Chen v Tawa Trade Finance Limited
[2023] NZHC 1801
•11 July 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-427
[2023] NZHC 1801
BETWEEN LIYUN CHEN
First Plaintiff
AND
LC152319 DEVELOPMENT CO LIMITED
Second Plaintiff
TAWA TRADE FINANCE LIMITED
Defendant
Hearing: Judicial telephone conference Appearances:
No appearance for First plaintiff
D Tan for Second plaintiff/applicant D J Chisholm KC for Defendant
Judgment:
11 July 2023
JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 11 July 2023 at 2pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors:
Turner Hopkins, Auckland
CHEN v LC152319 DEVELOPMENT CO LIMITED [2023] NZHC 1801 [11 July 2023]
Introduction
[1] This judgment relates to the interlocutory application by Liyun Chen (the first plaintiff) dated 24 June 2023 for an order by way of an interim injunction staying the defendant from proceeding with mortgagee sales of the properties at 92 Jeffs Road Flat Bush; 4 Tipu Road Flatbush; and 2 Living Stream Road, Albany (the properties) pending determination of the claim by the first plaintiff and LC1521319 Development Co Limited (the second plaintiff) against the defendant.
Background
[2] The plaintiffs commenced this proceeding by statement of claim filed on 17 March 2023. They claim that the defendant, Tawa Trade Finance Limited (Tawa) repudiated its promise to extend the term of two loans it had advanced to the second plaintiff, and as a result the second plaintiff was unable to refinance borrowings it required for its intended subdivision of the properties at 92 Jeffs Road, Flat Bush (Jeffs Road) and 2 Living Stream Road, Albany (Living Stream Road).
[3] The plaintiffs claim that the projected results from the refinancing and subdivision of the properties would have yielded profits of $1.9 million for Jeffs Road;
$2.9 million for Living Stream Road; and $1.6 million for a building development. The plaintiffs claim that these losses were incurred as a result of the defendant not extending the term of its loans, and thereby frustrating the plaintiffs’ ability to arrange the finance necessary to carry out the subdivisional development of the properties. They claim damages from the defendant of $5,150,000.
[4] In a separate proceeding (CIV-2023 – 404 - 000492) the plaintiffs applied for leave to apply by originating application to set aside a letter of demand and a Property Law Act (PLA) notice issued by the defendant in respect of defaults by the second plaintiff in relation to the two loans. By judgment delivered on 31 May 2023, Gordon J declined to grant the plaintiffs leave to commence their proceeding by originating application.1 In her judgment, Gordon J set out the factual background to the plaintiffs’ claim, and it is unnecessary to repeat it again here.2
1 Chen v Tawa Trade Finance Ltd [2023] NZHC 1333.
2 At [3] – [12].
[5] The defendant has filed a statement of defence and notice of opposition to the interim injunction application.
[6] Following this matter being referred to me on 5 July 2023, I requested the Registrar to arrange a telephone conference to be attended by the parties. The telephone conference was convened at 2.15 pm on 6 July 2023, and as noted above, the second plaintiff and the defendant Tawa, were both represented by counsel. However, the first plaintiff did not attend the conference and she was not represented by counsel. Mr Tan advised that he and his firm had been engaged by the second plaintiff to represent it shortly prior to the telephone conference and he confirmed that the first plaintiff had been informed and knew that the conference was to take place at 2.15pm.
[7] Mr Tan advised that the second plaintiff does not support or oppose the first plaintiff’s application for an interim injunction, and abides the Court’s decision.
Submissions
The first plaintiff
[8] The first and second plaintiff filed a brief memorandum dated 28 June 2023 signed by the first plaintiff stating that the properties would be “on mortgagee Auction or Tender at 4.7.23”, and urgently seeking an interim injunction to stop the mortgagee sale process pending further orders of the Court.
[9] Although the interlocutory application dated 24 June 2023 names only the first plaintiff as the applicant it is described on its title page as being made by both plaintiffs, and is signed by the first plaintiff on behalf of both the first and second plaintiffs. The principal grounds of the application are that the first plaintiff has applied for leave to appeal and for a stay of execution of Gordon J’s judgment in the “492” proceeding. Further grounds refer to errors by Gordon J not taking into account a verbal agreement by Tawa to renew one of the loans and by failing to take into account that “most Chinese do business more toward verbal agreement rather than written contract.” It is also alleged that Gordon J’s failed erred by not taking account of the loans being made to the first plaintiff personally and to a family trust, and are
commercial loans. It is also alleged that Gordon J failed to consider whether Tawa’s financial situation was “suspicious” because it had failed to provide its financial statements in the proceeding.
The defendant
[10] Mr Chisholm KC for the defendant refers to Tawa’s notice of opposition to the plaintiff’s application for an injunction, and submits that the plaintiffs have not shown that there is a serious question to be tried, and that the balance of convenience clearly favours the defendant. He submits that the overall interests of justice also clearly favour the defendant.
[11] Mr Chisholm notes that by application dated 26 June 2023, the defendant has applied for summary judgment against the first and second plaintiffs. And in support of its notice of opposition to the application for an interim injunction and in support of its application for summary judgment, the defendant has filed three affidavits, being: two affidavits by Yishong Xu, Tawa’s sole shareholder and director; and an affidavit by Siyu (Winnie) Deng who is employed by Tawa as a Finance Adviser Assistant. These affidavits exhibit the loan offer documents for the first and second loans and include the first plaintiff’s personal guarantee documentation, and the deponents state that there was no verbal arrangement entered into at any time by which Tawa agreed to extend the term loans beyond their terms. Ms Deng says that while Tawa did offer to extend the term of the first loan for a period of two months from 17 December 2022 to 17 February 2023, this was on the condition that the second plaintiff agreed to pay a lender fee, interest, and full repayment of the first loan by 17 February 2023. However there was no response from the plaintiffs to the offer.
[12] As regards the issue of whether there is a serious question to be tried, Mr Chisholm notes that the second plaintiff is a property developer and the first plaintiff is its director, and guarantor of a loan of $1,766,000 made by Tawa to the second plaintiff for a term of six months expiring 17 December 2022 (the first loan). The first plaintiff is also guarantor of another loan made by Tawa to the second plaintiff of $442,000 for a term of six months expiring 5 February 2023 (the second loan).
[13] The defendant says that it never agreed or represented that the first loan was to be renewed. The defendant says that the first loan offer was made on terms that required the first plaintiff to grant a first ranking mortgage over her property at Jeffs Road. The defendant says however that the first plaintiff failed to disclose that she had already entered into an agreement with another finance company, General Finance Limited (General Finance), to grant that company a first mortgage over her Jeffs Road property, and this was only discovered when General Finance registered a caveat on the title.
[14] Mr Chisholm says that the plaintiffs were therefore already in breach of the conditions of the first loan when Tawa advanced the funds to the second plaintiff on 17 June 2022. The second loan agreement was entered into after the plaintiffs accepted a written loan offer dated 28 July 2022. The term of the loan was six months and Tawa never agreed to extend the term, or represented that it would do so on “reasonable terms” as alleged by the plaintiffs.
[15] The defendant says that both the first and second loans were not repaid by the second plaintiff when they fell due and they remain unpaid and outstanding. Mr Chisholm says that the plaintiffs have not provided any evidence to support their allegation that the defendant breached statutory provisions related to its financing of the loans3, and he submits that the plaintiffs have failed to show that their statement of claim discloses any tenable cause of action.
[16] Mr Chisholm further says that the matters raised by the plaintiffs have already been addressed by this Court in the judgment delivered by Gordon J on 31 May 2023.4
Discussion
[17] The factual background to the two loans, the issue of whether Tawa ever agreed to extend the terms of the loans and the events that have followed expiry of the loans were addressed by Gordon J in her judgment of 31 May 2023 in which Her Honour also referred to her judgment in the related proceeding of Chen v General Finance Ltd
3 The Anti-Money Laundering and Countering Financing of Terrorism Act 2009; the Credit Contracts and Consumer Finance Act 2003; and the Fair Trading Act 1986.
4 Chen v Tawa Trade Finance Limited, above at n 1.
in which she declined the plaintiffs’ application to commence a proceeding against General Finance Ltd by originating application, and adopting the approach applicable to determining an application for an interim injunction,5 found that there was no serious question to be tried; the balance of convenience favoured General Finance; and that it was not in the interests of justice to grant an interim injunction and leave to commence the proceeding by origination application.6
[18] Addressing the merits of the same argument raised by the plaintiffs in support of this present application, Justice Gordon said:7
[30] The position is simply that the company took out two commercial loans from Tawa, a financial provider, with Ms Chen guaranteeing both loans. The loans were secured via mortgages on properties owned by the applicants. Tawa provided the applicants with a loan extension offer on 6 December 2022 that was subject to repayment conditions by 16 December 2022, however, the applicants did not accept the loan extension offer.
[31] Both loans expired (the first on 17 December 2022 and the second on 5 February 2023). A letter of demand was sent to the applicants on 23 February 2023 demanding the applicants to remedy the default, and upon the applicants’ failure to comply with the letter of demand, Tawa served a s 119 PLA notice on the company on 8 March 2023, and on Ms Chen on 9 March 2023. The PLA Notice had expired for both the company and Ms Chen by 9 May 2023. Tawa is simply seeking to enforce its contractual rights under the loan documentation.
….
[33] Regardless of what Ms Chen thinks of the rates proposed on any renewal of the loan, because there was no obligation to renew the loan, I do not find there was any oppression on the part of Tawa.
[34] I further do not accept Ms Chen’s submission that because Tawa did not renew the loan, it is not able to collect any unpaid interest after the term of the loan had expired. That cannot be right. Default interest is provided for in the contract. Ms Chen’s reliance on Li v Green Land Investment Ltd8 is misplaced. In that case the Court considered there were serious reasons to doubt the credibility and authenticity of the alleged term loan agreement. There was good reason to suspect that that agreement was a concoction rather than a single authentic document. That is not the case here.
…
5 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).
6 Chen v General Finance Limited [2023] NZHC 1329 at [34] and [35].
7 Chen v Tawa Trade Finance Limited, [2023] NZHC 1333 at [30] – [37]
8 Li v Green Land Investment Ltd, above n 2.
[36] The situation is the same here. There is no right at risk that the applicants will lose if Tawa exercises its rights under the PLA Notice prior to the substantive proceeding being determined.
[37] For all the above reasons, I conclude it is not in the interests of justice for the applicants to be permitted to commence their proceeding by an originating application.
[19] The plaintiffs have failed to provide any evidence to show that they have an arguable or tenable claim against Tawa that there was ever any agreement to extend the terms of the two loans, or that Tawa had ever made a representation to the plaintiffs that it would extend either of the loans.
[20] The fact that the plaintiffs have applied for leave to appeal from Gordon J’s judgment and have applied for an order for stay of execution of the judgment, are not sufficient grounds on which to obtain the interim injunction now being sought by the plaintiff. While the application for leave to appeal is yet to be determined, it is significant that the plaintiffs have failed to provide any evidence to support their claim that Tawa ever agreed to an extension of the terms of the two loans. To the contrary however, the detailed evidence in the affidavits by Tawa’s two witnesses and the signed loan documents which they have exhibited, confirm that no extension of the loans was agreed.
[21] I accordingly find that the plaintiffs have failed to show that they have an arguable case and failed to show that there is a serious question to be tried. The balance of convenience clearly favours the defendant. The terms of both of the two loans have expired and the defendant is entitled to take steps to recover the outstanding amounts due under the loan contracts from the second plaintiff as borrower, and the first plaintiff as guarantor of the loans.
[22] I have recently declined an application for an interim injunction by the first plaintiff and her family trust sought against General Finance Limited which has a registered first mortgage over another of the first plaintiff’s properties at 9 Sunderlands Road, Half Moon Bay, and a caveatable interest by way of security for its lending to the first plaintiff and her interests, over the property at Jeffs Road.9 This present
9 Chen v General Finance Limited [2023] NZHC 1758.
application by the first plaintiff is another instance of a meritless application being made in an attempt to prevent the finance companies from whom substantial sums were borrowed from exercising their contractual rights to recover the amounts of their loans.
[23] Having regard to the circumstances and background it is clear that the interests of justice do not require the making of an order for an interim injunction to preserve the interests of the first and second plaintiffs pending determination of their claim against the defendant in which they allege that there was an arrangement with the defendant for the extension of the terms of the two loans. There is no tenable evidence to support the plaintiff’s claim, while there is cogent evidence to the contrary.
[24]For these reasons I shall decline the application.
Result
[25] I make an order declining the first and second plaintiffs’ application dated 24 June 2023 seeking an order staying the defendant’s mortgagee sale of the properties 92 Jeffs Road, Flatbush; 4 Tipu Road, Flatbush; and 27 Living Stream Road, Albany pending determination of the plaintiffs’ claim in CIV 2023-404-427.
[26] The defendant having succeeded in opposing the plaintiffs’ application is entitled to an award of costs. I direct the defendant to file and serve a costs memorandum within 7 working days from delivery of this judgment, and the first and second plaintiffs to file and serve their costs memorandum within 7 working days from their receipt of service of the defendant’s costs memorandum. The costs memorandum of each party is not to exceed three pages in length. Upon the filing of the costs memoranda of the parties in accordance with this direction I shall proceed to determine costs on the papers.
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