Chongquing Jinzhiran Jiabochen Building Materials Co. Ltd v Huang
[2021] NZHC 3582
•21 December 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000832
[2021] NZHC 3582
IN THE MATTER OF an enforcement of a foreign judgment BETWEEN
CHONGQING JINZHIRAN JIABOCHENG BUILDING MATERIALS CO. LTD
Plaintiff
AND
YUANCHENG HUANG
Defendant
Hearing: On the papers Counsel:
S Lowery and D van Hout for Plaintiff
B Hollyman QC and T Mullins for Defendant
Judgment:
21 December 2021
JUDGMENT OF WOOLFORD J
[As to costs]
This judgment was delivered by me on Tuesday, 21 December 2021 at 11:30 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:Russell Legal (S Lowery and D van Hout), Auckland LeeSalmonLong (T Mullins), Auckland
Counsel: B Hollyman QC, Shortland Chambers, Auckland
CHONGQING JINZHIRAN JIABOCHENG BUILDING MATERIALS CO. LTD v HUANG [2021] NZHC
3582 [21 December 2021]
Introduction
[1] The defendant, Yuancheng Huang, applies for costs in relation to the plaintiff’s discontinued summary judgment application.
[2] The plaintiff, Chongqing Jinzhiran Jiabocheng Building Materials Co Ltd (CJJ), opposes Mr Huang’s application, and says that costs should be reserved in the ordinary way.
[3] In the substantive proceeding, CJJ seeks to enforce three decisions of Chinese courts against Mr Huang.
Background facts
[4] The defendant, Mr Huang, is the founder of the Yuancheng Group of companies in the People’s Republic of China (China). Yuancheng was a major freight and logistics company with a registered share capital of around NZD 327 m and 50,000 employees. The plaintiff, CJJ, is a company based in China which supplies construction material and capital loans.
[5] Yuancheng obtained a loan from CJJ of RMB 40 m (NZD 8.7 m), which Mr Huang personally guaranteed. Yuancheng defaulted on the loan. CJJ sued Yuancheng in China and obtained judgments in 2018 and 2019 against Mr Huang and the corporate debtors to the sum of NZD 5.6 m, plus interest. The judgment debt was not paid.
[6] Mr Huang resides in Auckland and has been ordinarily resident in New Zealand since late 2019. He has known assets in New Zealand, including 103 apartments in central Auckland.
[7] In May 2021, CJJ commenced proceedings against Mr Huang, seeking to enforce the Chinese judgments in New Zealand. The following timeline indicates relevant actions taken since then:
(a)2 June: Mr Huang was served with a copy of proceedings.
(b)15 June: CJJ’s solicitors, by letter, sought undertakings in relation to certain corporate assets and alleged that there was a risk Mr Huang would hide assets or abscond to avoid his debt obligations.
(c)18, 21 and 23 June: Mr Huang’s solicitors, by letters, rejected the allegations, asserted that Mr Huang was only made aware of the Chinese judgments once the current proceedings were served, sought further information and key documents from CJJ in relation to the Chinese judgments, and raised the lack of impartiality of Chinese courts as a key issue.
(d)25 June: Mr Huang filed an interim notice of opposition and affidavit in support; he also sought further time given the issues raised and the difficulties faced in obtaining evidence.
(e)25 June: CJJ sought and was granted a without notice freezing order in relation to Mr Huang’s New Zealand assets.1
(f)29 June: An interlocutory summary judgment application was granted, and a one day hearing scheduled for 27 October.2
(g)6 August: CJJ filed additional evidence.
(h)17 September: Mr Huang filed affidavits and an amended notice of opposition in response.
(i)18 October: CJJ discontinued its application.3
1 Chongqing Jinzhiran Jiabocheng Building Materials Co Ltd v Huang HC Auckland CIV-2021- 404-832, 25 June 2021 (Minute of Downs J).
2 Chongqing Jinzhiran Jiabocheng Building Materials Co Ltd v Huang HC Auckland CIV-2021- 404-832, 29 June 2021 (Minute of Gault J).
3 Chongqing Jinzhiran Jiabocheng Building Materials Co Ltd v Huang HC Auckland CIV-2021- 404-832, 20 October 2021 (Minute of Moore J).
Defendant’s submissions on costs
[8] The defendant, Mr Huang, submits that he is entitled to scale costs for the discontinued summary judgment application, with a small increase for preparing a defence and affidavits, given the complexity of the proceeding and the need to involve foreign experts.
[9] Mr Huang says that CJJ were aware that there were significant factual disputes between the parties that could only be resolved at trial, from 25 June 2021 (being the date on which his first affidavit was served). From this date, Mr Huang asserts that CJJ knew it would have difficulty proving that:
(a)New Zealand courts had jurisdiction; knowing that Mr Huang was a Hong Kong citizen and CJJ’s claims were split across three separate proceedings;
(b)Mr Huang had been afforded natural justice; knowing that Mr Huang claimed he did not know of the proceedings and had not been served with them;
(c)Enforcement would not be contrary to New Zealand public policy; knowing that Mr Huang had raised issues about the lawfulness of CJJ’s moneylending activities.
[10] Mr Huang relies on the Court of Appeal decision, NZI Bank Ltd v Philpott,4 which said that while the appropriate course in relation to most unsuccessful summary judgment applications is “to reserve the question of costs until the litigation is determined”, discretion remains to depart from the ordinary course if the party “embarked on summary judgment erroneously”, such as where it had “certain knowledge that there is a bona fide question of fact or law that can be determined only after a trial”.5
4 NZI Bank Ltd v Philpott [1990] 2 NZLR 403 (CA).
5 At [72].
[11] Mr Huang also cites Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Co Ltd,6 in which costs were awarded on a discontinued summary judgment application. In this case, the Judge observed that it had been a “bold move” for the plaintiff to proceed when it knew the application turned on points in respect of which there was “inevitably considerable scope for argument”, and that it had been “unwise” to ignore the defendant’s asserted right to a set-off.
Plaintiff’s submissions on costs
[12] The plaintiff, CJJ, says that costs should be reserved in the ordinary way. It submits that the presumption established by Philpott, that costs arising out of a summary judgment will ordinarily be reserved, should apply.
[13] CJJ says that there are no grounds which establish that CJJ filed the summary judgment application with certain knowledge of a question of fact or law which could only be determined after trial. It submits that Mr Huang’s affidavit of 25 June 2021 (June affidavit) makes bare assertions which are unsupported by, and inconsistent with, contemporaneous documentary evidence. In particular, the June affidavit provides no evidence to indicate that the Chinese judgments could be challenged on jurisdictional grounds. The court was therefore entitled to find that Mr Huang’s assertions disclosed no reasonably arguable defence.7 In these circumstances, CJJ submits it was entitled to advance a summary judgment application.
[14] CJJ submits that Mr Huang’s affidavit dated 17 September 2021 (the September affidavit) raised new factual disputes and matters of foreign law, which “altered the summary judgment calculus”. The amended notice of opposition filed the same day advanced new grounds of opposition to reflect the new evidence. In these circumstances, it was entirely appropriate for CJJ to withdraw the summary judgment application.
6 Emmons Developments New Zealand Ltd v Mitsui Sumimoto Insurance Co Ltd [2016] NZHC 1244.
7 The plaintiff refers to Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26] and Attorney‐ General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14.
[15] CJJ cites BSC Ltd v Sargon Capital Pty Ltd,8 in which the Associate Judge declined to order costs on a discontinued summary judgment application, as analogous. In this case, the plaintiff sought summary judgment against a defendant who had failed to settle a transaction. In response, the defendant alleged that the plaintiff had made fraudulent misrepresentations, and breached warranties and pre‐ completion obligations. The plaintiff discontinued its application after the defendant filed four affidavits in support of its opposition. The court reserved costs in accordance with the Philpott presumption.
[16] CJJ also cites the High Court decision, Dance v McLaughlin,9 in which the plaintiff sought costs on the defendant’s discontinued summary judgment. In this case, the summary judgment application was based upon expert evidence to the effect that the plaintiff’s causes of action could not succeed. In opposition, the plaintiff submitted an expert affidavit that said the opposite.10 Given the conflicting expert evidence, the defendant discontinued its summary judgment application. The court noted that costs should be awarded on a discontinued summary judgment application only in “exceptional cases”, such as “where it is crystal clear from the outset that the application had no prospect of success”.11 The court declined to order costs because it was not clear it was an abuse of process to seek summary judgment in these circumstances.
Defendant’s reply submissions
[17] Mr Huang says that CJJ’s submissions on costs exceed the three-page limit and include inaccuracies and omissions. In particular:
(a)There was no direct evidence to counter Mr Huang’s assertion that he had no knowledge of the Chinese proceedings;
(b)Mr Huang informed CJJ that he was a citizen of Hong Kong (not China) in a letter dated 15 June 2021;
8 BSC v Sargon Capital Pty Limited [2017] NZHC 2609.
9 Dance v McLaughlan HC Auckland CIV‐2003‐404‐5313, 19 December 2006.
10 At [11].
11 At [7].
(c)Mr Huang lacked access to key documents because CJJ had ignored his access requests;
(d)The fact that CJJ split its debt claim into three proceedings shows that CJJ knew the claim might be challenged on jurisdictional grounds;
(e)Mr Huang’s June affidavit was filed at short notice in support of an interim notice of opposition; the grounds of opposition and evidence did not change “significantly” between June and September.
Discussion
[18] Part 12 of the High Court Rules 2016 governs the procedure for summary judgments. This process enables parties to obtain judgment without the cost and delays attendant upon a full trial. It is only available in circumstances in which the defendant has no arguable defence, or the plaintiff’s causes of action cannot succeed:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[19] The onus lies with the party seeking the summary judgment to satisfy the court that the particular circumstances set out at r 12.2 justify the procedure.
[20] The approach to costs following an unsuccessful (or discontinued) summary judgment application was set out by the Court of Appeal in NZI Bank Ltd v Philpott. The Court relevantly stated:12
As with most questions of costs, they should be approached on broad principles. Whilst a defendant may be regarded as successful in one sense in resisting an application for summary judgment, it is of course not a final determination in the proceeding itself. If ultimately the plaintiff does succeed it seems to us in the general run of cases that the defendant should pay for both
12 At 405 – 406.
proceedings, the Court paying particular attention to the reasons why the plaintiff was unsuccessful in the first case. If those reasons include some question of fault on the part of the plaintiff then it may be appropriate to reduce or even eliminate an entitlement to costs for that part of the proceedings so far as the plaintiff is concerned. Where, however, the defendant has raised defences which cannot by their nature be resolved at a summary judgment application but ultimately turn out to have no basis, then costs on both sets of proceedings belong to the plaintiff.
There will be other cases where the plaintiff has embarked on summary judgment proceedings erroneously in the sense that the rules do not allow the summary judgment procedure, or in the certain knowledge that there is a bona fide question of fact or law which can be determined only after a trial. In those circumstances the Court should be able in its discretion to deprive the plaintiff of costs in those unsuccessful and abortive proceedings and award costs to the defendant.
Having regard to the difficulty in determining those matters until the case itself is concluded, in many cases the best course will be for the Judge or Master to reserve the question of costs until the litigation is determined. In some cases (and this may be one) the impecuniosity of the defendants may mean the plaintiff will not proceed to the more expensive contested hearing having failed at the summary judgment level. That does not mean that a defendant who feels he is entitled to costs is prevented from bringing the matter before the Court and having the question argued and obtaining an order if necessary. We repeat however that the incidence of costs is best settled when the result of the litigation is known. Hence the widespread practice as we see it of reserving costs in such situations. The Master may well indicate for the trial Judge the extent and duration of the argument on the application.
[21] The issue for determination in this case is whether CJJ proceeded with a summary judgment application with certain knowledge that the dispute involved a question of fact or law which could only be determined after trial. CJJ submits that the application was reasonably continued after 25 June 2021 as Mr Huang’s initial affidavit evidence appeared inconsistent and unsupported. It says that once Mr Huang filed further and more substantial evidence, and amended the grounds of opposition, it took the appropriate course of action and discontinued the application. On the contrary, Mr Huang argues that, from the date on which the June affidavit was filed, CJJ knew that key issues concerning jurisdiction, natural justice and enforcement could only be determined after a trial.
[22] After reviewing all the materials, I am of the view the application for summary judgment was appropriately filed on 6 May 2021 and appropriately continued after 25 June 2021 until such time as Mr Huang’s further and more substantial evidence and expanded notice of opposition were analysed by the plaintiff.
[23] The notice of opposition filed on 25 June 2021 was said to be an interim notice. It specifically stated:
3. The Defendant files this interim notice of opposition to set out the grounds of which he is aware at present, and subject to amendment when he has received further information from China.
[24] Paragraph 4(g) of the interim notice stated that the judgments were obtained contrary to natural justice, but acknowledged that the defendant had not been able to obtain full copies of the proceedings in China and had not received them from the plaintiff. The interim notice also stated it relied on:
such other grounds as may become apparent once the defendant has had the opportunity to review the conduct and process of proceedings in China.
[25]Mr Huang filed his first affidavit on 25 June 2021. He stated:
2.I intend to oppose the plaintiff’s application for summary judgment.
3.I am able to properly to do that at this stage as there are important documents and information I do not have possession of and have not seen before.
4.I have made requests for further documents and information from the plaintiff. Those requests are currently unanswered.
…
6.I make this affidavit in support of a request for an extension of time to file an opposition and affidavit evidence to the plaintiff’s application. I have set out a brief background below to provide some context.
[26] The affidavit is reasonably brief at six and a half pages. One of the headings in the affidavit is “Need for more time”. Mr Huang states:
15.After I was served with this proceeding in New Zealand, and found out about the awards, I instructed lawyers in China (Grandall law firm, Shandong) and senior counsel in New Zealand.
16.I have had my lawyers write to the plaintiff three times and request it provide full explanations and documents so I can understand what has gone on. I am still waiting on a response.
17.In the meantime, my lawyers in China have sought to obtain the files from the Chinese bodies that the awards relate to. To date, I have only been provided with incomplete files and the files are missing significant parts…
18.It is obviously important that I have those files so I can understand what has gone on. I will not be able to find out what happened in the proceedings until the full files are obtained and I have had a chance for them to be reviewed.
19.I do not know what happened with the appeals the plaintiff says were withdrawn, or what has happened over the last 2 years and more since the awards were apparently obtained and what steps the plaintiff has taken in China. Through my solicitors, I sought information from the plaintiff about that.
20.I cannot understand this situation for a number of reasons;
(a)I simply do not know what went on in the proceedings;
(b)I do not know why appeals were filed and apparently withdrawn
…
(d)I will not be able to understand any other irregularities until the full files are released to me…
21.More time is needed to review the Chinese claims to understand what the awards in fact relate to, how I am said to be personally liable, how the proceedings were conducted, why the claims have not been satisfied, and how any appeal was said to be made and then withdrawn.
[27] It was not until 17 September 2021 that Mr Huang’s notice of opposition was finalised and filed. At the same time, Mr Huang filed a further affidavit and additional affidavits from five other persons, totalling over 1,700 pages.
[28] I am also of the view that it was not unreasonable for CJJ to give detailed consideration to the new material before advising the Court, on 19 October 2021, that it discontinued its summary judgment application on the basis that Mr Huang’s notice of opposition and supporting affidavits filed on 17 September 2021 disclosed factual disputes which would make the proceeding better suited to a full hearing.
[29] I see no reason to depart from the presumption in NZI Bank Ltd v Philpott where the Court of Appeal stated that the appropriate course in relation to most unsuccessful summary judgments applications is to reserve the question of costs until the litigation is determined. CJJ did not embark on the summary judgment route erroneously. It did not have certain knowledge that there was a bona fide question of fact or law that could be determined only after a trial.
[30] I agree with counsel for the plaintiff that the bare assertions in Mr Huang’s June affidavit had to be verified. For instance, no evidence was provided to suggest that the Chinese judgments relied upon by CJJ could be challenged on jurisdictional grounds. Further, Mr Huang said he had no knowledge of the proceedings, yet counsel had appeared on his behalf, having submitted powers of attorney to the Chinese Court which had been signed by the defendant. Mr Huang now says counsel appeared without his knowledge or authorisation and explained that the powers of attorney may have been some old blank powers of attorney that he signed.
[31] In accordance with the principles set down in NZI Bank Ltd v Philpott, costs on the withdrawn summary judgment application are reserved.
Woolford J
0