Song v Jiang

[2018] NZHC 2321

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1319

[2018] NZHC 2321

BETWEEN

YANA SONG

Applicant

AND

HONGMING JIANG

First Respondent

ALLIANCE INVESTMENT HOLDINGS LIMITED
Second Respondent

ASB BANK LIMITED
Third Respondent (Non-Party)

ANZ BANK NEW ZEALAND LIMITED
Fourth Respondent (Non-party)

Contd …/2

Hearing:

9 August 2018

Appearances:

D Zhang for Applicant

D R Bigio QC and L Clews for Respondents

Judgment:

5 September 2018

JUDGMENT OF PALMER J

This judgment is delivered by me on 5 September 2018 at 10am

pursuant to r 11.5 of the High Court Rules.

.....................................................

Registrar / Deputy Registrar

Solicitors/Counsel:

David Bigio QC, Auckland Amicus Law, Auckland

Lee Salmon Long, Auckland

SONG v JIANG [2018] NZHC 2321 [5 September 2018]

WESTPAC NEW ZEALAND LTD

Fifth Respondent (Non-party)

JOANNA MAREE PIDGEON
Sixth Respondent (Non-party)

SIYUAN QIU

Seventh Respondent (Non-party)

Summary

[1]    Ms Yana Song and Mr Hongming Jiang were married for about two years. They are now separated and in dispute over relationship property and sale of an Auckland residential property by Mr Jiang for less than the price for which they bought it. Ms Song was granted a temporary without-notice freezing order over all of the property of Mr Jiang and an associated company, Alliance Investment Holdings Ltd (Alliance), as well as ancillary disclosure orders. She applies to renew the orders. Mr Jiang applies to discharge them. I extend the freezing orders against Mr Jiang’s property because I consider Ms Song has a good arguable case and there is a real risk of dissipation of assets. I discharge the freezing order over Alliance’s property and the disclosure orders.

What happened?

[2]    Ms Song and Mr Jiang met and married in China in January 2016. Mr Jiang was a permanent resident of New Zealand. They moved to New Zealand and had a child. Mr Jiang was a vice president of an investment bank in China so travelled back and forth. Ms Song was also employed in the banking sector. In December 2016, they bought a residential property in Epsom, Auckland for $3.67 million. Mr Jiang says the property was registered in his name because Ms Song did not have New Zealand permanent residence or the ability to obtain a mortgage. He paid for it with funds of

$1.22 million as well as mortgage finance. Ms Song says the $1.22 million came from her. Mr Jiang says he provided the funds.

[3]    They were going to develop the property. They did not and they never lived there. Their second child was born in August 2017. In early 2018, Ms Song and Mr Jiang separated. They agreed to sell the property but it was passed in at auction in April 2018. In May 2018 Mr Jiang received an offer of $3.03 million which he accepted. Ms Song offers screenshots of dated WeChat messages from Mr Jiang which appear to acknowledge her contribution of $1.2 million and others that appear to tell her there was no buyer, after he had signed the sale and purchase agreement.

[4]    On 6 July 2018, Ms Song obtained from Woodhouse J temporary freezing orders over all real and personal property belonging to Mr Jiang and to a company

associated with him, Alliance.1 On 12 July 2018 Moore J extended them to all bank accounts held by Mr Jiang with Westpac New Zealand Ltd.2   On 12 July 2018 Wylie J extended them until this hearing and also granted disclosure orders regarding Mr Jiang’s property interests and bank statements, which have been suspended pending this hearing.3 Ms Song allowed the property sale to proceed and the net proceeds of

$484,374.22 are now held in Pidgeon Law’s trust account. Immediately after the hearing, I extended the freezing orders until further order of the Court.

[5]    Ms Song seeks orders in the Family Court under the Property (Relationships) Act 1976 (PRA) for the division of relationship property and compensation for disposition of property by Mr Jiang including under ss 15 and 18C. In the meantime, she applies to continue the freezing orders. Mr Jiang seeks their discharge or variation.

Relevant law of freezing orders

[6]    To obtain freezing orders, an applicant must satisfy the Court he or she has a good arguable case for substantive relief, there are assets to which the order can apply and there is a real risk of their dissipation.4 The Court must weigh the overall interests of justice. A good arguable case requires “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”.5 Freezing orders do not prevent payment of ordinary living expenses or legal expenses related to the freezing order under r 32.6 of the High Court Rules 2016 (the Rules). Ancillary orders, including for eliciting information relevant to the freezing order, may be made under r 32.3.

[7]    Freezing orders may be made against a respondent who is not party to the substantive proceeding under r 32.4. There must be good reason for supposing there is a relevant interest in the assets purportedly belonging to the third party.6 In Shaw v Narain the Court of Appeal stressed the court must balance the interests of justice, and

1      Minute of Woodhouse J, 6 July 2018.

2      Minute of Moore J, 12 July 2018.

3      Minute of Wylie J, 12 July 2018.

4      Shaw v Narain [1992] 2 NZLR 544 (CA) at 548; High Court Rules 2016, r 32.5(4).

5      Hannay v Mount [2011] NZCA 530 at [22].

6      Westpac Banking Corp v Gill (No 1 (1987) 2 PRNZ 52 (HC), citing SCF Finance Co Ltd v Masri

[1985] 1 WLR 876 (EWCA) at 884.

imposed freezing orders on a third party to whom the respondent was alleged to have made dispositions in order to defeat a matrimonial property claim.7

Submissions

[8]    Mr Zhang, for Ms Song, submits she has a good arguable case against Mr Jiang under the PRA. She says she contributed at least $1.2 million to the purchase of the property, which went through Mr Jiang’s bank accounts. She says Mr Jiang was reckless or intended to diminish the property’s value by selling it at a loss and concealing the offer from her. Alternatively, Mr Zhang submits she has a good arguable case Mr Jiang held the property as a resulting trustee for her. Ms Song says there is a real risk of dissipation of the assets because Mr Jiang has been living in China for the past few years, has no assets here and has no intention to return. Ms Song has given an undertaking as to damages and has provided an affidavit as to her financial position. She seeks continuation of the disclosure orders up to the point of Mr Jiang showing he has $1.2 million in assets.

[9]    Mr Bigio QC, for Mr Jiang, submits Ms Song has no good arguable case for the $1.2 million because there is no evidence Mr Jiang deliberately diminished the value of the property. He submits there is no evidence supporting Ms Song’s PRA claim and it should be limited to the net proceeds of sale. Mr Jiang provides affidavit evidence that Alliance has very limited assets, having sold its primary asset of a Newmarket property. Mr Bigio submits there is no risk of dissipation. Mr Jiang offers to provide undertakings regarding the trust funds and says Ms Song provides no evidence as to her means of meeting her undertaking. He submits the balance of convenience favours discharge of the freezing orders and the ancillary disclosure orders, which he characterises as oppressive. Mr Jiang offers to disclose his bank accounts and other assets in China if the sale proceeds do not meet his alleged liability. Alternatively, Mr Bigio seeks to vary the freezing orders. He also seeks confirmation the freezing orders do not prevent Mr Jiang paying for his step-mother’s cancer treatment in China, his father’s house renovation in China and the legal expenses associated with the PRA claim.

7      Shaw v Narain, above n 4, at 548.

Should the freezing order be extended here?

[10]   The PRA claim stands to be decided in the Family Court. I do not prejudge it. But, on the information available to me, I consider Ms Song has a good arguable case. She has provided a plausible account of her contribution of $1.2 million towards the purchase of the property. Depending on the application of New Zealand’s PRA regime, and the amounts of relationship property and separate property, she may be entitled to the $1.2 million she claims or to some other amount.

[11]   There are clearly assets to which the freezing orders can apply. The question is what they are. If Mr Jiang wishes to identify, for the Court and Ms Song, assets amounting to the $1.2 million she seeks, the freezing order could be varied so as to relate only to those assets. Until he does so, the freezing orders will apply to all of his assets.

[12]   On the basis of the evidence before me, I consider there is a risk Mr Jiang’s assets may be dissipated unless a freezing order is extended. Ms Song provided an undertaking as to damages on 5 July 2018. She says in her affidavit of 2 August 2018 she will be able to meet the undertaking as she has savings, assets in China and is currently operating a company. I do not consider the sufficiency of her undertaking provides good reason to refuse to extend the freezing orders over Mr Jiang’s property. Overall, I consider it is in the interests of justice to extend these freezing orders.

[13]   I do not extend the freezing order over Alliance’s assets. Ms Song has not established sufficient reason to think it is holding assets in which Mr Jiang has an interest. There is uncontested evidence Alliance’s property in Newmarket has been sold and the proceeds distributed.

[14]   I do not consider payment of Mr Jiang’s step mother’s medical expenses, or his father’s renovation expenses in China, are ordinary living expenses within the meaning of r 32.6. Ordinary living expenses include recurrent expenses but not exceptional expenses,8 which precludes renovation expenses. And there is insufficient

8      TDK Tape Distributor (UK) Ltd v Video Choice Ltd [1985] 3 All ER 345 (QB) at 349, discussed in Twentieth Century Fox Film Corporation v Dotcom [2016] NZHC 1948.

evidence either sets of payments are ordinary recurrent expenses incurred by Mr Jiang. Mr Jiang says in his affidavit he has now borrowed money to meet his stepmother’s medical costs but there is nothing to suggest he ordinarily meets them. They cannot be met from the frozen assets. Mr Jiang’s legal expenses in defending this proceeding and the PRA claim can be meet from his frozen assets. But if the orders are varied to apply only to $1.2 million of assets those expenses should be met from other assets.

[15]   I do not consider the disclosure orders should continue. The disclosure regime in the Family Court’s PRA jurisdiction will apply to Ms Song’s substantive claim.

Result

[16]   Subject to r 32.6, until further order of the Court, I grant Ms Song’s application to renew, and decline Mr Jiang’s application to discharge, cls 1, 2, 3, 4, 7, 8, 10, 11, 12 and 13 of the current freezing orders in respect of Mr Jiang’s property;

(a)including the net proceeds of sale of the property at 7 Dunkerron Avenue, Epsom, Auckland held in Pidgeon Law’s trust account (rather than the property itself); and

(b)while varying cl 8.2(b) to allow Mr Jiang to pay legal expenses relating to the freezing order and the substantive claim against him by Ms Song.

[17]   I grant Mr Jiang’s application to discharge, and decline Ms Song’s application to renew, cl 4 of the current freezing orders in respect of Alliance’s property and cls 5 to 6 of the current ancillary disclosure orders.

[18]   I grant leave for any party affected by the orders to apply to discharge or vary the orders on five working days’ notice to the other parties.

[19]Costs will lie where they fall.

Palmer J