Xiangtan County Xintian Micro Mortgage Company Limited v BCH Investments Limited
[2021] NZHC 1537
•25 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000556
[2021] NZHC 1537
BETWEEN XIANGTAN COUNTY XINTIAN MICRO MORTGAGE COMPANY LIMITED
ApplicantAND
BCH INVESTMENTS LIMITED
Respondent
Hearing: 27 May 2021 Appearances:
A Yang for the Applicant
H McDermott for the Respondent
Judgment:
25 June 2021
JUDGMENT OF WALKER J
This judgment was delivered by me on 25 June 2021 at 12.30 pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
XIANGTAN COUNTY XINTIAN MICRO MORTGAGE COMPANY LIMITED v BCH INVESTMENTS LIMITED [2021] NZHC 1537 [25 June 2021]
[1] The applicant, Xiangtan County Xintian Micro Mortgage Company Limited (“Xiangtan”), filed an originating application under the Land Transfer Act 2017 (the “Act”) for an order preventing lapse of its caveat against property owned by BCH Investments Limited (“BCH”).1 The originating application sought orders under s 145 of the Act instead of under s 143 of the Act. This is but one of the defects in the originating application which was filed by individuals associated with Xiangtan, rather than by a solicitor. A company is not a natural person and can only present a case in court through legal representation, that is, a lawyer with a current practising certificate unless there are exceptional circumstances.2
[2]BCH opposed the application. It applies to strike it out with costs to follow.
[3] For the reasons set out below, the application to strike out proceeded to a one hour formal proof hearing before me on 27 May 2021.
[4] I now make orders striking out the application that the caveat not lapse as an abuse of process. My reasons may be stated briefly.
Background
[5] On 27 November 2019, Hunan Hengyu Investment Guarantee Corporation Limited (“Hunan”) registered a caveat over three properties owned by BCH. BCH submits that Hunan is one of several Chinese companies so closely related with Xiangtan and those controlling Xiangtan that “they are interchangeable”. On 25 March 2020, the Court determined that Hunan did not have a caveatable interest in the properties.3
[6] The Hunan application arose out of business dealings between two Chinese families - the Zhou family (represented by Hunan) and the Tang family (represented
1 The originating application is dated 22 March 2021, filed on 1 April 2021, and lists the caveat number as 11753930.1, but does not provide the caveat.
2 See Re G J Mannix Ltd [1984] 1 NZLR 309 (CA). Xiangtan was reminded of this in a minute dated 13 April 2021.
3 Hunan Hengyu Investment Guarantee Corp Ltd v BCH Investments Ltd [2020] NZHC 650.
by BCH). Hunan asserted that it had advanced funds via Mr Junwei Tang for the purpose of a development near the Westfield mall in Albany. Mr Zhou withdrew from the joint development and the development company returned the advances made to Mr Tang who was required to pass them on to Hunan. Hunan alleged that Mr Tang instead advanced them into BCH. BCH denied receiving funds and denied any use of the funds in the purchase or development of the properties subject to Hunan’s caveat.
[7] Associate Judge Andrew dismissed Hunan’s application determining that the evidential basis for its claims was tenuous; there was a great deal of uncertainty about key aspects of the Hunan claim, including how much BCH borrowed for the property development, where the funds came from and why the Zhou family is still in dispute with the Tang family over these funds where the evidence (although disputed) is that the matter had been settled. In short, Hunan had not discharged the burden of establishing that it had a reasonably arguable claim for a beneficial interest in the land.
[8] On 25 June 2020, Xiangtan registered a caveat said to be over the same properties.4 Xiangtan asserts that the BCH owes it some $7.5 million plus interest.
[9]On 17 March 2021, BCH applied to remove the caveat.
[10] On 22 March 2021, Xiangtan applied to sustain the caveat but served that application only on 1 April 2021.
[11] On 13 April 2021, BCH filed both a notice of opposition and application to strike out the application to sustain the caveat, supported by an affidavit of Qian Yu Bu dated 9 April 2021. It asserts that there is no basis for a claim against it and seeks that the application to sustain the caveat be struck out. In particular, BCH relies on the following grounds:
(a)no affidavit was filed with the originating application contrary to r. 7.20 of the High Court Rules 2016;
4 The caveat instrument was only put into evidence by BCH.
(b)the reference to evidence in other proceedings is a reference to proceedings between different parties, not the same parties;
(c)the Hunan proceeding asserted the same factual background and the caveat at issue is in respect of properties which were the subject of the first caveat;
(d)there is no court order granting leave to file a second caveat to protect the same interest;
(e)Xiangtan is a related company to Hunan in that there are common directors and overlapping shareholding interests.
[12] The opposition in short asserts that this application to sustain a caveat is a disingenuous attempt to circumvent the earlier determination by Associate Judge Andrew by lodging a caveat in the name of a different entity.
[13] By minute dated 13 April 2021, Gault J issued timetabling directions including directions that Xiangtan was to file and serve any notice of opposition to the strike- out application and affidavit or affidavits in support by 11 May 2021. A half day hearing was allocated for 21 June 2021 to hear the applications.
[14] However, Xiangtan filed no notice of opposition or affidavit in support by 11 May 2021. The hearing set down for 21 June 2021 was deferred to 24 June 2021 and subsequently vacated. BCH filed a memorandum on 13 May 2021 requesting a formal proof hearing in light of Xiangtan’s non-compliance.
[15] By minute dated 14 May 2021, Gault J concurred that the strike-out application should proceed by way of formal proof. No opposition had been filed, nor had Xiangtan taken any other steps since the 13 April minute. A formal proof hearing was allocated for 27 May 2021.
[16] Xiangtan, through Mr Zhou, subsequently emailed the Court directly on 17 May 2021 explaining that its lawyer was supposed to have taken over the proceeding but had been unwell.
[17] BCH’s counsel filed a memorandum in response dated 17 May 2021 noting that Xiangtan was aware that it needed to be represented by a lawyer. Some five weeks had passed since Gault J’s minute dated 13 April 2021 which gave sufficient time for Xiangtan to instruct counsel and to inform the Court of its representation. BCH argued that the formal proof hearing should proceed.
[18] On 18 May 2021, Xiangtan filed a memorandum noting that it had recently obtained legal representation in the proceeding. It advised that the reason for its delay in instructing counsel was a lack of funding. Xiangtan then requested a further opportunity to file and serve a notice of opposition and/or affidavits in response to BCH’s strike-out application. It sought directions vacating the formal proof hearing and leave to file an amended originating application and notice of opposition and/or affidavits by 4 June 2021.
[19] On 19 May 2021, BCH filed a memorandum in response. It noted that Xiangtan had initially claimed in its email on 17 May 2021 that its delay in responding to the strike-out application was due to its lawyer “not feeling well”. However, the memorandum on 18 May 2021 now claimed that the issue was a “lack of funding”. BCH reiterated its assertion that the formal proof hearing should proceed as scheduled. It also sought increased or indemnity costs against Xiangtan.
[20] By minute dated 20 May 2021, Gault J determined that Xiangtan’s explanation for the delay was unsatisfactory. It had filed no affidavit in support of the originating application to sustain the caveat, merely seeking leave to refer to affidavits in other proceedings. Xiangtan did not file any notice of opposition to BCH’s strike-out application as directed in the Judge’s minute of 13 April 2021. It now sought to vacate the formal proof hearing without filing any substantive document outlining its position. In the absence of an application for leave to file a notice of opposition out of time and some explanation of Xiangtan’s position in response to the strike-out application, Gault J was not prepared to vacate the formal proof hearing on the papers.
[21] The strike-out application accordingly proceeded to a formal proof hearing on 27 May 2021. On the eve of the hearing, Xiangtan filed notice of interlocutory application to file a notice of opposition and affidavit out of time. No supporting
evidence was filed. The asserted grounds were that a lack of funding had delayed instructing legal counsel and that counsel acting in inter-related proceedings had health issues. Further, it suggested that no leave is required to lodge a second caveat because Xiangtan is a different entity to Hunan and the caveatable interest in this instance arose from lending between 2012 and 2013 between Xiangtan as lender and Wenbin Tang as borrower.
[22] At the formal proof hearing I did not accept that there was an adequate explanation for the failure to comply with the timetable and the ensuing delay meant that the Court would not grant the indulgence sought. I therefore declined leave to file the notice of opposition and declined to vacate the hearing. I however permitted Ms Yang to respond to Ms McDermott’s legal submissions provided no evidence was given from the bar.
Discussion
[23] The principles relating to an application that a caveat not lapse were succinctly summarised by the Court of Appeal in Botany Land Development Ltd Council:5
[24] The onus is on the caveator to demonstrate that it holds an interest in the land which is sufficient to support a caveat. The caveator must put before the Court a reasonably arguable case to support the interest it claims. An order for the removal of a caveat will only be made if it is clear that there was either no valid ground for lodging it in the first place or, alternatively that such ground as then existed has now ceased to exist. There is a residual discretion, once a reasonably arguable case has been established as to whether to make an order removing the caveat. This will be exercised only cautiously, for example, where the Court finds there is no practical advantage to maintaining a caveat and the caveator will not be prejudiced.
[24]The applicant must adduce evidence to discharge that onus:6
[9] To establish a reasonably arguable case there must be evidence tending to prove the facts relied on. Assertion, whether in pleadings or affidavit, is not enough. The evidence need not be as extensive as that given in a hearing on the substantive merits. It may be circumstantial. But if there
5 Botany Land Development Ltd v Auckland Council [2014] NZCA 61 (footnotes omitted). See also
Philpott v Noble Investments Ltd [2015] NZCA 342.
6 Virtual Spectator Ltd v Rothlander [2016] NZHC 499. Albeit I accept that this discussion concerned applications to remove caveats rather than applications that caveats not lapse. The principles as to what constitutes a reasonably arguable case are nevertheless relevant.
is no evidence to prove the facts contended for, the caveator will not have made out a reasonably arguable case for those facts.
[25] A caveator must show an entitlement to, or beneficial interest in, the estate referred to in the caveat by virtue of an unregistered agreement or an instrument or transmission, or of any trust expressed or implied.7
[26] Xiangtan has plainly failed to discharge any of the evidential requirements. I need not belabour the point beyond emphasising that no evidence was provided by Xiangtan in support of its assertions. As set out in Gault J’s minute dated 13 April 2021, it did not file an affidavit in support of the originating application but merely sought leave to refer to affidavits in other proceedings between different parties. There is accordingly no proper basis upon which the Court can determine its application to sustain the caveat, despite multiple opportunities being given to Xiangtan to shore up its application.
[27] Under r 15.1 of the High Court Rules, the Court may strike out all or part of a pleading if it:8
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the court.
[28] This jurisdiction, as emphasised by the Court of Appeal, is to be exercised sparingly.9 In the present case, BCH submits that the application to sustain the caveat ought to be struck out on both procedural and substantive grounds. It describes the application as an abuse of process and “so untenable that [it] cannot possibly succeed for a wide variety of reasons”, as set out in the notice of opposition and application to strike out.
7 Land Transfer Act 2017, s 138.
8 High Court Rules 2016, r 15.1(1). The principles governing such an application are well established Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267–268 endorsed by the Supreme Court in Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [10].
9 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [89].
[29] Counsel for BCH submit that the Court has “no option” but to strike out the application to sustain the caveat. I agree that is the appropriate outcome.
[30] The application was defective from the outset. Xiangtan subsequently failed to comply with any of the timetabling directions in the various ways outlined above. Moreover, and in my view more crucially, the complete lack of any proper evidential foundation in support of its application renders it hopelessly inadequate. There is no basis on the evidence properly before the Court to find that Xiangtan has a caveatable interest in the properties in question. The claim is therefore an abuse of process for the reasons set out.
[31] I accordingly grant the application by BCH to strike out the application to sustain the caveat.
[32] BCH is entitled to costs. It seeks an uplift of 20 per cent to reflect the fact that it has been put to the time and trouble of resisting an application to sustain a caveat which fell well short of the procedural requirements under the rules, which defects were never rectified. I agree. I award costs on a 2B basis with an uplift of 20 per cent.
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Walker J
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