Liu v Jiang pka Kang
[2025] NZHC 1212
•19 May 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1018
[2025] NZHC 1212
BETWEEN MINYING LIU
First Plaintiff
YUHUAN LI
Second PlaintiffAND
KUPE HEYOKA JIANG previously known as WETEX KANG
First Defendant
MANUKA WHENUA HOLDING LIMITED
Second Defendant
1668 HONEY LIMITED (in liquidation)
Third Defendantcontinued overleaf…
Hearing: 8 May 2025 Counsel
M J van Zyl/ G Chan for the plaintiffs First defendant in person
Date of Judgment:
19 May 2025
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 19 May 2025 at 2.30 pm.
Pursuant to Rule 11.5 of the High Court Rules.
………………..
Registrar/Deputy Registrar
Solicitors:
Norling Law Ltd, Auckland:
LIU v JIANG [2025] NZHC 1212 [19 May 2025]
AND HONEY SCIENCE MANUKA HONEY
LIMITED (in liquidation) Fourth Defendant
1201 OKAU ROAD LIMITED
Fifth DefendantNORTH HONEY LIMITED (in
liquidation)
Sixth Defendant
Introduction
[1] The plaintiffs, Minying Liu and Yuhuan Li (Mrs Liu and Mr Li), are a retired couple from China. Between 2018 and 2022, they invested approximately $960,000 in the second to sixth defendants, companies associated with the first defendant, Kupe Jiang (Mr Jiang). The companies were in the honey business, and no longer trade.
[2] Mrs Liu and Mr Li are dissatisfied with the outcome of their investments. The third, fourth and sixth defendants are now in liquidation. In this proceeding, Mrs Liu and Mr Li bring causes of action against the defendants alleging shareholder oppression, breach of fiduciary duty by Mr Jiang, conversion, and breach of contract. The causes of action against the third, fourth and sixth defendants are effectively stayed under the Companies Act 1993 (CA), because those companies are in liquidation.
[3]Mr Jiang applies for:
(a)an order striking out all claims on the grounds that they are an abuse of process; and
(b)alternatively, an order that the plaintiffs pay security for costs of
$100,000 on the grounds that they reside in China.
[4] Mrs Liu and Mr Li oppose strike-out. They accept that an order for security for costs is appropriate, but they dispute the quantum of $100,000 sought by Mr Jiang.
[5] At the conclusion of the hearing on 8 May 2025, I indicated that the application for strike-out would be declined and security for costs for the next stage of the proceeding would be fixed at $5,200. This judgment confirms those orders and gives my reasons.
Procedural background
[6] When the proceeding was commenced, the plaintiffs pursued various applications for freezing orders. None were successful.
[7] On 5 February 2024, the plaintiffs applied to strike out Mr Jiang’s statement of defence. The application was scheduled for a hearing on 10 July 2024, but Mr Jiang sought an adjournment. A hearing was not ultimately necessary, because on 8 July 2024, the Court made an order requiring Mr Jiang to file and serve a more explicit statement of defence.1
[8] On 31 October 2024, Gault J awarded costs of $9,993.20 against Mr Jiang in respect of the plaintiffs’ application (the costs order).2
[9] Mr Jiang filed a memorandum seeking directions on the recovery of legal costs that he claimed to have incurred in relation to the freezing order applications, alleging that he suffered injustice and emotional harm from the proceeding.
[10] In a minute dated 11 November 2024, Gault J recorded that the costs order dealt only with costs in relation to the plaintiffs’ application for strike-out, and not costs in respect of the freezing order applications.3 However, Gault J analysed Mr Jiang’s claim for costs and found that he was not entitled to costs because:
(a)the first application for freezing orders was dismissed by Jagose J on 26 May 2023, prior to service on Mr Jiang;4
(b)the second application was discontinued in July 2023;
(c)the third application was made without notice, served on a Pickwick basis and dismissed by van Bohemen J on 18 December 2023, prior to any documents being filed in opposition;5 and
1 Liu v Kang HC Auckland CIV-2023-404-1018, 8 July 2024 (Minute of Gault J).
2 Liu v Kang HC Auckland CIV-2023-404-1018, 31 October 2024 (Minute of Gault J).
3 Liu v Kang HC Auckland CIV-2023-404-1018, 11 November 2024 (Minute of Gault J).
4 At [6].
5 At [6].
(d)the fourth application was made on notice and discontinued by memorandum dated 11 March 2024, with the Court minute dated 12 March 2024 recording that there was no issue as to costs (Mr Jiang being self-represented, and the steps taken by him pre-dating the changes to sch 2 to the High Court Rules 2016 (HCR), which now allow costs for parties acting in person).6
[11] On 2 April 2025, Mr Jiang sought to file a counterclaim pursuing those same costs issues and allegations of abuse of process. On 1 May 2025, O’Gorman J directed the Registry to reject the counterclaim for filing because:7
(a)it constitutes an abuse of process to pursue the same costs issues which have already been determined by the Court; and/or
(b)it improperly pursues issues already addressed by Mr Jiang’s existing application to strike out the claim (dealt with in this judgment).
[12]Mr Jiang asks the Court to revisit the rejection of his counterclaim.
[13] The costs order is the basis of a bankruptcy notice served by Mrs Liu and Mr Li on Mr Jiang. Mr Jiang has applied to stay enforcement of the costs order and to set the bankruptcy notice aside. The application for a stay is set down for hearing on 9 July 2025.
[14] Mr Jiang has not obtained leave to represent the second defendant, Manuka Whenua Holding Ltd (Manuka Whenua) or the fifth defendant, 1201 Okau Road Ltd (1201 Okau).8 Nonetheless, he seeks an order striking out the causes of action against them. I permitted Mr Jiang to make submissions on that basis, which has not prejudiced Mrs Liu and Mr Li. If Mr Jiang wishes to represent Manuka Whenua and 1201 Okau for any further steps in this proceeding, he will need to file an interlocutory application seeking permission.
6 At [7]–[8].
7 Liu v Jiang HC Auckland CIV-2023-404-1018, 1 May 2025 (Minute of O’Gorman J).
8 See Re G J Mannix Ltd [1984] 1 NZLR 309 (CA) at 311.
Mrs Liu and Mr Li’s pleadings
[15] I will begin by summarising the essence of Mrs Liu and Mr Li’s pleaded complaints against the company defendants, set out in the statement of claim dated 25 May 2023 (the claim).
Second defendant — Manuka Whenua
[16]Mrs Liu and Mr Li say that they advanced Manuka Whenua approximately
$200,000 between February 2018 and March 2019, for the purpose of Manuka Whenua purchasing three properties for use in honey production. In consideration, Mrs Liu received 44.37 per cent of the shares in Manuka Whenua.
[17] Mrs Liu and Mr Li are dissatisfied with how Mr Jiang has managed Manuka Whenua. Most significantly, they say that Mr Jiang caused Manuka Whenua to sell the three properties. They acknowledge receiving $129,305.53 from the proceeds of sale of one of the properties. They say that there has been no accounting for the balance of the proceeds of sale from the three properties.
Third defendant — 1668 Honey Ltd (in liquidation) (1668 Honey)
[18] Mrs Liu and Mr Li say that, in 2018, they purchased 4,000 shares in 1668 Honey. They are dissatisfied with Mr Jiang’s management of the company. They say that Mr Jiang failed to call meetings of shareholders and the company failed to pay dividends. They say that Mr Jiang “might have” misrepresented the company’s assets to them before they purchased the shares.
[19] Mrs Liu and Mr Li say that, in 2018, they purchased 80 beehives from 1668 Honey for a price of $104,000 on terms entitling them to receive honey and a return of their investment after three years. They say that they have not received all the honey that they are entitled to and only part of their investment has been returned, leaving a balance of the investment outstanding of approximately $82,000.
Fourth defendant — Honey Science Manuka Honey Ltd (in liquidation) (Honey Science)
[20] Mrs Liu and Mr Li say that, between July 2019 and April 2020, they purchased drums of honey from Honey Science, paying approximately $303,000. They say that their drums of honey have been converted by Mr Jiang and/or Honey Science.
Fifth defendant — 1201 Okau
[21]Mrs Liu and Mr Li say that, in 2018, they advanced 1201 Okau approximately
$57,000 for the purchase of a property for use in honey production. In consideration, they received 40 per cent of the shares in 1201 Okau. They take issue with subsequent share transactions. More significantly, they say that 1201 Okau Road has sold the property and failed to account for the proceeds of sale.
Sixth defendant — North Honey Ltd (in liquidation) (North Honey)
[22] Mr Li says that, in 2018, he purchased 36 shares in North Honey for a price of approximately $66,000, as the legal owner of the shares for other beneficial owners. Mr Li says that Mr Jiang failed to register 16 of the shares in his name, and he is dissatisfied with how Mr Jiang managed the company.
[23] Mrs Liu and Mr Li say that they invested approximately $74,000 in North Honey for the purchase of drums of honey, allegedly converted by Mr Jiang and/or North Honey.
The causes of action
[24] These various complaints by Mrs Liu and Mr Li have resulted in five causes of action in the claim:
(a)First, for shareholder oppression seeking relief under s 174 of the CA. The cause of action relates to the affairs of Manuka Whenua, 1668 Honey, 1201 Okau and North Honey.
(b)Secondly, for breach of fiduciary duties by Mr Jiang owed to them. Mrs Liu and Mr Li plead that fiduciary duties arise because they
reposed trust and confidence in Mr Jiang as their investment advisor, and from a relationship between Mrs Liu, Mr Li and Mr Jiang that was akin to a business partnership. Mrs Liu and Mr Li seek to recover their various losses under this omnibus cause of action.
(c)Thirdly, for breach of contract by 1668 Honey. This cause of action is stayed by the liquidation of 1668 Honey.
(d)Fourthly, for conversion by Mr Jiang and/or Honey Science and/or North Honey of drums of honey owned by Mrs Liu and Mr Li , with a value of approximately $430,000. The claims of conversion against Honey Science and North Honey are stayed by the liquidation of those companies.
(e)Fifthly, for breach of contract by North Honey. This cause of action is stayed by the liquidation of North Honey.
Mr Jiang’s application to strike out the proceeding
[25] Mr Jiang applies to strike out the proceeding in its entirety. Mr Jiang’s primary argument is that the proceeding was commenced, and is being pursued, in bad faith for the purpose of extracting a settlement payment from him. Therefore, the proceeding is an abuse of process.
[26]Mr Jiang argues that Mrs Liu and Mr Li’s bad faith is demonstrated by:
(a)their unsuccessful applications for freezing orders;
(b)an email from their solicitors, Norling Law, to Mr Jiang dated 21 February 2025 regarding settlement;
(c)Norling Law disclosing issues regarding Mr Jiang’s mental health to a process server;
(d)steps taken by Norling Law in respect of the Companies Register;
(e)Mrs Liu and Mr Li applying for the description of Mr Jiang as first defendant to be altered to reflect his legal name; and
(f)delays by Mrs Liu and Mr Li in progressing the proceeding.
[27] Alternatively, Mr Jiang argues that the cause of action under s 174 of the CA cannot succeed. He says that:
(a)Mr Jiang’s conduct in managing the companies does not amount to anything more than errors of judgement in management, which are not actionable under s 174;
(b)Mrs Liu and Mr Li have failed to give particulars of any allegations that Mr Jiang acted unfairly towards them in their capacity as shareholders; and
(c)Mrs Liu and Mr Li have failed to provide evidence to prove shareholder oppression.
Legal principles
Strike-out
[28] Pursuant to r 15.1(1) of the HCR, 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.
[29] The principles governing strike-out applications are summarised in the Court of Appeal decision in Attorney-General v Prince and Gardner:9
(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.
(e)The fact that an application to strike out raises difficult questions of law, and requires extensive argument, does not exclude the jurisdiction.
[30] To establish an improper purpose, the defendant must show that the plaintiff has an ulterior motive, seeking a collateral advantage beyond what the law offers;10 something not properly available to the plaintiff in the course of properly conducted proceedings.11
9 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
10 Goldsmith v Sperrings Ltd [1977] 1 WLR 478 (EWCA) at 498–499 per Scarman LJ.
11 Broxton v McClelland [1995] EMRL 485 (EWCA) at 498.
[31] A plaintiff who has commenced a legitimate claim may negotiate with a defendant to achieve a result different from the result that could be achieved in the litigation. As Lord Scarman put it in Goldsmith v Sperrings Ltd:12
But, equally, a man, while pursuing the remedies offered by the law, may negotiate to secure, by arrangement with the parties sued, terms more favourable than, or different from, what he would get in the absence of agreement. Such a negotiation, undertaken by properly advised parties, each of whom may have a legitimate interest in avoiding litigation and may be prepared to concede more than the law requires of them to achieve that end, does not necessarily mean that the plaintiff by his litigation is reaching out to secure a collateral advantage.
[32] In M v H,13 the Court of Appeal recently reviewed the leading authorities14 and summarised the principles to apply in determining whether the Court’s processes are being used for an improper and vitiating purpose:15
(a)the improper purpose alleged to be the motivation for the relevant proceedings need not be the sole purpose, as long as it is the predominant purpose;
(b)qualifying abuse will not be found, and a litigant will not be barred from pursuing a genuine cause of action, if the cause of action would be pursued despite the collateral purpose, notwithstanding that the collateral purpose is a consciously desired by-product of the claim;
(c)the onus on the party alleging abuse of process is a heavy one, and the power to grant a remedy (such as a stay) is to be exercised only in exceptional circumstances; and
(d)it is unnecessary to prove the commission of an improper act to justify a remedy but, other than in the clearest of cases, it will be necessary to point to some separate manifestation of intent, in the form of an overt act (such as a demand) which is indicative of the true (collateral) purpose.
Shareholder oppression under s 174 of the CA
[33] Under s 174, a shareholder may seek relief against unfair prejudice they suffered not just as a shareholder, but also in any other capacity. This includes being prejudiced as a creditor, agent or supplier of the company.
12 Goldsmith v Sperrings Ltd, above n 10, at 499–500 per Scarman LJ.
13 M v H [2024] NZCA 243, [2024] 3 NZLR 44.
14 Including Re Majory [1955] Ch 600 (EWCA); Williams v Spautz (1992) 174 CLR 509; and
Goldsmith v Sperrings Ltd, above n 10.
15 M v H, above n 13, at [138].
[34] Conduct that is oppressive, unfairly discriminatory or unfairly prejudicial involves instances or courses of conduct amounting to an unjust detriment to the interests of a shareholder. A complainant does not need to point to any actual irregularity or to an invasion of legal rights or to a lack of probity or want of good faith on the part of those in control of the company.16
[35] The Court may intervene under s 174 when there is a visible departure from the standards of fair dealing, viewed in light of the history and structure of the particular company and the reasonable expectations of its members.17
Discussion
[36] Mr Jiang falls well short in establishing that Mrs Liu and Mr Li are prosecuting this proceeding in bad faith:
(a)The freezing order applications were unsuccessful, but that does not mean that the applications were made in bad faith. The progression of the applications may have been cumbersome, but, at the end of the day, the issue of whether freezing orders were justified was determined on the merits. The Court has already determined that there is no basis for an order for costs in Mr Jiang’s favour, consistent with the applications having been made in good faith.
(b)The email from Norling Law to Mr Jiang dated 21 February 2025 states:
…
As such, I encourage you to make a sensible settlement offer. Our clients have lost much. Your ongoing unmeritorious defence puts them at further, and unnecessary cost. You will end up paying or bankrupt.
I encourage you to do the right thing.
If you refuse to do the right thing, we will continue as planned.
…
16 Thomas v HW Thomas Ltd [1984] 1 NZLR 686 (CA) at 693.
17 At 694–695; Latimer Holdings Ltd v SEA Holdings NZ Ltd [2005] 2 NZLR 328 (CA).
The email reflects that Norling Law was instructed to continue with the proceeding unless there was an out-of-court settlement, inviting a settlement offer. There is nothing untoward in that.
(c)Mr Jiang’s complaints about disclosure of his mental health and approaches to the Companies Office do not impeach the motives of Mrs Liu and Mr Li in pursuing the proceeding.
(d)Mr Jiang was previously known as Wetex Kang. He legally changed his name, and it was appropriate for his legal name to be recorded on Court documents.
(e)The delay in the progress of the proceeding is primarily due to the various interlocutory applications that have been filed, and availability of Court hearing time.
[37] I am satisfied that Mrs Liu and Mr Li’s claims are tenable as a matter of law. The substance of Mr Jiang’s argument is that the claim under s 174 of the CA cannot succeed on the evidence. As I explained to Mr Jiang during the hearing, the Court will only strike out a cause of action if it is untenable as a matter of law, assuming that the plaintiff’s pleadings of fact can be proven at trial. Mr Jiang’s arguments on the facts are matters for trial, or perhaps in support of an application for summary judgment.
[38] The liquidation of 1668 Honey, Honey Science and North Honey may not prevent Mrs Liu and Mr Li from pursuing claims against Mr Jiang in respect of those companies under s 174 of the CA.18
[39] The conduct pleaded by Mrs Liu and Mr Li to be oppressive goes well beyond routine management decisions. The alleged oppressive conduct in respect of Manuka Whenua and 1201 Okau includes conduct in respect of the sale of properties and accounting for proceeds. There are allegations of conversion. The theme underlying the allegations is that Mr Jiang has misappropriated funds and property. If proven, the allegations may justify relief under s 174 of the CA.
18 West v Cowley [2013] NZHC 2356 at [20].
[40] Mr Jiang did not present any specific arguments in support of his contention that the other causes of action are untenable as a matter of law.
Security for costs
[41] Mr Jiang seeks security of $100,000, working from a starting point that this is a category 3C proceeding for the purpose of costs and assuming that Mr Jiang is represented by counsel. I reject that submission. This is a conventional shareholder dispute. There is nothing about the proceeding that takes it out of the ordinary. Category 2B is the appropriate starting point when assessing quantum for security for costs. Security for costs must be assessed on the basis that Mr Jiang is self- represented.
[42] Orders for security for costs orders are generally prospective. Attached as schedule A is a table setting out the likely steps required from now until the completion of discovery. On a 2B basis, an award of costs to Mr Jiang, as a litigant in person, would be $5,200. That is the appropriate quantum for security for costs for that stage of the proceeding.
[43] The quantum of security can be revisited if Mr Jiang elects to instruct counsel, and as the proceeding progresses beyond discovery.
Costs
Arguments
[44] I heard submissions on costs at the conclusion of the hearing. Mrs Liu and Mr Li seek costs on a 2B basis together with an uplift of 100 per cent on the following grounds:
(a)Mr Jiang’s application for strike-out was based on arguments that lack merit, contributing unnecessarily to the expense of the proceeding and justifying an increase under r 14.6(3)(b)(ii) of the HCR;
(b)Mr Jiang ignored Muir J’s caution to Mr Jiang regarding the likely efficacy of an application to strike out a proceeding under s 174 of the CA;19
(c)Mrs Liu and Mr Li offered to pay $15,000 as security before they took any steps in respect of the application for security for costs, and Mr Jiang contributed unnecessarily to the expense of the proceeding by failing, without reasonable justification, to accept Mrs Liu and Mr Li’s offer of security, justifying a refusal of costs to Mr Jiang under r 14.7(f)(v) of the HCR.
[45] Mr Jiang submitted that he was the successful party in respect of his application for security, and that he should be awarded costs. He conceded that he did not write to Mrs Liu and Mr Li’s solicitors regarding security for costs before filing his application.
[46] Mr Jiang submitted that his application for strike-out was not so hopeless as to warrant an increase in costs. He requested the Court to stay any costs order made against him until the conclusion of the proceeding.
Discussion
[47] Mr Jiang’s application to strike out the proceeding, on the basis that it is being pursued in bad faith to extract a settlement payment, had no reasonable basis on the available evidence and was ill conceived. Mr Jiang’s decision to take this step caused Mrs Liu and Mr Li to unnecessarily incur legal costs. An increase in costs is justified.
[48] Similarly, Mr Jiang’s refusal to accept security of $15,000 was unjustified and based on his unreasonable view that security of $100,000 was appropriate. There was no prospect of the Court ordering security in the vicinity of $100,000 to a litigant in person in respect of claims of the nature brought in this proceeding. Mrs Liu and Mr Li should receive costs.
19 Liu v Jiang HC Auckland CIV-2023-404-1018, 24 February 2025 (Minute of Muir J) at [6].
[49] Considering all matters in the round, I am satisfied that Mr Jiang should pay costs to Mrs Liu and Mr Li on a 2B basis together with an uplift of 50 percent uplift for the following steps:
(a)step 23 — opposition to application for strike-out (0.6 days);
(b)step 23 — opposition to application for security for costs (0.6 days);
(c)step 24 — preparation of written submissions (one set of submissions only) (1.5 days);
(d)step 26 — appearance at half-day hearing (no certification for junior counsel) (0.5 days); and
(e)step 29 — sealing order (0.2 days).
[50]Mr Jiang should also pay Mrs Liu and Mr Li’s disbursements.
[51] I am not prepared to stay enforcement of costs on the basis of Mr Jiang’s oral submission. Mr Jiang will need to file a formal application.
Other matters
[52] The first cause of action alleging shareholder oppression under s 174 of the CA is a pt 18 proceeding. It appears that Mrs Liu and Mr Li are yet to apply for directions as to service.
[53] Mrs Liu and Mr Li’s statement of claim may benefit from refinement once discovery has been completed. If an amended statement of claim is filed, it should separate out the causes of action in conversion against Mr Jiang from the causes of action in conversion against Honey Science and North Honey, which are presently stayed by the CA.
[54] I confirm that the Registry should continue to refuse to accept Mr Jiang’s counterclaim for filing in its current form, for the reasons set out by O’Gorman J in her minute dated 1 May 2025.20
[55] Mr Jiang advised the Court that he intends to obtain legal advice regarding the conduct of his defence, and he will consider whether he ought to file a revised counterclaim and/or apply for summary judgment. Those matters can be addressed at the next case management conference. The Registry should not accept the filing of a counterclaim from Mr Jiang in person without approval from a judge.
[56] Mr Jiang has paid a filing fee on the counterclaim, even though it has not been accepted for filing. That filing fee should be returned to him.
[57] The proceeding should now be allocated a case management conference to deal with:
(a)any amendment of the pleadings;
(b)discovery;
(c)any further interlocutory applications;
(d)all outstanding sch 5 matters; and
(e)setting down for trial and pre-trial directions.
Orders
[58]The first defendant’s application to strike out the proceeding is declined.
[59] The first plaintiff and the second plaintiff shall pay security for costs of $5,200 in respect of the interlocutory steps set out in schedule A to this judgment, by payment into Court.
20 Liu v Jiang HC Auckland CIV-2023-404-1018, 1 May 2025 (Minute of O’Gorman J).
[60] Leave is reserved to the first defendant to apply for a variation of the order for security for costs:
(a)if the first defendant instructs a solicitor on the record and/or retains counsel; and/or
(b)at the conclusion of discovery, in respect of the steps required to conclude a trial of the proceeding.
[61] The first defendant shall pay the plaintiffs’ costs in respect of the application for strike-out and the application for security for costs on the terms set out in [49] above, together with disbursements as fixed by the Registrar.
[62] The proceedings shall be allocated a case management conference before me on the next available date.
Associate Judge Brittain
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