Lau v Hollis & Scholefield Limited
[2022] NZHC 3223
•2 December 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-608
[2022] NZHC 3223
BETWEEN AUGUSTINE E K LAU
Plaintiff
AND
HOLLIS & SCHOLEFIELD LIMITED
First Defendant
WESTPAC NEW ZEALAND LIMITED
Second DefendantAUCKLAND COUNCIL
Third DefendantQUOTABLE VALUE LIMITED
Fourth Defendant
Hearing: 28 November 2022 Appearances:
Plaintiff in person (via VMR)
J N Bierre and L G Cox for first defendant B J Upton for second defendant
E P V H Colenbrander for third defendant
E B Moran and M Fitzpatrick-Cockram for fourth defendant (by VMR)Judgment:
2 December 2022
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
[Strike out]
This judgment was delivered by me on 2 December 2022 at 3.30pm, pursuant to r 11.5 of the High Court Rules
Solicitors:
Registrar/Deputy Registrar Date:
Morgan Coakle, Auckland for first defendant Simpson Grierson, Auckland for second defendant Auckland Council, Auckland
DLA Piper, Auckland for fourth defendant
Copy to: The plaintiff
LAU v HOLLIS & SCHOLEFIELD LIMITED [2022] NZHC 3223 [2 December 2022]
Introduction
[1] The underlying proceeding is the latest in a long-running dispute pursued by Mr Augustine Ee Kuo Lau in respect of mortgagee sales of two properties formerly owned by his partner, Ms Annie Zhang.
[2] Mr Lau says that he was the “caveator and property manager” of the properties prior to their sales. On that basis he filed a statement of claim dated 13 April 2022, seeking to recover alleged losses arising from sale of the properties at an undervalue.
[3] Mr Lau alleges misleading and deceptive conduct or “commercial duress” by the first defendant, Hollis & Scholefield Limited (Hollis & Scholefield), the third defendant, Auckland Council (the Council) and the fourth defendant, Quotable Value Limited (QV), as well as breach of s 176 of the Property Law Act 2007 (PLA) and “commercial duress” by the second defendant, Westpac New Zealand Limited (Westpac).
[4] Hollis & Scholefield, Westpac and QV now apply to strike out Mr Lau’s claims against them. Auckland Council supports the applications. In the alternative, QV seeks summary judgment against Mr Lau.
Background
[5] In 2017, Ms Zhang defaulted in repayment of loans from Westpac secured by two properties owned by her in Paremoremo and Orewa. Westpac subsequently instigated a mortgagee sale process. As part of that process, Westpac engaged Hollis & Scholefield to prepare valuations in respect of the two properties.
[6] Mr Lau proceeded to lodge three caveats over the properties. Two were voluntarily removed, and the third was removed by order of this Court.1
[7] In late February 2018, both properties were sold by Westpac as mortgagee. Mr Lau did not submit any tender offer to purchase either property. There was a
1 Westpac New Zealand Ltd v Lau [2018] NZHC 385.
shortfall of approximately $400,000 after the sales and on 28 August 2018 Westpac obtained summary judgment against Ms Zhang for the shortfall.
[8] Mr Lau was adjudicated bankrupt on 10 May 2018, on the application of the Commissioner of Inland Revenue.
[9] On 15 April 2019, Westpac applied to have Ms Zhang adjudicated bankrupt. Ms Zhang defended the bankruptcy proceeding and sought to have the summary judgment set aside, on the grounds that she had an arguable defence and counterclaim against Westpac. Ms Zhang argued that:
(a)the sales of the properties may not have been arm’s-length transactions;
(b)that Westpac had failed to take reasonable steps to obtain the best possible price for the properties with the result that the sales were at a substantial undervalue; and
(c)had Westpac not undersold the properties there would have been no shortfall.
[10] On 25 September 2019, this Court found that Ms Zhang had no reasonably arguable counterclaim against Westpac in relation to any of the issues she raised and granted Westpac’s application to adjudicate her bankrupt.2 Ms Zhang appealed to the Court of Appeal. Her appeal was dismissed on 10 December 2021.3 Leave to appeal to the Supreme Court was declined.4 I refer to this litigation between Ms Zhang and Westpac as “the prior Zhang litigation”.
[11] Throughout the prior Zhang litigation, Mr Lau corresponded with Westpac on Ms Zhang’s behalf and appeared at court hearings as her translator and McKenzie Friend. After the Supreme Court declined leave to Ms Zhang to appeal, Mr Lau commenced this proceeding.
2 Zhang v Westpac New Zealand Ltd [2019] NZHC 2422.
3 Zhang v Westpac New Zealand Ltd [2021] NZCA 672.
4 Zhang v Westpac New Zealand Ltd [2022] NZSC 34.
Strike out principles
[12] Pursuant to r 15.1(1) of the High Court Rules 2016, the Court may strike out all or part of a pleading if it:
(a)discloses no reasonably arguable cause of action; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the Court.
[13] The principles governing strike-out applications are summarised in the Court of Appeal decision in Attorney-General v Prince,5 as endorsed by the Supreme Court in Couch v Attorney-General:6
(a)A strike-out application is to proceed on the assumption that the facts pleaded in the statement of claim are true unless those pleaded facts are entirely speculative and lack any foundation.
(b)It is only where, on the facts alleged in the statement of claim, however broadly they are stated, no private law claim of the kind or kinds advanced can succeed that it is appropriate to strike out the proceedings at a preliminary stage.
(c)The threshold for strike-out is high. Before a proceeding may be struck out the causes of action must be so clearly untenable that they cannot possibly succeed.
(d)The jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material.
5 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267.
6 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
(e)The fact that an application to strike out raises difficult questions of law, and requires extensive argument, does not exclude the jurisdiction.
Summary judgment principles
[14] Rule 12.2(2) of the High Court Rules provides that the Court may enter judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[15] The test for summary judgment is set out by the Court of Appeal in Stephens v Barron:7
(a)The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually this will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(b)An application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment able to be properly arrived at only after a full hearing of the evidence.
(c)The Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment is not to be arrived at on a fine balance of the available evidence as would be appropriate at a trial.
(d)The residual discretion of the Court to refuse summary judgment would be properly invoked to avoid the oppression which would otherwise result if an application by a defendant for summary judgment would pre-empt a plaintiff exercising the right to amend the pleadings.
(e)Summary judgment should not be applied for unless the substantive merits of the case are clear and capable of summary disposal.
The essence of Mr Lau’s claims in this proceeding
[16] Mr Lau’s statement of claim is difficult to understand. However, when read together with his written submissions, and considering his oral submissions, it is possible to discern the essential nature of his complaints.
7 Stephens v Barron [2014] NZCA 82 at [9] citing Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
[17] As against Hollis & Scholefield, Mr Lau complains that the valuation report in respect of the Orewa property contained incorrect information regarding the potential for subdivision. Mr Lau alleges that this amounts to misleading and deceptive conduct, which I take to be a claim under the Fair Trading Act 1986 (FTA). Alternatively, Mr Lau claims that this conduct amounts to “commercial duress”.
[18] As against Westpac, Mr Lau’s complaint that the bank failed to exercise reasonable care to obtain the best prices reasonably obtainable at the time of the mortgagee sales replicates allegations made by Ms Zhang in the prior Zhang litigation, as summarised in [9] above. Mr Lau claims that the mortgagee sales were to customers of Westpac and that Westpac failed to give adequate regard to a prior appraisal of value by Bayleys Real Estate. Mr Lau then recasts these allegations as amounting to “commercial duress”, and adds a complaint that the removal of his caveat prejudiced his ability to purchase the properties during the mortgagee sale process.
[19] The allegations against the Council and QV relate to the zoning of the properties and the effect of zoning on the capital value of the properties. Mr Lau alleges that conduct by the Council and QV was misleading or deceptive, or amounts to “commercial duress”.
The grounds advanced in support of the application to strike out
[20] The defendants primarily argue that the proceeding should be struck out because the statement of claim discloses no reasonably arguable cause of action, and the proceeding is an abuse of process. Ancillary arguments are made regarding the quality of the pleading itself, which is criticised as unintelligible.
No reasonably arguable cause of action
[21] Mr Lau is not in a contractual relationship with any of the defendants. Mr Lau has not assumed any legal obligations as a result of conduct by any of the defendants. There is no basis in fact or law for a plea of duress.
[22] I treat the claims of misleading and deceptive conduct as allegations of a breach of s 9 of the FTA:
9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[23] In respect of the claims against the Council and QV, similar claims were made by property owners in Mao v Quotable Value Ltd.8 In that case, the plaintiffs alleged that the Council and QV had engaged in misleading or deceptive conduct in relation to the 2017 general revaluation of properties owned by the plaintiffs, and the plaintiffs challenged the zoning of the properties.9 The claims were struck out. Associate Judge Andrew held that there was no credible basis upon which the plaintiffs could allege that a reasonable person would be likely to have been misled,10 and the Council did not owe the plaintiffs a duty of care when implementing zoning changes.11
[24] In the present case, the claims against the Council and QV also seem to focus on the 2017 rating valuation process, and the Council’s zoning of the properties sold by Westpac as mortgagee.
[25] Based on Mr Lau’s pleading, and given his sparse affidavit evidence, I cannot discern a reasonably arguable claim by Mr Lau that he was misled or deceived, or that a reasonable person in his position would likely have been misled or deceived, by conduct on the part of the Council or QV. The position is the same in respect of conduct by Hollis & Scholefield.
[26] In any event, Mr Lau’s claims under the FTA are untenable because it is not reasonably arguable that he has suffered a loss as a result of misleading or deceptive conduct. Under s 43 of the FTA, the Court must look to see whether it is proved that the claimant has suffered loss or damage “by” the conduct of the defendant.12
8 Mao v Quotable Value Ltd [2022] NZHC 1680.
9 At [31]–[37].
10 At [30].
11 At [32].
12 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [29].
[27] Mr Lau has not pleaded, or adduced any evidence of, any legal or beneficial interest on his part in the two properties sold by Westpac by mortgagee sale. Mr Lau has made a bare assertion that he was “caveator and property manager” of the properties. Neither status can provide the foundation for a personal financial loss by Mr Lau arising from any conduct by Hollis & Scholefield, the Council or QV which is the basis of Mr Lau’s complaints. Mr Lau has not provided any evidence of, or any other basis for, a personal loss. The claim by Mr Lau that he has suffered loss or damage by the conduct of Hollis & Scholefield, the Council or QV is untenable.
[28] For similar reasons, Mr Lau’s claim against Westpac under s 176 of the PLA is untenable. The statutory duty under s 176 is owed by a mortgagee to a limited class of persons, comprising the current mortgagor, any former mortgagor, any covenantor, any mortgagee under a subsequent mortgage, and any holder of any other subsequent encumbrance.
[29] A caveat is not an encumbrance,13 and Mr Lau’s caveats had been removed before the time of sale. Mr Lau does not fall within the class of persons who have the benefit of the statutory duty of care.
[30] Finally, Mr Lau complained that the funds advanced by Westpac to Ms Zhang may have been sourced by “money laundering”. This complaint was also raised in the prior Zhang litigation.14 This complaint has not been pleaded by Mr Lau. As the Supreme Court noted, Westpac denies the allegations.15 Mr Lau cannot articulate the legal basis of his potential claim against Westpac, or how this might possibly have caused him a personal loss.
[31] Mr Lau faces a further insurmountable obstacle, as a result of his adjudication as a bankrupt on 10 May 2018. This obstacle applies to all causes of action.
13 Property Law Act 2007, s 4 definition of “encumbrance” and Orange Builders Ltd v Joint Venture Partners Ltd HC Christchurch CP90/96, 19 November 1997 at 8–10.
14 Zhang v Westpac New Zealand Ltd, above n 3, at [33] and Zhang v Westpac New Zealand Ltd, above n 4, at [3] and [6].
15 Zhang v Westpac New Zealand Ltd, above n 4, at [6].
[32] The mortgagee sales were made by agreements for sale and purchase dated 27 and 28 February 2018. The conduct that Mr Lau complains about in respect of the mortgagee sale process occurred prior to 28 February 2018, and if a loss had been suffered, it would have crystallised by 28 February 2018. If Mr Lau had causes of action against any of the defendants, then those causes of action accrued by 28 February 2018.
[33] All causes of action were choses in action which vested in the Assignee on Mr Lau’s adjudication on 10 May 2018, pursuant to s 101(1)(a) of the Insolvency Act 2006. Similarly, any powers that Mr Lau could have exercised over those choses in action also vested in the Assignee, pursuant to s 101(1)(b).
[34] There is no pleading and no evidence of any assignment or transfer of the choses in action from the Assignee to Mr Lau on his discharge from bankruptcy. Mr Lau has no standing to bring this proceeding.
[35] I find that the proceeding should be struck out in its entirety. The statement of claim does not disclose any reasonably arguable cause of action, and is not capable of remediation.
Abuse of process
[36] Alternatively, Hollis & Scholefield and Westpac contend that Mr Lau’s claims against them which challenge the mortgagee sale process, including the provision of valuations by Hollis & Scholefield, is an attempt to relitigate matters dealt with by the courts in the prior Zhang litigation, and therefore an abuse of process.
[37] In the prior Zhang litigation, this Court held that Ms Zhang did not have arguable grounds of defence to the summary judgment that had been entered against her, on either of the following grounds:
(a)that the properties may not have been arm’s-length sales, including on the basis that the purchasers may have been customers of Westpac;16 and
(b)that the mortgagee sales were at an undervalue, including on the basis that the Hollis & Scholefield valuations were flawed and the appraisal of value from Bayleys Real Estate was not given sufficient regard.17
These findings were upheld by the Court of Appeal. The same complaints are the basis of Mr Lau’s causes of action against Hollis & Scholefield for misleading or deceptive conduct, and against Westpac for breach of s 176 of the PLA.
[38] Various other matters raised by Mr Lau in his written submissions have also been traversed in the prior Zhang litigation:
(a)a complaint that the proceeding in the High Court was unfair, which was dealt with by the Court of Appeal;18 and
(b)a complaint that the funds advanced by Westpac to Ms Zhang may have been sourced by “money laundering”.
[39] Mr Lau was not a party to the prior Zhang litigation, so issue estoppel and res judicata do not apply. In the decision of the Supreme Court in Lai v Chamberlains, Elias CJ said:19
Although cause of action and issue estoppel apply only to proceedings between the same parties, the courts have been prepared to find abuse of process in cases entailing collateral challenge by a party to an earlier determination in fresh proceedings with a different party.
[40] In the decision of the House of Lords in Johnson v Gore Wood & Co (a firm), Lord Bingham said:20
16 Zhang v Westpac New Zealand Ltd, above n 2, at [23]–[27].
17 At [28]–[34].
18 Zhang v Westpac New Zealand Ltd, above n 3, at [31]–[33].
19 Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7 at [59].
20 Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (HL) at 31.
… Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter.
[41] This principle can be applied where the plaintiff in the second action is not the same as the plaintiff in the first. In Johnson, Lord Millett said:21
Particular care, however, needs to be taken where the plaintiff in the second action is not the same as the plaintiff in the first, but his privy. Such situations are many and various, and it would be unwise to lay down any general rule. The principle is, no doubt, capable in theory of applying to a privy; but it is likely in practice to be easier for him to rebut the charge that his proceedings are oppressive or constitute an abuse of process than it would be for the original plaintiff to do so.
[42] Mr Lau was involved in the prior Zhang litigation, entering into correspondence with Westpac on behalf of Ms Zhang, and appearing at court hearings as her translator and McKenzie Friend. The claims that he seeks to advance in this proceeding against Hollis & Scholefield and the Council are in substance identical to the allegations raised by Ms Zhang in the prior Zhang litigation. These claims are a collateral attack on the prior judgments of this Court, the Court of Appeal and the Supreme Court, and they are an abuse of process and should be struck out.
Result
[43] The applications by Hollis & Scholefield, Westpac and QV to strike out the proceeding are granted. The proceeding is struck out in its entirety, including the cause of action against Auckland Council.
[44] I am not required to decide QV’s alternative application for a grant of summary judgment.
Costs
[45] The first defendant, second defendant and fourth defendant seek an award of indemnity costs under r 14.6(4)(a) of the High Court Rules, on the basis that Mr Lau
21 Johnson v Gore Wood & Co (a firm), above n 20, at 60.
has acted vexatiously, frivolously, improperly or unnecessarily in commencing and continuing the proceeding.
[46] Indemnity costs are exceptional and may be ordered where a party has behaved either badly or very unreasonably.22
[47] In Bradbury v Westpac Banking Corp, the Court of Appeal confirmed that making allegations which ought never to have been made, constituting a “hopeless case”, can fall within r 14.6(4).23
[48] For the reasons given above at [21] to [30], this proceeding can be fairly characterised as a case that was hopeless from its inception. Further, any cause of action that might exist is vested in the Assignee. Finally, the abuse of process is flagrant.
[49] Accordingly, I find that the plaintiff should pay the reasonable indemnity costs of the first defendant, second defendant and fourth defendant.
[50] The third defendant played a minor role in the proceeding, and is entitled to costs on a 2B basis and any disbursements as fixed by the Registrar.
[51] I direct counsel for the first defendant, second defendant and fourth defendant to file memoranda by 9 December 2022, giving full particulars of the indemnity costs claimed, including supporting invoices, for consideration and approval of the Court if appropriate.
Associate Judge Brittain
22 Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
23 At [29] and [30].
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