Shuo v Yueyang Limited

[2024] NZHC 2401

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-1691

[2024] NZHC 2401

BETWEEN

YAN SHUO

Plaintiff

AND

YUEYANG LIMITED

Defendant

Hearing:	On the papers
Counsel:	AAH Low for plaintiff
Date of judgment:	26 August 2024

JUDGMENT OF JAGOSE J

[Freezing orders]

This judgment was delivered by me on 26 August 2024 at 4.00pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

AAH Low, Barrister, Auckland Turner Hopkins, Auckland

SHUO v YUEYANG LTD [2024] NZHC 2401 [26 August 2024]

[1]    As duty judge, I have today had referred to me for determination Yan Shuo’s 6 August 2023 without notice interlocutory application for freezing orders in support of as-yet unserved debt recovery proceedings. I regret the delay in the registry’s reference of the application to me.

Background

[2]    In this proceeding, Ms Shuo alleges she progressively lent $1.5 million to Yueyang Limited (the company) on terms of a 21 June 2021 agreement for repayment with interest on 29 June 2024, and the company has not repaid on her demand the then-due approximately $1.8 million.1 She says her husband also lent the company

$650,000, presumably on similarly unmet terms, in respect of which another proceeding is issued against the company.2 Her husband’s father, Kun Jiang, is a director of the company.3

[3]    On the present application, Ms Shuo seeks to freeze the company’s assets in New Zealand, predominantly being a property in Auckland’s Pakuranga acquired for development into five separate units, but extending to derivative titles and money. Although separate title has yet to issue, on 26 July 2024, all five lots in the property were offered for sale by 8 August 2024. At least four of the lots appear still to be listed for sale, and still for “Deadline Sale 8th August 2024 3.00pm (unless sold prior)”.4

Law on freezing orders

[4]    Freezing orders may be ordered if I am satisfied, having regard to all the circumstances, there is a danger a prospective judgment in Ms Shuo’s favour will be wholly or partly unsatisfied because the value of the company’s assets are alienated from it in some manner.5

1      The agreement in evidence only is signed by Ms Shuo. She proposes to file further affidavit evidence to establish its acceptance, but that has yet to be done.

2      Jiang v Yueyang Ltd HC Auckland, CIV-2024-404-1706.

3      Bo Li, resident at the same address as Kun Jiang, is the other director and sole shareholder.

4      < Court Rules 2016, r 32.5(4).

[5]    Freezing orders are “a valuable protective measure for those commencing civil proceedings”,6 for which Ms Shuo must show “a good arguable case on an accrued or prospective cause of action”.7 By ‘good arguable case’ is meant establishment of “a sufficiently plausible foundation” such that “the cause of action is at least tenable”.8

A good arguable case against the respondent is therefore established if the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence, bearing in mind the early stage at which the application is likely to be brought.

[6]    As to the danger of alienation, I must be satisfied assets may be removed or dealt with in a way that may frustrate the prospective judgment; that there are “circumstances from which a ‘prudent, sensible commercial man, can properly infer a danger of default’” on adverse judgment.9

[7]    I then must consider where lies the balance of convenience,10 meaning if it bears harder on Ms Shuo to be without prospective recourse to the company’s assets, or on the company to have its assets frozen, pending judgment in their respective favours.11

[8]    The form of any freezing order must not prohibit dealings with the assets to pay ordinary living expenses and legal expenses relating to the freezing order or in the ordinary course of business,12 and where made without notice be limited to a particular date as early as practicable after the freezing order is made,13 and with leave reserved to the defendants to discharge or vary the freezing order urgently on notice.14

6      Hannay v Mount [2011] NZCA 530 at [20], referring to Deutsche Schachtbau-und Tiefbohrgesellschaft MBH v Shell International Petroleum Co Ltd (trading as Shell International Trading Co) [1990] 1 AC 295 (HL) at 317.

7      High Court Rules, r 32.5(1)(b).

8      Hannay v Mount, above n 6, at [21], citing Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2011] 1 NZLR 754 (CA) at [41] and referring to Kuwait Asia Bank EC v National Mutual Life Nominees Ltd (No 2) [1989] 2 NZLR 50 (CA) at 55, and [22].

9      Murren v Schaeffer [2018] NZCA 318, (2018) 24 PRNZ 285 at [16], citing Raukura Moana Fisheries Ltd v The Ship “Irina Zharkikh” [2001] 2 NZLR 801 (HC) (citing Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645 at 671).

10 At [17].

11 By analogy with Wellington International Airport Ltd v Air New Zealand Ltd HC Wellington CIV- 2007-485-1756, 30 July 2008 at [4] citing Cayne v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.

12 High Court Rules, r 32.6.

13     Rule 32.7.

14     Rule 32.8.

Discussion

[9]    Being satisfied r 32.2 of the High Court Rules 2016 expressly permits the application to be made  without  serving  notice  of  the  application,  I  determine  Ms Shuo’s application can properly be dealt with without notice.15

[10]   I am satisfied by Ms Shuo’s proposed affidavit evidence (from herself and her husband’s business partner, Shiquan Zhang) her allegations against the company are capable of tenable argument. They appear to illustrate the existence of an existing debt for repayment of which demand has been made but is not met. The proposed affidavits as filed in Court are not compliant with the requirements of either the Oaths and Declarations Act 1957 or the High Court Rules 2016.

[11]   Ms Shuo also contends the intended sale of all units at one time and in advance of separate title issue is precipitate, and therefore nefarious as it will result in the company’s resulting funds being expatriated to China. Without hearing from the company, it is at least as possible the sale is sought to generate funds to repay the loan, which is accruing penalty interest. And settled sale is improbable without issue of titles, the imminence of which I have no evidence (except apparent unsuccessful passage of the sale deadline).

[12]   But Ms Shuo disputes the company should be afforded any benefit of doubt, because — during the term of the loan, in October 2023 — her father-in-law (Kun Jiang) denied “he” owed her anything because of countervailing debts said to be owed by her husband to his father’s new partner (who may or may not be Bo Li, the company’s sole shareholder) in China, where Kun Jiang maintains citizenship and bank accounts. Shiquan Zhang reports a similar conversation, contending also for an apparent rift between Ms Shuo’s husband and his father as explanatory of the father’s dismissal to Shiquan Zhang of “those ‘foreign loans’”.

15     Rule 7.46(3).

[13]   By exceptionally slim margin, I infer the requisite danger then “may” exist. In those circumstances, particularly given subsequent freezing order procedures as I have explained them,16 the balance of convenience favours Ms Shuo.

Result

[14]   I therefore order in terms of para 4 of the draft orders annexed to Ms Shuo’s 6 August 2024 without notice interlocutory application and otherwise in terms of the High Court Rules’ Form G 38:

(a)the freezing order to have no effect after its call in the duty judge’s list

at 10.00 am on Monday, 2 September 2024;

(b)any interlocutory application to discharge or vary the order to be made on two working days’ notice to Ms Shuo; and

(c)attaching Ms Shuo’s undertaking as to damages—

such order to lie in Court until the earlier of either the original or a copy of compliant affidavits are filed or counsel files an undertaking such will be filed on receipt.

—Jagose J

16     At [8] above.