Mo v Tamaki Homes Limited

[2020] NZHC 302

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2619

[2020] NZHC 302

IN THE MATTER

of an application for a pre-judgment charging order

BETWEEN

QINGHUA MO AND YU HUANG

Plaintiffs

AND

TAMAKI HOMES LIMITED

First Defendant

ZHE YANG and JACKSON ING WEI LAW

Second Defendants

Hearing:

20 February 2020

Appearances:

G D Wiles for the Plaintiffs

I M Hutcheson for the Defendants

Judgment:

27 February 2020

JUDGMENT OF POWELL J

This judgment was delivered by me on 27 February 2020 at 3.30 pm pursuant to R 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

MO AND ANOR v TAMAKI HOMES LIMITED [2020] NZHC 302 [27 February 2020]

[1]        The defendants have applied to vary interim charging orders made by consent on 29 November 2019 (“the charging order”).

[2]        The charging order replaced an earlier pre-judgment charging order granted by me on a without notice basis. The order was crafted so as to allow for a five dwelling development to be completed by the defendants and then for four of the five lots to be sold, with the net proceeds being held in trust. With regard to the remaining lot (Lot 1) it was agreed the plaintiffs’ claimed interest was to be protected by a caveat.

[3]        The charging order provides that the defendants may distribute the proceeds of the sale of Lots 2-5 to pay the following expenses:

(a)the mortgage loan balance owing on the development to First Mortgage Trust as assessed at the relevant time;

(b)the agent’s commission not exceeding $62,000 payable in terms of the relevant agency agreements;

(c)rates, water rates, reasonable costs and other subdivision invoices and amounts not exceeding the estimated costs listed in the indicative summary of sale estimate attached to the order (“the indicative summary”).

[4]        With regard to the present application two of the variations sought were agreed to by the plaintiffs namely:

(a)that the amount required to repay First Mortgage Trust be increased from $2,020,000 in the indicative summary to $2,028,782.07;

(b)the amount assessed for Auckland City Council general rates ($2,200) be increased to reflect the actual rates for the financial year being the sum of $3,077.04 (including penalties);

[5]        The variations sought on these two issues are clearly appropriate and are accordingly made by consent.

[6]        The remaining two variations sought were opposed by the plaintiffs. The first was to enable payment of GST in respect of the sales of Lots 2-5. This was not opposed in principle and indeed an amount was included in the indicative summary annexed to the order. Rather as both parties agree, the amount of GST cannot at present be calculated exactly, and the plaintiffs wish to have the opportunity to consider the calculation prior to payment being made. As Mr Hutcheson accepts there is clearly no prejudice for the defendants if this course of action is followed. In the circumstances I agree that rather than a variation of the type sought, a process should be directed to enable the plaintiffs to consider the defendants’ calculation as to the GST payable with any dispute to be resolved by me following this consideration taking place.

[7]        The final and most contentious issue involved the payment of trade creditors. The defendants sought approval to pay the trade creditors the total sum of

$144,864.36, which was the sum included in the indicative schedule to  the order.  Mr Wiles, on behalf of the plaintiffs, did not in any way contend that any of the amounts sought were not genuine,1 but submitted that as payment was likely to be akin to a controlled liquidation situation, the trade creditors were in effect being preferred over the plaintiffs and as a result any distribution should only be carried out pari passu.

[8]        As I discussed with the parties at the hearing, it is difficult to see on what basis the variation sought with regard to the trade creditors is not reasonable. The pre- judgment charging orders sought and obtained by the plaintiffs were on the basis that they did not want to obstruct the completion of the development as it was in all parties’ interest for this to occur. Having essentially completed the development it seems inappropriate to then delay payment to the trade creditors that have made this possible.

[9]        Furthermore, the plaintiffs have, through the order, effectively taken steps to secure their position, both through the agreed caveat on Lot 1 and the preservation of the net proceeds of sale after payment of the specified costs and expenditure. On any basis the plaintiffs have been successful in protecting their position well beyond  that

1      Mr Wiles did note some of the invoices were addressed to the defendants’ previous project manager and that one of the defendants (Mr Yang) was a shareholder in one of the trade creditors, but agreed in the course of argument that neither of these issues detracted from the fact that they remained genuine creditors.

available to the trade creditors. Finally, it is in any event difficult to know, given the plaintiffs’ claims are being vigorously disputed, what figure would be used if I was to adopt Mr Wiles suggestion and direct paying out all creditors, including the plaintiffs, on a pari passu basis.

[10]      On the contrary, taking into account these various matters, I am quite certain that it is appropriate for the trade creditors to be paid at this time and vary the order accordingly.

Decision

[11]The orders are varied as follows:

(a)increase in the amount payable to First Mortgage Trust from

$2,020,000 to $2,028,782.07;

(b)increase in the amount payable to Auckland City Council for general rates from $2,200 to $3,077.04; and

(c)approval for payment of creditors in the sum of $144,864.36.

[12]      Upon carrying out the calculation of the GST payable the defendants are to provide the calculation and necessary working papers to Mr Wiles whereupon the plaintiffs will have 48 hours to consider the calculation. In the event that the plaintiffs notify their agreement with the calculation the payment of that sum is approved in terms of the order. In the event that there is a dispute over the amount of GST to be paid the parties are to notify the Registry following which a conference is to be convened before me as soon as it can be arranged, following which I will determine the issue.

Powell J