Feng v Ye
[2014] NZHC 2377
•30 September 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-003988 [2014] NZHC 2377
BETWEEN BIN FENG
Plaintiff
AND
YINGZHEN YE Defendant
Hearing: 11 September 2014 Appearances:
Royal Reed for the Plaintiff
Ming Pang for the DefendantJudgment:
30 September 2014
RESERVED JUDGMENT OF MOORE J
This judgment was delivered by on 30 September 2014 at 3:30pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
FENG v YE [2014] NZHC 2377 [30 September 2014]
Introduction
[1] Bin Feng and Yingzhen Ye are Chinese nationals. Their relationship began in Auckland in July 2006. They married three years later. There is one child of their union, born in 2010.
[2] In February 2011 the couple separated and have been living apart ever since. Ms Ye has moved back to China where she now lives with the couple’s child. While Ms Ye returns to New Zealand from time to time, Mr Feng lives in New Zealand.
[3] In the course of their marriage the couple brought two properties in New Zealand; a residential unit in Eden Terrace, Auckland and a section of vacant land in Rotorua. The properties are now registered in their joint names.
The Chinese proceedings
[4] Following their separation, Mr Feng commenced proceedings in China to settle the various matrimonial matters between the parties. These proceedings were filed in Futian People’s District Court of Shenzhen City, Guangdong Province. The proceedings took the form of a mediation which was presided over by a Judge. A certified copy of the transcript, entitled, “Written Records of Trial” was produced as well as another document referred to as the “Paper of Civil Mediation”. It is signed by the Judge, dated the same date as the transcript, i.e. 16 January 2013, and records what the parties had agreed to in the course of the mediation.
[5] At the mediation the parties agreed to a variety of issues to resolve their matrimonial differences. Amongst them was the division of property. The two New Zealand properties were to be transferred to Mr Feng in exchange for the payment of
150,000 yuan. However, there is a disagreement as to the sequence in which this was to be undertaken. Mr Feng says the agreement was for him to pay the funds into the Court and Ms Ye would effect the transfer after the funds were received in Court. Ms Ye says the funds were to be paid directly to her and she would then effect the transfer into Mr Feng’s name. Thus the focus of dispute is not on the amount of the monies to be transferred or what, once transferred, was to happen. It is simply a dispute over the order or sequence in which these steps were to be undertaken and
for this reason the correct interpretation of the two documents referred to above, the
Written Records of Trial and the Paper of Civil Mediation are said to be central.
[6] The Paper of Civil Mediation records seven issues which were resolved during the course of the mediation. In the context of settling matrimonial differences the heads of agreement are unremarkable and cover the following:
(a) dissolution of marriage;
(b) custody and maintenance arrangements; (c) child access;
(d) details surrounding the transfer of the New Zealand properties; (e) cash payment by Mr Feng to Ms Ye;
(f) discharge of liabilities with the Agricultural Bank of China;
(g)the agreement is in full and final settlement of all outstanding matrimonial issues.
[7] For the purposes of these proceedings it is (d) above which is of greatest relevance. The transfer of the properties under (d) was to be achieved by Mr Feng paying 150,000 Yuan (the approximate equivalent of NZ$30,000) to Ms Ye and within 10 days of receiving payment Ms Ye was to “… handle the formalities of property transfer registration”.
[8] One of the difficulties which this Court has been placed in is that in the absence of expert evidence on Chinese law and evidence as to what the legal effect of the documents relied on is, it is possible only to draw inferences from the face of the documents themselves. Although this is plainly unsatisfactory the issues in this case are not complex and are not dependant on legal interpretation or comparative law.
[9] As noted, the two primary documents which the parties rely on are the Written Records of Trial and the Paper of Civil Mediation. Certified translations were produced in evidence. There is no dispute over the accuracy of the translated versions. The dispute is that the parties are not agreed as to the documents’ meaning and effect.
[10] The Written Records of Trial appears to be a verbatim transcript of the mediation with the “plaintiff”, Mr Feng, agreeing to various outcomes with the “defendant”, Ms Ye, and the Judge tending to intervene to confirm not only the various areas of agreement but also the final outcome.
[11] At the end of the Written Records of Trial the Judge is recorded as stating:
Judge: This mediation agreement shall have legal force when the two parties of the Plaintiff and the Defendant sign on it, the service of paper of civil mediation will no longer (sic) the requirement of validity. Do the two parties be clear and agree to it?
The Plaintiff: Clear and agrees to it. The Defendant: Clear and agrees to it.
[12] Following this exchange the document concludes with the following:
Judge: Today’s court trial will end, all parties shall sign the record after
checking it. Court closed.
(The judge knocks at gavel)
Court Clerk: All rise, judge is leaving court.
[13] Thus, on its face, the Written Records of Trial would appear to be legally binding once the parties signed it. The translated version indicates the parties did sign it.
[14] However, this leaves the status and effect of the Paper of Civil Mediation uncertain. If the Written Records of Trial, on signing, binds the parties what is the effect of the Paper of Civil Mediation? And in any event does it actually matter in the context of the present case? On its face the one page Paper of Civil Mediation appears to be a summary of the agreement which repeats the seven heads of agreement. The last paragraph reads as follows:
The two parties have reached an unanimous consent that this Paper of Civil Mediation will come to force after both parties affix their signatures on the Written Records of Trial.
[15] This tends to support the inference that the Written Records of Trial is the determinative document.
[16] The Paper of Civil Mediation is signed by the Judge of the Shenzhen Futian People’s District Court and dated 16 January 2013, the same date as the Written Records of Trial. It would appear to be the equivalent of what in this jurisdiction would be described as a Court order but I received no evidence on that point.
[17] There is a difference between the two documents which, it is argued, is material in the circumstances of this case. It is the primary area of disagreement. Paragraph 41 concerns the transfer of the New Zealand properties to Mr Feng. The relevant portion reads as follows:
The petitioner Feng Bin shall pay the 150,000 Yuan one-off compensate (sic) payment to the respondent Ye Yingzhen. The respondent Ye Yingzhen shall assist the petitioner Feng Bin to handle the formalities of property transfer registration in 10 days after receiving all payment.
[18] In other words the Paper of Civil Mediation requires Mr Feng to pay the
150,000 Yuan directly to Ms Ye.
[19] However, this provision is in contrast to the Written Records of Trial where the parties appear to agree that Mr Feng will pay the 150,000 Yuan to the Court rather than directly to Ms Ye.
[20] The relevant passage records as follows:
The Plaintiff: With respect to 150,000 Yuan paid to the Defendant by the Plaintiff, the Plaintiff will voluntarily apply for the execution of Court in consideration of the fact that the Defendant is needed to co-ordinate the handling of house properties in (sic) overseas, this payment shall be paid into court account. The Defendant will directly apply for this payment through court after the Defendant assists the Plaintiff to complete the transfer and registration of house property in New Zealand.
The Defendant: The Defendant agrees to it.
1 Paragraph [6][d] of this judgment.
[21] The transcript then records the seven heads of agreement which are also repeated in the Paper of Civil Mediation. In particular clause 4, which relates to the transfer of the properties to Mr Feng’s name, records:
4. The house property located in 5 Ngahura Street, No. 3 of Eden Terrace in Auckland, New Zealand and land located in 93A TIHI ROAD, Rotorua, New Zealand registered in the name of the Plaintiff Feng Bin and the Defendant Ye Yingzhen, will be in the possession of the Plaintiff Feng Bin, the Plaintiff Feng Bin will pay for the Defendant Ye Yingzhen one off
150,000 Yuan, the Defendant Ye Yingzhen will assist the Plaintiff Feng Bin to conduct house property alternation (sic) registration procedures within 10
days after receiving payment, all expenses incurred in house property
alternation (sic) registration procedures and attorney fees shall be borne by the Plaintiff Feng Bin. The Plaintiff Feng Bin shall pay an additional 10,000
Yuan to the Defendant Ye Yingzhen if the Defendant Ye Yingzhen is needed to go to New Zealand for co-ordination of conduct of house property alternation (sic) registration procedures;
[22] The dispute arising out of these documents and which it is argued is relevant to the proceedings in this Court is that Mr Feng claims under the Written Records of Trial he was obliged to make the payment of 150,000 Yuan to Ms Ye via the Court. In contrast, Ms Ye claims that the documents plainly convey that Mr Feng’s obligation was to make the payment directly to her.
[23] In any event, consistent with his stated belief, Mr Feng paid the required sum into the Court. He prepared the relevant documents to give effect to the transfer of the properties to his name and attempted to contact Ms Ye without success to execute them.
[24] He then applied to the Futian People’s District Court to enforce the order but it appears that because the subject property was in New Zealand the Court ordered his remedies should be enforced in New Zealand. The funds he paid into the Shenzhen Futian District People’s Court were returned to him.
[25] Also, somewhat confusingly, Ms Ye applied to the same Court sometime later for an enforcement order requiring Mr Feng to make the payment directly to her. In doing so it appears she relied on clause 4 of the order contained in the Paper of Civil Mediation, namely that the 150,000 Yuan be paid to her in exchange for which she would cause the properties to be transferred to Mr Feng’s name within 10 days of
receiving the payment. The Court found in her favour and directed Mr Feng to comply with its earlier order in terms of the Paper of Civil Mediation.
[26] Thus, there is no dispute between the parties that Mr Feng is required to pay Ms Ye 150,000 Yuan and that Ms Ye on receipt of that payment would, within 10 days, co-operate in having the properties transferred into Mr Feng’s name. The dispute is in relation to the appropriate mechanism; whether the payment should have been made via the Shenzhen Futian District People’s Court or directly to Ms Ye.
[27] There is, however, another area of disagreement between the parties although this assumed a good deal less prominence in argument. This is in relation to the proper interpretation of clause 6 of the Paper of Civil Mediation and clause 6 of the Written Record of Trial. Both relate to the same issue and are expressed in similar language. The dispute between the parties again appears to relate more to sequence
rather than substance. Clause 6 of the Paper of Civil Mediation records as follows: 2
6. The loan contract worth 210000 yuan signed with the Agricultural Bank of China, Shenzhen Longhua Branch by the petitioner Feng Bin and the respondent Ye Yingzhen on May 4, 2009 and all rights and duties under the name of the petitioner Feng Bin and the respondent Ye Yingzhen will be enjoyed and borne by the petitioner Feng Bin, which is to say the loan of the contract shall be paid back by the petitioner Feng Bin. However, this agreement is not allowed to be used against the Agricultural Bank of China, Shenzhen Longhua Branch;
[28] It would appear that the funds owed to the Agricultural Bank of China are, at least in part, mortgage funds in relation to the New Zealand properties. Mr Feng has agreed to repay the loans owed to the bank but is not inclined to do so until Ms Ye has transferred the properties to his name. Conversely, Ms Ye appears unwilling to transfer the properties until she is satisfied that all her liabilities to the Agricultural Bank of China have been extinguished. Thus, again, the argument is not that Mr Feng refuses to discharge the mortgage or repay the bank. He accepts that he agreed to do this. It is simply he does not accept he is obliged to do so until Ms Ye has
transferred the properties to him.
2 Paragraph [6][f] of this judgment.
[29] When it became apparent in the course of argument that these issues were the sole basis of disagreement; each relating to form rather than substance, I suggested that it would be in the best interests of all if the matter could be settled simply by agreeing on the mechanism by which the funds might be transferred and held pending settlement of the properties. I took a short adjournment for that purpose and invited the parties to confer. On my return to Court I was advised that the parties were unable to agree and the hearing continued.
The New Zealand proceedings
[30] Having been directed by the Shenzhen Futian People’s District Court that his remedies in relation to the New Zealand properties should be pursued in New Zealand, Mr Feng commenced proceedings in August 2013 against Ms Ye in this Court seeking an order that she perform her obligations under the agreement. The claimed obligations arose from her agreement under the mediation that she would transfer the properties into Mr Feng’s name. Mr Feng applied at the same time for substituted service. In his affidavit in support Mr Feng said his solicitors had spoken with Ms Ye regarding her obligations under the agreement but she refused to sign the documents for the transfer. He said he applied to have the mediation agreement enforced in China but because the properties were located in New Zealand he was obliged to bring proceedings in this jurisdiction.
[31] In support of the application for substituted service Mr Feng deposed that the respondent lived in China and he did not know whether or when she intended to return to New Zealand. He said that it was not possible to gain access to her private apartment in China because it could be accessed only if Ms Ye permitted it.
[32] He said that the respondent’s solicitors in China had advised him he could contact the respondent in relation to these matters through her email address. He listed her email addresses as:
(a) “Hotmail A”;
(b) “Hotmail B”.3
[33] The application for substituted service came before Bell AJ. His Honour ordered service by email at the nominated addresses.
[34] On 11 September 2013 the proceedings were served electronically in accordance with the orders for substituted service.
[35] No response was received from Ms Ye and accordingly Mr Feng applied for and obtained judgment by way of formal proof from Gilbert J on 9 April 2014.
[36] On 16 April 2014 the defendant was served with a copy of the judgment by email.
[37] On 19 May 2014 Mr Feng applied to enforce Gilbert J’s orders that the
properties be transferred to him.
[38] On 5 June 2014 Ms Ye applied to set aside Gilbert J’s judgment on the grounds that she had not been served with the proceedings, the orders for substituted service had been improperly obtained and the order transferring the New Zealand properties did not reflect the content of the mediated agreement in its entirety.
Current Application
[39] Ms Ye first invites this Court to set aside Gilbert J’s judgment of 9 April 2014 claiming she was not served. She goes further. She claims Mr Feng knew where she lived and thus could have attempted to have had her served personally.4 However, Bell AJ’s orders for substituted service were complied with. Service was effected in accordance with that order. What Ms Ye is saying is that service was ineffective because she was not given notice of the proceedings. She is, in effect, asking this
Court to invalidate the order for substituted service.
3 In the interests of privacy, the email addresses are not recorded.
4 High Court Rules, rr 6.11 and 6.27.
[40] Under r 15.10 any judgment obtained by default may be set aside if the Court considers there may have been a miscarriage of justice.
[41] Grieg J put it this way:5
The authorities are plain that where a default judgment is irregularly obtained the defendant is entitled ex debito justitiae to a setting aside. It is to be noted further that it is an irregularity in obtaining the judgment rather than the irregularity in the judgment itself.
[42] If the judgment was regularly obtained the test is whether it is just, in all the circumstances, to set aside the judgment. Relevant factors include:
(a) the party’s failure to appear was excusable;
(b) there is a substantial ground of defence;
(c) irreparable injury to the party that obtained the judgment would result if the judgment was set aside.
[43] Considering these factors it is necessary for the Court to step back and consider whether, in the circumstances, there has been a miscarriage of justice.6
Was the judgment irregularly obtained?
[44] Ms Ye submits the judgment was irregularly obtained because:
(a) Mr Feng knew Ms Ye’s physical address at the time of filing the
statement of claim and the application for substituted service;
(b)no attempt was made to personally serve the statement of claim under rr 6.11 or 6.27. Mr Feng could have personally served Ms Ye;
5 O’Shannessy v Dasun Hair Designers Ltd [1980] 2 NZLR 652 (HC) at 654; applied in Williams v
Van Loghem Investments Ltd [2012] NZHC 829 at [21].
6 Caltex Oil (NZ) Ltd v McIntosh HC Napier CP123/87, 10 November 1988.
(c) Mr Feng knew the email which Ms Ye was using which was a gmail account. He did not disclose it to the Court and thus breached his duty to disclose all material facts. This failure resulted in an irregularity.
[45] Under r 6.27 leave was not required for Mr Feng to serve Ms Ye overseas. If the proceeding was not served that would certainly amount to an irregularity.7
However, in the present case, the order for substituted service was complied with.
Was Ms Ye served?
[46] Putting to one side the power to invalidate an order for substituted service, I am satisfied that the order was not only properly made but that service was effected by email. My reasons follow:
(a) Mr Feng’s unchallenged evidence is that Ms Ye’s Chinese lawyers
told him he could contact her via her email addresses.
(b) Ms Ye said that she stopped using the “Hotmail A” address on 20 May
2013 because she had started a new job and was using her new work email. Furthermore, she said that she was “fed up” with the problems she was encountering using hotmail in China because of the Chinese internet “Great Firewall”. She said she started to use the address again on 14 January 2014 to receive product information from a long- time friend. She has given no explanation as to why this address, rather than any other, was reactivated for that purpose while she was still in China or why the problems she had previously encountered with hotmail in China later permitted her to start using it again when, it seems, other email addresses she claims she was using were not
encountering similar problems.
7 White v Weston [1968] 2 QB 647 (CA).
(c) She said she continued to use this email address after she returned to New Zealand on 31 March 2014. At that stage she found the account was cluttered with hundreds of junk emails and had to go through these individually. Then, around early April 2014, she said she bought some products using this address. Again, she gave no explanation why she used this address in preference to others she had used or was using. On 11 April 2014 she decided to clear up the junk mail. In other words, on her account, it was sheer coincidence that within a few days of the orders being made by Gilbert J she started to clear an email account she had earlier neglected despite access to several other email addresses. It was then she discovered an email relating to the proceedings.
(d)She said that immediately after she saw “the emails” related to this matter she obtained preliminary legal advice. It is apparent from her affidavit that initially she saw only one email but later she refers to seeing “… the emails that are related to this current matter”. Her affidavit is silent as to when she first saw these emails. However, if it was around April 2014, the first email leaves unexplained what the other emails she saw were or why it was not until 16 April 2014 she first took steps by lodging the notice of claim against the two titles. It also seems a remarkable coincidence that this occurred on the same day that Mr Feng’s solicitors sent Ms Ye the order made by Gilbert J. In the circumstances it is more likely that Ms Ye’s conduct relative to the emails and contact with her lawyers is consistent with a belated appreciation on her part that she could no longer ignore the significance and effect of the proceedings against her.
(e) The other email address used to serve the proceedings, “Hotmail B”, was, according to Ms Ye, hacked by an unknown third party who reset the password. Since 2010, Ms Ye says she has been unable to access it. That claim is disproved by an email from that same address which Ms Ye sent to Mr Feng on 9 May 2013 in which she advised him that she was back in New Zealand and was ready to discuss the
outstanding property and land issues with him. She provided him with her New Zealand cellphone number and invited him to contact her as soon as possible. This email was sent only four months before the order for substituted service was made. It is also notable that there is no reference anywhere in that email suggesting that Mr Feng should use another email address or that the other hotmail address was not being used by her. It is unsurprising that Mr Feng nominated this email address for substituted service.
(f) Furthermore, Ms Ye said that at all relevant times the email address she was using and continues to use was “Gmail A”.8 Apparently this was because the Great Firewall does not block gmail correspondence as effectively as hotmail.
(g) Ms Ye produced a copy of this gmail account for the period 22 May
2013 to 27 March 2014. Over that 11 month period only 17 emails appear to have been received by her which, given the other evidence of her regular, if not prolific, email usage is on any analysis an extraordinarily modest and uncharacteristic usage. I do not accept this was the principal email account used by Ms Ye over the relevant period. In the course of argument I was referred to one email in that inbox. While the date is difficult to decipher it appears to be August or September 2013. It records an email received from yolanda_yip. The carrier name is not recorded. If it was the hotmail account it adds to the evidence which supports the conclusion Ms Ye was still using the purportedly hacked hotmail address in August/ September 2013, in other words at about the time the orders for substituted service were made. Mr Pang, for Ms Ye, submits this email was sent from another email account, [email protected] and produced a screen shot of an email, in Chinese characters, sent from that account on 8
September 2013. In the end, I do not need to determine whether the yolanda_yip address used in August/September 2013 was from Ms
Ye’s hotmail or gmail account. Her use of the “hacked” hotmail
8 In the interests of privacy, the email address is not recorded.
account to correspond with Mr Feng just a few months before the orders for substituted service were made satisfies me that service was effective and that her attempts to explain her failure to file a defence or otherwise acknowledge service cannot be advanced on the grounds she was not served.
[47] I am satisfied Ms Ye was properly served. It follows that I find judgment was regularly obtained as service not only complied with the order for substituted service but was effective in the sense Ms Ye was, in fact, served.
[48] Even if I am wrong, I am not satisfied it would be just in all the circumstances to set aside the judgment.
Judgment regularly obtained
Does Ms Ye have a substantial ground of defence?
[49] Ms Ye submits she has a substantial ground of defence. She accepts that she carries the onus of establishing a substantial ground of defence9 and that it is a defence which ought to be heard.10 She submits that the Paper of Civil Mediation is the binding document rather than the Written Records of Trial and that the discrepancy as to the means by which the 150,000 yuan is to be paid by Mr Feng demonstrates this. She also relies on the Enforcement Order she obtained against Mr
Feng.
[50] As noted earlier in this judgment, the only area of dispute is whether in order to give effect to the transfer, Mr Feng is to pay the 150,000 yuan into Court or directly to Ms Ye.
[51] There is no dispute between the parties as to the essence of the agreement irrespective of whether reliance is placed on the Written Records of Trial or the Paper of Civil Mediation. Both require Mr Feng to pay Ms Ye 150,000 yuan. In
exchange for that payment Ms Ye has undertaken to transfer the properties to
9 Pioneer Farms Limited v Stoddard [2012] NZHC 3114 at [24].
10 Sandall v Cardno HC Blenheim 2/87, 10 June 1987 at [3].
Mr Feng within 10 days. Furthermore, Mr Feng has undertaken to discharge all the liabilities he owes to the Agricultural Bank of China.
[52] Those are the relevant obligations of the respective parties. There is no disagreement as to these obligations; only the order and mechanism by which they should occur. It follows that although Ms Ye has a technical defence to Mr Feng’s claim and the orders made by Gilbert J, this defence is of little substance and does not result in a miscarriage of justice.
Has Ms Ye explained her failure to take steps?
[53] As discussed above I am not satisfied on the evidence Ms Ye has a reasonable explanation for her delay in defending the substantive proceedings. I am satisfied that she was properly served and was given notice of the proceedings. She failed to take any steps to defend the claim until it became apparent to her that Mr Feng was moving to enforce the orders made by Gilbert J.
Will Mr Feng suffer irreparable harm?
[54] Ms Ye claims that Mr Feng will not suffer irreparable harm if the judgment is set aside. Ms Ye does not accept Mr Feng’s assertion that his mother is presently servicing the mortgages over the New Zealand properties. Ms Ye asserts that Mr Feng could mortgage other properties to release the necessary funds to service them.
[55] Mr Feng submits there is no reasonable explanation for Ms Ye’s delay in defending the proceedings and that the ongoing and significant delays are unreasonable and are causing him significant costs.
[56] While I do not accept irreparable harm will be caused to Mr Feng if Gilbert J’s judgment was set aside, I do agree with him that the delay is unreasonable and that there appears to be no justified reason for Ms Ye not to comply with the orders already made.
Result
[57] Ms Ye’s application to set aside the judgment of Gilbert J of 9 April 2014 is
dismissed.
[58] Mr Feng’s application for orders that the following properties be transferred
to him is granted:
(a) an apartment owned by the parties and situated at 3 Ngahura Street, Unit 5, Eden Terrace, Auckland (Certificate of Title 55644); and
(b)vacant land owned by the parties and situated at 93A Tihi Road, Rotorua (Certificate of Title 413104).
[59] I do not make an order in terms of (1)(b) of Mr Feng’s application of 19 May
2014 seeking orders that Mr Feng and/or the Registrar is authorised to sign any such documents as are necessary to give effect to the transfer of the properties on behalf of Ms Ye. Those orders do not take account of Mr Feng’s corresponding responsibilities to Ms Ye to pay the 150,000 yuan or discharge Ms Ye’s liabilities under the Agricultural Bank of China loan. Furthermore, the application seeking those orders was framed on a without notice basis before Ms Ye participated in the proceedings. Ms Ye is now on the record. She does not claim she has no obligation to effect the transfer of the properties. The parties can utilise the services of their respective solicitors to ensure that Ms Ye, in consideration for effecting the transfers, will receive the equivalent of 150,000 yuan from Mr Feng who will also discharge the debt owed to the Agricultural Bank of China, Shenzhen Longhua Branch.
[60] If the parties, through their solicitors, are unable to agree on how these respective obligations are to be given effect, leave is reserved to apply to this Court for further orders. Any application for further orders must be made within 10 days of the date of this judgment.
Costs
[61] Costs on these proceedings are awarded to Mr Feng on a 2B basis with disbursements as fixed by the Registrar.
Moore J
Solicitors:
R Reed, Auckland
M S Pang, Auckland
2
0