Han v Zhu
[2021] NZHC 3007
•8 November 2021
NOTE: IN RELATION TO PARAGRAPH [39] ONLY, PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT
REFERRING TO THE CONTENT OF [39] OF THIS JUDGMENT MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980.
FOR FURTHER INFORMATION, PLEASE SEE
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1082
[2021] NZHC 3007
UNDER the Contempt of Court Act 2019 BETWEEN
HONGZE HAN
Applicant
AND
LANYING ZHU
Respondent
Hearing: 1 November 2021 Appearances:
K Sun for the Applicant
K Puddle for the Respondent
Judgment:
8 November 2021
JUDGMENT OF GORDON J
This judgment was delivered by me on 8 November 2021 at 2 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Capstone Law Limited, Auckland
K3 Legal Limited, Auckland
HAN v ZHU [2021] NZHC 3007 [8 November 2021]
[1] The applicant, Hongze Han and the respondent, Lanying Zhu, were married. They separated in around 2013 and their marriage was dissolved in August 2015. On 28 February 2017, Judge S J Fleming in the Family Court at Auckland, after a formal proof hearing in the absence of Ms Zhu, made orders that a property in Gillies Avenue, Epsom (the property) be sold by way of public action and the net sale proceeds equally divided between the parties.1
[2]Ms Zhu is the sole registered proprietor of the property which remains unsold.
[3]Mr Han seeks orders under s 16 of the Contempt of Court Act 2019 (the Act):
(a)that a warrant be issued committing Ms Zhu to a term of imprisonment as the Court considers appropriate to penalise Ms Zhu for her refusal to comply with the Family Court order;
(b)that a fine be imposed on Ms Zhu, in part or in whole, payable to Mr Han;
(c)an award of costs in favour of Mr Han for, and incidental to, the application on a solicitor-client basis; and
(d)any other relief that the Court considers just.
[4]Ms Zhu opposes Mr Han’s application.
A brief background
[5] Mr Han and Ms Zhu married in 1986, and have one daughter named Dan Han Hoolihan (also known as Alice). Their marriage was dissolved in August 2015. During the course of their marriage, Ms Zhu purchased the property and she is the sole registered proprietor. In April 2015, Mr Han issued proceedings seeking orders for the division of relationship property (including the property). The Family Court
1 Han v Zhu FC Auckland FAM-2015-004-000407, 28 February 2017.
proceeding and Judge Fleming’s order for sale of the property are described in more detail below.
[6] In her affidavit filed in support of her notice of opposition to the application, Ms Zhu says that over the course of 2012, wanting to provide for her daughter who was about to be married, she set up the Dan Han Family Trust (the Trust). Ms Zhu is the sole trustee and Alice, and her children and grandchildren, are the beneficiaries. On 14 June 2012, Ms Zhu gifted the property to the Trust by way of a deed of gift. Mr Puddle, for Ms Zhu, submits it is incontestable that Mr Han knew of the transfer of the property to the Trust by at least August 2014, evidenced by an email sent that month in which Mr Han acknowledged the transfer. Mr Puddle submits that Mr Han knew that the property was owned by the Trust (and that Ms Zhu’s name was on the title in her capacity as trustee of the Trust) when Mr Han asserted in the Family Court proceeding that it was relationship property.
[7] Mr Puddle says that the Family Court proceeding derailed for Ms Zhu due to communication difficulties between her and her then barrister who was not a Chinese language speaker. This is supported by an affidavit from Ms Zhu to that effect. Ms Zhu says she was unaware that the proceeding (by way of formal proof) was even taking place.
[8] Counsel for Mr Han, Mr Sun, says that in the four years since the date of the Family Court hearing Ms Zhu has still not complied with the sale order, despite repeated requests from Mr Han. However, the nature of these requests is not particularised. In his affidavit Mr Han simply says “I have tried to ask the respondent to comply with the Order for 4 years since 2017”. Ms Zhu says Mr Han did not get in touch with her about the sale of the property until around April this year. She then instructed her present solicitors who began communications with the law firm then acting for Mr Han about how the issue might be resolved. Then in late May 2021, Mr Han instructed new counsel who filed the application for orders under s 16 of the Act on 15 June 2021.
Family Court decision and orders
[9] The sale order in question was made by Judge S J Fleming in the Family Court at Auckland, on 28 February 2017, after the application by Mr Han for orders for the division of relationship property was set down for a formal proof hearing.2
[10] Judge Fleming began by traversing the difficult history of the proceeding, which had first been filed by Mr Han in April 2015. The Judge noted that service difficulties had necessitated Mr Han applying for substituted service, and that nothing had been filed by Ms Zhu in support of her notice of defence except for an affidavit of assets and liabilities early on in the proceeding.3 The Judge recorded that, on 2 June 2016, Judge McHardy had indicated that Ms Zhu had a period of 10 days to file affidavit evidence after which, if no such evidence was received, she would be disqualified from having a formal role in the proceeding and the matter would progress to formal proof.4
[11] Judge Fleming noted than an issue was whether the property was being held on trust for the parties’ daughter. The Judge stated, with respect to the trust issue:5
… That was referred to in the respondent’s notice of defence but, as I have indicated, no evidence apart from an affidavit of assets and liabilities was ever filed by Ms Zhu. So there is no evidence in support of her claim that the property at Gillies Avenue was owned in trust for the parties’ daughter6 and, accordingly, I am quite satisfied that that property is relationship property.
[12] The Judge was satisfied that both properties at issue (of which only the property is relevant for this proceeding) were relationship property and should be the subject of equal sharing. Accordingly, the Judge made orders:7
(a)For sale of the property conducted by way of public action; and .
(b)For equal division of the net sale proceeds, after deduction of reasonable legal fees and land agent’s commission, from the property between the parties.
2 Han v Zhu, above n 1..
3 At [2] – [3].
4 At [4].
5 At [8].
6 In fact Ms Zhu had stated in her affidavit of assets and liabilities that the property was held on trust for the parties’ daughter. However it was a bare statement with no supporting evidence.
7 At [11].
[13] Judge Fleming made a 2B costs award against Ms Zhu. She noted that Ms Zhu had delayed proceedings, necessitated an application for substituted service and ignored three separate directions at conferences to file evidence.8
[14]The Judge concluded by reserving leave for further directions, stating:9
Finally, I will reserve leave to either party to come back to Court for further directions to implement or make further orders to give better effect to the orders I have made. I am doing so because, looking at the history of these proceedings, there may be difficulties for the applicant in enforcing the order I have made for sale of the Gillies Avenue property in particular. There may also be difficulties around distribution but I anticipate that the most difficulty will relate, if it is going to happen to implementing the order for sale.
Submissions
Mr Han
[15] Mr Sun, for Mr Han, submits there are no other methods of enforcing the sale order. He submits that while Mr Han could hypothetically seek further orders from the Family Court to appoint himself as attorney to implement the sale order, it is reasonable to anticipate that Ms Zhu would “vehemently threaten any conveyancing lawyer who dared to process this transaction”. Additionally, Mr Sun says Ms Zhu’s cooperation would be required for other aspects of the sale process, such as land agent access to take photographs for marketing purposes and she would need to give vacant possession. Mr Sun submits the reality is that, given Ms Zhu has not complied with the sale order to date, she will not comply with any further orders. In short, Mr Sun submits even if further orders were obtained from the Family Court, Ms Zhu would simply ignore or oppose them. Mr Sun acknowledges that other methods of enforcing the order have not been attempted but he says Mr Han’s resources are limited. Accordingly, he has elected to proceed as he has to avoid the possibility of multiple applications to the Family Court without there being any certainty that Ms Zhu will comply with further orders of that Court.
[16] Mr Sun submits the sale order is clear, unambiguous and clearly binding on Ms Zhu. In response to Ms Zhu’s position that the sale order is unclear and ambiguous
8 At [12].
9 At [14].
because it does not specify a date by which the sale must occur, Mr Sun submits a reasonable person would interpret the sale order to mean the public auction must take place as soon as practicable. Further he submits Ms Zhu is not disobeying the sale order because of the lack of an express date but rather because of her disagreement with the Family Court’s decision.
[17] Mr Sun says there is no doubt that Ms Zhu has knowledge of the terms of the sale order.
[18] Finally, Mr Sun submits Ms Zhu has knowingly failed to comply with the sale order. He submits that if Ms Zhu did not agree with Judge Fleming’s decision, the appropriate course would have been to appeal the decision to the High Court.10 But he says Ms Zhu is now barred from bringing an appeal because the 20 working days for bringing an appeal has long since expired.11 Accordingly, Mr Sun submits Ms Zhu does not have any reasonable excuse for knowingly refusing to comply with the sale order.
[19] For completeness, Mr Sun submits that Ms Zhu’s trust claim has no merit. However, in making that submission, Mr Sun emphasises that the Court, on an application such as this, does not consider the merits or validity of the sale order.
Ms Zhu
[20] Mr Puddle submits the application does not get through the first gateway under s 16(3)(a) of the Act . He submits there are two methods of enforcement available to Mr Han. One appears to have been considered but not pursued and the other appears not to have been considered at all.
[21] In relation to the first method, Mr Puddle notes that the Family Court expressly reserved leave to Mr Han to seek further directions or orders. He submits this is the obvious first step to enforce compliance. Mr Puddle says while it is correct to say Ms Zhu considers the Family Court decision is problematic, the fact that Mr Han has not taken up the Family Court’s invitation to apply for further directions or orders
10 Property (Relationships) Act 1976, s 39.
11 High Court Rules 2016, r 20.4(2)(b).
means that he cannot pass through the statutory gateway. Mr Puddle submits that keeping in mind an order under the Act is a remedy of last resort, Mr Han’s vague and unsupported assertions as to futility are insufficient.
[22] The second method Mr Puddle refers to is the express provision in s 33(5) of the Property Relationships Act 1976 (PRA) whereby the Court can make orders to facilitate the sale of properties held by recalcitrant owners. Mr Puddle submits that, at best, Mr Sun refers to “hypothetical” orders to appoint him as attorney. However, says Mr Puddle, there is nothing hypothetical about orders that may be made under s 33(5) of the PRA. Nor is it a given that Mr Han, as opposed to an officer of the Family Court, would be granted the authority to execute the documents and take other steps necessary for transfer of the property.
[23] Next, Mr Puddle submits the sale order is not clear and unambiguous, nor is it clearly binding on the respondent. First, Mr Puddle submits the order has no date for compliance as required by r 202 of the Family Court Rules 2002. As to Mr Han’s submission seeking to impose a standard of a “reasonable time”, Mr Puddle says this ignores the requirement that the unambiguous nature of the order must be established beyond reasonable doubt. Mr Puddle submits reasonable people can disagree as to what a reasonable time is and, in any event, Mr Han himself was content to wait for over four years before seeking to implement the sale order.
[24] Mr Puddle submits it is also not clear that the order is binding on Ms Zhu. He submits the documents filed in this proceeding show unequivocally that Ms Zhu gifted the property in 2012 to herself as trustee of the Trust. Ms Zhu owns the property as trustee with all the obligations on her as contained in the Trust Deed. Mr Puddle says that it was Ms Zhu, in her personal capacity, who was the party to the Family Court proceeding and again in this proceeding in the High Court. At no time was she joined in the Family Court in her capacity as trustee nor in this Court, as required by r 5.35 of the High Court Rules 2016. Nor was notice given to the parties’ daughter, Alice, who is the beneficial owner of the property.
[25]Mr Puddle accepts that Ms Zhu has knowledge of the terms of the sale order.
[26] Finally, he submits that Ms Zhu has a reasonable excuse for failing to comply with the sale order as it requires her to sell at an uncertain and unspecified time a property that she did not and does not beneficially own. Mr Puddle submits the sale of the property and a distribution of the proceeds to non-beneficiaries (to her and Mr Han) would be a breach of the Trust capable of being injuncted and exposing Ms Zhu, as trustee, to claims against her. In addition, if any portion of the proceeds was paid to Mr Han he would be a knowing recipient of the proceeds of the breach of trust.
[27] Mr Puddle submits, given the indisputable fact that the property is held subject to the Trust and the issues arising from that factual position, there is a reasonable excuse for Ms Zhu not complying with the sale order.
Applicable Law
[28] The availability of contempt of court proceedings for non-compliance with court orders is premised on the effective administration of justice and the rule of law that court judgments and orders will be enforced.12 The Act, which came into force on 26 August 2020, governs this application.
[29]Section 16 of the Act reads:
(1)This section applies to—
(a)any interim or final order, decision, decree, direction, or judgment of a court (a court order) to do or abstain from doing something, except as provided in section 17:
(b)any undertaking given to the court if, on the faith of the undertaking, the court has sanctioned a particular course of action or inaction.
(2)A court may enforce the court order or undertaking against the party, non-party, or other person bound by the order or undertaking by taking action provided for in subsections (3) and (4) on application by—
(a)the party who sought the order or undertaking being enforced; or
(b)a person who benefits from, or has an interest under, the order or undertaking; or
12 See discussion in Siemer v Solicitor-General [2010] NZSC 54, [2010] 3 NZLR 767.
(c)the Solicitor-General, if the Solicitor-General is satisfied that there is a high degree of public interest in enforcing the order or undertaking.
(3)The court—
(a)must not proceed further under this section unless it is satisfied that other methods of enforcing the court order or undertaking have been considered and are inappropriate or have been tried unsuccessfully; and
(b)if so satisfied, must make a finding as to whether it is proved beyond reasonable doubt that—
(i)the court order or undertaking being enforced has been made in clear and unambiguous terms and is clearly binding on the person; and
(ii)the person had knowledge or proper notice of the terms of the court order or undertaking being enforced; and
(iii)the person has, without reasonable excuse, knowingly failed to comply with the court order or undertaking being enforced.
[30] Section 16(3)(a) is unambiguous that contempt of court proceedings are a last resort.13 A court must not act unless all other methods of enforcing an order have been either exhausted or have been considered and deemed inappropriate. The Court must then be satisfied beyond reasonable doubt of the three matters listed in s 16(3)(b).
[31] Even if the Court gets to that point, the penalty to be imposed (or whether a penalty is imposed at all) is a discretionary matter for the Court under s16(4). This subsection reads:
(4)On finding beyond reasonable doubt that the requirements of subsection (3)(b)(i) to (iii) are met, the court may—
(a)do any of the following:
(i)issue a warrant committing the person or a director or an officer of the body corporate, as the case may be, to a term of imprisonment not exceeding 6 months:
impose a fine,—
(A)in the case of an individual, not exceeding
$25,000; or
13 Johnson v Johnson [2021] NZHC 840 at [64].
(B)in the case of a body corporate, not exceeding
$100,000:
(iii)order the individual or a director or an officer of the body corporate, as the case may be, to do community work, not exceeding 200 hours, as the court thinks fit:
(b)if the court is the High Court, make a sequestration order in accordance with the rules of court.
[32] Under subs (4), it is clear that notwithstanding the elements of contempt being satisfied, there will be situations where penalties will be inappropriate in the circumstances.14 The Court will consider the extent of the contempt, the defendant’s motive, and the degree of prejudice suffered by the innocent party.15
[33] Finally, it is not for a defendant in contempt proceedings to challenge the validity of the order with which they have not complied. As the Supreme Court said in Siemer v Solicitor-General (and the Act does not alter this position):16
Provided the court had power to make an order of its kind, a court order is binding and conclusive unless and until it is set aside on appeal or is for some other reason lawfully quashed. Collateral attacks on such orders are not permitted. Neither the parties, nor other persons subject to an order, are permitted to arrange their affairs in accordance with their perceptions of its flaws, including any individual views they may have concerning the validity of the order.
Discussion
[34] I put to one side Ms Zhu’s evidence and submissions that the property is owned by her in her capacity as trustee of the Trust. That is a collateral attack on the sale order. Ms Zhu may be able to raise that argument in other proceedings, but it is not relevant on this application, except perhaps insofar as it might shed light on whether a penalty would be appropriate.
[35]However, the application does not get that far. It fails at the first hurdle.
14 See for example Lockwood Group Ltd v Small HC Auckland CIV-2009-404-1019, 21 April 2010 at [68]; and Pihema v Pihema [2020] NZHC 2749 at [52].
15 Booth v Tito [2020] NZHC 1071 at [20]; and Lockwood Group Ltd v Small, above n 14, at [68].
16 Siemer v Solicitor-General [2013] NZSC 68, [2013] 3 NZLR 441 at [191].
[36] Mr Han cannot make it through the s 16 (3)(a) gateway. The Court must not proceed further unless it is satisfied that other methods of enforcing the court order have been considered and are inappropriate or have been tried unsuccessfully. Mr Han simply has not given any evidence of what steps he took in the four intervening years to enforce the order. It seems none. In fact, he first made contact with Ms Zhu through his solicitors in only April this year.
[37] I accept Mr Puddle’s submission that there are two available means of enforcing the sale order. The first is to go back to the Family Court under Judge Fleming’s reservation of leave to seek “… further directions to implement or make further orders to give better effect to the orders I have made. …”.17
[38] The second method of enforcing the sale order could well operate in conjunction with the first method. Section 33(5) of the PRA provides:
(5)Where, pursuant to this Act, the court makes an order for the sale of any relationship property and for the division, application, or settlement of the proceeds, the court may appoint a person to sell the property and divide, apply, or settle the proceeds accordingly; and the execution of any instrument by the person so appointed shall have the same force and validity as if it had been executed by the person in whom the property is vested.
[39] Under the above provision the Court can, on the making of an order for sale, appoint any person to sell the property and deal with the proceeds of sale. The subsection also provides that the signing of any documentation by the person appointed is valid. The Court is not limited to appointing Mr Han. It may, for example, appoint the Registrar of the Family Court or an independent solicitor to act as directed. Examples of such orders are:
(a)An order that one of four property lawyers in the relevant area be appointed as the Court’s agent to sell two properties. Powers given included the power to list the properties with appropriate real estate agents, to act on settlement of sale and to attend to division of the proceeds in accordance with the Court’s orders;18
17 Han v Zhu, above n 1, at [14].
18 Sparks v Prescott [2016] NZFC 275 at [96].
(b)An order appointing the Registrar of the Family Court to execute the transfer and/or client authority and instructions form to effect the transfer of the property concerned to one of the parties;19
(c)If the parties were unable to agree on the means of marketing and effecting the sale of the home, within 21 days of that default then the Registrar of the Family Court was appointed to sell the family home;20 and
(d)An order that the sale process be managed by an independent solicitor. Detailed orders made regarding the authorisation and directions to the solicitor, including that he was authorised to sign on behalf of the parties all documents necessary to arrange and complete the sale howsoever, including any contract whether of sale, appointment of auctioneers, real estate agents and solicitors or otherwise .21
[40] It simply is not sufficient to submit, as Mr Sun does, that even if Mr Han sought further orders from the Family Court Ms Zhu would not comply because she believes the decision was wrong. That is speculative. Such speculation does not make the alternative method inappropriate. Further, Mr Sun himself recognises in his written submissions that “alternatively, Mr Han could hypothetically seek further orders from the Family Court to appoint himself as attorney to implement the Sale order”. In a situation where even counsel for the party seeking the contempt order acknowledges there is an alternative option (albeit submitting that option would not result in an effective outcome) then a contempt order would be manifestly inappropriate as a judicial tool of “last resort”. It is immaterial that Mr Sun asserts that seeking further orders from the Family Court is futile as Ms Zhu would “simply ignore (or oppose) them”. It is still a reasonable alternative route to enforcement.
[41] Mr Sun says Mr Han’s financial resources are limited. Accordingly, he has elected to have one shot (my expression) at enforcing the sale order by means of an
19 MDG v SLG FC Palmerston North FAM-2007-054-000869, 28 April 2009 at [41(2)].
20 APG v SMG FC Christchurch FAM-2008-009-000856, 24 September 2008 (Order 2).
21 S v M FC Ashburton FAM-2006-003-000155, 8 December 2006 at [22].
order under s 16 of the Act. I do not accept that is a sufficient reason to resort to an application under the Act. It does not follow that simply because it may be necessary for Mr Han to go back to the Family Court on more than one occasion that either of the two enforcement methods referred to above is “inappropriate”.
[42] For all the above reasons the Court is not able to proceed further under s 16 as I am not satisfied that other methods of enforcing the order for sale made by Judge Fleming had been considered and are inappropriate or have been tried unsuccessfully. It is, therefore, unnecessary to consider the further arguments by the parties made in relation to s 16(3)(b).
Result
[43] The application by Mr Han for orders under s 16 of the Contempt of Court Act 2019 is refused.
Costs
[44] Costs are reserved. Ms Zhu, as the successful party, is prima facie entitled to costs. If the parties are able to agree costs, a joint memorandum is to be filed within 20 working days of the date of this judgment. If costs are not able to be agreed, Ms Zhu may file and serve a memorandum in support of an application for costs (supplementing, if necessary, the submissions on costs already made in the synopsis of submissions filed for the hearing).
[45] Mr Han is to respond by filing and serving a costs memorandum within five working days of the date of service of Ms Zhu’s memorandum.
[46] If separate memoranda are filed, Ms Zhu’s memorandum should not exceed two pages (supplementing the three pages of submissions already filed). Mr Han’s memorandum should not exceed five pages. In either case, the parties may file attachments to the memoranda which exceed the limit on the number of pages that I have directed.
[47]I will determine costs on the papers.
Gordon J
2
4
0