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Mao v Best Capital Ltd

Mao v Best Capital Ltd

Case [2021] NZHC 735 1 April 2021

Jurisdiction

Breach of Contract

Misleading and Deceptive Conduct

Unconscionable Conduct

Abuse of Process

Civil Litigation & Procedure

Property Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2197

[2021] NZHC 735

BETWEEN
JIAWEN MAO

First Plaintiff

LIANSEN MAO
Second Plaintiff

YINTIAN CO LIMITED
Third Plaintiff

AND

BEST CAPITAL LIMITED
First Defendant

HYUN BIN KIM

Second Defendant

DUK YOUNG LEE

Third Defendant

Hearing: 19 November 2020

Counsel:

A Yang for the Plaintiffs

SP Gamble for the Defendants

Judgment:

1 April 2021

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 1 April 2021 at 4pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
JC Legal, Auckland Hesketh Henry, Auckland

JIAWEN MAO v BEST CAPITAL LIMITED [2021] NZHC 735 [1 April 2021]

Introduction

[1] The defendants have applied to strike out the plaintiffs’ claim on the basis that it discloses no reasonably arguable cause of action and is an abuse of process.

[2] The plaintiffs’ claim relates to two development loan agreements entered into between various of the plaintiffs and the defendants.

[3] The first two causes of action relate to 31 Chester Avenue, Greenhithe and allege:

(a)that the second and third defendants’ mortgagee sale of 31 Chester Avenue was in breach of s 176 of the Property Law Act 2007 by failing to obtain the best reasonably obtainable price at the time of sale; and

(b)misleading and deceptive conduct by the second and third defendants in failing to lend further funds once a house was relocated onto the property leading to the plaintiffs suffering loss.

[4] The second and third defendants brought proceedings in the District Court subsequent to the mortgagee sale of 31 Chester Avenue to recover the shortfall of
$209,931.92. Default judgment was entered by the District Court following the failure to file a statement of defence by the first and second plaintiffs.

[5] The full amount of the shortfall was paid by the first plaintiff on 22 September 2020 (after bankruptcy notices had been served on the first and second plaintiffs).

[6] In this strike out application, the defendants say that allowing the two causes of action to proceed in relation to 31 Chester Avenue would be an abuse of process given the proceedings that have already been heard and determined in the District Court (and the judgment sum fully paid by the plaintiffs). They further contend that they are not sufficiently pleaded.

[7] The third cause of action relates to 88 Fairburn Road, Otahuhu. It pleads that the defendants are in breach of a duty of care owed to the plaintiffs by continuing to charge penalty interest at 20 per cent per annum and not releasing the plaintiffs from their debt by disposing of the property within a reasonable timeframe.

[8] As well as submitting that the third cause of action is not sufficiently pleaded, the defendants say it does not disclose a reasonably arguable cause of action because there is no such duty owed.

[9] The issues for determination are not only whether the three causes of action…

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 Mao v Best Capital Ltd

Details

AGLC: Mao v Best Capital Ltd [2021] NZHC 735
Case: [2021] NZHC 735
Decision Date: 1 April 2021

CaseChat Overview and Summary

The defendants have applied to strike out the plaintiffs' claim, arguing that it discloses no reasonably arguable cause of action and constitutes an abuse of process. The plaintiffs' claim pertains to two development loan agreements, one for 31 Chester Avenue, Greenhithe, and the other for 88 Fairburn Road, Otahuhu. The first two causes of action claim breaches of the Property Law Act 2007 and misleading and deceptive conduct by the defendants, while the third cause of action alleges a breach of duty of care by the defendants in relation to the property at 88 Fairburn Road.

The court examined whether the causes of action were sufficiently pleaded and if allowing them to proceed would be an abuse of process. The first and second causes of action, relating to 31 Chester Avenue, were deemed to infringe the rule in Henderson v Henderson, as they should have been raised in earlier District Court proceedings where default judgment had been obtained by the defendants. The court held that it would be an abuse of process to allow these claims to proceed given that the plaintiffs had already paid the judgment debt in full. Furthermore, these causes of action were not sufficiently pleaded, as they failed to disclose whether the allegations related to the Fair Trading Act 1986 or the Contract and Commercial Law Act 2017 and did not provide the facts supporting the allegations of misleading or deceptive conduct.

The third cause of action, relating to 88 Fairburn Road, was also found to be insufficiently pleaded and did not disclose a reasonably arguable cause of action. The court held that there is no duty of care owed by a mortgagee to sell within a certain time, as established in Applefields Ltd v Damesh Holdings and Mitchell v Trustee Executives Ltd. The court also found that a claim for breach of the duty of good faith was not available in the circumstances of this case.

As a result, the defendants succeeded in their strike-out application in respect of all three causes of action, and the amended statement of claim was struck out in its entirety. The defendants were awarded costs, including indemnity costs, on the basis that the proceedings were an abuse of process and had an ulterior motive of delaying bankruptcy proceedings.

Orders