Luo v Shiu - [2022] NZHC 1707

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2019-404-000706

[2022] NZHC 1707

UNDER Rule 12(3) of the Court of Appeal (Civil) Rules 2005

IN THE MATTER OF

An application to stay execution of judgment pending determination of appeal

BETWEEN

ZHENLIN (ROBERT) LUO

First Plaintiff

KC BROTHERS LIMITED

Second Plaintiff

ANG YIP

Third Plaintiff

MANFEI COMPANY LIMITED
Fourth Plaintiff

AND

XIAOLING (ANNIE) SHIU

First Defendant

R&G PHOENIX LIMITED

Second Defendant

CSR POKENI LIMITED

Third Defendant

Hearing: 20 June 2022

Appearances:

S Judd for the Plaintiffs/Respondents

D Bigio QC for the Defendants/Applicants

Judgment:

18 July 2022

JUDGMENT OF TAHANA J

This judgment was delivered by me on 18 July 2022 at 12.30pm. Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar

LUO v SHIU and CSR POKENO LIMITED v LUO [2022] NZHC 1707 [18 July 2022]

CIV 2022-404-000285

UNDER

Section 290 of the Companies Act 1992

IN THE MATTER OF

An application to set aside statutory demands

BETWEEN

CSR POKENO LIMITED

Applicant

AND

ZHENLIN (ROBERT) LUO
First Respondent

MANIFEI COMPANY LIMITED

Second Respondent

Solicitors/Counsel:
Shortland Chambers, Auckland Righteous Law, Auckland Pidgeon Judd, Auckland Kitchener Chambers, Auckland

Introduction

[1] In a judgment dated 21 December 2021, Whata J entered judgment against the first and third defendants, Ms Shiu and CSR Pokeno Limited (“CSR Pokeno”) (together, “the applicants”).1 Ms Shiu was ordered to pay $2,671,183.73 to Mr Luo and Manfei Company Ltd (together, “the respondents”). CSR Pokeno was held to be jointly liable for a portion of that sum totalling $1,886,856.80.

[2] The applicants filed an appeal which is yet to be heard. The respondents subsequently served statutory demands on CSR Pokeno for the judgment sum it owes plus costs. The respondents have also served bankruptcy notices on Ms Shiu but these are not the subject of the applications.

[3] The applicants have applied for a stay of execution pending appeal and to set aside the statutory demands. The respondents oppose both applications but say they would consent to a stay:

(a)against both applicants if the applicants pay the full amount of the judgment sums plus interest into Court or into a solicitor’s trust account; and

(b)against CSR Pokeno if it procures an undertaking from Pokeno West Ltd (“Pokeno West”) that it will not sell, transfer, mortgage or otherwise deal in any way with the land owned at 53 Munro Road, Pokeno (“the Munro Rd property”).

[4]The applicants have offered security but not in the form described at [3] above.

[5] The issue I need to determine is whether the form of security offered by the applicants is sufficient and the grounds for granting a stay of proceedings are satisfied.

1 Luo v Shiu [2021] NZHC 3564.

Factual background

[6] In 2019, the plaintiffs issued proceedings against Ms Shiu, R&G Phoenix Ltd and CSR Pokeno alleging that Ms Shiu (and through her, CSR Pokeno) made various false representations in relation to five investment properties2 in Pokeno.

[7] Prior to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Luo v Shiu

Details

AGLC: Luo v Shiu [2022] NZHC 1707
Case: [2022] NZHC 1707
Decision Date: 18 July 2022

CaseChat Overview and Summary

This case involves an application to stay the execution of judgment pending the determination of an appeal and to set aside statutory demands. The respondents, Mr Luo and Manfei Company Ltd, have been awarded judgment against the applicants, Ms Shiu and CSR Pokeno, and have served statutory demands on CSR Pokeno for the judgment sum plus costs. The applicants have applied for a stay of execution pending appeal and to set aside the statutory demands. The respondents oppose both applications but would consent to a stay under certain conditions. The applicants have offered security, but not in the form described by the respondents.

The court must determine whether the form of security offered by the applicants is sufficient and whether the grounds for granting a stay of proceedings are satisfied. The court has discretion to order a stay of execution pending appeal, but must balance the need to preserve the appellant's position in the event of the appeal succeeding against the successful party's entitlement to the fruits of its judgment. The overall approach is a balancing exercise, with all relevant factors to be weighed.

The court found that the appeal may not be rendered nugatory by the lack of a stay, as the respondents are not seeking to enforce judgment and are willing to consent to a stay if the applicants provide sufficient security. The applicants' bona fides in pursuing the appeal are not contested, but the respondents question the applicants' willingness to pay the full amount of the judgment sums into trust or Court, given the adverse credibility findings against Ms Shiu and the applicants' access to equity valued at approximately $25 million.

The court found that the respondents will not be injuriously affected by the stay if security is provided by way of payment of the judgment sums into trust. The form of security offered by the applicants is insufficient because the charging orders over shares do not prevent the directors of the relevant companies from dissipating assets. The key issue is the adequacy of the security offered by the applicants.

The court found that the balance of convenience weighs in favour of granting the stay based on the security that has been offered. The applicants have offered $800,000 paid into trust, a first registered mortgage over the Papakura property, and charges over shares. The court has accepted security other than payment of the full judgment sum, as follows: in Loktronic Industries v Diver the Court granted the stay on condition that the applicants provide a bank bond for the judgment sum in favour of the Court; and in Eden Refuge Trust v Hohepa the stay was granted on condition that the funds were paid into trust or, in the alternative, by providing a registered security over realty to the value of the judgment sum. The offer of a registered security over the Papakura property is not complex and any costs associated with the registered security can be borne by the applicants.

The next issue is security for the remaining amount of the judgment sum. The remaining security offered comprises charges over shares and an undertaking from CSR Pokeno that it will not approve any shareholders' resolution to sell the Munro Road property. The court found that the charges over shares do not prevent the directors of the companies from dissipating the assets of the companies. The court found that it would be inappropriate for a third party to be required to provide security, but the applicants must accept that in the absence of an undertaking from Pokeno West there is greater uncertainty that CSR Pokeno or Mr Shiu can block a sale of the Munro Rd property.

The court found that the balance of convenience is in favour of granting the stay but with greater security than has been offered by the applicants. The court therefore granted the application for stay of the proceedings pending determination of the appeal on condition that the applicants provide the following by way of security: pay $800,000 into the trust account of Pidgeon Judd (if they have not already done so); provide a first registered mortgage over the Papakura property in favour of the respondents with a priority amount of $1 million, the costs of which are to be borne by the applicants; and provide a bank bond in favour of the Court for the remaining amount of the judgment sums plus interest or in the alternative, procure an undertaking from Pokeno West that it will not approve the sale of the Munro Rd property. The court also ordered that the statutory demands be set aside subject to CSR Pokeno complying with the conditions set out above.

Orders