Liu v Qian
[2023] NZHC 3499
•4 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2022-404-756
[2023] NZHC 3499
UNDER The Trusts Act 2019
The Property (Relationships) Act 1976
IN THE MATTER OF
An application for the removal and replacement of a trustee
BETWEEN
JINGWEN LIU
Plaintiff
AND
HAO QIAN
Defendant
Hearing: 30 November 2023 Appearances:
M S Pang and X Lin for the plaintiff
N Malarao and C Rutledge for the defendant
Judgment:
4 December 2023
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 4 December 2023 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
LIU v QIAN [2023] NZHC 3499 [4 December 2023]
[1] The plaintiff applies for an order setting aside my judgment in this proceeding dated 22 September 2023 (in which I granted the defendant’s application for a sale and interim distribution order), or alternatively for a stay of execution of the judgment pending the substantive outcome in this proceeding.
Background
[2] The plaintiff, Ms Liu, and the defendant, Mr Qian, married in October 2013 and separated in November 2019. In the course of their marriage, the Qian Duo Duo Family Trust (the Trust) was settled. The parties are the two trustees of the Trust.
[3] This proceeding began in March 2022 as one by Ms Liu seeking orders under the Trusts Act 2019 against Mr Qian as trustee of the Trust (the Trust Proceeding). In February 2023, Mr Qian brought his own proceeding against Ms Liu in the Family Court, applying for division of relationship property (the Relationship Property Proceeding). In that proceeding, Mr Qian made an interlocutory application for orders for sale of the parties’ family home and for interim distribution of the proceeds (the Sale and Interim Distribution Application).
[4] On 24 March 2023, Ms Liu filed a notice of opposition to the Sale and Interim Distribution Application. She did not file any affidavit in support of her opposition.
[5] The Relationship Property Proceeding was subsequently transferred (by consent) to this Court. The two proceedings were subsequently consolidated.
[6] On 7 July 2023, Associate Judge Brittain directed that, in relation to the Sale and Interim Distribution Application, Ms Liu was to file any amended notice of opposition and supporting affidavits by 21 July 2023, and her written submissions by 4 September 2023. The Application was allocated a hearing date.
[7] I heard the Sale and Interim Distribution Application on 11 September 2023. Mr Qian had filed, as directed, his written submissions, authorities and a bundle of documents for the hearing. Ms Liu did not file any supporting affidavits or any written submissions.
[8] Mr Pang appeared, with Ms Lin, for Ms Liu. He told me he had been unable to communicate with Ms Liu until speaking with her that morning. Despite speaking with her, he had been unable to obtain clear instructions on the application. He asked that I adjourn the application to allow him to obtain clear instructions. If I did not grant an adjournment, he said it was likely he would apply for leave to withdraw as solicitor on the record for Ms Liu, and in the meantime would seek to be excused from appearing as counsel on the application.
[9] I declined to adjourn the application. Any adjournment would have been for at least two months. I was not given any satisfactory reasons for Ms Liu’s non- compliance. It was not clear to me what the basis of Ms Liu’s grounds of opposition to the application would be. Mr Pang had suggested some grounds but candidly acknowledged they were not supported by any affidavit evidence. The application had been on foot for over seven months. There was an associated lack of compliance by Ms Liu with discovery orders in the substantive proceeding.
[10] Having adjourned the application, I excused Mr Pang and Ms Lin from appearing as counsel. Ms Lin remained in the courtroom to observe the hearing.
[11]I delivered my judgment on 22 September 2023.1 I granted Mr Qian’s
application. I ordered that:
(a)The family home be sold.
(b)After repayment of the ANZ Bank loan (secured over the family home) and deducting any reasonable costs of the sale, the balance of the sale proceeds be divided equally between Mr Qian and Ms Liu.
[12] I reserved leave to the parties to seek further directions from the Court to implement the orders.
1 Liu v Qian [2023] NZHC 2653.
Ms Liu’s application to set aside or stay my judgment
[13] The working day after my judgment was delivered, Ms Liu applied to set it aside or for execution of it to be stayed. She made a detailed affidavit in support.
[14]The key grounds of Ms Liu’s application, as advanced at the hearing of her
application to set aside or stay my judgment, are:
(a)Ms Liu’s delay in responding to Mr Qian’s application is reasonably
explained and she is apologetic for the delay.
(b)Ms Liu has day-to-day care of the parties’ daughter, who is eight. The family home is the only one the daughter has ever lived in. The home is the closest to the daughter’s school, compared to the other properties owned by the Trust. It would be seriously detrimental for Ms Liu and the daughter to have to move out of the home. The daughter might have to change schools.
(c)The sale of the family home would result in no, or minimal, net sale proceeds. The home is subject to a mortgage in favour of the ANZ Bank. The mortgage secures not only a loan made by the ANZ Bank to the parties to purchase the home, but also the parties’ obligations under a guarantee they gave to the ANZ Bank of the Trust’s obligations to the ANZ Bank in respect of a loan made to the Trust to purchase a property in Kokiri Street, Te Atatu South. The family home cannot be sold without discharging the mortgage over it, and the ANZ Bank has said it will only provide a discharge if the net sale proceeds from the family home are applied in discharge of the Trust’s loan. There will be no or minimal net sale proceeds once the two loans are discharged.
(d)Mr Qian made his application without disclosing that the mortgage secured the parties’ obligations under the guarantee of the Trust’s obligations and therefore without informing the Court of the risk that there would be no or minimal net sale proceeds from the sale.
[15] Mr Qian opposes the application. He says the Court was aware at the previous hearing that the mortgage over the family home also secures the parties’ obligations under a guarantee in respect of the Trust’s property at Kokiri Street. He says Ms Liu is impermissibly attempting to relitigate the application by raising matters that she had the opportunity to pursue at the earlier hearing. Mr Qian says Ms Liu has no excuse for her earlier failure to respond to the application.
Legal principles governing the application to set aside
[16] Ms Liu’s application to set aside relies on rr 10.9 and 15.10 of the High Court Rules 2016. I consider neither is applicable. Rule 10.9 deals with applications to set aside a judgment following a trial where one party has not appeared. There has been no trial. Rule 15.10 deals with applications to set aside a judgment obtained by default. My judgment was not one obtained by default.
[17] In advance of the hearing, I issued a minute suggesting that r 7.49 is the applicable rule. Mr Pang, counsel for Ms Liu, accepted at the hearing that r 7.49 was applicable. Relevantly, this provides:
(1) A party affected by an interlocutory order (whether made on a Judge’s own initiative or on an interlocutory application) or by a decision given on an interlocutory application may, instead of appealing against the order or decision, apply to the court to vary or rescind the order or decision, if that party considers that the order or decision is wrong.
…
(6)The Judge may,—
(a)if satisfied that the order or decision is wrong, vary or rescind the order or decision; or
(b)on the Judge’s own initiative or on the application of a party, transfer the application to the Court of Appeal.
[18] The approach to applications under r 7.49 depends on whether the interlocutory order was made without notice or on notice. An application to rescind a without notice order is a rehearing of the original application. Indeed, a party affected by a without- notice order should apply for review under r 7.49 rather than appealing. An
application to rescind an on-notice order is more circumscribed. Review under r 7.49 is generally appropriate only where there was not full argument at the original hearing, some relevant point of evidence was overlooked at that hearing, there has been a material change of circumstances, or some other special circumstance has arisen.2
[19] Mr Pang’s written submissions referred to Mr Qian’s application having been heard “ex parte”. That characterisation is incorrect. Mr Qian’s application was made on notice to Ms Liu. That Ms Liu failed to file submissions or provide instructions to her counsel at the original hearing does not convert the application into one made without notice.
Legal principles governing the application for a stay
[20] Ms Liu applies for a stay under rr 17.29 and 17.30. Under r 17.29 a party may apply for a stay of enforcement on the ground that a “substantial miscarriage of justice” would be “likely” to result if the judgment were enforced. There must be a real and substantial risk of a substantial miscarriage of justice.3
Should the judgment be set aside?
[21] Ms Liu’s principal argument focuses on the effect of what the parties called the “interlocking” mortgages in favour of the ANZ Bank over the Trust’s property at Kokiri Street and the parties’ family home. According to Ms Liu’s affidavit in support of the application, as at 22 September 2023 the amount owing by the parties under the mortgage over the family home was $453,521.40 and the amount owing by the Trust under the mortgage over the Kokiri Street property was $1,041,163.15.
[22] Ms Liu says in her affidavit that it is likely that if the family home were sold, the ANZ Bank would require the sale proceeds to be applied not only to pay the loan that is secured by the mortgage over the family home but also to repay the loan in respect of the Kokiri Street property, a total of $1,494,684.55. She says the estimated market value of the family home is only $1,500,000. Allowing for the costs
Jessica Gorman and others McGechan on Procedure (looseleaf ed, Brookers) at [HR7.49.04];
Crequer v Chief Executive of the Ministry of Social Development [2014] NZCA 284 at [18]–[19].
3 Re/Max New Zealand Ltd v Bay Cities Real Estate Ltd [2011] NZCA 623 at [10].
of sale, she says there would be no net proceeds available once the two loans were repaid.
[23] Mr Pang submits that Mr Qian failed to disclose this matter to the court at the original hearing. He says that the matter undermines the entire basis of Mr Qian’s application for order for sale and interim distribution. That application was made on the grounds that Mr Qian was experiencing financial hardship and the delay in realising and accessing equity in the family home was causing unfair prejudice to him. Mr Pang says it is evident that any sale of the family home would be pointless, as it would generate no or minimal proceeds.
[24] I do not accept that Mr Qian failed to disclose this matter to the Court. In his affidavit in support of his application, dated 19 January 2023, Mr Qian deposed that “approximately $500,000” was owing on the mortgage over the family home. (This was a conservative estimate, as it appears the figure was closer to $450,000.) He also deposed that the Trust had obtained a loan of $1,031,000 to purchase the Kokiri Street property, with that loan secured over both the Kokiri Street property and the family home. Mr Qian did not provide a current statement of the loan, but the loan amount of $1,031,000 to which he referred is not materially different to the $1,041,163.15 to which Ms Liu referred. In his affidavit, Mr Qian also deposed that the market value of the family home was $1,630,000.
[25]Notably, Ms Liu’s notice of opposition to Mr Qian’s application did not raise
any issue about a sale of the family home generating no or minimal proceeds.
[26] When Mr Pang sought an adjournment of the original hearing, he told me that one of the grounds on which Ms Liu would resist Mr Qian’s application was that there were two interlocking mortgages, so that any sale was unlikely to generate funds for the parties. After I declined to adjourn the hearing, I raised this point with counsel for Mr Qian, who at that hearing was Ms Hong. Ms Hong took me to the relevant parts of Mr Qian’s affidavit that identified the interlocking mortgages, the approximate amounts owing, and the market value. She told me that Mr Qian accepted there was a risk that the ANZ Bank would require both loans to be paid from the sale proceeds
of the family home. (By the time that discussion occurred, I had excused Mr Pang and Ms Lin from appearing, but Ms Lin remained in the court to observe.)
[27] This matter was, therefore, disclosed to the Court by Mr Qian at the original hearing. There is now, I accept, more information before the Court:
(a)Ms Liu has provided more accurate information as to the amounts owing on the two loans. But the total to which she refers ($1,494,684.55) is slightly less than what appeared to be the case from Mr Qian’s affidavit ($1,531,000).
(b)It is clear that the ANZ Bank will require the proceeds of any sale of the family home to be used to repay both loans. This became clear because, in response to Ms Liu’s application to set aside, Mr Qian contacted the ANZ Bank to ascertain its position. The Bank responded that it would require any net proceeds of sale of the family home to be applied towards the loan to the Trust for the Kokiri Street property. One of the reasons it gave was that the Trust was then in arrears on its loan.
(c)There is now more valuation information for the family home. Ms Liu annexed an online valuation. This showed two estimates, one of
$1,500,000 and one of $1,600,000. Mr Qian filed an affidavit with three online valuations as at 23 November 2023. Two of these were updated (and slightly increased) valuations from those annexed to Ms Liu’s affidavit. The range of the three updated valuations is from
$1,540,000 to $1,660,000, with an average of $1,613,333.
[28] Ms Liu had the opportunity to put all of this information before the Court at the original hearing. The information is not materially different from what appeared at that hearing. Then, based on Mr Qian’s affidavit, the difference between the estimated market value of the family home and the two loans was about $99,000. Now, taking the average of the online valuations of $1,613,333, it is about $118,000. Then, there was only a perceived risk that the ANZ Bank would require both loans
to be repaid. Now, that is almost certain. But this change is not material, as Mr Qian was willing to take the risk in any event.
[29] The figures in the previous paragraph do not take account of the likely costs of sale. Mr Pang provided estimates of these at the hearing, which appear reasonable. Taking those into accounts, he submitted that even if a sale achieved a price at the average of the updated online valuations, the net proceeds would only be about
$72,000, or $36,000 as Mr Qian’s half share. Given there was of course a risk that the sale price might be lower, he submitted that there might be no net proceeds available to Mr Qian. Mr Pang said this showed there was little point to a sale order. By contrast, any sale would see Ms Liu and the parties’ daughter having to leave their home of many years.
[30] Mr Pang’s submission ignores the other rights that both parties would enjoy were the proceeds of sale used to repay the Trust’s loan to the ANZ Bank. Any such payment would mean that the parties would, in their capacities as guarantors, be repaying the Trust’s loan (or most of it) to the Bank. The parties would then enjoy a right of indemnity against the Trust and would be subrogated to the mortgage that the Bank holds over the Kokiri Street property as security for the Trust’s loan. These rights, while not the same as money in the bank, would be very valuable. Ms Liu said in her affidavit that the Kokiri Street property is valued at about $1,065,000. There would be ample equity to satisfy most or all of what the Trust would owe to the parties.
[31] I accept that Ms Liu and the parties’ daughter will suffer some prejudice from the orders that Ms Liu seeks to rescind. If the family home is sold they will likely have to move out (though Mr Pang referred to a possibility of Ms Liu, with the support of her family, purchasing the home). But, as I noted in my earlier judgment,4 Ms Liu and the daughter may be able to live in one of the Trust’s rental properties, and any prejudice is a consequence that Ms Liu and the daughter are likely to suffer in any event once the Relationship Property Proceeding is determined (as there is no suggestion that Ms Liu could (without assistance from her family) purchase Mr Qian’s
4 Liu v Qian [2023] NZHC 2653 at [33].
share in the family home). That Proceeding currently has a five-day trial scheduled to commence 15 April 2024.
[32] As has been observed before, an application under r 7.49 is not an opportunity to relitigate.5 That observation is obviously applicable where the r 7.49 application is made by a party who participated at the earlier hearing. But it is equally applicable where the party had every opportunity to participate but failed to do so.6 I consider that Mr Malarao, counsel for Mr Qian, was right when he submitted that, were it otherwise, there would be an incentive to disregard court processes.
[33] All the points that Ms Liu advanced on this application could have been advanced by her at the original hearing. In any event, her points have not persuaded me that my original decision was wrong. I decline to set aside the judgment.
Should the judgment be stayed pending the substantive outcome in this proceeding?
[34] Ms Liu relied on the same points in seeking a stay of judgment pending the substantive outcome in this proceeding.
[35] Given that the judgment made only interim orders, a stay would have the same effect as setting aside the judgment. For the same reasons that I gave for declining to set aside the judgment I therefore decline the application for a stay.
Costs
[36] Mr Qian is entitled to costs on this application. Failing agreement on quantum, counsel may file memoranda on costs. Each memorandum is not to exceed two pages (excluding relevant annexures and schedules). Mr Qian is to file first, followed by Ms Liu within five working days.
5 Howard v Accident Compensation Corp [2013] NZHC 1004 at [4].
6 A similar observation was made by Isac J in ADM International SARL v Golden Shine NZ Ltd
[2023] NZHC 2694 at [25].
Result
[37] I decline the application to set aside or stay my judgment dated 22 September 2023.
Campbell J
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