Wang v Future Urban Limited
[2024] NZHC 1615
•19 June 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV CIV-2023-404-2772
[2024] NZHC 1615
BETWEEN YUE WANG
Plaintiff
AND
FUTURE URBAN LIMITED
Defendant
Hearing: 10 June 2024 Counsel:
D Hickson for the Plaintiff B Han for the Defendant
Judgment:
19 June 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 19 June 2024 at 12 midday Pursuant to r 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel:
Essence Law Ltd, Auckland PCW Law Ltd, Auckland
WANG v FUTURE URBAN LTD [2024] NZHC 1615 [19 June 2024]
Introduction
[1] On 20 September 2023, the plaintiff, Yue Wang (Mr Wang), obtained judgment by formal proof against the defendant, Future Urban Limited (FUL), for $29,686.30 plus interest and costs (the judgment).1
[2] On 18 October 2023, Mr Wang served a statutory demand on FUL for the amount due under the judgment of $63,762.01, including interest and costs. FUL did not satisfy the statutory demand. Mr Wang then commenced this proceeding seeking the liquidation of FUL.
[3] This proceeding was served on FUL on 19 December 2023. The last day for FUL to file a statement of defence as of right was on 9 January 2024.2 FUL did not file a statement of defence within time and now applies for orders extending time under r 31.20 of the High Court Rules 2016 (HCR) and staying the liquidation proceeding. Mr Wang opposes the application.
[4] FUL’s director, Lai Wai (Mr Wai), says that he did not receive a copy of the statement of claim and supporting documents filed in this proceeding until 15 February 2024.
[5] On 15 February 2024, FUL applied to set the judgment aside, on the grounds that FUL has a defence to the quantum of the judgment and FUL has a reasonable explanation for its failure to take steps in the proceeding that resulted in the judgment.
[6] FUL’s application for an order extending time to file a defence in this proceeding raises two issues:
(a)Is there an arguable basis for FUL to set aside the judgment?
(b)Does FUL have a reasonable explanation for its delay in filing a defence in this proceeding?
1 Wang v Future Urban Ltd [2023] NZHC 2609.
2 High Court Rules 2016, r 31.17. The rule provides: A statement of defence must be filed within 10 working days after the date on which the statement of claim is served on the person filing the statement of defence.
Legal principles
[7] The principles to be applied on an application for an extension of time to file a defence in a liquidation proceeding are well settled. The Court is exercising a discretion, and the Court should consider the following factors:3
(a)Is there an arguable basis that the defendant is not liable?
(b)Is the defendant solvent?
(c)Has the defendant advanced a reasonable explanation for the failure to file a statement of defence?
[8] If factors (a) and (b) justify a grant of leave, the absence of a convincing reason why the delay occurred will not be fatal to the application.4 The ultimate consideration that informs the exercise of the discretion is the overall justice of the case.5
[9] These factors largely overlap with the grounds that FUL will need to establish for the judgment to be set aside, namely that there has been a miscarriage of justice because:
(a)FUL has a substantial defence to the quantum of the judgment; and
(b)FUL has a reasonable explanation for failing to take steps to defend that proceeding.
Is there an arguable basis for FUL to set aside the judgment?
The basis for the judgment
[10] FUL did not take steps to defend the proceeding that resulted in the judgment. Mr Wai was also a defendant in that proceeding, so FUL was aware of it.
3 Auckland City Council v Stonne Ltd HC Auckland CIV-2007-404-4208, 30 November 2007 at [21]; NZ Commercial Property Maintenance Ltd v Soullight Painting & Plaster Ltd [2022] NZHC 1401 at [64].
4 Auckland City Council v Stonne Ltd, above, at [49].
5 NZ Commercial Property Maintenance v Soullight Painting & Plaster Ltd, above n 3, at [65].
Mr Wai initially defended the claim against him, however, his defence was struck out for failure to comply with directions of the Court.
[11] In the judgment, Downs J upheld Mr Wang’s claim against FUL and dismissed Mr Wang’s claim against Mr Wai. Downs J held that FUL had engaged in misleading or deceptive conduct in respect of a deed of nomination, which purported to appoint Mr Wang as FUL’s nominee to complete a purchase of a residential section.6
[12] The transaction did not proceed, and Downs J held that Mr Wang was entitled to recover his wasted expenditure incurred in the expectation that the transaction would proceed. Mr Wang had produced invoices to prove his wasted expenditure, which were accepted by Downs J to total $29,686.30, being the damages awarded.7
Does FUL have a substantial defence?
[13] In his affidavits filed in this proceeding, Mr Wai does not take issue with the liability findings in the judgment. However, Mr Wai says that the amount of the damages awarded to Mr Wang was “unjust due to material misstatement by the plaintiff”. Mr Wai now asserts that some of the invoices said to prove Mr Wang’s claim were for payments that were refundable, some related to materials that could have been used by Mr Wang elsewhere, and some relate to entirely different property developments.
[14] Mr Wai’s assertion that some of the payments were refundable relates to payments to Auckland Council for a building consent for the subject property. There is one invoice and one debit note in issue, and it does appear that it is arguable that the amount claimed and awarded of $11,118.80 may have been double counted to the extent of $4,730.
[15] Mr Wai’s assertion that some of the payments were refundable or related to materials that could have been used by Mr Wang elsewhere relates to one invoice of
$500.
6 At [21].
7 At [23].
[16] The remaining invoices were for services that were project specific and there is evidence that the underlying work was performed. The total of these invoices is
$19,904.30. Mr Wai has not produced any evidence to suggest that the documentary evidence that supported an award of damages for these payments was unreliable.
[17] Therefore, even if FUL can establish grounds to set aside the judgment on quantum, that would not impeach FUL’s liability for $19,904.30. FUL cannot meet the threshold of establishing that it has a substantial defence.
Does FUL have a reasonable explanation for its failure to take steps in the proceeding that resulted in the judgment?
[18] FUL, by its director, Mr Wai, was aware of the proceeding and elected to take no steps to defend it, even after FUL was aware that Mr Wai’s defence to the claims against him personally were struck out. It seems unlikely that FUL will be able to adequately explain its failure to take steps.
Conclusion
[19] Based on the evidence filed in this proceeding, FUL does not appear to have arguable grounds to set aside the judgment.
Does FUL have a reasonable explanation for its delay in filing a defence in this proceeding?
[20] Mr Wang was required to serve the statutory demand and the statement of claim and supporting documents in compliance with s 387(1)(c) of the Companies Act 1993, which relevantly provides:
387 Service of documents on companies in legal proceedings
(1) A document, including a writ, summons, notice, or order, in any legal proceedings may be served on a company as follows:
…
(c)by leaving it at the company’s registered office or address for service; or
…
[21] In Denize Trustee Company Ltd v Waimauri Ltd, Hinton J held that s 387(1) requires a two-stage approach: first, determining whether there is technical compliance with s 387; and second, whether a residual discretion should be exercised to hold that service should not stand due to a miscarriage of justice.8
[22] The statutory demand and the statement of claim and supporting documents in this proceeding were served on FUL by affixing copies to the front door of Mr Wai’s home in New Zealand, which is FUL’s registered office.
[23] Mr Wai says that he was in China from 18 September to 9 December 2023 when the statutory demand was served, and then away from his New Zealand home from 15 December 2023 to 5 January 2024 when the statement of claim and supporting documents were served. Mr Wai says that the documents were, in each case, lost by the time that he returned to his home.
[24] Mr Wai has produced a copy of a trip itinerary produced by his travel agent and an extract from his passport to confirm that he was in China from 18 September 2023 to 9 December 2023. Mr Wai has produced bank statements which confirm expenditure by BWX Restaurant Ltd in Hamilton on 15, 18 and 22 December 2023, which he says corroborates his claim that he was in Hamilton from 15 December 2023 to 5 January 2024. Mr Wai’s connection to BWX Restaurant Ltd is not explained.
[25] I accept that Mr Wai was in China from 18 September 2023 to 9 December 2023, and that he may have been away from his New Zealand home when the statement of claim and supporting documents were affixed to his front door on 19 December 2023.
[26] On 19 October 2023, the day after the statutory demand was served, an email was sent from Mr Wai’s email address to Mr Wang’s solicitor making an offer to settle the judgment. The email states:
8 Denize Trustee Company Ltd v Waimauri Ltd [2020] NZHC 1718, (2020) 21 NZCPR 247 at [21],
[35] and [36].
Mr Lau is my creditor who put my company into liquidation, he gave me 24 hours to negotiate with you for a full and final settlement for the matter between my company Future Urban and Mr Wang’s case.
The threat of another creditor liquidating FUL was used to attempt to gain leverage in the negotiation with Mr Wang.
[27] Mr Wang’s solicitor replied by email on 19 October 2023, advising that Mr Wang declined the offer and that the solicitor’s instructions were to pursue liquidation proceedings against FUL if the judgment was not paid in full by the expiration date of the statutory demand. The email noted that the statutory demand was served on 18 October 2023.
[28] In his reply affidavit, Mr Wai says that he did not have access to his email account when those emails were sent and received, because he was in China where it is not possible to access Gmail. Mr Wang agrees that it is not possible to access Gmail in China. Mr Wai says that he had authorised Mr Lau to correspond on his behalf using Mr Wai’s email address. If that is correct, then Mr Lau must have been acting as FUL’s agent, and Mr Lau’s knowledge is imputed to Mr Wai and FUL.
[29] Following the email exchange on 19 October 2023, FUL was aware that a statutory demand had been served by Mr Wang on FUL, and that a liquidation proceeding was threatened.
[30] There was a further exchange of emails between Mr Wang’s solicitor and Mr Wai’s email address on 20 October 2023, regarding the claim that Mr Lau was about to file a liquidation proceeding against FUL. That exchange ended with an email from Mr Wang’s solicitor to Mr Wai’s email address confirming that FUL’s offer was rejected, and that Mr Wang required payment of the judgment in full, failing which, a liquidation proceeding would be commenced.
[31] Mr Wai’s evidence is that he learned of this proceeding when Mr Lau told him about it on 15 February 2024, and that he then contacted Mr Wang’s solicitor asking for details. On 15 February 2024, Mr Wai sent an email to Mr Wang’s solicitor requesting that the liquidation hearing be deferred.
[32] The evidence on Mr Wai’s knowledge of this proceeding is unsatisfactory. There is no explanation of how Mr Lau learned of this proceeding, including whether Mr Lau made any visits to Mr Wai’s home, where the statement of claim and supporting documents had been affixed to the front door. There is no adequate explanation of the relationship between Mr Wai and Mr Lau.
[33] There was technical compliance with s 387(1)(c) in this case. Further, Mr Wai had instructed Mr Lau to act as an agent of FUL. I am satisfied that there has been no miscarriage of justice. FUL was aware that a statutory demand had been served and that a liquidation proceeding would follow if the demand was not satisfied. It was open to Mr Wai to take steps to ensure that FUL filed a defence on time. There is no satisfactory explanation as to why that did not occur.
Solvency
[34] Mr Wai gave no evidence regarding FUL’s solvency, other than production of the emails between Mr Wai’s email address and Mr Wang’s solicitor, which included reference to a debt owed by FUL to Mr Lau of $150,000, which I treat with skepticism.
Conclusion
[35] This is not an appropriate case for an extension of time for FUL to file a defence. There is no reasonable prospect of FUL setting aside the judgment in full, and FUL has not satisfactorily explained its delay in filing a defence in this proceeding.
[36] There is no basis to stay the liquidation proceeding. I will adjourn the proceeding to allow FUL a final opportunity to settle the debt.
Orders
[37]The defendant’s application for an order extending time to file a statement
of defence is declined.
[38] The proceeding is adjourned to the companies list on 12 July 2024 at 11.45 am.
[39] The defendant shall pay the plaintiff’s costs on this application on a 2B basis plus disbursements as fixed by the Registrar.
Associate Judge Brittain
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