Feng v Sea Tx Property Limited

[2024] NZHC 779

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2733

[2024] NZHC 779

BETWEEN

YANLANG FENG AND CHENGPIN CAI

Plaintiffs

AND

SEA.TX PROPERTY LIMITED

First Defendant

LING NING
Second Defendant

BARFOOT & THOMPSON

Third Defendant

Hearing:

15 March 2024

Counsel:

S Lu for Plaintiffs

T A Hwang for First Defendant
E R Harrison and C A Twyman for Second and Third Defendants

Judgment:

12 April 2024

JUDGMENT OF RADICH J

(First defendant’s application for leave to appeal out of time)

[1]    I gave my decision in this proceeding on 4 August 2023.1 In it, I ordered rectification of an agreement between the plaintiffs and the first defendant and ordered the payment of damages that arose as a consequence.

[2]    On 20 December 2023, I issued a further judgment in which, on the application of the plaintiffs, I recalled the substantive judgment in order to add interest to the

1      Feng and Cai v Sea.TX Property Ltd [2023] NZHC 2067, (2023) 24 NZCPR 434.

FENG AND CAI v SEA.TX PROPERTY LIMITED [2024] NZHC 779 [12 April 2024]

damages award.2 The application was supported by the second defendant and was, essentially, unopposed by the first defendant.

[3]    On 7 March 2024, the first defendant applied for leave to appeal, out of time, from my recall decision. The grounds of appeal relate to the substantive decision. The first defendant says that it can seek to appeal the substantive decision through the recall decision because the recall decision affects the substantive decision.

[4]    For the reasons I come on to give, I see this as being the wrong procedural pathway for the first defendant to take to appeal the substantive decision. There was an appeal as of right available from that decision, exercisable by 1 September 2023. Leave to appeal, out of time, can still be obtained from the Court of Appeal.

[5]    But I do not see an appeal from the recall decision as enabling the first defendant to raise the points that it wishes to raise on appeal about the substantive decision.

The substantive decision, the recall decision and the appeal

[6]In the substantive decision, I made orders:

(a)rectifying an agreement for sale and purchase between the plaintiffs, as purchasers, and the first defendant, as vendor, to give effect to the parties’ common intention that the purchase price for a property was to be $1.58 million including GST, rather than $1.58 million plus GST;

(b)requiring the sum of $237,000 (reflecting the value of the GST on the

$1.58 million purchase price that had been held in trust pending the outcome of the case) to be repaid to the plaintiffs as damages; and

(c)requiring the first defendant to pay to the plaintiffs the sum of $66,447 (being interest paid by the plaintiffs on the loan that was required to fund the payment of $237,000).

2      Feng and Cai v Sea.TX Property Ltd [2023] NZHC 3825.

[7]    The plaintiffs sought to recall the judgment for the purpose of including interest in the Court’s orders. The application was justified. The prayer for relief in the second cause of action sought interest under s 10 of the Interest on Money Claims Act 2016 and interest had not been included in the orders made in the substantive decision.

[8]    As is recorded in the recall decision, the first defendant did not oppose the recall request but asked that interest awarded not involve the double counting of interest. The double counting points were upheld in the recall decision:

(a)interest was not to be payable on the sum $66,447 as that sum was in itself an interest calculation; and

(b)interest on the sum of $237,000 (being the GST component of the purchase price and which was paid into trust) was payable only from  2 December 2019, when the loan the plaintiffs needed to take out to pay that GST component was repaid.

[9]    On 7 February 2024, the first defendant filed in the Court of Appeal a notice of appeal from both the recall decision and from a costs decision that I had issued on 12 October 2023. The errors alleged in the recall decision related, with one exception, entirely to the substantive judgment. The exception was a ground of appeal in which it was said that the Court “consequently erred” in awarding interest on the judgment sum in the recall decision.

[10]   A deputy registrar in the Court of Appeal declined to accept the appeal for filing because a recall decision is an interlocutory decision from which an applicant has no direct right of appeal.3

[11]   As a result, the first defendant has now applied to the Court for leave to appeal under s 56(3) of the Senior Courts Act 2016.

3      On the appeal from the costs decision, the applicant was advised by the deputy registrar in the Court of Appeal that it was out of time to exercise a direct right of appeal and would need to apply for an extension under r 29A of the Court of Appeal (Civil) Rules 2005 which, as I understand it, is what the first defendant has since done.

The recall decision is an interlocutory decision

[12]Section 56(3) of the Senior Courts Act is in the following terms:

No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.

[13]   “Interlocutory application” is defined in s 4(1) of the Senior Courts Act in the following way:

interlocutory application—

(a)means any application to the High Court in any civil proceedings or criminal proceedings, or intended civil proceedings or intended criminal proceedings, for—

(i)an order or a direction relating to a matter of procedure; or

(ii)in the case of civil proceedings, for some relief ancillary to that claimed in a pleading; and

(b)includes an application to review an order made, or a direction given, on any application to which paragraph (a) applies

[14]   It is sufficiently clear that a recall judgment is an interlocutory judgment in terms of s 56(3) of the Senior Courts Act.4 A recent example is provided in Navaratnam v HG Metal Manufacturing Ltd in which it was said for the Court of Appeal:5

The recall judgment was an interlocutory one and hence leave to appeal is required under s 56(3). Leave not having been obtained, the Deputy Registrar proceeded correctly in declining to accept the notice of appeal so far as it related to the recall judgment.

[15]   The first defendant appears to accept the principle, but its submissions on the point are not clear. Starting with a proposition that the recall decision “gives rise for the applicant to appeal both the substantive judgment as well as the recall judgment”, the first defendant has then said in its submissions that its “application for appeal is

4      Ding v James [2021] NZCA 578 at [15], referring to Sax v Campbell [2021] NZCA 346 at [2]; and

Jiao v Commissioner of Inland Revenue (2009) 24 NZTC 23,763 (HC) at [14].

5      Navaratnam v HG Metal Manufacturing Ltd [2021] NZCA 571 at [12].

based on the substantive judgment”. Referring to the requirement to seek leave to appeal interlocutory applications, the first defendant has gone on to say:

However, it is respectfully submitted that a recall decision needs to be distinguished from other “interlocutory” decisions which are interim in nature with an expectation that a substantive decision in the proceedings will follow.

[16]It then went on to say that:

… while the Recall Judgment technically required leave to appeal in this Court because a recall is classified as an “interlocutory  application” falling under  s 56(3) (instead of the exception under s 56(4) where there is an inherent right of appeal), recalls must be distinguished from the kind of interlocutory applications Parliament intended when enacting this section”.

[17]   The consequence of that, in the first defendant’s submission, is that leave should readily be granted.

[18]   However, I do not believe that this is the right way to consider the issues that arise. A recall decision is an interlocutory decision. Leave is needed. The fact that the interlocutory decision is a recall decision should not change the principles to be applied or the way in which they are applied. What it really comes down to is whether, if leave is granted, an appeal from the recall decision enables the first defendant to appeal also from the earlier, substantive, decision.

[19]   I come on to consider that issue after first addressing the accepted test for appeals from interlocutory decisions and the first defendant’s proposed grounds of appeal.

The test under s 56(3)

[20]The Court of Appeal set out the test to be applied under s 56(3) of the Act in

Greendrake v District Court of New Zealand:6

In Finewood Upholstery Ltd v Vaughan, to which Dunningham J referred to in the leave decision, Fitzgerald J appropriately observed that the requirement for leave to appeal should serve as a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not

6      Greendrake v District Court of New Zealand [2020] NZCA 122 at [6], citing Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].

unnecessarily delay the proceedings in which the orders were made. The following considerations were recognised as relevant on an application for leave to appeal:

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

(d)the circumstances must warrant incurring further delay; and

(e)the ultimate question is whether the interests of justice are served by granting leave.

Proposed grounds of appeal

[21]   As was the case with the notice of appeal that the first respondent sought to file in the Court of Appeal, and referred to in [9][8] above, the proposed grounds of appeal in the first defendant’s application for leave to appeal relate, over 11 subparagraphs, to particular aspects of the substantive decision. The twelfth subparagraph is the only one that mentions the recall decision. It is in the following terms:

The Court consequently erred in ordering the applicant to pay interest on

$237,000 from 2 December 2019 to the date of judgment to the first respondents.

[22]   Because it is said that the Court “consequently erred,” this ground relates to the substantive decision also. As the applicant said in its submissions, its “application for appeal is based on the substantive judgment”. The primary question then is whether that is possible or whether, as the plaintiffs and the second and third defendants say, it amounts to an abuse. It is a threshold question that arises before the considerations referred to in [20] can be addressed.

The fundamental hurdle

[23]   The plaintiffs and second and third defendants say that, if the first defendant seeks to appeal the recall decision, then the grounds of appeal must relate to the recall decision itself. They say that an application seeking on its face to appeal one decision

while, in substance, seeking to appeal another is an abuse of process. Reference is made to Walmsley v Aitchison, where Clark J said:7

[25] The present application is yet a further attempt to relitigate a point that has been addressed and determined by the Environment Court, the High Court and the Court of Appeal. The decision Mr Walmsley seeks to recall has been upheld by the Court of Appeal. It is extraordinary that he would seek to relitigate the issue in this way. The application is completely lacking in merit and constitutes an abuse of process.

[24]   There are a number of other decisions in which endeavours to use the recall process to challenge an underlying substantive decision has been found to be an abuse. They include Wu v Stalix Property Limited in which the Court of Appeal said that an attempt to relitigate matters already decided is not grounds for a recall but, rather, is an abuse of process8 and Ideal Investments Ltd v Earthquake Commission, in which the Court of Appeal said:9

[5]     A recall application cannot be used to relitigate the reasons provided in a leave decision. Nor can it be a means of collateral attack on a decision. A judgment should not be recalled in order to consider a challenge to substantive findings of fact or law, nor to allow a party to recast arguments previously made or advance arguments that could have been raised earlier but were not. Recall applications that do not engage with the established grounds for recall but rather attempt to re-open the merits of the judgment sought to be recalled are an abuse of process and will be dismissed on that basis.

[25]   While these decisions are directed at applications for recall themselves, there are parallels in the sense that, here, an appeal from the recall decision is sought in order to facilitate an appeal against the substantive decision. That cannot, in my view, be the right procedural pathway. An appeal as of right from the substantive decision was available. It was not exercised within time but the way to deal with that is an application in the Court of Appeal to bring an appeal out of time against the substantive decision itself. But, to attempt to reach back to the substantive decision through the recall decision, in relation to which no independent error of law or fact is raised, is in my view an abuse of process such that the first defendant’s application needs to be dismissed on that basis.

7      Walmsley v Aitchison [2019] NZHC 1551.

8      Wu v Stalix Property Limited [2022] NZCA 549 at [7].

9      Ideal Investments Ltd v Earthquake Commission [2023] NZCA 388.

The application of the s 56(3) test as a result

[26]   The ultimate question in the Greendrake test (which is set out in [20]) is whether the interests of justice are served by granting leave. In Rae v Commissioner of Police, the Supreme Court considered an application for leave to appeal under      s 74(1) of the Senior Courts Act.10 Like the test under s 56(3), the Court was required to consider whether it was in the interests of justice to hear and determine the proposed appeal. The Court said:

[23]   … considering [the question of whether granting leave would be in   the interests of justice] in the context of an application for leave to appeal against a recall decision, the Court will be aware that the applicant either has, or could have, applied for leave to appeal against the Court of Appeal’s substantive judgment. If, as can be expected in almost every case, the matters of concern to the applicant that led to the recall application could be addressed by this Court in an appeal against the Court of Appeal’s substantive judgment, it would not be in the interests of justice to grant leave to appeal against the recall judgment.

[27]   In a similar way here, and for the reasons given, the matters of concern to the applicant, outlined in its application for leave, are addressed appropriately by the Court of Appeal in an appeal from the substantive decision. Accordingly, the other Greendrake factors – identification of an arguable error of law or fact of sufficient importance and the circumstances that would warrant further delay – are most appropriately addressed through an application for leave to appeal from the substantive decision itself.

Related matters

[28]   The first defendant’s application for leave to appeal the recall decision was itself out of time, such that leave was needed in the first instance. It was only three days out of time and so I have proceeded on the basis that the short delay should not stand in the way of an assessment of the application on its merits.

[29]   The second related matter is that, on 7 March 2024, the first defendant filed an unsworn affidavit of its director, Xinyi Li. The affidavit was sworn by Ms Li in Tokyo on 14 March 2024. In the affidavit, Ms Li explains that she did not give instructions

10     Rae v Commissioner of Police [2023] NZSC 156, [2023] 1 NZLR 579.

to her lawyers to appeal from the substantive decision until late in December 2023. These are not matters that are relevant to the three-day extension sought for the application for leave to appeal from the recall decision. Rather, they are factors that are relevant in the context of an application for leave to appeal from the substantive decision out of time under s 29A of the Court of Appeal (Civil) Rules 2005.

[30]   Counsel for the plaintiffs and for the second and third defendants challenge the admissibility of the affidavit. They do so on both procedural and substantive grounds. Procedurally, it is said that the affidavit was not sworn in accordance with the relevant High Court Rules, that it was not filed in time and that it is not sufficiently relevant to this application. Substantively, it is said that the evidence does not assist the first defendant because, amongst other things, Ms Li accepts that she was advised of her right to appeal from the substantive decision, her evidence about being in a distant location with limited internet access was inconsistent with the ongoing communications between the parties about costs and about the recall application and because, it is said, medical records are not provided to support Ms Li’s evidence about feeling upset and anxious.

[31]   I have proceeded on the basis that the affidavit is admissible but that the evidence it seeks to give is not, for the reasons I have given, relevant to this application.

Costs

[32]   The plaintiffs and the second and third defendants seek costs on this application. Moreover, increased or indemnity costs are sought under r 14.6 of the High Court Rules 2016.

[33]   The increased costs are sought on the basis that, on 27 February 2024, counsel for the second and third defendants filed a memorandum in which they explained why, in their view, the application for leave to appeal was misconceived – for much the same reasons that I have given in this decision. They said that, in the event that the first defendant was to proceed with the application despite the concerns expressed, then increased or indemnity costs would be sought. The application is supported by the plaintiffs.

[34]   This is not a case in which, in my view, the first defendant has acted vexatiously, frivolously, improperly, or unnecessarily in bringing the application, in terms of r 14.6(4)(a). Nor is it a case in which there has been an unreasonable failure to comply with rules under r 14.6(3)(b)(i). It is a case in which, on the basis of the findings I have made, the first defendant has chosen the wrong procedural pathway. Costs should, as a result, follow the event but there is not in my view a basis for an uplift. Accordingly, the plaintiffs and the second and third defendants are entitled to a single award of costs, to be shared equally between them, on a 2B basis relating to the filing and hearing of this application.

Radich J

Solicitors:

Nolan & Lu, Hamilton for Plaintiffs

Queen City Law, Auckland for First Defendant

Wynn Williams, Auckland for Second and Third Defendants