Li v 110 Formosa (NZ) Limited
[2019] NZCA 98
•8 April 2019 at 4 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA81/2019 [2019] NZCA 98 |
| BETWEEN | JUN LI |
| AND | 110 FORMOSA (NZ) LIMITED |
| Counsel: | D Connor for Appellant |
Judgment: | 8 April 2019 at 4 pm |
JUDGMENT OF CLIFFORD J
AThe application is granted. Van Bohemen J’s judgment of 5 February 2019 is stayed pending the determination of Mr Li’s appeal to this Court against that judgment.
BThe parties are to file an agreed timetable for the filing of the case on appeal and submissions, with these to be completed by 5 pm on 8 May 2019.
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REASONS
Introduction
In this proceeding Mr Li is appealing a judgment of van Bohemen J given in the High Court in Auckland on 5 February 2019.[1] In that judgment van Bohemen J declined to stay a judgment of Fitzgerald J involving a dispute concerning ownership of a property.[2] In doing so, van Bohemen J ordered the discharge of a caveat (the Caveat) Mr Li had registered against the property in question.
[1]Li v 110 Formosa (NZ) Ltd [2019] NZHC 70.
[2]Li v 110 Formosa (NZ) Ltd [2018] NZHC 3418.
Mr Li now applies, with urgency asserted, for a stay of the judgment under appeal pending the hearing of that appeal.
Background
The background to Fitzgerald J’s judgment is relatively straightforward, the background to this application less so.
The substantive dispute
Mr Li and the second respondent, Meng Wang, entered into certain arrangements whereby they would participate through a corporate vehicle in the purchase of the Formosa Golf Course at Gulf Harbour (the Formosa Property). As conceived at one point, the vehicle to acquire the Formosa Property was the fourth respondent, Jenny and Eamon Holdings Ltd (JEHL). At some point, the third respondent Golden Beachlands Holdings Ltd (GBHL) was to perform that function. As matters transpired, a third company 110 Formosa (NZ) Ltd (110 Formosa), acquired the Formosa Property.
Mr Li paid his initial contribution of $4.8 million as part payment of the $12.16 million, in exchange for which he understood he was to receive a 32 per cent interest in the corporate vehicle. Mr Wang, asserting that the $4.8 million that originated from his family, denied any obligation to Mr Li as regards 110 Formosa’s purchase of the Formosa Property.
Mr Li commenced proceedings in the High Court. Mr Li sued 110 Formosa alleging a constructive trust; 110 Formosa, Mr Wang and others for breach of fiduciary duty and knowing assistance; Mr Wang for breach of contract; and Mr Wang and others for unjust enrichment, monies had and received and negligent breach of statutory duty.
Fitzgerald J found that, although Mr Wang was personally liable to Mr Li for the $4.8 million, Mr Li had no claims against any of the other parties to the proceeding. He also had no claim to the Formosa Property itself.
Fitzgerald J expressed the result of her judgment in the following terms:[3]
[267] For the reasons set out in this judgment, there will be (but pending an election by the plaintiff, as to which see below) orders that:
(a)Mr Li’s third cause of action, resulting trust, is made out, on the basis that Mr Wang holds that proportion of his shareholding in 110 Formosa which represents an original contribution of $4.8 million, on resulting trust for Mr Li.
(b)Mr Li’s fourth cause of action, breach of contract, is made out, and Mr Wang is to pay Mr Li damages in the sum of $4.8 million.
(c)Mr Li’s claims are otherwise dismissed.
[268] As will be appreciated, the outcomes and remedies on the third and fourth causes of action are inconsistent. Before making formal orders on those causes of action upon which judgment can be entered, Mr Li must confirm his election between the two remedies. He is to file a memorandum within 20 working days from the date of this judgment confirming his election. I will then make a formal order in accordance with that election.
[269] Given none of Mr Li’s claims against 110 Formosa and Loo & Koo have been made out, it is not necessary to address the various cross-claims by those parties against Mr Wang.
[3]Li, above n 2 (footnote omitted).
Fitzgerald J did not address the status of the Caveat.
Mr Li is appealing Fitzgerald J’s judgment to this Court in CA44/2019. Mr Wang cross-appeals. Mr Li has not applied for a stay of that judgment.
Van Bohemen J’s stay refusal and caveat discharge
Once 110 Formosa became the registered proprietor of the Formosa Property Mr Li registered the Caveat against the Formosa Property to protect what he regarded as his beneficial interests. 110 Formosa applied to lapse the Caveat. Mr Li applied in response for an order that the Caveat not lapse.
Thereafter, on 25 July 2016 Mr Li and 110 Formosa, through their solicitors, signed a consent memorandum in the following terms:
Counsel respectfully request that the Court make the following orders by consent:
(a)Unless the applicant and respondent agree to the contrary, caveat 10209375.1 shall not lapse pending determination of the applicant’s main proceeding;
(b)The applicant is to file the main proceeding in the High Court by Wednesday, 10 August 2016;
(c)This caveat proceeding is adjourned. Costs will be determined on this proceeding once the main proceeding is determined;
(d)Leave is reserved to apply for any ancillary orders.
Lang J made orders accordingly on 26 July 2016.
Mr Li filed his substantive proceeding on 10 August 2016.
110 Formosa subsequently sought the removal of the Caveat, on the basis that Mr Li’s statement of claim did not disclosure a caveatable interest in the Formosa Property.
Associate Judge Christiansen upheld Mr Li’s application opposing discharge.[4] He did so by reference to the terms of 110 Formosa’s consent to the lodging of the Caveat, and in particular the acknowledgement that the Caveat was not to lapse “pending determination of the applicant’s main proceeding”. The Associate Judge was also of the view that Mr Li had an arguable claim to a beneficial interest in the Formosa Property.[5]
[4]Li v 110 Formosa (NZ) Ltd [2017] NZHC 174.
[5]At [61].
After the substantive proceedings had been heard before Fitzgerald J, but before Her Honour had issued her judgment, 110 Formosa again sought to have the Caveat discharged. Associate Judge Andrew declined that application.[6] He found that he could not be completely satisfied that removal would not prejudice Mr Li’s interests: the consent order featured significantly in his reasoning.[7]
[6]Li v 110 Formosa (NZ) Ltd [2018] NZHC 2529.
[7]At [25]–[27].
Following the issue of Fitzgerald J’s judgment, competing applications were filed by 110 Formosa for orders to discharge the Caveat and by Mr Li for stay of the judgment. Van Bohemen J heard those competing application on 30 January and released his judgment on 5 February. Towards the end of his judgment the Judge recorded he had considered the application on the basis that:[8]
Both parties accept that Mr Li has no caveatable interest in the Formosa Property if execution of the judgment of Fitzgerald J is not stayed.
[8]Li, above n 1, at [65].
Having concluded that a stay of execution would not render Mr Li’s appeal nugatory, the Judge found that the balance of convenience lay in favour of dismissing the application for a stay. Accordingly, the Judge said it followed he should grant 110 Formosa’s application to vary or revoke the orders of Lang J on 26 July 2016 and discharge the Caveat.[9]
[9]At [65].
The Judge then stayed his orders for 20 workings days until 7 March to give Mr Li the opportunity to appeal to this Court. Mr Li filed his substantive appeal on 6 March, and the following day, the Judge issued a minute extending the Caveat once more until 22 March so that Mr Li could seek a stay from this Court.[10] On 18 March, Mr Li made this application.
[10]Li v 110 Formosa (NZ) Ltd HC Auckland CIV-2016-404-1650, 7 March 2019 (Minute of van Bohemen J).
This application first came before me pursuant to s 49 of the Senior Courts Act 2016. Given the fact I did not receive the application until late on the afternoon that van Bohemen J’s interim order was due to expire, I granted a temporary stay of his judgment until I had a chance to consider that application.[11] I have now done so. In this decision I:
(a)Grant Mr Li a stay of the judgment of van Bohemen J under appeal in this proceeding pending the hearing of the appeal.
(b)Set that appeal down for an urgent hearing before a Civil Division of this Court in Auckland on 21 May 2019.
(c)Direct the parties to file an agreed timetable for the preparation of the case on appeal and the filing of submissions by no later than 5 pm Wednesday 8 May 2019.
Analysis
[11] Li v 110 Formosa (NZ) Ltd CA81/2019, 22 March 2019 (Minute of the Court).
The Caveat was registered by consent pending the determination of the substantive dispute. In Sutcliffe v Tarr this Court said:[12]
[21] Appeals are commonly understood to form part of the proceeding originally initiated in the High Court (or other first instance jurisdiction). Whilst appeals do, when filed and processed have a different character (and filing number) from the initial proceeding, we consider that they are still part of that initial proceeding in the sense that the rights and interests at issue are the same. One way of testing this interpretation is to ask when a proceeding is determined. The answer is that a proceeding is not determined until all appeal rights are exhausted and all enforcement procedures at an end.
[22] On this analysis, the first interpretation of the transitional provisions we set out above is the correct one. Proceedings commenced in the High Court prior to 1 March 2017 will continue under provisions of the Judicature Act through all High Court stages of the proceeding, and through any appeals in this Court or the Supreme Court, to final disposition and enforcement.
[12]Sutcliffe v Tarr [2017] NZCA 360, [2018] 2 NZLR 92 (footnotes omitted).
So, in terms of the consent order, Mr Li’s main proceeding will not be determined until all his appeal rights are exhausted.
Moreover, were this Court, or indeed the Supreme Court on further appeal, to conclude that Fitzgerald J was wrong when she found that Mr Li did not have a beneficial interest in the Formosa Property, the declaratory theory of law would then result in Mr Li always having had that beneficial interest and there having been from the time of Fitzgerald J’s judgment until that appellate determination, a misunderstanding as to his legal rights.
Accordingly, I consider that there should be a stay as Mr Li sought pending the hearing of his appeal against the decision of van Bohemen J. The conceded basis on which the Judge considered matters would seem to have taken attention away from the terms of the consent memorandum pursuant to which the Caveat was registered. Moreover, given the factual background — at least as I understand it now — Mr Li’s appeal would not appear to be hopeless.
I acknowledge, as Associate Judge Andrew did, that the Caveat unfortunately poses an obstacle to what would appear to be the necessity for 110 Formosa to raise funds to maintain and develop the Formosa Property. The papers reflect that fact, however, that Mr Li has agreed to facilitate the borrowing of some $3 million by 110 Formosa. That, at least in part, would appear to address 110 Formosa’s concerns as to its fund-raising ability even if only in the very short term. Formalisation and enforcement, if necessary, of that agreement would be a matter for the High Court.
Timetabling
Mr Li claimed urgency in bringing this application before this Court. I note that, in terms of van Bohemen J’s own suspension of the effect of his judgment, Mr Li did not act in a timely manner.
The first respondent has also claimed urgency as regards this on the papers determination. It recently filed a memorandum to that effect. In doing so it asserted that Mr Li was not pursuing his appeal against van Bohemen J’s judgment in a timely fashion. I have considered that memorandum to constitute an application by the first respondent for an urgent hearing of Mr Li’s appeal against van Bohemen J’s decision.
I agree that, in these circumstances, Mr Li’s appeal against van Bohemen J’s judgment should be given priority. The sooner the status of the Caveat, pending the substantive appeal, is determined the better. I have therefore determined that Mr Li’s appeal against van Bohemen J’s judgment will be heard by a Civil Division of this Court in Auckland on 21 May 2019. I direct the parties to file an agreed timetable for all necessary interim steps, including the filing of the case on appeal and submissions, with these steps to be completed by 5 pm on 8 May 2019.
Result
I grant Mr Li’s application for an order staying execution of van Bohemen J’s judgment of 5 February 2019, pending the determination of Mr Li’s appeal to this Court against that judgment.
Solicitors:
Carson Fox Bradley Limited, Auckland for Appellant
Foy & Halse, Auckland for First Respondent
Cook Morris Quinn, Auckland for Second, Third and Fourth Respondents
Robertsons, Auckland for Fifth Respondents
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