Mills v Feng

[2023] NZHC 1199

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2022-404-1909

[2023] NZHC 1199

BETWEEN

DAVID LAWRENCE MILLS and FIONNA

EILEEN MILLS as trustees of THE MILLS FAMILY TRUST
Plaintiffs

AND

WEIQIANG FENG (also known as BRIAN FENG)

First Defendant

KAI WANG (also known as TONY WANG) Second defendant

Hearing:

11 May 2023

Appearances:

K Wendt for the plaintiffs

The first defendant in person, with Augustine Lau as McKenzie Friend and George Chang as interpreter

Judgment:

22 May 2023

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 22 May 2023 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

MILLS and MILLS v FENG and ENG [2023] NZHC 1199 [22 May 2023]

[1]                  On 7 December 2022, Lang J granted the plaintiffs’ application for summary judgment against the first and second defendants. Judgment of just over $750,000 was entered, for which the first and second defendants are jointly and severally liable.

[2]                  The first defendant, Mr Feng, applies for a stay of execution of that judgment, pending the plaintiffs’ enforcement of the judgment against the second defendant, Mr Wang, and the outcome of Mr Feng’s own proceeding against Mr Wang. The plaintiffs oppose Mr Feng’s application.

Background

[3]                  The judgment arose  from  the  defendants’  failure  to  settle  the  purchase  of a property owned by the plaintiffs. The plaintiffs entered into an agreement to sell the property to Mr Feng in October 2021. In April 2022, Mr Feng nominated Mr Wang as purchaser. Mr Feng and  Mr Wang  executed  a  deed  of  nomination  in  which Mr Wang gave an indemnity to Mr Feng in respect of any liability Mr Feng might have under the sale and purchase agreement.

[4]                  The nomination of Mr Wang as purchaser did not release Mr Feng from liability under the sale and purchase agreement. Neither Mr Feng nor Mr Wang settled the purchase. The plaintiffs cancelled the agreement and re-sold their property. The resale was at a price lower than the price that Mr Feng had agreed to pay. The plaintiffs then sued Mr Feng and Mr Wang for their loss on resale and for interests and costs.

[5]                  Mr Feng was represented by counsel before Lang J but did not oppose the summary judgment application. Mr Wang took no steps. In those circumstances, Lang J had no difficulty in granting summary judgment against both defendants.

[6]                  Mr Feng then brought his own proceeding against Mr Wang, relying on the indemnity that Mr Wang had given Mr Feng in the deed of nomination. Mr Feng applied for summary judgment against Mr Wang. Mr Feng’s summary judgment application is to be heard on 6 June 2023.  Judgment in Mr Feng’s favour is likely,   as Mr Wang has yet to take any steps in that proceeding.

[7]                  Meanwhile, the plaintiffs have been taking steps to execute the judgment against both Mr Feng and Mr Wang. At their request, the court issued bankruptcy notices for each of Mr Feng and Mr Wang in early February 2023. The plaintiffs have also obtained charging orders over property owned by Mr Feng and Mr Wang. Those charging orders are in the process of being registered.

[8]                  The plaintiffs have served the bankruptcy notice on Mr Feng. Mr Feng has applied to set aside that bankruptcy notice. The first call of his application is on 8 June 2023.

[9]                  The plaintiffs have had difficulty serving the bankruptcy notice on Mr Wang. They have been told that he is now in China.  The plaintiffs have applied  for leave to serve the bankruptcy notice overseas and also for substituted service orders.

[10]              Mr Feng has also had difficulty serving Mr Wang with his own summary judgment application. Mr  Feng told me that he understands  that Mr Wang  is now  in China. Mr Feng applied for  and obtained orders for substituted service against  Mr Wang. As noted, Mr Wang has taken no steps in response to Mr Feng’s summary judgment application. Further, Mr Feng told me that he had received no communication from Mr Wang in respect of it.

Mr Feng’s application for a stay of execution

[11]              Mr Feng’s application notes that he has a right of indemnity against Mr Wang and  has  sought  summary  judgment  against  him.  He  says  there  is  likely  to  be a substantial miscarriage of justice if the judgment is enforced against him. More specifically, he says that:

(a)Mr Wang has assets from which the plaintiffs’ judgment can be satisfied;

(b)It is unnecessary to enforce a judgment against Mr Feng if the judgment can be wholly satisfied by Mr Wang; and

(c)If the judgment is enforced against Mr Feng, it is likely that Mr Feng would be forced into bankruptcy unless indemnified in whole or in part by Mr Wang.

[12]              Since filing his application for a stay of execution in February 2023, there has been a development that Mr Feng says further supports his application. On 19 April 2023, Mr Feng started a new proceeding against Mr Wang, the real estate agent involved in the sale of the property and the plaintiffs. In that proceeding, Mr Feng claims that the re-sale by the plaintiffs was not genuine, that the plaintiffs did not take reasonable steps to mitigate their losses and that the plaintiffs breached s 9 of the Fair Trading Act 1986. Mr Feng claims that as a result of those matters, he has suffered loss in the form of the judgment sum for which he is now liable in this proceeding. He seeks judgment against the plaintiffs (and the other parties) for that amount together with general damages of $20,000 and exemplary damages of $30,000.

[13]              Mr Feng says that this new proceeding supports his application for a stay because he is claiming more against the plaintiffs than he is liable to them in this proceeding.

Another development

[14]              On 14 April 2023, Mr Feng transferred three properties of which he and his wife were the registered owners to a company, Helio Managing Trustee Ltd (Helio). Mr and Mrs Feng both resigned as directors of Helio and transferred their shares in Helio to Mr Feng’s lawyer.

Applicable principles

[15]Rule 17.29 of the High Court Rules 2016 provides:

A liable party may apply to the court for a stay of enforcement or other relief against the judgment upon the ground that a substantial miscarriage of justice would be likely to result if the judgment were enforced, and the court may give relief on just terms.

[16]              The Court of Appeal recently, in SRG Global Remediation Services (NZ) Ltd v Body Corporate 197281, stated the general principles governing applications for a stay of enforcement under r 17.29:

(a)The starting point is that the successful party is entitled to the fruits of its judgment.

(b)The onus is on the applicant seeking a stay of enforcement to persuade the court to exercise its discretion.

(c)A substantial miscarriage of justice must be involved, substantial being more than minor or insubstantial.

(d)It is not sufficient that a miscarriage of justice might result if the judgment were enforced. It must be probable rather than possible. The test is whether there is a “real and substantial risk”.

(e)The court must undertake a balancing exercise where it recognises and reconciles the conflicting interests of both parties in such manner as will best serve the overall interests of justice.

(f)The mere existence of a counterclaim is not sufficient. A miscarriage of justice is unlikely to result where a party is required to pay to another an amount owing and the payer is otherwise free to pursue its claim against the other party in the normal way.

(g)Other relevant factors may include the apparent strength or weakness of the claim; the ability of the applicant to meet the judgment that is being enforced; and the potential bankruptcy or liquidation of a party seeking to pursue an apparently strong claim.

Should a stay of enforcement be granted?

[17]              The starting point is that the plaintiffs are entitled to the fruits of their judgment against Mr Feng.

[18]              Mr Feng submitted that, if a stay were not granted, he would be adjudicated bankrupt and it was unlikely the Official Assignee would pursue Mr Feng’s claim against  Mr Wang.    He  submitted it  was in the interests  of justice to allow him     to prosecute a strong and good claim against Mr Wang and to prosecute the new proceeding that he had recently commenced against Mr Wang, the real estate agent and the plaintiffs. He also said that a stay would not cause prejudice to the plaintiffs because they would not be prohibited from enforcing their judgment against Mr Wang. Mr Feng said that Mr Wang appeared to have assets that might be sufficient to satisfy the judgment. If so, it would be pointless to adjudicate Mr Feng bankrupt.

[19]                I do not accept that submission. The evidence suggests Mr Wang does not have assets sufficient to satisfy the judgment. When he failed to settle the purchase from the plaintiffs, he said that he did not have the funds to settle without selling     a property that he owned in Riddell Road, Auckland. Evidently Mr Wang was unable to sell that property, as he remains the registered owner. The property is subject to two registered mortgages in favour of trading banks. There is no evidence of the equity,  if any, that Mr Wang may have in the property. Further, a caveat has been lodged against the property claiming a 72.72 per cent interest in the property under a bare trust.

[20]              It appears Mr Wang is now living in China. He may have assets there, though there was no evidence of this. If he does have assets there, it will be costly and time- consuming to enforce the judgment in China.

[21]              Mr Feng is applying for enforcement to be stayed pending enforcement of the judgment against Mr Wang. He is therefore asking for the Court to make the plaintiffs bear the consequences of Mr Wang’s impecuniosity and absence from New Zealand. This is contrary to the general principle that a defendant who shares joint and several liability with another defendant bears the risk of impecuniosity and absence of that other defendant. This suggests a miscarriage of justice would not occur if the judgment were enforced against Mr Feng, even if he were made bankrupt as a result of enforcement action.

[22]              In any event, I am not satisfied that Mr Feng’s bankruptcy is a probable consequence of enforcement. In his affidavit in support, Mr Feng said that he would find a way to pay the judgment debt even if there were a shortfall (after enforcement against Mr Wang). I also accept the submission of Ms Wendt, counsel for the plaintiffs, that Mr Feng has not been fully forthcoming in providing his financial information. He has provided some information but has ignored reasonable requests for other information. For example, on the information he has provided, Mr Feng and his wife have persuaded banks to lend them substantial sums of money despite them having apparently modest incomes. It was reasonable for the plaintiffs to request copies of the information that Mr Feng and his wife provided to the banks to obtain those advances. Further, the timing of the recent transfer of the three properties from

Mr Feng and his wife to Helio that suggests that Mr Feng has assets available to him (even if not in his name) to satisfy the judgment.

[23]              The separate proceeding that Mr Feng has commenced against Mr Wang, the real estate agent and the plaintiffs does not assist Mr Feng on the stay application.  As against the plaintiffs, the claim appears exceedingly weak.  It  essentially seeks  to question the judgment that the plaintiffs have already obtained against Mr Feng.

[24]              For these reasons, Mr Feng has not satisfied me that any, let alone a substantial, miscarriage of justice would be likely to result if the judgment were enforced against him.

Result

[25]I dismiss Mr Feng’s application for a stay.

[26]              The plaintiffs are entitled to costs from Mr Feng. If costs are not agreed by  31 May 2023, memoranda of not more than two pages each (excluding relevant annexures  and schedules) may be filed: the plaintiffs by 2 June 2023, Mr Feng by    9 June 2023.

Campbell J