Tian v Xu

[2023] NZHC 1261

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-735

[2023] NZHC 1261

BETWEEN

YANG TIAN

Plaintiff

AND

CHEN XU

Defendant

Hearing:	On the papers
Counsel:	Y Yang and H Huang
Date of judgment:	26 May 2023
Reissued:	31 May 2023

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 26 May 2023 at 10.00am.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

Solicitors:
Great Wall Lawyers, Auckland

TIAN v XU [2023] NZHC 1261 [26 May 2023]

[1]    As duty judge, I have Yang Tian’s 25 May 2023 without notice interlocutory application for freezing and ancillary orders in support of this summary judgment proceeding for enforcement of foreign proceedings in New Zealand.

Background

[2]    In this proceeding, Mr Tian alleges he and Chen Xu are party to a 30 August 2021 settlement confirmation sealed by the Lubei District People’s Court of Tangshan City in the People’s Republic of China’s Hebei Province (the Lubei Court), requiring Mr Xu pay Mr Tian an outstanding loan principal of approximately RMB 2.887 million by 1 September 2021, plus interest thereafter. The Lubei Court later partly enforced the settlement confirmation by obtaining sale of property belong to Mr Xu, net proceeds of approximately RMB 1.171 million being paid to Mr Tian, leaving a balance owing of some RMB 1.717 million plus interest to Mr Tian. The Lubei Court also is alleged to have determined on 18 May 2022 Mr Xu separately was jointly and severally liable as guarantor of a third party’s loan from Mr Tian to pay Mr Tian RMB 650,000 plus interest from 8 September 2021, which remains unpaid. Together, the principal sums amount to approximately NZD 600,000.

[3]    On the present application, Mr Tian seeks to freeze Mr Xu’s assets in New Zealand, being his sole shareholding of Knox X Trustee Limited,1 which owns a property in Auckland’s Hobsonville, presently offered for sale by auction on 28 May 2023 unless sold prior. Mr Xu’s spouse, child and parents-in-law are said to live at the property, but Mr Xu resides in China (as does Mr Tian). Mr Tian evidences another of Mr Xu’s companies in New Zealand, Golden Ocean Investment Limited, is said to have unpaid tax liabilities of some NZD 2.8 million and is in voluntary liquidation.2 Mr Tian observes he maintains cordial relations with Mr Xu in China, but who has sought to avoid contact with Mr Tian until after the auction date. Mr Tian’s counsel, Eddie Yang and Charlie Huang, perceive Mr Xu may be making arrangements to

1      The present application also is entituled as brought against Knox X Trustee Limited. I accept for present purposes the substantive proceeding may be enlarged to include the company as a party. Given freezing orders may be granted without any substantive claim having been filed (Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [26(a)]), the company’s omission from the proceeding in its present form is not disqualifying of freezing orders against it. And see r 32.4 of the High Court Rules 2016.

2      Mr Tian’s affidavit presently is unsworn. Note the final line of this judgment.

depart New Zealand, as his overseas residence may prevent him directly or indirectly acquiring another residential property in New Zealand without Overseas Investment Act 2005 approval.

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 Mr Tian’s favour will be wholly or partly unsatisfied because the value of Mr Xu’s assets are alienated from him in some manner.3

[5]    Freezing orders are “a valuable protective measure for those commencing civil proceedings”,4 for which Mr Tian must show “a good arguable case on an accrued or prospective cause of action”.5 By ‘good arguable case’ is meant establishment of “a sufficiently plausible foundation” such that “the cause of action is at least tenable”.6

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’”.7

3      High Court Rules 2016, r 32.5(4).

4      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.

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

6      Hannay v Mount, above n 4, 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].

7      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).

[7]    I then must consider where lies the balance of convenience,8 meaning if it bears harder on Mr Tian to be without prospective recourse to Mr Xu’s assets, or on Mr Xu to have his assets frozen, pending judgment in their respective favours.9

[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,10 and where made without notice be limited to a particular date as early as practicable after the freezing order is made,11 and with leave reserved to the defendants to discharge or vary the freezing order urgently on notice.12

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 Mr Tian’s application can properly be dealt with without notice.13

[10]   I am satisfied from Mr Tian proposed affidavit evidence his allegations against Mr Xu are capable of tenable argument. They appear to establish the Lubei Court’s determinations, which may be enforceable in New Zealand.

[11]   Given money’s inherent fungibility, the prospective sale of Knox’s property and Mr Xu’s seemingly perilous financial circumstances, I also infer the requisite danger. I am in no doubt, particularly given subsequent freezing order procedures as I have explained them,14 the balance of convenience much favours Mr Tian.

8 At [17].

9      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.

10 High Court Rules, r 32.6

11     Rule 32.7.

12     Rule 32.8.

13     Rule 7.46(3).

14     At [8] above.

Result

[12]   I therefore order in terms of subparas 5.1–5.7 of the draft orders annexed to Mr Tian’s 25 May 2023 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 Wednesday, 7 June 2023;

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

(c)attaching Mr Tian’s 24 May 2023 undertaking as to damages—

such order to lie in Court until the earlier of either the original or a copy of Mr Tian’s affidavit is filed or counsel files an undertaking such will be filed on receipt.

—Jagose J