Eight Mile Investments Limited v Liu
[2025] NZHC 736
•1 April 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-000761
[2025] NZHC 736
BETWEEN EIGHT MILE INVESTMENTS LIMITED
First Applicant
TAT BOR LEUNG
Second ApplicantAND
CHAOQIAN LIU
First Respondent
LL FUTURE LIMITED
Second RespondentRONG SU
Non-Party
Hearing: 13 March 2025 Appearances:
K Sun for the Applicants
No appearance for the Respondents C Jiang for the Non-Party
Judgment:
1 April 2025
JUDGMENT OF WALKER J
This judgment was delivered by me on 01 April 2025 at 3 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors:
Capstone Law Limited, Auckland Tompkins Wake, Auckland
Heritage Law, Auckland
EIGHT MILE INVESTMENTS LIMITED v LIU [2025] NZHC 736 [1 April 2025]
[1] This is an application by a non-party adversely affected by a freezing order by virtue of being a joint tenant in relation to various assets impacted by the order. The non-party, Ms Su, is the former wife of the first respondent in the proceeding, Mr Liu. The applicants, Eight Mile Investments Limited (Eight Mile) and Mr Leung, issued substantive proceedings together with an application for summary judgment against Mr Liu, in effect requesting the New Zealand court recognise and enforce a judgment of a Chinese court (the Foreign Judgment) against Mr Liu for RMB 28,026,788.54 (approximately NZD $6.7 million).1
[2] That judgment related to an agreement between Mr Liu and the applicants by which Mr Liu agreed to recover a debt from a third party and to distribute the proceeds to the applicants and Mr Liu himself. When Mr Liu failed to distribute an amount due to the applicants in accordance with the agreement, they commenced proceedings in China to recover it.
[3] On commencement of proceedings in New Zealand, the applicants also applied for without prejudice freezing orders. Those orders were made on 23 April 2024, over the assets of Mr Liu and LL Future Limited (LL Future), a company in which Mr Liu and Ms Su hold shares.
[4] Ms Su was not a defendant in the proceeding in China and nor was she a party to that judgment. Consequently, she is not a defendant in the substantive proceedings in this Court and not a respondent to the summary judgment application. Further, Ms Su was not a respondent or party to the freezing orders. Nonetheless, as a consequence of the orders, Ms Su has been unable to access funds to pay for her living expenses and those of her son, in respect of whom she says that she has sole custody. She also asserts she has been unable to pay her legal costs.
[5] This application by Ms Su to vary the freezing orders argues that there is no basis for the applicants to restrict Ms Su’s access to her half-share of the jointly held assets because they are only able to claim Mr Liu’s half-share even if successful in
1 The Foreign Judgment debt was for the sum of RMB 28,337,812.28 plus interest. However, following a payment of RMB 311,023.74 by Mr Liu, the applicants’ application for summary judgment was for the sum of RMB 28,026,788.54 (plus interest).
their claim.2 Ms Su applies to vary the freezing orders to permit her to sever her joint tenancies with Mr Liu.
[6] The applicants oppose Ms Su’s application but have not filed any evidence in support of the opposition. The grounds of opposition are various as follows:
(a)The Foreign Judgment debt is a relationship debt incurred during Ms Su and Mr Liu’s marriage, which was used for the benefit of both parties.
(b)Ms Su must apply to the Family Court for the Foreign Judgment debt to be determined as a personal debt of Mr Liu.
(c)The applicants have already recently consented to release $30,000 from the frozen assets for Mr Liu’s living costs.3 The release of $30,000 was consented on the basis that it covered the living costs of his family.
(d)Any severance of joint tenancy would undermine the purpose of the Freezing Order.
[7] The first respondent takes a neutral position on Ms Su’s application and abides the decision of the Court. He did not seek to be heard at the hearing.
Background
[8] Mr Leung and Mr Liu had business dealings together in China from the 1990’s until relatively recently.
2 Joint tenancy arises where a parcel of land is vested in two or more persons without any indication they are to take distinct and separate shares.
3 Eight Mile Investments Limited v Mr Liu HC Auckland CIV-2023-404-71, 9 December 2024 (minute of Edwards J). An amount of $90,000 was released for legal and ancillary costs along with $30,000 for living costs (for the period 16 September 2024 to 31 March 2025) as explained by the applicants. Previously by minute of Blanchard J (dated 15 July 2024) an amount of $50,000 was released for initial legal costs and $15,000 for living expenses (for the period to 15 September 2024). By minute of Moore J (dated 6 September 204) a further $115,000 was released for legal costs and disbursements.
[9] In 2014, Eight Mile,4 Mr Leung and Mr Liu signed an agreement to facilitate their business interests to pursue creditors of the businesses in China (the 2014 agreement). In October 2018, Mr Liu received a payment of RMB 48,956,040.92 from a liquidator of one of the creditors (the settlement payment). Eight Mile and Mr Leung’s position is that the 2014 agreement required Mr Liu to account to them for a share of the settlement payment.
[10] In May 2021, Eight Mile and Mr Leung commenced a proceeding (the Guangzhou proceeding) against Mr Liu in the Intermediate Peoples’ Court of Guangzhou City, Guangdong Province, China (the Guangzhou Court) to recover the amount allegedly due.
[11] On 30 May 2022, the Guangzhou Court entered judgment against Mr Liu for RMB 28,337,812.28 together with interest.
[12] Following a Ruling for Enforcement by the Guangzhou Court, Mr Liu paid a sum of RMB 311,023.74 to the applicants. They then sought summary judgment for the remaining RMB 28,026,788.54 (plus interest) against Mr Liu in New Zealand in the substantive proceedings.
[13] Judgment on the summary judgment application was delivered on 14 March 2025 (the day after this hearing) by Associate Judge Brittain.5 He held that the applicants had proved their case against Mr Liu and were entitled to judgment. Further, that Mr Liu had failed to discharge the evidential onus on him in respect of his asserted defences to the claim for recognition of the Chinese court judgment.6
[14] The freezing orders made in this Court restrain Mr Liu from disposing, dealing with or diminishing the value of:
(a)Mr Liu and Ms Su’s 499 shares (representing 55.44 per cent of total shares) in LL Future;7
4 Eight Mile is a company controlled by Mr Leung.
5 Eight Mile Investments Limited v Liu [2025] NZHC 526.
6 At [81].
7 Mr Liu and Ms Su additionally each hold one share individually; being 0.11 per cent of total shares.
(b)a property at 82 Orakei Road, Remuera, Auckland held by Mr Liu and Ms Su as joint tenants; and
(c)all bank or deposit accounts in Mr Liu’s name or control (which includes several bank accounts held as joint tenants with Ms Su).
[15] The freezing orders also restrained LL Future from disposing, dealing with, or diminishing the value of a property at 42 Clara Road, Silverdale, Auckland which was owned by the company.
[16] By consent order dated 12 June 2024, the freezing orders were varied to the following effect:8
(a)LL Future’s bank account was no longer subject to the freezing order and was permitted to sell the property at 42 Clara Road;
(b)55.55 per cent of net sale proceeds (being shares held by Mr Liu and Ms Su) would be held on escrow subject to the freezing order; and
(c)the expenses relating to sale (commission, conveyancing fees et cetera) would be deducted from the net sale proceeds.
[17] On 5 July 2024, 42 Clara Road was sold for $1,049,980.43 in accordance with the variation of the freezing orders, the net proceeds were transferred to the trust account of Queen City Law, solicitor for LL Future. 44.44 per cent of the net sale proceeds (being $404,387.52) was transferred to the unrelated third party and the balance of the net sale proceeds (being $505,575.39) continues to be held on trust for Mr Liu and Ms Su.
[18] As a result of the freezing orders, Ms Su has been prevented from dealing with the property at 82 Orakei Road, various bank accounts, the value of her shareholding in LL Future and, curiously, her own KiwiSaver account.
8 Eight Mile Investments Limited v Liu HC Auckland CIV-2024-404-761, 12 June 2024 (minute of Justice Moore).
[19] Ms Su maintains she had no involvement in the business dealings between the applicants and Mr Liu. Further, her evidence is that she divorced Mr Liu on 29 May 2024. She provides supporting documentation in the form of a translated certified copy of a civil mediation agreement entered into in Guangzhou Yuexiu District People’s Court of Guangdong Province, China, dated 29 May 2024. This was after commencement of the substantive proceeding. Relevantly, Ms Su explains that the funds released from the freezing order to date were made to Mr Liu only (as she is no longer married to him) and due to the restrictions over the bank accounts she has been unable to cover living expenses, credit card debt, rates, insurance, fixed power and water charges and the legal expenses incurred in relation to the freezing order.
[20] This is notwithstanding that the freezing order makes clear that the ordinary reasonable living expenses of a “respondent” and legal expenses incurred by a “respondent” in relation to the freezing order are not subject to the orders.
[21] Ms Su’s solicitors proposed a variation of the freezing orders on 29 July 2024, to allow for home loan repayments, property expenses, her credit card debt repayment, her living expenses and those of her dependent child, and legal costs.
[22] Solicitors for the applicants agreed only a variation in relation to the home loan and rejected the balance of her request, including as to living expenses and legal costs.
[23] Since that correspondence, solicitors for Mr Liu have resolved the question of payment of arrears of the home loan.
[24] On 20 December 2024, Ms Su made this application to vary the freezing orders, providing an affidavit in support and a further affidavit in response to the notice of opposition from the applicants.
[25] Mr Jiang, counsel for Ms Su, submits that there is no basis to restrict Ms Su’s access to her share of the joint property. He characterises the opposition by the applicants as effectively an application against Ms Su for a freezing order over her properties, without any evidential basis. He maintains that the Courts uphold contractual or equitable ownership arrangements with third parties in the context of a
debt claim, relying on Chambers v Grindley.9 He argues that where spouses are joint tenants, a spouse may sever their joint tenancy unilaterally by conduct and that separation of husband and wife may provide a basis for an inference of severance. He contends that Ms Su should be allowed to transfer her half of the assets to a bank account or bank accounts in her sole name.
[26] He criticises the applicants’ opposition to Ms Su’s application as being based on speculation that Ms Su and her former husband purchased property in New Zealand using funds from the disputed settlement payment received by Mr Liu in October 2018. Mr Jiang points to the evidence of Ms Su that those assets and properties were purchased using money that had existed prior to October 2018.
[27] In particular, 82 Orakei Road had been purchased in March 2018 using sale proceeds of their property in China:
(a)On 19 April 2017, Mr Liu and Ms Su sold a property in China for RMB 9,128,817.76 which was transferred into Mr Liu’s bank account.
(b)The couple immediately transferred NZD $1,260,000 to New Zealand and applied around $900,000 of that to the purchase of 82 Orakei Road in March 2018.
[28] Ms Su explains in her affidavit how their contribution to 42 Clara Road was financed and the source of the $1 million savings in the savings account. She deposes:
(a)Mr Liu and Ms Su had purchased 26A Cotter Avenue, Remuera for $1.3 million, which settled on 15 February 2017. They sold it for $1,645,800 and received net sale proceeds of $623,610 in settlement on 28 June 2018. This all took place prior to October 2018.
(b)After purchasing 82 Orakei Road in March 2018, Ms Su and Mr Liu still had around $1.1 million of cash left over from the sale of the property in China. Adding together that $1.1 million and the $623,610
9 Chambers v Grindley HC Wellington CIV-2006-485-000909, 21 March 2007.
from the 26A Cotter Avenue sale, they had a total of around $1.7 million cash in June 2018.
(c)They used $795,000 of the $1.7 million to purchase the apartment at 117/6A Nugent Street, Grafton, Auckland. The purchase took place in September 2018, by taking a nomination from the original purchaser. They then sold 117/6A Nugent Street on 12 December 2022 and received net sale proceeds of $921,536.67. This amount was later invested in LL Future (discussed below).
(d)The remainder of the $1.7 million was invested in LL Future. The company purchased and developed four sections in Silverdale. Three of the sections had been sold previously, and they made a profit. This is why there is $1 million in their savings account.
(e)The last property, 42 Clara Road, Silverdale was bought by LL Future in May 2023 and sold in July last year. As explained above at [16] a balance of around $500,000 is currently held on trust.
[29] The applicants argue that the Foreign Judgment debt is likely to be a relationship debt based on s 20 of the Property (Relationships) Act 1976 (PRA). They contend that it is for Ms Su to file proceedings in the Family Court to determine whether the sum is a relationship debt or personal debt (of Mr Liu), and the issue should not be determined in a summary fashion on application to vary a freezing order. Counsel for Ms Su maintains that the onus falls on the person asserting that the debt is relationship debt to provide sufficient evidence to establish that claim which the applicants have not done.10
[30] The applicants also argue that they have previously released funds to Mr Liu which they understood took care of Ms Su’s position, since there had been no prior mention of the parties’ separation or divorce.
10 Penn v McQueen [2019] NZHC 2192 at [51].
Discussion
[31] At the outset of the hearing, before the submissions of counsel on the substantive application, I challenged the parties as to why agreement had not been reached to release funds for Ms Su’s living expenses and legal costs. Mr Sun, on behalf of the applicants, confirmed that they do not oppose some funds being released provided the amount is based on sufficient detail to justify that release. This was an appropriate concession. Having indicated to the parties that I was inclined (before determining the substantive application) to vary the freezing order to accommodate reasonable living expenses and legal expenses, I invited them to confer to reach agreement on an appropriate sum.
[32] By joint memorandum dated 18 March 2025, the parties reached agreement as follows:
(a)That $100,000 shall be released from the ANZ term deposit account [REDACTED] to pay for Ms Su’s living costs from 23 April 2024 until 23 April 2025.
(b)That $50,000 be released from the ANZ term deposit account [REDACTED] to Ms Su to pay for her legal costs in relation to the freezing orders: being $40,000 to cover her legal costs and disbursements in relation to the freezing orders to date and $10,000 as a retainer for future legal costs in relation to the freezing orders.
(c)Leave is granted for Ms Su to come back seeking further living costs after 23 April 2025 and for further legal costs.
[33] I record that that position was reached without prejudice to their respective arguments in relation to the application to discharge the freezing orders.
[34] Along with the joint memorandum, the applicants sought to file a further memorandum expanding reasons for opposing discharge of the application. Counsel for the non-party protested on the basis no leave had been provided to file additional submissions. I agree. I put to one side that memorandum.
[35] The value of the relationship property that may be divided between spouses under the PRA is calculated by deducting any “relationship debts” owed by either or both spouses from the total value of the relationship property.11 The PRA defines “relationship debt” as follows:
20 Interpretation
(1)In sections 20A to 20E, unless the context otherwise requires,—
personal debt means—
(a)a debt that is not a relationship debt:
(b)a debt to the extent that it is not a relationship debt
relationship debt means a debt that has been incurred, or to the extent that it has been incurred,—
(a)by the spouses or partners jointly; or
(b)in the course of a common enterprise carried on by the spouses or partners, whether alone or together with another person; or
(c)for the purpose of acquiring, improving, or maintaining relationship property; or
(d)for the benefit of both spouses or partners in the course of managing the affairs of the household; or
(e)for the purpose of bringing up any child of the marriage, civil union, or de facto relationship.
[36] With the change in position enabling release of funds for living expenses (an inevitable outcome had Ms Su properly been a respondent to the application for freezing orders), I am not inclined to discharge the freezing order impacting Ms Su’s arguably severable property. My reasons are these.
[37] First, it would have the effect of stymying the applicants’ recovery on a summary basis at a point in time when they have not been able to explore the circumstances in which Ms Su claims to have separated from her husband. The fact of Ms Su’s asserted non-involvement in the business dealings between the applicants and Mr Liu does not preclude the debt from being treated as relationship debt. A
11 Property (Relationships) Act 1976, s 20D
relationship debt may be incurred by one partner without the knowledge of the other in certain circumstances.12
[38] Second, the proximity of separation and execution of a document termed a “mediation agreement” (provided by Ms Su in support of her separation) is an insufficient basis to warrant severance. Put another way, I am satisfied the applicants have an arguable case to sustain a freezing order of Ms Su’s interest in the assets currently subject to the order. This is notwithstanding her evidence of the use of separate funds for the purchase of properties in New Zealand. I note that the applicants’ claim is not that there is a proprietary interest in the New Zealand assets and so the source of funds is not a complete answer to the applicants’ position.
[39] Thirdly, and relatedly, there is an insufficient basis to determine whether or not the Foreign Judgment sum is a relationship debt based on s 20 of the PRA. The applicants have not provided evidence in support of their assertion because they are disadvantaged by information asymmetry, however inferences are available as a result of the timing of the claimed relationship split. The circumstances remain sufficiently unexplored that such a determination is premature.13
[40] Accordingly, I vary the freezing orders only insofar as making the orders by consent as set in [32] above. Otherwise, I dismiss the application to discharge the freezing order insofar as Ms Su’s claimed assets are concerned. A substantive determination on the matters she raises must be left over for another day.
[41] Although the application to discharge has failed, it has led to an agreed position in respect of release of some funds for Ms Su’s living expenses. In those circumstances, I consider that costs should lie where they fall. I make no order as to costs.
............................................................
Walker J
12 Johnson v Johnson [2023] NZCA 566 at [53].
13 PRA proceedings are not necessarily ones in which burden of proof is treated in the same way as in general civil litigation. See Johnson v Johnson [2023], above n 11, at [66].
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