Du v M5 Holdings Limited - [2020] NZHC 28

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-2124

[2020] NZHC 28

BETWEEN
JIANYU DU

Plaintiff

AND

M5 HOLDINGS LIMITED

First Defendant

DAVID COTTER
Second Defendant

YUE YANG
Third Defendant

FENG SHI

Fourth Defendant

Hearing: On the papers

Counsel:

D Zhang for plaintiff

A Manuson for fourth defendant

Judgment:

28 January 2020

JUDGMENT OF KATZ J

[Costs on discontinuance]

This judgment was delivered by me on 28 January 2020 at 4:30pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Amicus Law, Auckland
Prestige Lawyers Limited, Auckland

DU v M5 HOLDINGS LIMITED [2020] NZHC 28 [28 January 2020]

Introduction

[1] The plaintiff, Ms Jianying Du, issued proceedings against four defendants in respect of an investment that she attempted to make in the first defendant, M5 Holdings Limited (“M5”), which is a New Zealand company. The claims against the first, second and third defendants were subsequently discontinued.

[2] On 9 March 2017, I delivered judgment in favour of Ms Du against the fourth defendant, Mr Feng Shi, following a formal proof hearing. Mr Shi was not present or represented by counsel at the hearing. Both Ms Du and Mr Shi live in China.

[3] I found that in 2014, Ms Du had decided to invest in M5, which is in the business of manufacturing honey. She entered into an agreement (“the Agreement”) with Mr Shi, in which he agreed to transfer his 22.5 per cent shareholding in M5 to her for $270,000. The agreement included a number of representations, covenants and warranties on the part of Mr Shi as transferor. By 27 June 2014, Ms Du had paid the full share purchase price. Although Ms Du was initially added to the share register by Mr Shi, she was removed shortly after, due to Mr Shi’s failure to comply with the pre-emptive rights provisions in M5’s Constitution. I concluded that Ms Du had paid the full contract price for transfer of the shares, but Mr Shi had not fulfilled his part of the bargain and transferred the shares. Ms Du was accordingly entitled to the return of the purchase price for the shares, together with costs and interest.

[4] On 18 April 2018, I issued a further judgment awarding costs in favour of Ms Du. (I will refer to the two judgments collectively as “the Judgments”). Ms Du subsequently took steps to enforce the Judgments in the People’s Republic of China.

[5] Mr Shi then applied to this Court to set aside the Judgments, primarily on the basis that he had not been properly served with the proceeding. He claimed that he only became aware that there were New Zealand court proceedings against him in July 2018, when Ms Du sought to enforce the Judgments in China.

[6] I found that the proceeding had been properly served, but that the service documents did not comply with r 6.31 of the High Court Rules (“Rules”).1 The Judgments were accordingly set aside.

[7]…

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: [2020] NZHC 28
Decision Date: 28 January 2020

CaseChat Overview and Summary

Jianying Du, the plaintiff, commenced proceedings against four defendants in relation to an investment in M5 Holdings Limited, a New Zealand company involved in the manufacturing of honey. The claims against three of the defendants were discontinued, leaving only Feng Shi, the fourth defendant, against whom proceedings continued. In 2014, Ms Du had entered into an agreement with Mr Shi to purchase his 22.5 per cent shareholding in M5 for $270,000. Despite Ms Du paying the full contract price, she was removed from the share register due to Mr Shi's failure to comply with the pre-emptive rights provisions in M5's Constitution. The court found that Ms Du was entitled to the return of the purchase price, together with costs and interest. Mr Shi later applied to set aside the judgment, claiming improper service of the proceedings. The court found the proceeding had been properly served, but the service documents did not comply with High Court Rules. The judgment was set aside, and Ms Du discontinued the proceeding.

The court was required to decide what costs should be awarded to Mr Shi for his successful application to set aside the judgments and for the substantive proceeding. It was common ground that Mr Shi was entitled to costs, as Ms Du had discontinued the proceeding. The court found that the application to set aside the judgments should be treated as an interlocutory application rather than an originating application. It also found that, for the substantive proceeding, the costs claims for work on substantive claims should not be increased under r 14.6, as no statement of defence had been filed. The court concluded that the costs payable in respect of steps taken in the substantive proceeding were $956.

The court ordered that Ms Du pay costs to Mr Shi in the sum of $10,277 together with disbursements of $1,958, totalling $12,235. The court reasoned that the exercise of the discretion to award costs should follow the principles in r 14.2 unless there were special reasons to the contrary. The court found that there were no special circumstances in this case that would require a departure from the general approach. The interests of justice did not require an uplift for the factors raised by Mr Shi, and the costs claims for work on substantive claims should not be increased as no statement of defence had been filed. The court's final orders were that Ms Du pay costs to Mr Shi in the sum of $10,277 together with disbursements of $1,958, totalling $12,235.

Orders