Huang v Chung
[2015] NZHC 610
•31 March 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-004797
CIV-2014-404-001072 [2015] NZHC 610
IN THE MATTER of the Property (Relationships) Act 1976
and the Trustee Act 1956
BETWEEN
TONY JUN HUANG Plaintiff
AND
CHOU HUI CHUNG also known as MAY CHUNG
First Defendant
CHOI HUI CHUNG and PHILLIP WONG as trustees of the May Chung Family Trust
Second Defendant
Hearing: 8 March 2015 Appearances:
G Illingworth QC for Plaintiff
M Penman-Chambers for First DefendantJudgment:
31 March 2015
(RESERVED) JUDGMENT OF ANDREWS J
[First Defendant's applications for a contempt order against Plaintiff,
and for joinder of an additional party]
This judgment is delivered by me on 31 March 2015 at 10 am pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
HUANG v CHUNG & ANOR [2015] NZHC 610 [31 March 2015]
Introduction
[1] Two interlocutory applications by the first defendant (Ms Chung) require determination:
(a) an application made in the proceeding CIV-2014-404-1072 (“the 2014 proceeding”) for an order that Qi Huang (the sister of the plaintiff, Mr Huang) be joined as a fourth defendant in that proceeding; and
(b)an application made in the proceeding CIV-2013-404-4797 (“the 2013 proceeding”) for an order that Mr Huang is in breach of discovery orders made on 9 July 2014, and is in contempt of court. Ms Chung seeks an order for committal and/or a fine of $1,000, with half of the fine to be paid to Ms Chung.
Background
[2] Mr Huang and Ms Chung are in dispute over the identification and division of relationship property. The 2013 proceeding was begun in this court seeking, among other things, an order restraining disposition of relationship property. The
2014 proceeding is an application originally made in the Family Court for orders under the Property (Relationships) Act 1976, and subsequently transferred to this Court by consent. An order has been made for the two proceedings to be heard together.1
Joinder of Ms Qi
[3] Ms Chung’s application was listed for mention on 8 March 2015. Mr Illingworth QC, on behalf of Mr Huang, advised that Ms Qi can be joined as a party to the proceeding by consent, although he expressed doubt as to the capacity in which she is to be joined. He submitted that Mr Huang does not seek to sue Ms Qi,
so joinder as a defendant appears not to be appropriate.
1 Huang v Chung HC Auckland CIV-2013-404-4797, 23 October 2014 at [2(a)].
[4] It may be, as Mr Illingworth submitted, more appropriate to join Ms Qi as a counterclaim defendant (or indeed simply to seek non-party discovery against her). However, it also appears that joinder of Ms Qi meets the requirements of r 4.56(1)(b)(ii) in that her “presence before the court may be necessary to adjudicate on or settle all questions involved in the proceeding.”
[5] As Mr Illingworth consented to joinder, I made an order for joinder at the hearing, joining Ms Qi as a party. I further directed that Mr Huang was to serve Ms Qi with the proceeding by 15 March 2015, and that counsel were to discuss which documents in the proceeding needed to be served on her.
[6] Ms Penman-Chambers, on behalf of Ms Chung, sought an order for costs against Mr Huang. In the light of the matters I have set out above, I have concluded that costs in respect of the joinder application should be reserved, and I so order.
Application for a contempt order
Ms Chung’s application for tailored discovery
[7] Particular difficulties have arisen between Mr Huang and Ms Chung in relation to discovery. They have each contended that the other is in breach of discovery obligations, and they each sought discovery orders against the other.
[8] Of particular concern to Ms Chung are investments in three Chinese entities:
(a) Shares in a Chinese company, Shanghai Junce Investment Ltd (“Shanghai Junce”): Ms Qi holds, as trustee for Mr Huang and Ms Chung, a 64.5 per cent shareholding in Shanghai Junce. Shanghai Junce in turns holds a 50.82 per cent shareholding in another Chinese company, Shanghai Pudong Dongchao Logistics Ltd (“Shanghai Pudong”).
(b)Tianjin Baoyin Investment Centre LP (“Tianjin”): in 2008, Mr Huang and Ms Chung invested RMB1 million (approximately NZ$198,412) in Tianjin, through Ms Qi.
(c) Shanghai Jinshiyuan and Hui Equity Investment Centre LP (“Jinshiyuan”): in 2011, Mr Huang and Ms Chung invested RMB3 million (approximately NZ$595,238) in Jinshiyuan, again through Ms Qi.
[9] On 27 February 2014, Mr Huang swore two affidavits in the 2014 proceeding: his affidavit of assets and liabilities, and his first narrative affidavit. The former affidavit listed real property, bank accounts, company shares and interests in partnerships in New Zealand and China. The investments in Shanghai Junce, Tianjin and Jinshiyuan were included.
[10] In his narrative affidavit, Mr Huang said that he had “had to travel to Hong Kong and China to gather most of the supporting documents that are required to be exhibited to this affidavit”. He then listed real estate, shares, bank accounts and partnership interests in New Zealand and China (including the investments in Shanghai Junce, Tianjin and Jinshiyuan) and annexed documents relating to each.
[11] By a memorandum of counsel dated 8 July 2014, Ms Chung sought an order that Mr Huang make tailored discovery (pursuant to r 8.8) of the following categories of documents (as relevant to her later application for a contempt order):
…
6. Further the defendants require discovery of the following documents:
a.Audited annual accounts for Shanghai Junce Investments Ltd for the last three years.
b. Audited annual accounts for Shanghai Pudong Dongchao Logistics
Ltd for the last three years.
c.All statements relating to the investment in Tianjin Baoyin Investment Centre referred to at paragraph 27 of [Mr Huang’s] first narrative affidavit of 27 February 2014.
d. All statements related to the investment in Jinshiyuan referred to at
paragraph 29 of [Mr Huang’s] first narrative affidavit of 27 February
2014.
…
[12] The proceeding was called for mention in the Duty Judge List on 9 July 2014, before Woolford J. His Honour’s Minute of that date recorded (as relevant):
[1] This case was called before me today in the Duty Judge List. After discussions with counsel, the following orders are made by consent:
…
(d) Discovery is also ordered of the documents listed in paras [6] (a)-(f) in the memorandum filed by Ms Penman- Chambers dated 8 July 2014, by Tuesday, 5 August 2014. The requirement to provide discovery only extends to documents, which are available in New Zealand. I note that [Mr Huang] has already travelled to Hong Kong and China for the purposes of assisting in the discovery process.
[13] On 20 August 2014, Mr Huang swore an affidavit of documents in response to the order for tailored discovery, as follows:
I, Tony Jun Huang, of 1/251 Tamaki Drive, St Heliers, Auckland, Businessman swear:
1. I am the plaintiff in these proceedings.
2.I make this affidavit under an order for tailored discover [sic] under rule 8.10 on 9 July 2014.
3. I understand the obligations imposed by the discovery order.
4.In order to fulfil those obligations, I have diligently searched for all documents required to be discovered under the discovery order, and I have also taken the following particular steps:
(a) searching through my financial and bank records.
5.In the Schedule of this affidavit, I list the documents that I am required to discover.
6.In Part 1 of the Schedule, I list the documents that are in my control and for which I claim neither privilege nor confidentiality.
7.To the best of my knowledge and belief, this affidavit is correct in all respects and carries out my obligations under the discovery order.
[sworn]
[14] As relevant, the schedule annexed to the affidavit lists as documents 1.1–1.3
the following:
No. Date
Description
1.1
31/01/13–
31/01/14
Profit & Loss statements for
Shanghai Junce Investment Ltd
1.2
December
2013
Profit & Loss statement for Shanghai Pudong Dongchao Logistics Ltd
1.3
01/03/13–
31/03/13
Plaintiff’s SPD bank statement
regarding funds advanced to Qi Huang
…
[15] Mr Huang’s affidavit was served on Ms Chung’s solicitors by email, with the
following covering message:
By way of service please find attached the plaintiff’s affidavit of
documents.
In order to expedite inspection, we also attach herewith the relevant documents referred to in the said affidavit.
Please note that:
1. Document 1.1 relates to paragraph 6(a) of your memorandum dated
8 July 2014 (“the Memorandum”).
2. Document 1.2 relates to paragraph 6(b) of the Memorandum;
3.No document is available for paragraphs 6(c) and (d) of the Memorandum other than those already exhibited to our client’s narrative affidavit dated 27 February 2014 as exhibits 24 and 25. We further note that documents relating to Tianjin Baoyin Investment Centre and Jinshiyuan are readily obtainable by your client as those investments were made through the parties’ mutual friend, Qiang Huang.2
…
2 It is apparent from later correspondence that the “mutual friend” is in fact Qiang Wang.
Ms Chung’s application for a contempt order
[16] Ms Chung’s application for a contempt order is on the grounds that Mr Huang has not complied with the order made by Woolford J, wilfully and without lawful excuse.
[17] Ms Penman-Chambers submitted that Mr Huang cannot have misunderstood his discovery obligations in relation to Shanghai Junce, Tianjin and Jinshiyuan, and that his search for documents falls well short of what was required. She submitted that Woolford J’s order to discover documents “which are available in New Zealand” included documents under Mr Huang’s control, but not located in New Zealand. She submitted that the order “must” include documents which Mr Huang can call on to be provided from China.
[18] Ms Penman-Chambers further submitted that even if it is the case that there are no audited accounts of Shanghai Junce or Shanghai Pudong, Mr Huang should have discovered any accounts which do exist. She submitted that the fact that Mr Huang said there were no audited accounts suggested that he had knowledge and control of the companies’ documents, and he should at least have discovered unaudited accounts.
[19] On the issue as to whether the documents referred to in the order are “in Mr Huang’s control”, Ms Penman-Chambers submitted that in the light of the 64.5 per cent shareholding in Shanghai Junce, and Shanghai Junce’s 50.82 per cent shareholding in Shanghai Pudong, those companies’ documents “must” be in Mr Huang’s control.
[20] Regarding the Tianjin and Jinshiyuan investments, Ms Penman-Chambers submitted that “instinctively”, investments of such a magnitude must have generated a paper trail. She submitted there must have been dividend statements and other financial information, which Mr Huang had not disclosed.
[21] Finally, Ms Penman-Chambers submitted that the fact that Mr Huang had already been to China to look for documents counted for little, as that was before any discovery orders were made, so he would not have known what would be required.
[22] Mr Illingworth submitted that Mr Huang has complied with his discovery obligations, in that he has discovered all documents available in New Zealand, and he has told Ms Chung where she can find other documents. Further, Mr Huang has told Ms Chung that the documents sought under the order for particular discovery do not exist in relation to Shanghai Junce and Shanghai Pudong.
[23] Mr Illingworth submitted that the order made by Woolford J is crystal clear: it requires discovery of documents which are available in New Zealand, only. The order was made by Woolford J in those terms because he knew that Mr Huang had travelled to China to obtain relevant documents. Accordingly, the order clearly excluded any requirement to obtain documents from China. Mr Illingworth submitted that to interpret “the requirement to provide discovery only extends to documents which are available in New Zealand” as including a requirement to disclose “documents outside New Zealand which would be available if you tried to get them” would fly against the plain and express terms of the order.
[24] Mr Illingworth also referred to subsequent correspondence from Mr Huang’s solicitor (Mr Liu) to Ms Chung’s solicitors, in which Mr Liu further explained that the disclosed documents were the only ones available in New Zealand, and provided contact details for Mr Qiang Wang, who had arranged, and managed, the Tianjin and Jinshiyuan investments.
[25] Mr Illingworth further submitted that there is, in any event, no evidence that documents such as the accounts of Shanghai Junce and Shanghai Pudong are in Mr Huang’s control. That is, there is no evidence before the court as to the position of shareholders of companies in China and what, if any, control a shareholder has to obtain financial documents. In the circumstances, there are no grounds to go beyond the terms of the discovery order.
[26] Finally, Mr Illingworth submitted that there has been no wilful disobedience of Woolford J’s order. His Honour accepted that it was unreasonable for Mr Huang to have to travel to China again, to try to obtain documents. Mr Huang has deposed to the fact that he does not have further documents here and that he has diligently searched for documents. He has sworn his affidavit as to documents that are in his
possession and his lawyer has explained the position. It is, therefore, not correct to say that Mr Huang agreed to provide documents, and has not done so. He has given evidence of the steps he took to find documents and has been responsible, and transparent. He submitted that the fact that Mr Huang refers to unaudited accounts only shows that he has made efforts to get such documents as he can.
Discussion
[27] I reject Ms Penman-Chambers’ submission that the fact that Mr Huang had gone to China and Hong Kong to look for documents counts for little, as it was before any discovery orders were made, so Mr Huang would not have known what documents were required to be disclosed.
[28] Mr Huang travelled to China shortly before he commenced the 2014 proceeding. He was at the time obliged, pursuant to s 8.4, to give initial disclosure of documents referred to in his pleadings, and any additional documents in his control that he had used in preparing the pleadings, and on which he intended to rely at trial. In the circumstances, it cannot be inferred that Mr Huang would not have known what documents would have to be discovered. The more reasonable inference is that Mr Huang knew that documents relating to investments in China had to be discovered, and that he obtained such documents as he could when he travelled there.
[29] It is evident that Mr Huang’s previous travel to China was in his Honour’s mind when Woolford J made the tailored discovery order. I do not accept that the order is to be interpreted as meaning anything other than what it says: that discovery was limited to documents available to Mr Huang in New Zealand.
[30] It must also be kept in mind that Mr Huang was responding to an order for tailored discovery, not an order for standard discovery under r 8.7. He was ordered to give discovery of the particular categories of documents set out in the order (that is, in this case, the documents specified in Ms Penman-Chambers’ memorandum). Tailored discovery refers to specific documents or categories of documents. I do not accept that an order for tailored discovery must necessarily include a requirement to
disclose any other documents which might be seen as alternatives to the specific documents sought.
[31] I also accept the force of Mr Illingworth’s submission that I should reject Ms Penman-Chambers’ submission that in the light of the majority shareholding in Shanghai Junce (held by Ms Qi as bare trustee for Mr Huang and Ms Chung) and that company’s shareholding in Shanghai Pudong, Mr Huang must (necessarily) have control over those companies’ financial statements, audited and unaudited. As Mr Illingworth submitted, there is absolutely no evidence before the Court as to what rights, if any, a shareholder (or a beneficial owner of shares) of a Chinese company might have.
[32] That said, I have some disquiet as to the fact that Mr Huang’s affidavit in response to the order was sparse. He has not stated in his affidavit that the documents he had agreed to discover were not in fact available in New Zealand, nor did he state what efforts he had made to ascertain whether those documents were available, or where they might be available. To that extent, I conclude that he has not complied with the order.
[33] I am not, however, persuaded that Mr Huang’s non-compliance amounts to wilful disobedience, such as to justify his being held in contempt. This is because his affidavit was accompanied by an explanatory communication from his solicitor and, indeed, further communications thereafter.
[34] Accordingly, I do not find Mr Huang in contempt. However, I order that Mr Huang is to swear an affidavit, and serve it on Ms Chung, identifying the categories of documents in the order that are not available to him in New Zealand, setting out the steps he has taken to ascertain the availability of such documents, and identifying the whereabouts, if known, of such documents. That affidavit is to be filed and served within 15 working days of the date of this judgment.
Summary of orders
[35] At the hearing on 8 March 2015, an order was made joining Qi Huang as fourth defendant in the proceeding. A further order was made that Mr Huang was to
serve Ms Qi with the proceeding by 15 March 2015, and counsel were to discuss which documents in the proceeding needed to be served on her. Costs in respect of that application are reserved.
[36] I decline to make an order holding Mr Huang in contempt in relation to the order for tailored discovery made by Woolford J on 9 July 2014. I order Mr Huang to file and serve an affidavit in the terms set out at [34], above. That affidavit is to be filed and served within 15 working days of the date of this judgment.
[37] Ms Penman-Chambers sought costs in favour of Ms Chung in respect of the application for a contempt order. Mr Illingworth sought indemnity costs in favour of Mr Huang on that application. I have concluded that costs in respect of that application should be reserved.
Final comment
[38] I refer the parties to r 8.2, which provides that parties must co-operate to ensure that the processes of discovery and inspection are proportionate to the subject matter of the proceeding, and facilitated by agreement on practical arrangements. There is little evidence in this proceeding of such co-operation or of the parties having considered options to reduce the scope and burden of discovery, as is required
by r 8.2(2).
Andrews J
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