Royal v Zheng
[2025] NZHC 370
•3 March 2025
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2025-409-30
[2025] NZHC 370
BETWEEN JIMMY ROYAL
Plaintiff/Appellant
AND
QI ZHENG
Defendant/Respondent
Hearing: 12 February 2025
further submissions filed 19 February 2025
Appearances:
H C Matthews and K M Anderson for Plaintiff/Applicant
Judgment:
3 March 2025
Reissued:
11 March 2025
JUDGMENT OF EATON J
(application for interim charging order or freezing order and interim injunction)
This judgment was delivered by me on …….. at ……… pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
ROYAL v ZHENG [2025] NZHC 370 [3 March 2025]
[1] Jimmy Royal, a company director based in Christchurch has issued summary judgment proceedings against Qi Zheng, the defendant who is resident in China. In those proceedings he seeks to enforce a judgment obtained by him from the Xinxiang Intermediate People’s Court, Henan, People’s Republic of China dated 31 May 2023. Judgment was entered in favour of Mr Royal against Mr Zheng in the sum of CNY 16,570,000 (approximately NZD 4,000,000) plus interest and an order was made that Mr Zheng bear the joint and several liability for the judgment.
Proceeding without notice
[2] When filing the application for summary judgment, Mr Royal also applied, on a without notice basis, for an interim charging order, or in the alterative, a freezing order. The property the target of both applications is known as 12 Walters Road, Marshlands, Christchurch (described as Lot 10 Deposited Plan 18049, identifier CB4C/19) (the property). He also seeks a substituted service order. His applications are supported by a memorandum from Mr Matthews on his behalf and affidavits filed by Mr Royal.
[3] A hearing was convened on 11 February. Having heard from Mr Matthews, I was satisfied it was appropriate for the applications to proceed without notice. To require Mr Royal to proceed on-notice would, I accept, give rise to the likelihood of dissipation of assets thereby causing prejudice to Mr Royal.
Subsequent process
[4] On 11 February I indicated my tentative view that the evidence did not meet the threshold for an interim charging order to issue but that I was minded to make a freezing order. Mr Matthews expressed concern that unlike a charging order, there is no mechanism by which the freezing order can be registered against the property. He submitted that a freezing order could not prevent Mr Zheng and his wife taking steps to transfer ownership of the property to a third party. Mr Matthews suggested the court might direct that the freezing order be registered against the title to the property. He
sought, and was granted, the opportunity to file further submissions addressing that issue.
[5] On 19 February a further memorandum was filed on behalf of Mr Royal. Mr Matthews no longer seeks a direction that a freezing order be registered on the title to the property. Instead, and with reference to Australian authority, he seeks leave to bring a without notice interlocutory application for an injunction restraining the Registrar-General of Land from registering an instrument on the title to the property.
[6] I will deal with the applications for an interim charging order, a freezing order, an interim injunction and for substituted service in turn.
Application for interim charging order
[7] Mr Royal applies under r 17.41 of the High Court Rules (HCR) for a charging order before judgment, otherwise known as an interim charging order. That rule provides as follows:
17.41 Leave to issue charging order
Leave to issue a charging order before judgment may be granted only on proof that the liable party, with intent to defeat either his or her creditors or the entitled party or both,—
(a)is removing, concealing, or disposing of the liable party’s property; or
(b)is absent from or about to leave New Zealand.
[8] I agree with the commentary in McGechan supporting the view that to secure an interim charging order the applicant must satisfy a test described as being equally stringent to the threshold to secure an interim injunction, namely that the liable party has an “intent to defeat” creditors or the entitled parties.1 As submitted by Mr Matthews the “intent to defeat” threshold has been interpreted as requiring the applicant to show the liable party has acted “illegitimately” or with nefarious intent in
1 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR17.41.01].
removing, concealing or disposing of property to defeat the entitled person.2 A high standard of proof is required.3
[9] There is no question that Mr Zheng is absent from New Zealand, but it is not suggested that he left New Zealand with intent to defeat creditors. Rather, Mr Matthews submits that Mr Royal’s evidence proves to the required standard that Mr Zheng is removing, concealing or disposing of his property with intent to defeat creditors.
[10] There is no doubt Mr Royal holds that view. However, I am not persuaded that the evidence goes that far. Much of his evidence is expressed generally and without reference to dates that might align the concerns expressed by Mr Royal to the judgment debt. Mr Royal’s evidence, perhaps understandably, reverts to expressing opinion without adequate reference to the underlying facts relied on. A number of his comments are, in my view, conclusory or hearsay, reflecting Mr Royal’s suspicions as to Mr Zheng’s means and why Mr Royal has encountered difficulties in enforcing the Chinese judgment.
[11] An example of the evidential shortcomings is paragraph 13.1. Mr Royal says, “when I was chasing the defendant for payment (prior to the issue of the Chinese proceedings) he told me that he owned three houses in the Henan province”. Mr Royal goes on to depose that, “judgment execution inquiries have shown that he does not own those houses”. No other details have been provided. Exactly what “judgment execution inquiries” means is far from clear. But more significantly Mr Royal is referring to a conversation that predated the proceedings being issued.
[12] Another example is Mr Royal’s reference to a property search carried out in China that identified a residential property in the Henan province in Mr Zheng’s name. Mr Royal says it turns out this property was subject to encumbrances as a result of other court proceedings taken by a third party, “meaning there was little or no equity
2 McGechan on Procedure at [HR17.41.02]; and McKay v 314 Maunganui Road Ltd HC Auckland CIV-2007-404-7434, 30 April 2008 at [25], citing Foodstuffs (Auckland) Ltd v Sloss HC Auckland M 1117/98, 17 August 1998 at 13.
3 Joseph Lynch Land Co v Lynch (1992) 6 PRNZ 37 at 44.
in that property”. Again, that evidence is framed so broadly as to carry little weight. It does not support an allegation that Mr Zheng was trying to defeat creditors.
[13] Mr Matthews’ primary argument was that a Chinese court had found, with reliance on Mr Royal’s evidence, that Mr Zheng had made a series of swift transfers of moneys advanced by Mr Royal to a company, then into his own accounts without explanation. Mr Matthews submits this is evidence of an intention to defeat creditors, but there is no reference within the Chinese judgment to any explanation offered or finding made regarding motive.
[14] Finally I observe that judgment was entered against Mr Zheng in the Chinese court on 31 May 2023. There is no suggestion that since that date and notwithstanding Mr Zheng’s knowledge Mr Royal is resident in Christchurch and knows of his interest in the property, that he has taken any steps to dispose of or otherwise deal with the property. That factors against a finding Mr Zheng is acting with intent to defeat creditors, and more particularly Mr Royal.
[15] I am not satisfied the evidence presented established grounds to issue an interim charging order.
Application for a freezing order
[16] If the Court is not minded to grant an interim charging order, Mr Matthews applies for a freezing order in relation to the any assets held by Mr Zheng in New Zealand and in particular, the property. An application for freezing order is considered under Part 32 of the HCR. The applicants must establish three essential requirements:
(a)first, that the applicants have a good arguable case on their substantive claim;
(b)secondly, that there are assets of Mr Zheng to which the orders can apply; and
(c)thirdly, that there is a real risk that Mr Zheng might remove, dispose of, deal with or diminish the value of their assets.
Good arguable case
[17] I am satisfied that Mr Royal’s affidavit, annexing the judgment he seeks to enforce, establishes a good arguable case for securing summary judgment against Mr Zheng.
Relevant assets
[18] I am also satisfied that Mr Zheng is a joint owner of the property at 12 Walters Road, Marshlands, Christchurch together with Ju Qiu, his New Zealand-based wife who is said to be living at that address.4 Mr Royal has attached to his affidavit a copy of the Record of Title of that property. Mr Zheng has been a joint owner of that property since its purchase in 2006. It has a current rateable value of $2,400,000.
Real risk of dissipation
[19] An applicant for a freezing order must point to circumstances from which a prudent, sensible commercial person could properly infer a danger of default,5 or more particularly a risk of dissipation or disposal of assets to defeat Mr Royal’s application to enforce the Chinese judgment.
[20]Rule 32.5(4) of the HCR provides:
32.5Order against judgment debtor or prospective judgment debtor or third party
(4)The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because—
(a)the judgment debtor, prospective judgment debtor, or another person might abscond; or
4 Mr Royal’s evidence is that Mr Zheng has two wives.
5 Raukura Moana Fisheries Ltd v The Ship Irina Zharkikh [2001] 2 NZLR 801, [2001] 2 Lloyd’s Rep 319 (HC) at [122].
(b)the assets of the judgment debtor, prospective judgment debtor, or another person might be—
(i)removed from New Zealand or from a place inside or outside New Zealand; or
(ii)disposed of, dealt with, or diminished in value (whether the assets are in or outside New Zealand).
[21] I accept the evidence of Mr Royal and the finding of the Chinese Court that Mr Zheng promptly transferred significant sums advanced by Mr Royal to a corporate entity to his personal account/s and has since failed to account for those monies. That conduct points to a risk of dissipating assets. Mr Royal’s attempts to identify what he believes to be the substantial assets of Mr Zheng have, to date, proven unsuccessful. His evidence indicates that the only asset he has identified in which Mr Zheng has a recorded personal interest in is the Walters Road property. There are grounds to believe Mr Zheng has made, for whatever reason, a conscious decision to divest himself of property.
[22] Mr Royal’s non-specific evidence as to the unsuccessful enforcement steps undertaken by the Chinese court support a finding of Mr Zheng defaulting on the Chinese judgment.
[23] I am satisfied the interests of justice support the issuing of the freezing order sought. That order will become enforceable following the provision of an undertaking in accordance with r 32.2(5) of the HCR.
Without notice application for injunction
[24] Mr Royal is concerned that Mr Zheng and his New Zealand-based wife might ignore a freezing order and attempt to deal with the property. Mr Matthews highlights that because a charging order is a charge on land and an interest in land in terms of the Land Transfer Act 2017, that a transfer or sale is prevented whilst the order is registered on the title. Consequently, the asset is preserved for the duration of the charging order.
[25] Conversely, a freezing order in and of itself would not prevent the transfer or sale of the asset. The remedy is solely in personam.6 Mr Matthews submits that in those circumstances there remains a risk that the defendant could transfer the property from his ownership and defeat the claim leaving the plaintiff without a remedy.
[26] Mr Matthews has referred to Australian authority holding that the court might make orders restraining the registrar of land from registering an instrument even though the plaintiff has no cause of action against the registrar. In Jensen v Bank of Queensland it was upheld on appeal that if a caveator is merely seeking to frustrate a mortgagee exercising its power of sale, the court can make orders restraining the registrar from accepting for lodgement any caveat purporting to prevent registration of a dealing effected by the mortgagee in exercising its powers of sale.7 That is a quite distinct factual circumstance from the injunctive relief proposed by Mr Matthews.
[27] Mr Matthews points very brief commentary in Hinde McMorland & Sim Land Law in New Zealand that he submits supports his submission that an injunction might be available under the Land Transfer Act.8 The authors of that text were referring to Jensen and the actions of caveators to frustrate a mortgagee from exercising a power of sale. He was unable to cite any authority in support of the injunctive relief sought by Mr Royal, namely to enforce a freezing order made in relation to a judgment debt.
[28] Given the novelty of Mr Matthews argument, even if I was of the view that there was jurisdiction to make such an order, I do not consider it would be appropriate to make that order on a without notice basis.
[29] I accept that a failure to comply with a freezing order is a live risk. But a breach would amount to a contempt of court and any transaction or other dealing with the property would be voidable.
6 Official Assignee v Scott [2012] NZHC 2579 at [24].
7 Jensen v Bank of Queensland [2011] NSWCA 71.
8 D W McMorland and others Hinde McMorland & Sim Land Law in New Zealand (online ed, LexisNexis) at [10.022A].
[30] I have resolved that it is appropriate to direct that a copy of the freezing order be provided to the Registrar-General of Land.
Substituted service
[31]I am satisfied an order for substituted service in the terms sought is appropriate.
Result
[32]I make an order pursuant to r 32.2 of the HCR restraining Qi Zheng from:
(a)removing any assets located in New Zealand; and
(b)disposing of, dealing with or diminishing the value of any assets in New Zealand, specifically including the property known as 12 Walters Road, Marshlands, Christchurch (described as Lot 10 Deposited Plan 18049, Identifier CB 4C/19).
[33]The order is to remain in place for review by the Court on 28 April 2025 at
11.45 am.
[34] Leave is reserved to Qi Zheng to apply to the Court to discharge or vary the freezing order on two (2) days’ notice.
[35]A copy of the freezing order is to be served on the Registrar-General of Land.
[36] I make an order for substituted service in the terms of paragraph [8] of the application.
Next call
[37] The Registrar had initially allocated a first call of the summary judgment application of 11 March 2025. In light of the delays in dealing with this application which was only referred to me as duty Judge on the afternoon of 10 February 2025 and with further submissions not filed until 19 February 2025, I enlarge that date to
28 April 2025 at 11.45 am in the duty judge list to ensure that there is at least 25 working days between the date of (substituted) service and the first call.
...................................................
Eaton J
Solicitors:
White Fox & Jones, Christchurch
Copy to:
Registrar-General of Land
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