be inappropriate to resolve by way of originating application.
[8] On top of that, Ms Chen and the Company had already commenced substantive proceedings making essentially the same claims but in much greater detail and substance (CIV-2023-404-427).
[9] I accept Mr Chisholm’s submission that, procedurally, there was no need for these “second proceedings” – the originating application process. The correct procedure would have been for Ms Chen and the Company to apply for an interim injunction in the existing substantive proceedings.
[10] In fact, Ms Chen did apply for an injunction in the substantive proceeding. That application was dismissed by Davison J in a judgment dated 11 July 2023.
The decision sought to be appealed
[11] Gordon J’s decision does not need to be repeated. It speaks for itself. It was a very careful analysis. On my assessment, Gordon J bent over backwards to help Ms Chen in terms of understanding her argument. In her view, the r 19.5 test for an originating application as here, which was outside the prescribed and allowed for matters in rr 19.2, 19.3 and 19.4, was not in the interests of justice.
[12] A large part of her Honour’s reasoning was based on the existence of deep and fundamental factual disputes which were not amenable to an originating application process. That process is designed to achieve fast, speedy and efficient justice when matters are largely uncontested or have a very narrow and precisely formulated focus.
[13] For what it is worth, Gordon J went much further. Out of respect for Ms Chen, and knowing that she wanted to obtain an injunction, her Honour dealt with her application on the basis that it might, indeed, be an injunction application. But her Honour was very clear that, even if it was, it could never succeed. On the merits of
what had been put before her, there was simply no possible basis for an injunction being granted.
[14] It seems that the very same decision was reached by Davison J when he later refused the specific and then second application for an injunction.
Leave to appeal – the law
[15] Against that background, Ms Chen applies for leave under s 56(3) of the Senior Courts Act 2016. Leave to appeal is specifically required in a case such as this, where an interlocutory application (for leave to commence proceedings by way of originating application) was made. In one sense, the leave process, as has been observed, is a “filter” to weed out unmeritorious or plainly unarguable appeals.
[16] As is emphasised by Mr Chisholm, the requirement for leave to appeal interlocutory applications has a high bar. And at paragraph [12] of his submissions, he sets out those now well-established principles:1
(a)a high threshold exists;
(b)the applicant must identify an arguable error of law or fact;
(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;
(d)the circumstances must warrant incurring further delay; and
(e)the ultimate question is whether the interests of justice are served by granting leave.
[17] As Mr Chisholm points out, and I agree, any appeal here faces, what I would call, a “second hurdle” because it is an appeal of a discretion. The decision whether or not to proceed by way of originating application is one that a Court may, but not necessarily must, make. It is entirely discretionary. That being the case, the criteria
1 Greendrake v District Court of New Zealand [2019] NZHC 1680.
for a successful appeal of a discretion, and certainly relevant to a leave application, are limited to:2
(a)an error of law or principle;
(b)evidence that the Court has taken account of an irrelevant consideration;
(c)evidence that the Court has failed to take account of a relevant consideration; or
(d)a decision that is plainly wrong.
So, any appellant seeking leave to appeal the exercise of a discretion, as occurred here with Gordon J, faces a very difficult task.
Grounds of appeal
[18] I have spent considerable time with Ms Chen today, over an hour, attempting to understand and refine her grounds for seeking leave to appeal. The Court has been assisted by the efforts of a senior interpreter. As best as I can understand her three- fold concerns, they are as follows:
First ground
[19] First, that there are two parallel sets of documentation in the proceedings. One involving Tawa Finance Limited, the case in which this decision is being issued. The second involving General Finance Limited (General Finance), in respect of which Gordon J delivered a very similar decision about an identical r 19.5 application.
[20] Ms Chen’s concern is that each case is being used to buttress the other. In particular, General Finance is “piggy-backing” off the arguments made by Tawa and the Court has failed to separate them in a way that means, particularly in the case of General Finance, erroneous factual decisions have been made. And because there has been reliance also on General Finance erroneous facts, so, too, any decision for Tawa
2 Kacem v Bashir [2011] 2 NZLR 1 (SC) at [32].
is tainted. So, I understand Ms Chen is arguing both ways, as it were: that each case has contaminated the other.
[21] Two things can be said about that. One, it does not appear to be relevant as to whether the r 19.5 process should be used in this case and, in fact, if anything, it reinforces that it should not have been. Secondly, Judges have been very clear to separate the two causes of action, as I am doing today and have delivered separate judgments in respect of each. There is nothing in that first ground.
Second ground
[22] The second argument seems to be that caveats that were issued in respect of the mortgaged properties, were without basis and, indeed, did not rest on any power to do so existing in the relevant loan documents. Two parallel loan documents were put to me. One, where there was an express power to lodge a caveat; and a second where there wasn’t. At least I think that is the argument. I repeat my observations for this ground, made previously for the first ground. I simply note it is not relevant to whether the r 19.5 procedure is used. And, again, if anything, it absolutely reinforces the unsuitability of the originating application process given the significant factual dispute here as to which set of loan documents were signed.
[23] I do not know where those two clauses come from nor what reliance has been placed on them in other matters. And even if (and I see no basis for this being the case) there was incorrect reliance placed by Gordon J on one or other of the clauses, and the legality of maintaining a caveat is in doubt, it is not relevant to this application.
Third ground
[24] The third argument is that a valuation dated 9 February 2022 is now available. On page 12 it describes the mortgaged property as a “Residential Large Lot Zone” providing for residential development. But, Ms Chen says, Tawa provided a business loan at a higher rate of interest than it should have done, given that this was residential property.
[25] Again, that serves to reinforce factual disputes, that are irrelevant to whether the originating application procedure should be used. If the valuation is relevant, this dispute again serves only to reinforce the unsuitability of the originating application process.
Discussion
[26] With great respect to Ms Chen, as I have set out, there is nothing in her grounds of appeal. I see no error in Gordon J’s approach. She gave a most comprehensive judgment and, in my view, understood all aspects of Ms Chen’s claim – and her Honour went even further than what Ms Chen was asking for by considering the interim injunction argument as well.
[27] I need also to observe, upholding Mr Chisholm’s submission on this point, that Ms Chen has not only commenced a conventional substantive proceeding by statement of claim but she has also applied for, and been refused an interim injunction – which is precisely what she wants to achieve here, through her proposed originating application. In my view, it is unarguable that it would be an abuse of process to have two separate proceedings against Tawa covering the same claims – which would be the result if the originating application process was approved here.
[28] I echo the words of Mr Chisholm, Ms Chen, just so we are clear. In this case Ms Chen comes nowhere close to meeting the high threshold for leave to appeal, particularly given that leave to appeal is sought against the exercise of discretion.
[29] As for Ms Chen’s application to stay the judgment, little needs to be said about this. Gordon J did not make any order. She did not direct anything that needed to happen nor any steps that needed to be taken. There is, in fact, nothing to stay. The stay application is also misconceived and should be dismissed.
Conclusion
[30]For the record, I dismiss both applications made by Ms Chen.
[31] There is a question of costs. I spent some time with Ms Chen trying to explain as carefully as I could that procedural matters such as this are complicated. Ms Chen needs legal advice. Her application today for leave to appeal was doomed. I need to be frank with Ms Chen and I am saying this looking her in the eye and explaining to her that it just could not succeed. It has involved a considerable waste of time.
[32] Tawa would be entitled to claim indemnity costs under its loan documentation. I have tried to explain to Ms Chen that this is not being claimed, for now. And today I would not grant it. But the time might come when lawyers do ask for full indemnity costs. And such an application might be granted.
[33] Ms Chen has also accused both Mr Chisholm and Mr Martin of deliberately and erroneously misleading the Court. The response of both counsel to that was restrained and polite. But clearly both were angry. I have explained to Ms Chen that those claims need to be carefully considered and they are not acceptable without clear evidence to back them up. There may have been some misunderstandings. There may have been some factual errors made by all the Judges who have dealt with Ms Chen, including me. But the fundamentals of all the claims seems clear. The fundamentals of the arguments made by Mr Chisholm and also Mr Martin seem clear. I see no basis for any claim that there has been a deliberate orchestrated attempt to mislead the Court.
[34] On this basis, Tawa’s application to seek costs on a 2B basis on the two applications, in my view, is unarguable. Ms Chen, when given the opportunity to respond, had nothing to say about it.
Result
[35] A schedule has been provided as to quantum. Total costs are $8,006.50 together with disbursements in the way of filing fees $234.78 (GST exclusive). I order costs to Tawa, as sought, in the sum of $8,241.28.
[36]I dismiss the two applications.
Becroft J
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