Mao v Industrial and Commercial Bank of China (New Zealand) Ltd

[2023] NZHC 673

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-1536

[2023] NZHC 673

BETWEEN

LIANSEN MAO

First Plaintiff

QIUFEN LU
Second Plaintiff

AND

INDUSTRIAL AND COMMERCIAL BANK OF CHINA (NEW ZEALAND) LIMITED

Defendant

Hearing:	On the papers
Judgment:	30 March 2023

JUDGMENT OF WYLIE J

(Leave to continue proceeding)

This judgment was delivered by Justice Wylie On 30 March 2023 at 10.30 am

Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

Date:…………………………

Solicitors/counsel:

Buddle Findlay, Auckland

Copy to: L Mao Q Lu

MAO v INDUSTRIAL AND COMMERCIAL BANK OF CHINA (NEW ZEALAND) LIMITED [2023] NZHC 673 [30 March 2023]

Introduction

[1]                 I refer to my minute of 15 March 2023. I there recorded my decision that it was not necessary to hold a hearing to consider Mr Mao’s and Ms Lu’s application for leave to continue these proceedings.

[2]                 I have now had the opportunity to fully consider all of the papers available and the affidavit which was not on the Court file but which Mr Edginton, on behalf of the defendant Bank (the Bank), has made available.

[3]                 I have determined that Mr Mao’s and Ms Lu’s (informal) application for leave to continue this proceeding should be declined. I set out my reasons for that decision.

Background

[4]                 In August 2015, the second plaintiff, Ms Lu, purchased a property in Albany for $6 million. She borrowed $2.94 million from the Bank to complete the purchase.

[5]                 Ms Lu quickly defaulted under the loan agreement. Some defaults were ultimately remedied but, from January 2018, Ms Lu stopped making any repayments to the Bank.

[6]                 The Bank issued a notice under s 119 of the Property Law Act 2007. The notice was served on Ms Lu in June 2018, pursuant to orders for substituted service made by this Court. The Property Law Act notice expired unremedied. The Bank thereafter commenced steps to sell the property through a mortgagee’s sale. Ms Lu endeavoured to sell the property herself to avoid this consequence but her efforts were unsuccessful. The Bank sold the property in October 2019 for $2.2 million.

[7]                 Prior to the sale, the Bank had taken steps to recover the monies due under the loan agreement. Ms Lu is a Chinese citizen and she normally resides in China. The Bank commenced proceedings against Ms Lu in China. As part of its claim it also brought a proceeding against her husband, Mr Mao. This is because, under Chinese law, certain debts of one spouse are deemed to be owed jointly by the other spouse. In the course of the Chinese proceeding, the Bank obtained the equivalent of freezing

orders over Mr Mao’s and Ms Lu’s bank accounts and other securities owned by them. Later these orders were, in part, discharged on compassionate grounds. The freezing order remains only over Ms Lu’s securities.

[8]                 Ms Lu and Mr Mao then brought a proceeding in New Zealand against the Bank and one of its officers—Ms Hou. The Bank and Ms Hou applied to strike out the proceeding as disclosing no reasonably arguable cause of action. Their application was granted by Fitzgerald J on 5 March 2020. Ms Lu’s and Mr Mao’s claims against the Bank and Ms Hou were struck out in their entirety.1

[9]                 Following this, Mr Mao and Ms Lu filed six further claims against the Bank and/or Ms Hou. In each of those claims, the allegations made were the same or similar to those that had been struck out by Fitzgerald J. In each case, Mr Mao’s and Ms Lu’s claims were either struck out as being an abuse of the Court’s processes or they were not accepted for filing. Ms Lu and Mr Mao have attempted to appeal some of these judgments. Their attempts to do so have been unsuccessful.

[10]              A further proceeding was filed against Buddle Findlay, the Bank, Ms Hou and another bank employee, Ms Liang. The defendants applied to strike out the proceeding and their application came before Associate Judge Andrew in February 2022. In a judgment issued on 22 March 2022, he struck out the proceeding.2 The defendants were also seeking a prevention order under s 166 of the Senior Courts Act 2016 against both Mr Mao and Ms Lu, to restrict them from bringing or continuing further civil proceedings. The Associate Judge did not have jurisdiction to deal with this application and he adjourned it to the Duty Judge List before a High Court Judge.

[11]              The prevention order application came before Moore J. In a reserved judgment issued on 4 November 2022, he declined Mr Mao and Ms Lu’s application to set aside and stay Associate Judge Andrew’s judgment and granted the defendants’ application for a prevention order. He made an order in the following terms:

The defendants’ application for a Prevention Order is granted. I order that the plaintiffs are restrained from commencing or continuing proceedings in this matter (and any related matter) against the first, second and third defendants

1      Lu v Industrial and Commercial Bank of China (New Zealand) Ltd [2020] NZHC 402.

2      Mao v Buddle Findlay [2022] NZHC 521.

as specified below, in any Court or Tribunal for a period of three years. “Proceedings in this matter (and any related matter)” includes:

(a)the Bank’s former lending relationship with the plaintiffs; and

(b)the steps taken by the Bank to recover the amounts outstanding and owing to the Bank by the second plaintiff, including the claim and the freezing order obtained by the Bank against the plaintiffs in China and the sale by the Bank as mortgagee of the property located at 41A Claudia Road, Swanson, Auckland (NA299874).

The present proceeding

[12]              The statement of claim in the present proceeding is dated 1 September 2022. It pre-dates Moore J’s judgment and accordingly, leave was not required to file the same. It was accepted for filing. The Bank has filed a statement of defence. The Bank has also applied to strike out the proceeding.

[13]              The proceeding takes issue with the steps taken by the Bank in China. Mr Mao and Ms Lu allege that because of the freezing order obtained by the Bank in that country, they were unable to either sell the property in New Zealand or to refinance their loan. They claim that the Bank is liable for all damages they say they have suffered and they seek judgment in the sum of $7,800,000.

Analysis

[14]Section 166 of the Senior Courts Act provides as follows:

166 Judge may make  order  restricting  commencement  or continuation of proceeding

(1)A Judge of the High Court may make an order restricting a person from commencing or continuing a civil proceeding.

(2)The order may have—

(a)a limited effect (a limited order); or

(b)an extended effect (an extended order); or

(c)a general effect (a general order).

(3)A limited order restrains a party from commencing or continuing civil proceedings on a particular matter in a senior court, another court, or a tribunal.

(4)An extended order restrains a party from commencing or continuing civil proceedings on a particular or related matter in a senior court, another court, or a tribunal.

(5)A general order restrains a party from commencing or continuing civil proceedings in a senior court, another court, or a tribunal.

(6)Nothing in this section limits the court’s inherent power to control its own proceedings.

[15]              Moore J’s order is an extended order. It applies to a particular matter, and any related matter, against named defendants.

[16]              Once Moore J’s judgment was issued, Mr Mao and Ms Lu required leave to continue the proceeding. As a result, they filed a memorandum on 6 December 2022 seeking leave to continue the proceeding. They also sought an order that the Bank pay 30 million RMB into a bank account in China so that they can start a further proceeding in a Chinese court in an attempt to get a preservation order in China against the Bank.

[17]              In my judgment, the claims and issues advanced in the proceeding fall directly within the scope of the s 166 order made by Moore J. The proceeding in issue is based on the Bank’s lending relationship with Mr Mao and Ms Lu and it concerns steps taken by the Bank in China to recover the amounts outstanding and owing to it by Ms Lu. The claim refers to the freezing orders obtained by the Bank against Mr Mao and  Ms Lu in China and the sale by the Bank of the property in Albany.

[18]              I do not consider that leave should be granted to allow Mr Mao and Ms Lu to continue with the proceeding. The proceeding is without merit. Were it to continue it would be amenable to a strike out. It is not obvious to me that the freezing order equivalents made in China extended to the property in Albany owned by Ms Lu. The Reciprocal Enforcement of Judgments Act 1934 does not extend to judgments given by Chinese Courts and this Court has no jurisdiction to order a New Zealand Bank to pay money into an account in China so that debtors of the Bank can sue the Bank in China. More generally, the proceeding is Mr Mao’s and Ms Lu’s ninth attempt to litigate what are essentially the same issues. All previous claims have either been struck out or were so defective that they were not accepted for filing. In my judgment, the proceeding is an abuse of process. Accordingly, Mr Mao’s and Ms Lu’s application

for leave to continue the proceeding is declined. The proceeding is at an end and there is nothing now to strike out.

Costs

[19]              The Bank is entitled to its reasonable costs and disbursements. It is my preliminary view that costs should be fixed on a 2B basis. If there is any dispute as to this or as to quantum, I direct as follows:

(a)the Bank is to file and serve a memorandum seeking costs within five working days of the date of this judgment;

(b)Mr Mao and Ms Lu are to file a memorandum in response within a further five working days; and

(c)memoranda are not to exceed three pages.

I will then deal with the issue of costs and disbursements on the papers unless I require the assistance of the counsel and/or Mr Mao and Ms Lu.

Wylie J