Chen v Tawa Trade Finance Ltd - [2023] NZHC 1333

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-000492

[2023] NZHC 1333

BETWEEN
LIYUN CHEN

First Applicant

LC1521319 DEVELOPMENT CO LIMITED
Second Applicant

AND

TAWA TRADE FINANCE LIMITED

Respondent

Hearing: 25 May 2023

Appearances:

Self-represented Applicants I Ko for the Respondent

Judgment:

31 May 2023

JUDGMENT OF GORDON J

This judgment was delivered by me on 31 May 2023 at 11 am, pursuant to
r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:
Turner Hopkins, Auckland Copy to: the Applicants

CHEN v TAWA TRADE FINANCE LTD [2023] NZHC 1333 [31 May 2023]

Introduction

[1] The first applicant, Liyun Chen, and the second applicant, LC1521319 Development Co Ltd (the company), (together, the applicants) have sought permission to apply by originating application to set aside a letter of demand and a Property Law Act 2007 (PLA) notice issued by the respondent Tawa Trade Finance Ltd (Tawa) until the applicants’ claim in a separate proceeding (CIV-2023-404-427) is determined.

[2]Tawa opposes the application.

Background

[3] The company, a property development company, took out two commercial loans from Tawa, a finance company providing second tier lending services. Ms Chen is the sole director of the company and guaranteed the loans in her individual capacity and in her capacity as sole trustee for the Royall Family Trust.

[4] The first loan was in the sum of $1,766,000 with an expiry date of 17 December 2022. The loan was secured by a mortgage over a property owned by the company, and a mortgage over a property owned by Ms Chen. The second loan was in the sum of $442,000 with an expiry date of 5 February 2023.1 That loan was secured by the existing securities under the first loan agreement and an additional mortgage over another property owned by Ms Chen.

[5] The dispute arises from the point at which Ms Chen sought to renew or extend the loan in light of the upcoming expiry date of the first loan. Ms Chen says first that Tawa agreed to extend the loan for an additional six months before the drawdown in August 2022, and then agreed to extend the loan for an additional two months with high lender fees and other fees of approximately $200,000.

[6] In her affidavit in support of the opposition, Siyu (Winnie) Deng, a financial adviser assistant at Tawa, says that this is incorrect. The first and second loan

1 The Term Loan Agreement for the second loan stipulates the term expiry date as 5 February 2022. However, as the term start date is only 5 August 2022, this must be incorrect and the date of 5 February 2023, as written in the affidavit, is to be taken as the correct date.

agreements contain no clauses indicating that the loans would be automatically extended after their respective expiry dates and the default position is that the loan must be repaid upon that automatic expiry. The loans are not extended unless there is…

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 1333
Decision Date: 31 May 2023

CaseChat Overview and Summary

The case of Chen v Tawa Trade Finance Ltd involved the applicants, Liyun Chen and LC1521319 Development Co Ltd, seeking permission to apply by originating application to set aside a letter of demand and a Property Law Act 2007 notice issued by the respondent, Tawa Trade Finance Ltd, until the applicants’ claim in a separate proceeding was determined. The applicants claimed that Tawa had refused to renew their commercial loans and had breached various statutes, while Tawa opposed the application and denied the allegations made by the applicants. The court was required to decide whether it was in the interests of justice to permit the applicants to commence the proceeding by way of an originating application, and whether there was a serious question to be tried.

The court held that it was not in the interests of justice for the applicants to commence their proceeding as an originating application. The court found that there was no obligation for Tawa to extend the term of the loan, and that the applicants had not accepted the loan extension offer provided by Tawa. The court also found that the applicants did not have a legal or equitable right at issue that may be prejudiced by Tawa exercising its rights under the Property Law Act. The court further found that even if it had granted leave, the application would fail on the merits, as it was the applicants who did not accept the loan offer extension, and Tawa was not obligated to provide information to the applicants in relation to the Anti-Money Laundering and Countering Financing of Terrorism Act. The balance of convenience would also favour Tawa, as the applicants’ substantive claim was a claim for damages.

The applicants' application to commence their proceeding by an originating application was therefore refused. Costs were reserved, with the parties required to file and serve memoranda within specified timeframes if costs could not be agreed.

Orders