LJ Group New Zealand Limited v New Zealand Capital Management Limited
[2025] NZHC 2659
•12 September 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2048
[2025] NZHC 2659
BETWEEN LJ GROUP NEW ZEALAND LIMITED
Plaintiff/Applicant
AND
NEW ZEALAND CAPITAL MANAGEMENT LIMITED and
BRIDGING FINANCE GROUP LIMITED
Defendants/Respondents
Hearing: 10 September 2025 Appearances:
G I Q Credo for Plaintiff/Applicant
S R G Judd for Defendants/Respondents
Judgment:
12 September 2025
JUDGMENT OF O’GORMAN J
This judgment was delivered by me on 12 September 2025 at 2 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………………
Solicitors/Counsel:
Ewart & Ewart Solicitors, Auckland G I Q Credo, Auckland
Aspiring Law, Wanaka S R G Judd, Auckland
LJ GROUP NEW ZEALAND LTD v NEW ZEALAND CAPITAL MANAGEMENT LTD [2025] NZHC 2659
[12 September 2025]
Introduction
[1] This is an application by LJ Group New Zealand Ltd (LJ Group) seeking relief pending appeal under r 12(3)(b) of the Court of Appeal (Civil) Rules 2005. Under r 12(3), the court appealed from may grant interim relief pending the determination of an appeal to the Court of Appeal.
[2] The subject matter of the application is net proceeds from a mortgagee sale held in a solicitor’s trust account subject to the terms of a written authority dated 17 October 2023. LJ Group seeks orders that the funds be paid out, whereas the defendants oppose that.
[3] On 10 September 2025 I heard from both parties on the application and declined to grant the relief sought, with reasons to be provided later. These are my reasons.
Facts
[4] The judgment appealed from in this Court is one for summary judgment in favour of the defendants issued by Associate Judge Paulsen on 6 May 2025.1 That judgment sets out the background between the parties.
[5] New Zealand Capital Management Ltd and Bridging Finance Group Ltd (for convenience, I will call them both NZ Capital) made a series of loans to LJ Group that were secured by a registered mortgage over a property at Kinloch. LJ Group defaulted in its repayment obligations and NZ Capital exercised its power of sale as mortgagee. This proceeding was initially commenced on 11 September 2023, when the mortgagee sale to Oji Fibre Solutions (NZ) Ltd (Oji Fibre) as purchaser had already settled, but the transfer had not been registered.
1 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd [2025] NZHC 1071.
[6] On 11 September 2023, Muir J made “interim interim” injunction orders restraining registration of the transfer and exercise of the power of sale.2 Muir J extended those orders on 14 September 2023 and directed that the application was to proceed on notice.
[7] It was in the context of that ongoing litigation that LJ Group signed the authority to hold and distribute funds. That authority was dated 17 October 2023 and provided as follows:
LJ GROUP NEW ZEALAND LIMITED hereby unconditionally and irrevocably authorise you to hold the net sale proceeds of 133 Kawakawa Road, Kinloch, Taupo in the sum of $286,750.52 in your trust account undisbursed on interest bearing deposit, and to distribute such funds in accordance with any order or direction given as to costs or damages by the Court, or as agreed by all parties in CIV-2023-404-2048 (LJ Group New Zealand Limited, New Zealand Capital Management Limited, Bridging Finance Group Limited and Oji Fibre Solutions (NZ) Limited) in writing.
[8] The on-notice injunction hearing was scheduled for hearing on 13 February 2024, but the plaintiff’s original solicitor and counsel sought leave to withdraw. On 13 February 2024, Robinson J rescinded the “interim interim” orders and dismissed the plaintiff’s application for interim injunction.3 The transfer to Oji Fibre as purchaser was registered.
[9] On 14 June 2024, Venning J awarded costs against LJ Group in respect of its interim injunction application in the following amounts:
(a)$49,510.23 in favour of NZ Capital on an indemnity basis, to be paid out of the funds held by Aspiring Law as stakeholder;4 and
(b)$55,234.75 and disbursements of $232.33 in favour of Oji Fibre, to be paid out of the funds held by Aspiring Law as stakeholder.5
2 As outlined in a subsequent costs judgment, LJ Group New Zealand Ltd v New Zealand Capital Management Ltd [2024] NZHC 1564 at [3].
3 At [5].
4 At [31].
5 At [44].
[10] The substantive matters then proceeded to a hearing on 12 February 2025 in respect of four applications by NZ Capital:
(a)an application for leave to apply for summary judgment;
(b)an application by the defendants seeking summary judgment;
(c)an alternative application by the defendants seeking orders striking out and dismissing the proceeding; and
(d)an application for indemnity costs.
[11] Following further written submissions received on 14 and 19 February 2025, Associate Judge Paulsen issued his judgment on 6 May 2025 granting summary judgment for the defendants and setting a timetable for the determination of their entitlement to costs. That judgment determined that there was no arguable claim for:
(a)a breach of the duty of care under s 176 of the Property Law Act 2007;
(b)allegations that the terms of the loan agreements were oppressive or that the defendants exercised the power of sale in an oppressive manner under s 120 of the Credit Contracts and Consumer Finance Act 2003; and
(c)related challenges to the validity of the notice issued under s 119 of the Property Law Act.
[12] In a judgment dated 30 June 2025 (reissued on 7 July 2025), Associate Judge Paulsen awarded indemnity costs of $72,855.63 and disbursements of $3,509.65.6 Like Venning J, the Judge accepted that the defendants were entitled to indemnity costs under:
6 LJ Group New Zealand Ltd v New Zealand Capital Management Ltd [2025] NZHC 1740.
(a)cl 7(5) of the loan agreements, covering all sums expended by the lender in the exercise of the lender’s rights and powers following a default or an exercising or enforcing or attempting to enforce any power, right or remedy contained or implied in the loan agreements; and
(b)cl 12(a), which specified the scope of the lender’s legal costs as including solicitor and client costs for legal services arising from or related to any default.
[13] As a result, from the original amount of net proceeds held on trust by Aspiring Law, the following amounts have been deducted in accordance with the orders of this Court:
(a)a payment of $60,342.58 to Oji Fibre on 1 July 2024;
(b)a payment of $49,510.23 made to the defendants on the same date; and
(c)a payment of $76,365.28 made to the defendants on 7 July 2025.
[14] On 4 June 2025, LJ Group filed and served a notice of appeal in respect of the judgment dated 6 May 2025. As a result, security for costs on a scale basis of $8,000 was due for payment on 4 September 2025.
[15] The present application for relief was filed and served on 6 August 2025, contending in ground 1(f) that:
The Applicant’s appeal will be rendered nugatory without the Release of Funds, as the Applicant cannot pay security for costs as ordered by the Court of Appeal.
[16]The supporting affidavit dated 5 August 2025 states, among other things, that:
Additionally, I am concerned that LJ Group will not be able to pay the Security for Costs due to the Chinese Foreign Exchange Currency regulations. Under these regulations, there is a limit to the amount of money that a Chinese citizen can take out of Chine which is USD$50,000 per year, per citizen. If I were to exceed this quote, it could lead to fines and/or the suspension of exchange privileges.
[17] At the hearing, counsel for the applicant advised that security for costs was paid on 4 September 2025. The case on appeal has also been filed and served.
Legal principles
[18] In determining whether or not to grant interim relief pending appeal, the Court of Appeal has stated that it is helpful to consider the same criteria application to applications for a stay.7 Factors to be taken into account include:8
(a)whether the appeal may be rendered nugatory by the lack of a stay;
(b)the bona fides of the applicant as to the prosecution of the appeal;
(c)whether the successful party will be injuriously affected by the stay;
(d)the effect on third parties;
(e)the novelty and importance of questions involved;
(f)the public interest in the proceeding;
(g)the overall balance of convenience; and
(h)the apparent strength of the appeal.9
7 Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust [2017] NZCA 377 at [10].
8 Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17 at [11], referring to Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 (CA) at 87.
9 At [11]; and Brook Valley Community Group Inc v Brook Waimarama Sanctuary Trust, above n 7, at [10].
Party submissions
[19] The applicant’s written submissions in support of the application for interim relief are dated 2 September 2025. In summary the applicant argues that:
(a)the appeal will be rendered nugatory if the application is not granted and the funds paid out to LJ Group;
(b)the appeal is being pursued in good faith and raises serious, arguable issues that warrant determination by the Court of Appeal;
(c)the respondents will not be injuriously affected if the funds are paid out, as all existing cost orders have already been satisfied;
(d)there are no third parties whose interests will be affected if the application for relief is granted;
(e)the appeal raises important questions as to the proper scope of a mortgagee’s statutory duty of care under s 176 of the Property Law Act and standards of conduct required under s 120 of the Credit Contracts and Consumer Finance Act 2003;
(f)the overall balance of convenience favours the release of the funds, which should not continue to be retained given that all its outstanding costs have been satisfied; and
(g)the applicant has strong grounds in support of the appeal in light of contested expert evidence.
[20] In oral submissions, counsel for the applicant acknowledged that security for costs has now been paid but contends this does not change the position. The other grounds remain applicable. In particular, the applicant contends that retaining the net proceeds in the trust account is contrary to the terms of the undertaking:
(a)Solicitors holding funds in trust are required to adhere strictly to the terms under which the funds are held.
(b)There is an obligation on solicitors to hold money received in trust exclusively for the person on whose behalf it is held, to be paid to that person as they direct.10
(c)The terms upon which Aspiring Law was authorised to retain the net sales proceeds have now expired, because the outcome in CIV-2023-404-2048 has been finally determined and all costs paid.
(d)The terms do not apply to the appeal to the Court of Appeal. In addition, the Court of Appeal has determined that $8,000 is sufficient security for costs in that proceeding. Therefore, there is no basis for funds that beneficially belong to LJ Group to be withheld.
[21] On behalf of the respondents, Mr Judd submitted that the fundamental basis for seeking relief no longer applies, given that security for costs in the Court of Appeal has now been paid. The jurisdictional basis for seeking these orders was interim relief pending appeal because otherwise the appeal may be rendered nugatory. There no longer seems to be any factual basis for this assertion.
[22] The necessity for the application in the first place was also disputed. The respondents had offered to waive security in the Court of Appeal, for the very reason that the funds in the trust account of Aspiring Law protect the respondents for the costs of the appeal. The default scale costs calculation of security is far less than the indemnity entitlement that the respondents will have if the appeal fails, which the respondents consider likely if not inevitable.
10 Lawyers and Conveyancers Act 2006, s 110.
[23] In any event, the clear purpose of the signed authority dated 17 October 2023 was to provide protection for any costs or damages arising from the litigation, and that purpose still continues while the dispute is ongoing and subject to an appeal. The reference to CIV-2023-404-2048 was to identify the parties involved in the dispute who could agree to release of the funds. It was not expressly or by implication limited to the High Court proceeding. It would make no sense to lack protection for an appeal.
[24] When the authority was signed on 17 October 2023, Mr Zeng was already living overseas in China, and there were no identifiable assets in New Zealand against which costs or damages could be enforced. That was the rationale for agreeing to the proceeds being held in trust subject to the terms of the authority. NZ Capital is continuing to incur legal costs not only in respect of the appeal, but also in this proceeding for the steps taken on this application, for which it will also be seeking indemnity costs.
Analysis
[25] In circumstances where security for costs has been set by the Court of Appeal, there would normally be no residual entitlement to achieve greater security through other means. However, in this case I accept the circumstances are different because the terms of the authority dated 17 October 2023 govern whether the funds should be paid out. With that protection in place, I accept that the respondents are not restricted by the default position on security for costs provided for in r 35 of the Court of Appeal (Civil) Rules.
[26] As a matter of interpretation of the terms of the authority dated 17 October 2023, I accept that the obligation to hold the net proceeds did not end once costs were paid as awarded in CIV-2023-404-2048. There are two triggers for disbursement of the funds, namely as agreed in writing by all parties, or in accordance with any order or direction given as to costs or damages by the Court. Neither of those situations presently applies. I accept that if there is any residual dispute about when it is appropriate for the funds to be paid out otherwise than in those two circumstances, then the Court may resolve the dispute by giving an appropriate order or direction. Effectively, that is what is sought in this application.
[27] The authority granted by LJ Group is given unconditionally and irrevocably. Accordingly, it is clear that the authority cannot be unilaterally withdrawn by LJ Group once it wishes to have the funds. I accept Mr Judd’s submission that the terms of the authority were clearly intended to protect against any costs or damages that the Court may award in the dispute that was the subject matter of CIV-2023-404-2048. That logically applies to an ongoing appeal about those same disputed issues. I reject the interpretation advanced on behalf of LJ Group that the terms of the authority were not intended to provide any protection against appeals.
[28] I also consider it irrelevant that the authority expressly refers to Oji Fibre, whereas that company is not a party to the appeal before the Court of Appeal. After the injunction was discharged, the transfer to Oji Fibre as purchaser was registered and costs owed to it were paid from the funds held by Aspiring Law, in accordance with Court orders and the terms of the authority. This does not mean that the authority no longer applies to protect the remaining parties in the ongoing dispute. There is nothing to prevent Oji Fibre providing express consent for payment of the remaining net proceeds at an appropriate time, given that it has no residual interest in those funds. Even if it did not provide such consent, the Court could resolve any such uncertainty by making an appropriate order or direction.
[29] Given that security for costs has been paid, I see no factual basis for believing that the appeal will be rendered nugatory if the net proceeds remain in Aspiring Law’s trust account pending conclusion of the appeal and resolution of all outstanding cost issues in this Court and the Court of Appeal. Notwithstanding the foreign currency regulations applicable in China, there are other means for achieving payment of ongoing legal costs and there is no evidence that the appeal now cannot proceed without the funds. The fact that the funds have remained in trust has not been any barrier to preparation of the case on appeal, or to the applicant taking steps in this proceeding.
[30] I accept that the respondents were the successful party before this Court with an established contractual right to indemnity costs for enforcement steps. If they are successful in the appeal, I accept they would be injuriously affected by this “interim relief” being granted because the funds would likely be dissipated, leaving them unable to recover their full indemnity entitlement for costs.
[31] I do not consider that the questions involved in the appeal involve any particular questions of novelty, importance or public interest. The principles applicable to a mortgagee’s obligations are well-established and are regularly tested at the Court of Appeal level.
[32] Overall, I accept that the balance of convenience favours maintaining the funds in the trust account of Aspiring Law subject to the terms of the authority dated 17 October 2023 as interpreted above. The intention of that authority was to protect the respondents from ongoing costs which they are continuing to incur in this proceeding and in the Court of Appeal.
[33]Accordingly, I declined the application for relief.
[34] The respondents are entitled to indemnity costs on this application. If the parties cannot agree, then the respondents may file and serve a memorandum within 10 working days, and the applicant’s memorandum should then be filed and served 10 working days later.
O’Gorman J
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