Tan v HND Holdings Limited

[2024] NZHC 1568

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-002725

[2024] NZHC 1568

BETWEEN

JIAN TAN

First Plaintiff

GOLDEN CIRCLE INVESTMENT LIMITED

Second Plaintiff

EE KUOH LAU
Third Plaintiff

AND

HND HOLDINGS LIMITED

Defendant/Applicant

Hearing:

13 June 2024

Appearances:

R O Parmenter for the Applicant/Defendant

No appearance for the Third Plaintiff/Respondent

Judgment:

14 June 2024

JUDGMENT OF VENNING J

This judgment was delivered by me on 14 June 2024 at 2.15 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Carson Fox Bradley, Auckland

Essence Law Ltd, Auckland

Counsel:            R O Parmenter, Auckland

TAN v HND HOLDINGS LTD [2024] NZHC 1568 [14 June 2024]

Introduction

[1]        HND Holding Limited (HND) applies to strike out the claim by Ee Kuoh Lau (Mr Lau) the third plaintiff in this proceeding against it. HND also seeks costs.

Background

[2]        The general background to these proceedings can be taken from a judgment of Associate Judge Brittain on a caveat application from 14 December 2023.1

[4]        HND holds a registered mortgage over the property at 18 Newington Road, Henderson, Record of Title Identifier NA902/189. The mortgagor and registered owner is Golden Circle Investment Limited. HND's mortgage was registered on 25 March 2022.

[5]        Golden Circle defaulted in its obligations to re-pay a loan to HND. HND has entered into a contract to sell the mortgaged property to a third-party, North Harbour Development Limited, in exercise of HND's power of sale under the mortgage. Settlement of the sale to North Harbour Development Limited is scheduled to occur five working days after removal of Mr Lau's caveat.

[6]        Mr Lau registered his caveat against the title to the property on 26 July 2023. Mr Lau's caveat asserts the following equitable interests in the land:

(a)an interest as beneficiary under a constructive trust, where Golden Circle is constructive trustee;

(b)an interest as purchaser of the land under an agreement for sale and purchase dated 11 November 2022; and

(c)an interest as lessee of the land under a pre-paid lease of the property pursuant to which he is entitled to rent the property from 11 November 2022 until 11 November 2047.

[7]        HND seeks an order removing the caveat, under s 142 of the Land Transfer Act 2017, so that it can complete the sale of the property.

[8]        This is at least the fifth occasion on which Mr Lau has attempted to prevent a financier from exercising its power of sale under a mortgage. The present proceeding is very similar to:

(a)Goodmore Investments (New Zealand) Ltd v Lau, where Mr Lau lodged a caveat against a title to a property in Flat Bush claiming to have exactly the same interests as he claims in this proceeding; and

1      HND Holding Ltd v Lau [2023] NZHC 1194.

(b)the situation in HND Holding Ltd v Lau (CIV-2023-404- 1500) and HND Holding Ltd v Lau (CIV-2023-404-2761 and 2783).

[9]        In Goodmore Investments, van Bohemen J held that the equitable interests asserted by Mr Lau were not sufficient to defeat the power of the mortgagee to sell the property using  its  power  of  sale  under  the mortgage. In HND Holding Ltd v Lau, Lang J made an equivalent finding.

[10]      Ms Tan claims to be a representative of the mortgagor. She has sworn an affidavit, making allegations regarding the mortgagee sale process and the sale to North Harbour Development Limited. These are matters between the mortgagee and the mortgagor, and do not assist Mr Lau in sustaining his caveat.

[11]      HND has never had knowledge of the interests Mr Lau claims he holds in the mortgaged property, and has never consented to them. The caveat is an attempt by Mr Lau to derail the mortgagee sale process. The interests that he claims cannot prevent HND from exercising its power under the mortgage to sell the property following default by Golden Circle.

[3]The mortgagee sale was completed.

The claim advanced by Mr Lau

[4]In the amended statement of claim dated 19 December 2023, Mr Lau pleads:

3.The third plaintiff is a 1/3 beneficial owner of the 2nd plaintiff as derived from debt owed by the 2nd plaintiff from 2021.

[5]        There are then the general allegations regarding the negotiations between the first and second plaintiffs and HND’s representatives which led to the first and second plaintiffs entering a loan agreement as guarantor and borrower with HND. It is said that as a consequence of breaches the second plaintiff was unable to complete a development and suffered financial loss. There was also a claim that the property was sold at mortgagee sale for an under value. Those claims will be dealt with in due course.

[6]        The plaintiffs then claim for injunctive relief to prevent mortgagee sales in respect of property not yet disposed of, which is of no relevance in relation to any relationship between Mr Lau and HND.

[7]Insofar as Mr Lau’s claim for damages is concerned, the relevant pleading is:

The first and third plaintiffs allege that they have each suffered consequential financial losses including loss of profits on planned developments of their properties sold as a consequence of the defendant’s breaches of the Loan Agreement and/or its statutory duties, full particulars of which will be provided in due course. In the meantime, the first and third plaintiffs record that they are claiming damages for breach of the Loan Agreement, to be fully particularised in due course.

[8]        An inquiry as to damages as to the third plaintiff’s loss of profits, together with judgment in the amount of the loss is sought. A similar claim is made in relation to alleged breaches of the Fair Trading Act 1986 (the Act) by Mr Fang on behalf of HND in relation to HND’s failure to provide further lending to enable the Golden Circle Investment Limited (Golden Circle) to complete the development. Mr Lau seeks relief by way of monetary compensation pursuant to s 43 of the Act, including an inquiry as to damages to the third plaintiff’s loss of profits, together with judgment in the amount of loss found to have suffered upon inquiry.

The application

[9]        The application to strike out is pursued on the basis that the claim discloses no reasonably arguable cause of action by Mr Lau against HND and/or is frivolous or vexatious and/or is an abuse of process of the Court.   The applicant HND relies on   r 15.1 of the High Court Rules 2016.

[10]      The Commentary to McGechan on Procedure confirms the criteria for striking out as summarised by the Court of Appeal in Attorney-General v Prince,2 and endorsed by the Supreme Court in Couch v Attorney-General,3 namely:

(a)Pleaded facts whether or not admitted or assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.

(b)The cause of action or defence must be clearly untenable. The Court must be certain it cannot succeed.

2      Attorney-General v Prince [1998] 1 NZLR 262.

3      Couch v Attorney-General [2010] NZSC 27.

(c)The jurisdiction is to be exercised sparely and only in a clear case.

(d)The jurisdiction is not excluded by the need to decide difficult questions of law even requiring extensive argument but the Court should be slow to strike out a claim in a developing area of the law.

Analysis

[11]      Mr Lau has not filed a notice of opposition to the application. There was no appearance of or for Mr Lau when the application was called. The application had previously been allocated a fixture on 10 April 2024 but was adjourned from that date at the request of Mr Kashyap on behalf of Mr Lau.

[12]      The applicant is entitled to have its application determined. In the absence of Mr Lau the matter proceeded as an unopposed application to strike out.

[13]      The general pleading on behalf of the plaintiffs is infelicitous at best. Insofar as Mr Lau’s claim is concerned the only relevant pleading which provides justification for the claims he seeks to pursue is that he is a one-third beneficial owner of the second plaintiff “as derived from debt owed by the second plaintiff from 2021”. I take that to be a reference to him having a one-third shareholding in the second plaintiff. There is a well established principle that a shareholder cannot bring a claim in respect of losses in the value of his shareholding in consequence of losses incurred by the company as a result of actions by a third party.4 The only person that can sue for injury done to a company is the company itself.5

[14]      The above principles were confirmed by the UK Supreme Court in Sevilleja v Marex Financial Ltd.6 However, the Supreme Court also accepted that a shareholder or creditor of a company may claim where the loss they sustain is quite different to the loss sustained by the company.

4      Prudential Assurance Co Ltd v Newman Industries (No 2) [1982] Ch 204.

5      Foss v Harbottle (1843) 2 Hare 461.

6      Sevilleja v Marex Financial Ltd [2020] UKSC 31.

[15]      The difficulty for Mr Lau’s proposed claim against HND is that the pleadings before the Court at present in his claim go no further than to plead he is a one-third shareholder in the second plaintiff Golden Circle. There is no pleading to support a separate and personal claim. The bare claim for some unspecified loss is insufficient to sustain a reasonably arguable claim by Mr Lau. The pleadings as they stand are defective. They do not disclose a reasonably arguable cause of action. HND should not be further vexed by the claim by Mr Lau.

[16]      Further, Mr Lau has failed to comply with directions of the Court regarding filing of notices of opposition by 25 March 2024 as he was directed to do. This proceeding, like a number of other proceedings issued by Mr Lau, is vexatious.

Result

[17]      For the above reasons, the application is granted and the claim by the third plaintiff, Ee Kuoh Lau, against HND is struck out.

[18]      HND is to have costs on a 2B basis which I fix in the sum of $3,704.50, together with the filing fee and sealing fee of $550, in total $4,254.50.

Venning J