Easternmanor Development Limited v Yeshe Development Limited

[2025] NZHC 1455

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-2342

[2025] NZHC 1455

BETWEEN

EASTERNMANOR DEVELOPMENT LIMITED

Plaintiff

AND

YESHE DEVELOPMENT LIMITED

Defendant

Hearing:	27 May 2025 (by AVL)
Appearances:	R O Parmenter for Plaintiff P J Wright for Defendant
Judgment:	5 June 2025

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 5 June 2025 at 2.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

………………………..

EASTERNMANOR DEVELOPMENT LIMITED v YESHE DEVELOPMENT LIMITED [2025] NZHC 1455 [5 June 2025]

[1]    Easternmanor Development Limited (Easternmanor) obtained summary judgment against Yeshe Developments Limited (Yeshe) in August 2023, following Yeshe’s failure to settle three vacant lots it had purchased from Easternmanor. All three contracts contained the same terms including price and provided that settlement was to be 20 working days after the issue of titles.1

[2]    The  summary  judgment  decision  was  not  appealed.   Easternmanor,  on   7 August 2024, issued a statutory demand against Yeshe, which it did not apply to set aside.  When  liquidation  proceedings  were  issued  by  Easternmanor, Yeshe  filed a statement of defence. Easternmanor applied to strike out the statement of defence as an abuse of process, on the basis that it raises a defence that could and should have been brought in the summary judgment application. By the time the matter came on for hearing, counsel had agreed the hearing could be treated as an opposed application for liquidation.

Defences raised in the summary judgment application

[3]    A number of defences were raised and rejected in the summary judgment hearing, but only one is relevant to the defence now relied on by Yeshe.

[4]    Under the heading “Breach of the Fair Trading Act 1986 — when were titles to issue”,  the  summary  judgment  decision  addressed  the  evidence  of  Mr Miao, a director of Yeshe. Mr Miao, in his affidavit in the summary judgment proceeding, said: “The agent for [Easternmanor] stated the titles for the properties would be available in March/April 2022 at the latest”. Titles did not issue until November 2022. I note in this proceeding, Mr Miao says the agent told him title would issue in February/March 2022.

[5]    Mr Miao referred to a WeChat message with the real estate agent who was referred to in the summary judgment decision as “Gary”. The WeChat message produced was dated 3 February 2022, however, the contracts in issue were made on

1      Easternmanor Development Ltd v Yeshe Development Ltd [2023] NZHC 2317 [the summary judgment decision].

21 October 2021. Presumably that was why the defence was raised under the Fair Trading Act.

[6]    I recorded in the summary judgment decision that the WeChat message was not relied on as a pre-contractual misrepresentation, given that it came after the date of the contracts when Yeshe had committed to purchase the properties. I also queried whether Gary continued to be the agent for Easternmanor at the time of these statements, but noted that, in any event, it was not claimed the WeChat message had caused Yeshe  to  act in  a certain way or  refrain  from acting in a particular way.      I concluded that the WeChat messages did not provide an arguable defence.

Yeshe’s defence to the liquidation proceeding

[7]    Mr Wright, counsel for Yeshe, said in his written submissions that Yeshe’s present defence raises an issue not previously put before the Court. Yeshe now says that Easternmanor’s agent (Gary) made false statements prior to Yeshe entering the contracts. It is said Gary represented that titles for the sections in question would be ready by February or March 2022 permitting settlement to occur shortly thereafter. It is said such statements were false, as Easternmanor was unable to call for settlement until November 2022 when the titles actually issued.

[8]    Mr Wright submits this factual matter raises the question of whether Yeshe has a defence by way of equitable set-off by reference to a pre-contractual misrepresentation by Easternmanor’s agent and/or misleading or deceptive conduct.

[9]As to why this defence was not raised earlier, Mr Wright says:

17.The  directors’ evidence in the director proceedings is that they  told  the defendant company’s and their previous barrister about this when he was preparing Yeshe’s defence in the main proceedings. The directors do not know why it was not relied on or raised at that time. Unfortunately the previous barrister passed away unexpectedly in April 2024.

Easternmanor’s response to the “new” defence

[10]   Easternmanor’s strike-out application was based on the proposition that the argument of pre-contractual misrepresentation could and should have been brought as

a defence in the summary judgment application. For the same reason, Mr Parmenter, counsel for Easternmanor, submits the defence cannot succeed, and Yeshe should be placed in liquidation.

[11]   While summary judgment is granted on an interlocutory application, the resulting judgment is a final order.

[12]   I gratefully adopt Associate Judge Paulsen’s statement of the principles from his judgment in Waikoro Ltd v Beach Arena Ltd.2

[13]   The starting point in a consideration of this application is the right of citizens to have access to the courts for the determination of their disputes. In Johnson v Gore Wood & Co, Lord Bingham said, “litigants are not without scrupulous examination of all the circumstances to be denied the right to bring a genuine subject of litigation before the court.”3 However, as was noted by the Court of Appeal in Craig v Stringer, access may be properly denied where a litigant seeks to misuse the court’s processes for an improper purpose such as to vex, harass or embarrass another party or to reopen disputes that have already been determined which is precluded by the doctrine of res judicata.4

[14]   In Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd, Lord Sumption noted res judicata is a portmanteau term used to describe different legal principles with different juridical origins.5 The first principle, known as cause of action estoppel, is that once a cause of action has been held to exist or not to exist, that outcome may not be challenged by either party in subsequent proceedings. The fourth principle, known as issue estoppel, is that even where the cause of action is not the same in a later action as it was in an earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties. The fifth principle, first formulated by Wigram V-C in Henderson v Henderson,6 precludes a party from raising

2      Waikoro Ltd v Beach Arena Ltd [20221] NZHC 1673 at [46][50].

3      Johnson v Gore Wood & Co [2002] UKHL J1214-3, [2002] 2 AC 1 at 24 cited in Craig v Stringer

[2020] NZCA 260 at [14].

4      Craig v Stringer, above n 3, at [15] and [16].

5      Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160 at [17].

6      Henderson v Henderson [1843] 6T ER 313 (Ch).

in subsequent proceedings matters which were not, but could and should have been, raised in the earlier ones.

[15]   Lord Sumption referred to Johnson v Gore Wood & Co7 as the most important decision directed against the abuse of process involved in seeking to raise in subsequent litigation points which could and should have been raised before. He quoted from the judgment of Lord Bingham of Cornhill as follows:8

But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole.  The bringing of a claim or the raising of   a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will  be much more obviously abusive, and there will rarely be  a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because the matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits–based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.

[16]These   principles   are   well   established   in   New   Zealand   law.9      In

Lai v Chamberlains, Elias CJ referred to Johnson v Gore Wood & Co, stating:10

Lord Bingham considered that what constitutes abuse as a “broad, merits – based judgment”, incapable of capture in hard and fast rules of determination and not limited to further litigation between the same parties or their privies. Lord Millett in the same case thought it “primarily an ancillary and salutary principle” which prevents res judicata and issue estoppel being “deliberately or inadvertently subverted”.

7      Johnson v Gore Wood & Co, above n 3.

8 At [47].

9      See, for example, Craig v Stringer, above n 3, at [17]; and Broadspectrum  (New  Zealand)  Ltd v Nathan [2017] NZCA 434 at [49].

10     Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7 at [62] (footnotes omitted), cited in

McGougan v De Puy International Ltd [2016] NZHC 3170 at [93].

[17]   The Court of Appeal in Craig v Stringer noted the underlying policy upon which the principle is based:11

… is to promote finality in litigation and ensure a defendant is not oppressed by successive suits. The objection is not that the law will not contemplate or tolerate apparently inconsistent decisions.

[18]To the above statements of principle, I would add the following passages from

Res Judicata and Double Jeopardy:12

[8.06] It has been suggested that many, if not most, res judicata cases are the result of some procedural error on the part of counsel for the party against whom the plea is being made. This must be especially true for cases of estoppel by omission, where in the first suit counsel for both sides have to predict what matters another court in a later suit will have expected them     to bring forward in the first action. However the courts have not been sympathetic to such difficulties, and on the whole have been content to leave lawyers to learn about the scope of estoppel by omission by trial and error in the hard school of experience.

…

[17.05] The negligence of a party’s legal advisor in failing to bring every part of a claim forward in the first action or to anticipate the subsequent operation of issue estoppel will not amount to a special circumstance. In the words of Stuart-Smith LJ:

“The mere fact that a party is precluded by the rule [of estoppel] from advancing a claim will invariably involve some injustice to him, if it is or may be a good claim, but that cannot of itself amount to a special circumstance, since otherwise the rule would never have any application.”13

In Chiron Corporation v Organon Teknika (No 6) a claim that the defendants did not have sufficient time to prepare their case properly was rejected as amounting to a special circumstance on the facts.

(footnotes omitted)

[19]   Mr Wright’s   submissions   effectively   acknowledge   that   the   claim    of a pre-contractual misrepresentation could and should have been raised at the summary judgment hearing, but attributes the failure to do so to counsel error.   That was        a responsible concession given Yeshe’s position it told former counsel about the claimed representation. That acknowledgement means that Mr Wright has to argue the merits mean that the interests of justice stand against finding an abuse of process.

11     Craig v Stringer, above n 3, at [18] (footnotes omitted).

12     Res Judicata and Double Jeopardy by Paul A McDermott.

13     Talbot v Berkshire CC [1993] 4 All ER 9 at 16.

[20]   Given, as noted above, counsel error is likely to play a part in most situations where an argument could and should have been raised but was not, if recourse to counsel error was an answer to the principle in Henderson v Henderson, it would deprive that principle of any real effect.14 This is consistent with what Wigram V-C said in Henderson v Henderson, that it is not enough to say a matter was “… not brought forward only because [of] …. negligence, inadvertence or even accident…”.

[21]   I do not accept Mr Parmenter’s primary submission that this is a situation of issue estoppel or cause of action estoppel. The defence that I rejected in the summary judgment application involved an allegation that a WeChat message in February 2022 gave rise to a breach of the Fair Trading Act. The claim Yeshe raises in resisting liquidation is that there was a pre-contractual misrepresentation by Easternmanor’s real estate agent. As I have said, Yeshe says the agent represented before the contracts were entered into that titles would be available February/March 2022. That is said to give rise to  a  cause  of  action  under  the  Contract  and  Commercial  Law Reform Act 2017.

[22]   Had both claims been made in the summary judgment hearing, it is possible that there could have been different outcomes in respect of each allegation. The Fair Trading Act cause of action was dismissed in the summary judgment decision, but had the pre-contractual misrepresentation been raised and, of course, subject to what might have been said in reply and in submissions, the summary judgment application might have been declined. Determination of the Fair Trading Act cause of action would not have decided an issue that would make the pre-contractual misrepresentation claim untenable. The misrepresentation and Fair Trading Act claims are distinct.

[23]   I   am   satisfied   that   the   applicable   principle   to   consider   in   assessing Easternmanor’s response to the statement of defence is that arising from Henderson v Henderson.

14     Henderson v Henderson, above n 6.

The broader assessment — are the overall merits of the omitted alleged defence relevant?

[24]   That a defence “could and should” have been raised in a prior proceeding does not necessarily mean raising it in a later proceeding is an abuse of process.

[25]In Anura Ltd v Sealegs International Ltd, the Court of Appeal said:15

Determining whether the claim or defence should have been raised in the earlier proceeding, so as to make the raising of it in a later proceeding an abuse of process, involves a broad merits-based judgment that takes account of all circumstances. The underlying purpose is to encourage finality in litigation and avoid the oppression of subjecting a party unnecessarily to successive actions or defences. The burden is on the party alleging abuse to establish there is an abuse.

[26]   Mr Wright emphasised that Yeshe’s evidence as to the alleged pre-contractual telephone call from Eastenrmanor’s real estate agent in which the agent is alleged to have said that titles would be available in February/March 2022, is not disputed.

[27]However, the Court of Appeal in Anura said:16

[59] The practical difficulties in raising a claim or defence, of  the  sort raised by Sealegs, are undoubtedly part of the relevant circumstances to be considered in assessing whether the claim or defence should have been raised earlier and whether it is therefore an abuse of process to raise it now. There is nothing to be gained (and likely much to be lost in clarity of analysis) by engaging in a broad merits-based judgment of the prior question whether the claim or defence could have been raised earlier.

[28]   The Court in Anura focused on whether it was feasible and reasonable in the circumstances for the omitted claim not to have been brought earlier when determining if it could and should have been raised, such that the subsequent attempt to raise it was an abuse of process. Accordingly, the merits-based process focuses more on whether, in the circumstances, the claim should have been brought, rather than the merits of the claim/defence itself.

[29]   Here, the only factor raised as to why the defence was not raised at the time of the summary judgment hearing is the allegation of counsel error. However, given

15     Anura Ltd v Sealers International Ltd [2024] NZCA 538 at [52].

16 At [59].

Mr Wright’s focus on the merits of the omitted defence, I make brief comments on those merits.

[30]   I see a number of factors weighing against the merits of the claim Yeshe now wishes to raise. The first is that what the real estate agent is meant to have said was  a statement  about  the  future.   The  starting  position,  therefore,  is  that  it  is  not  a representation, but rather a statement of opinion. As stated by the learned author’s of Burrows Finn and Todd on the Law of Contract in New Zealand: “As with statements of opinion generally, statements as to future fact cannot themselves form the basis of a misrepresentation but may imply statements of present fact”.17 Yeshe does not identify what it was about the facts existing at the time the alleged statement was made that was not correct, that is, the implicit statement of the then present fact that was false.

[31]   The second is the fact that in a WeChat message dated 3 February 2022 reproduced in the summary judgment decision at [14], Mr Miao asked the real estate agent whether there was “any update on the estimated time for settlement”? (emphasis added). Mr Miao’s reference to the agent giving an estimated time for settlement is inconsistent with the idea there was a clear commitment by the agent that titles would be available, and certainly weakens any claim that reliance was reasonable.

[32]   The WeChat exchange in February 2022 is also significant because it does not contain a complaint by Yeshe that titles were not  going  to  issue  in  February/March 2022. In that exchange the real estate agent referred to the titles being available “Say May to June” — no protest is then raised by Mr Miao. Nor was there any protest from Yeshe about the alleged pre-contractual misrepresentation when it was called upon to settle.

[33]   Mr Miao’s evidence as to exactly what he told prior counsel in this regard, is scanty. He says:

33. Ian and I told Noel King, our previous barrister, about Gary saying the sections would be ready in February to March before we signed the contracts and then March to April and later, when he was preparing

17     Stephen Todd and Matthew Barber  Burrows  Finn  and  Todd  on  the  Law  of  Contract  in  New Zealand (7th ed, LexisNexis, Wellington, 2022) at [11.2.1] at 11.2.1.

our previous affidavits in this claim and the claim against Yeshe. I do not know why he did not put this information in those affidavits.

[34]   The reference in the above quote to “Ian” is to Mr Wang, who is also a director of Yeshe. Mr Miao does not expressly claim that he told counsel about the telephone calls in which the statements relied on were said to be made. That might be an overly critical observation but what does not make sense is why there was no affidavit from Mr Wang in opposition to the summary judgment.

[35]Mr Wang, in an affidavit sworn in a related proceeding, said:

William and I told Noel King, our previous lawyer, that Gary had told us the sections would be ready in February to March 2022 before we signed the agreements. We told him this before we swore our affidavits in the earlier proceeding Easternmanor brought against Yeshe. I do not know why he did not put it in my previous affidavits.

[36]   The “earlier proceeding” is the summary judgment hearing. However, no affidavit from Mr Wang was, as far as I can ascertain, filed in that proceeding.

[37]   Mr Miao does not explain the process by which his evidence in the summary judgment hearing was prepared. Mr Wright submitted a person is entitled to rely on their lawyer’s assessment of what should go into affidavits, and a party cannot be expected to second-guess that assessment. However, that submission highlights the limited nature of Mr Miao’s evidence as to his discussions with former counsel.

[38]   Yeshe’s position does not depend on an understanding of the law of pre-contractual misrepresentation. Its position is as simple as saying the vendor’s agent gave assurances as to when title would be available and those assurances were not honoured. Yeshe says as a result of the delay in settlement, it suffered loss. One would expect this basic proposition to have been at the heart of what was conveyed to counsel, and its omission from Mr Miao’s affidavit to have been recognised by him.

[39]   During the hearing, Mr Wright, in response to a question I asked, advised he had part of former counsel’s file but that there is nothing in the evidence which is said to have come out of that file that supports Yeshe’s position. Having put instructions to former counsel in issue, such amounts to a waiver of privilege.

[40]   No steps were taken by Yeshe between the issuing of the summary judgment decision on 24 August 2023 until proceedings were issued by Easternmanor against the directors of Yeshe which led the directors, in their evidence of 13 June 2024 in that proceeding to refer to the telephone call from Gary now relied on. Mr Wright submits that Yeshe’s failure to advance the cross-claim it now asserts from 24 August 2023, was due to the matter still being in the hands of former counsel.

[41]   I am asked to believe that experienced  former  counsel failed to recognise     a straight cross-claim in the form of a pre-contractual misrepresentation that could, on Yeshe’s case, be supported by the evidence of two directors. That is a difficult submission to accept  when  the  same  counsel  recognised  the  need  to  frame  the 3 February 2022 WeChat message as a breach of the Fair Trading Act. Mr Miao has a Commerce Degree majoring in accounting and finance, having graduated from Auckland University in 2006. He would have understood that the affidavit he signed did not outline what, from his point of view, was the key event which, as he would have it, led to Yeshe entering the contracts.

[42]   The reality is that Yeshe’s present argument means that Easternmanor’s judgment from August 2023 is unenforceable. No application for a stay of enforcement has been made in respect of Easternmanor’s judgment in order to permit Yeshe’s cross-claim to be brought.

[43]   Mr Wright sought that the application to liquidate Yeshe be declined on the condition that Yeshe bring its claim promptly. There is no evidence as to why that claim could not have been brought earlier.

[44]   Omission of counsel is not an exception to the rule in Henderson v Henderson. I find it is an abuse of process for Yeshe to seek to raise the claimed pre-contractual misrepresentation as a defence to the liquidation proceeding when it is accepted it could and should have been brought at the time of the summary judgment hearing. The same allegation was made by Yeshe, albeit as a post-contractual Fair Trading Act claim. It follows I am satisfied Yeshe does not have a defence to the application it be placed in liquidation.

[45]   Accordingly, there is an order that Yeshe Development Limited be placed into liquidation, with the Official Assignee appointed liquidator. The order is timed at

2.00 pm on Thursday 5 June 2025.

Costs

[46]Mr Parmenter sought a short time to file submissions on costs.

[47]   Mr Parmenter is to file any submissions on costs (of not more than five pages) within 10 working days. Any reply (also restricted to five pages) is to be filed within 10 working days.

Associate Judge Lester

Solicitors:

Heritage Law, Auckland (for Plaintiff) Elite Legal, Auckland (for Defendant)

Copy to counsel:

R O Parmenter, Barrister, Auckland (for Plaintiff)

P J Wright and J A R Barrow, Barristers, Auckland (for Defendant)