XIAOMIN (MINDY) SONG AND ZENGLIANG (BEN) XUE

[2024] NZHC 2689

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2024-409-170

[2024] NZHC 2689

UNDER

The Contract and Commercial Law Act 2017, the Trusts Act 2019 and the Companies Act 1993

IN THE MATTER OF

ANFU Investment Company Limited

BETWEEN

XIAOMIN (MINDY) SONG

Applicant

AND

ZENGLIANG (BEN) XUE

First Respondent

AND

ANFU INVESTMENT COMPANY LIMITED

Second Respondent

Hearing:

15 May 2024 (via VMR), further submissions 22 and 27 August

2024

Appearances:

R A Idoine and N E Jirkowsky for Applicant

J R Pullar and B L Irvine for First Respondent No Appearance for Second Respondent

Judgment:

17 September 2024

JUDGMENT OF BOLDT J

Introduction

[1]    This case is about the management of a Christchurch motel called the Westside Motor Lodge (Westside). Westside is managed by the second respondent, Anfu Investment Company Ltd (Anfu). A dispute has arisen about ownership of Anfu’s shares, and the corresponding right to run the motel.

SONG v XUE and Anor [2024] NZHC 2689 [17 September 2024]

[2]    All the main protagonists in this case are Chinese, and some reside in China. In pleadings and submissions all but one — Mr Yucai Huang — are referred to by an English-language Christian name, and counsel confirm the participants would prefer me to do likewise in this judgment. The applicant, Ms Xiaomin Song, is known as Mindy, while the first respondent, Mr Zengliang Xue, is known as Ben. Another important participant, Mr Jing Yuan, is known as Justin.

[3]    Anfu’s shares are currently held by Ben, but Mindy says they are rightfully hers. In this application Mindy asks me to order, on an interim basis, that Ben transfer the shares to her pending the outcome of the substantive proceeding, and with them the right to manage Westside in the meantime.

[4]    The application was argued on 15 May 2024, subject to further information about the terms on which Mindy might be prepared to accept temporary custody of the shares. In the intervening months counsel have filed a series of joint memoranda indicating they are close to settling, and seeking more time before supplying the information I requested. It appears that reaching a final settlement has proved difficult, because the parties have now provided the information I sought in May and have asked that the proceeding be timetabled through to trial.

Background

[5]    The history between the parties is lengthy and complex. I need not traverse the background to the dispute in the detail likely to be required at trial.

[6]    In 2015, Mindy, her then husband, Mr Jin Wu, and their two children moved to Christchurch from China. Mindy entered New Zealand on a visitor visa and has remained on a visitor visa since. Shortly after they settled, Mindy and Mr Wu invested, along with others back in China, in a motel management business called Ances. Mindy was the largest shareholder, with a 50 per cent stake. Mindy says that despite the size of her shareholding, she had no involvement in running the business, though that assertion, like much of the narrative, is strongly contested.

[7]    Ances initially managed a motel called the Bush Inn Court Motel. According to Mindy, after Ances had managed the Bush Inn for two years, Mr Wu expressed an

interest in managing further motels, and sought further investors to enable him to do so. He discussed the idea with Justin and Mr Huang, both of whom live in China.1 Initially Mr Wu asked Justin and Mr Huang to invest directly in Ances.

[8]    In late 2017, Mindy and Mr Wu approached Justin and Mr Huang with an option to acquire the lease over Westside. The cost of doing so was RMB/CNY4.65 million, or approximately NZD1.06 million at today’s exchange rate. Mr Huang agreed to raise the capital, and in February 2018 Anfu was incorporated as a vehicle for acquiring the Westside lease. Mr Huang held 100 per cent of the shares, and Justin was appointed Anfu’s sole director.

[9]    Ances and Anfu entered into a series of agreements for the management of Westside. They agreed Ances would manage Westside and pay monthly management fees to Anfu. If the business was successful, Ances and Anfu would split the profits.

[10]   The arrangement was not a success, and Ances quickly defaulted on the payment of the management fees. It also fell behind in the payment of rent on the lease. Anfu cancelled the motel management agreement in September 2019. The two companies entered into a supplementary agreement, which also required Ances to pay management fees to Anfu, but Ances defaulted on that agreement as well.

[11]   Mindy and Mr Wu separated in 2018 and Mr Wu moved back to China. Ances was managing Westside on a day-to-day basis and Mindy was living in the manager’s quarters, though she says she was not, in fact, managing the motel (as the holder of a visitor visa she was, and is, unable to work in New Zealand). On 25 June 2020, Ances was placed in liquidation.

[12]   There appears no dispute that by late 2019, Mr Huang was anxious to recoup his investment, and Mindy and Mr Huang decided this should be achieved by Mindy purchasing the shares in Anfu. There is a dispute about the circumstances in which the purchase agreement was entered — Mindy says Mr Huang and Justin placed her under “extreme pressure” to do so, while Justin says the purchase was Mindy’s idea.

1      Justin is a New Zealand resident; it appears he divides his time between New Zealand and China.

[13]   In any event, on 30 June 2020 Mindy and Mr Huang entered into a contract by which Mr Huang would transfer his Anfu shares, along with the management rights to Westside,  to  Mindy  for  a  total  price  of  RMB/CNY5,335,343  (just  over  NZD1.2 million). The contract is described as an Equity Transfer Agreement (ETA).

[14]   Payment was to be made in instalments on dates listed in the ETA. Once RMB/CNY 2 million had been paid, Mindy was to issue an “IOU” to Mr Huang for the balance of the money owing. The agreement provided that when the IOU was issued, Mr Huang would transfer all Anfu’s shares to Mindy, and the balance of the purchase price would convert into a loan from Mr Huang to Mindy. Mindy was to pay the loan off in instalments of RMB/CNY500,000 every six months, plus interest at a rate of 0.02 per cent per day.

[15]   The contract also required Mindy to grant a mortgage over her Christchurch home, in favour of Justin as a representative of Mr Huang, to secure the sums she owed. The ETA was a three-year contract. It required Mindy to have completed her purchase of the shares, and repaid the loan in full, by 30 June 2023.

[16]   Mindy did not grant Justin a mortgage, but between 19 August 2020 and     30 September 2023 she paid RMB/CNY3,161,739,2 or around 60 per cent of the money due under the ETA, to Mr Huang. Payments were not always made on the dates listed in the ETA, nor did Mindy issue the IOU after paying RMB/CNY2 million. The purchase was not completed by 30 June 2023, and Mr Huang did not transfer the Anfu shares to Mindy.

[17]   Mindy’s evidence is not explicit about who was managing Westside during that three-year period, though Ben and Justin are adamant Mindy was running it personally, and the ETA appears to give her responsibility for doing so. There are certainly comments in Mindy’s evidence which imply she had a hands-on role, though during argument Mr Idoine, for Mindy, was at pains to disavow that suggestion. As noted, Mindy cannot legally work in New Zealand. To put it neutrally, during this period Westside was run under Mindy’s supervision.

2      Roughly NZD720,000 at current exchange rates.

[18]   Mindy acknowledges she did not pay all the ETA instalments on the dates listed in the agreement, but she contends Mr Huang did not raise any concern about the lateness of the payments at the time. Mr Idoine argues the ETA had accordingly been varied by (implicit) agreement. Mindy also says she thought she did not have to issue the IOU until after the shares were transferred, though the terms of the ETA are clear

— the IOU, and execution of the mortgage, were preconditions for the transfer of the shares.

[19]   On 16 October 2023, Mr Huang’s lawyer wrote to Mindy. The letter asserted she was in breach of the ETA and required her to pay the outstanding sum, in full, within three working days. It said failure to do so would result in the ETA being cancelled. Mindy did not pay the outstanding sum.

[20]   On 30 October 2023, Justin demanded Mindy move out of the manager’s quarters at Westside, though she did not move out until the following year. Between 30 October and 31 October 2023, Mindy says her access to the motel bank account and computer systems were revoked.

[21]   On 13 November 2023, Mr Huang’s lawyer wrote again to Mindy, this time giving notice that the ETA was cancelled. It said Mindy was in “serious” breach of the ETA and that Mr Huang had lodged a commercial arbitration with the Shanghai International Economic & Trade Arbitration Commission for breach of contract. It advised Mindy that if she had any objections she “may also submit to the Shanghai International Economic & Trade Arbitration Committee”.3

[22]   There is considerable dispute about the interactions between the parties in the weeks leading up to  that  letter.  For  example,  Mindy  says  the  16  October  and 13 November letters came out of the blue. Justin says he tried negotiating with Mindy so repayment of the outstanding sums could be organised and the ETA could be concluded, but that she was uncooperative. Mindy says she and Justin only met once during this period, in September 2023, and she told him she was having trouble making repayments. She said Justin advised her to speak to Mr Huang. Mindy also produced

3      That reference may be a mistranslation; the body is the Shanghai International Economic & Trade Arbitration Commission.

messages between herself and Mr Huang’s lawyer which, she says, shows there was no issue with the fact some payments had been late. Nothing turns on those disagreements, at least for the purposes of this application.

[23]   Throughout this period, Ben had been working as Anfu’s accountant. In March 2024, in circumstances which, like much of the narrative, are hotly contested, Mr Huang transferred Anfu’s shares to Ben. Ben and Justin say Ben and Mr Huang entered into a contract by which Ben would purchase the shares for NZD300,000 (or around 25 per cent of the price stipulated in the ETA). Ben says he paid just over NZD15,000 to Mr Huang, and that the balance is due to be paid by December 2025.

[24]   Ben produced the share purchase agreement between himself and Mr Huang. Its terms are similar, in many respects, to the ETA. It does, however, contain a clause confirming that any debt which may arise to Mindy as a result of her payments under the ETA are Mr Huang’s responsibility, not Ben’s.

[25]   Ben was appointed a director of Anfu on 15 March 2024, and the Anfu shares were transferred to him on 22 March 2024. Ben took over the management of Westside from around that date, and a short time later Mindy moved out. There is considerable dispute about the circumstances in which Mindy left and Ben assumed control; none of those matters are of any consequence for the present application. Justin remains a director of Anfu alongside Ben.

[26]   For present purposes it is sufficient to note that Ben says he acquired the shares in good faith. He was aware Mindy had not met all the repayments she was obliged to make under the ETA, and says he believed the terms of the ETA entitled Mr Huang to cancel the ETA in accordance with its terms.

[27]   Mindy says Westside has been doing badly since she moved out. Ben and his wife say it has been running well. Aside from the contents of various documents, and the objectively verifiable transactions, there is little on which the protagonists agree.

The ETA

[28]   The ETA was an unforgiving document. It included a clause providing it was not to be altered without the written consent of both parties, and that Mindy was in breach if she was more than 10 days late with any of the stipulated payments. Clause 7 (translated from Mandarin) provided:

CLAUSE SEVEN: LIABILITY FOR BREACH

1.     If any of the circumstances set out below arises, the equity transfer prices received by [Mr Huang] shall not be refunded, and [Mr Huang] has the right to demand [Mindy] to pay off the whole amount in one lump sum, and pay a liquidated damage[s] amount of 30% of the total sum in this Agreement to [Mr Huang], and [Mr Huang] has the right to immediately cancel this Agreement unilaterally. Where the liquidated damages are insufficient to compensate [Mr Huang’s] loss, [Mr Huang’s] actual loss shall prevail.

[29]The “circumstances” listed in cl 7 included:

(1) [Mindy] delays to pay any one instalment of the equity transfer prices set out in this Agreement (include payments converted to principal and interest on the loan) by over ten days; …

[30]   As noted, there is no dispute Mindy was more than 10 days late with several payments, and that she did not complete the purchase during the three-year term of the contract. On a strict reading of the ETA, Mr Huang would have been entitled to cancel the agreement, and retain whatever payments Mindy had made to that point.

The claim

[31]   Mindy says she was not in breach of the ETA; while she missed (or was late with) some payments, she contends Mr Huang’s silence implied the relevant terms of the ETA had been varied or waived. She also says she was unable to issue a mortgage in Justin’s favour, as her current mortgagee would be unlikely to consent until her existing mortgage was cleared.4 Again, she says Mr Huang did not raise the issue, so she “therefore understood [he] agreed this was not required.”

4      Mindy does not suggest she made inquiries with her mortgagee, a bank, about the possibility of granting a second mortgage to Justin.

[32]   Mindy claims Mr Huang’s cancellation of the agreement was unlawful, and accordingly that the transfer of the shares to Ben was unlawful too. She also argues the contract between Ben and Mr Huang for the sale and purchase of the shares was a sham. She says Ben did not take the shares in good faith and for value, and contends he holds the shares on bare trust for her.

[33]   Mindy seeks relief pursuant to s 43 of the Contract and Commercial Law Act 2017 (CCLA), noting she paid roughly 60 per cent of the purchase price for Anfu’s shares, meaning she had substantially complied with her obligations. She seeks orders that Ben relinquish control of Westside and transfer 100 per cent of the Anfu shareholding to her. She also seeks damages. Mindy acknowledges she remains liable to Mr Huang for the remaining 40 per cent of the purchase price.

[34]   Mindy also claims breach of trust, arguing she is the beneficial owner of the shares and that Mr Huang and Ben hold them as bare or constructive trustees for her. Ben’s actions, Mindy argues, are in breach of that trust. Alongside the relief she seeks under the CCLA, Mindy seeks a declaration that Ben holds Anfu’s shares in trust, and seeks equitable compensation plus interest.

[35]   Mindy alleges the affairs of Anfu are being conducted in a manner that is unfair, oppressive, unfairly discriminatory or unfairly prejudicial to her, in breach of s 174 of the Companies Act 1993. She asks for an order under s 174(2) that Anfu’s records are amended to record her as the 100 per cent shareholder. She also asks for orders that Ben relinquish control of Westside to Mindy, and seeks damages.

[36]   In the alternative, Mindy claims the ETA was an unconscionable bargain which she executed under duress. She seeks repayment of the funds she paid under the ETA, plus interest.

Interim injunction

[37]   Mindy seeks an interim injunction requiring Ben to transfer 100 per cent of the Anfu shares to her immediately, and to relinquish control of Westside. She also asks for an order that Ben “[complies] with Mindy’s instructions insofar as they relate to the handover of the Motel”.

[38]   Mr Huang, though named as third defendant, is based in China and has not been served. Mindy asks the Court, in effect, to put Ben into Mr Huang’s shoes. She alleges Ben is “an instrument of Mr Huang”, and effectively alleges the two of them have worked, hand in glove, to deprive her of her beneficial interest in Anfu’s shares.

[39]   Mindy says she has a reasonably arguable case for an order under s 43 of the CCLA, and that an injunction is required because Ben’s management is damaging Westside’s business. She says she needs Westside’s profits, as a return on her investment, to meet her living costs, and that if she does not regain ownership she will be forced to return to China with her children. She says damages will not be an adequate remedy.

[40]   In opposing Mindy’s application, Ben argues Mindy has no viable claim under the CCLA. Ben says he was satisfied Mindy had been in breach of the ETA, meaning Mr Huang was entitled to cancel it and sell the shares to him. He says he bought the shares in good faith and for value. He also notes that the ETA contains a dispute resolution clause, granting exclusive jurisdiction in the event of disagreement to the Shanghai International Economic & Trade Arbitration Commission, and that the decision of the arbitration commission shall be final.

The CCLA

[41]   Sections 43, 45 and 46 of the CCLA are relevant both to Mindy’s current application and the wider claim. They provide:

43   Power of court to grant relief

(1)   When a contract is cancelled by any party, the court may, if it is just and practicable to do so, make an order or orders granting relief under this section.

(2)   The relief may be granted in the course of any proceeding or on application made for the purpose.

(3)   An order under this section may—

(a)direct a party to pay to any other party the sum that the court thinks just (subject to section 35):

(b)direct a party to do or refrain from doing, in relation to any other party, any act or thing that the court thinks just:

(c)vest the whole or any part of any relevant property in a party:

(d)direct a party to transfer or assign the whole or any part of any relevant property to any other party:

(e)direct a party to deliver the whole or any part of the possession of any relevant property to any other party.

(4)   In subsection (3),—

party means a party to the proceeding

relevant property means real or personal property that was the subject of the contract or was the whole or part of the consideration for the contract.

…

45   Matters court must have regard to

In considering whether to make an order under section 43, and in considering the terms of any order, the court must have regard to—

(a)the terms of the contract; and

(b)the extent to which any party to the contract was or would have been able to perform it in whole or in part; and

(c)any expenditure incurred by a party in, or for the purpose of, performing the contract; and

(d)the value, in the court’s opinion, of any work or services performed by a party in, or for the purpose of, performing the contract; and

(e)any benefit or advantage obtained by a party because of anything done by another party in, or for the purpose of, performing the contract; and

(f)any other matters that the court thinks proper.

46   Protection of purchaser of property in good faith and for valuable consideration

No order may be made under section 43(3)(c) to (e) that would have the effect of depriving a person, not being a party to the contract, of the possession of, or any estate or interest in, any property acquired by the person in good faith and for valuable consideration.

[42]   Mindy’s claim centres on the fact she paid Mr Huang around 60 per cent of the purchase price under the ETA but has nothing to show for it. By contrast, and even taking Mr Huang’s contract with Ben at face value, Ben has acquired 100 per cent of the shares for around 25 per cent of the sum Mindy agreed to pay. The NZD300,000

transfer price can be contrasted with the (roughly) NZD720,000 Mindy has paid already, and the approximately NZD480,000 still outstanding under the ETA. Mindy argues Ben has derived a substantial benefit from the sums she paid under the ETA, whereas she has suffered a total loss.

Discussion

[43]   There is no dispute about the principles that apply to Mindy’s application. It falls to be determined under the usual three-stage test for interim relief, namely an examination of whether Mindy has demonstrated a serious question to be tried, an analysis of the balance of convenience and an assessment of the overall justice of the case as a check.5

Serious question to be tried

[44]   The evidence, as presented so far, shows Mindy breached the ETA. She missed payments when they fell due, did not complete the purchase and/or repay the loan by 30 June 2023, and failed to grant Justin a mortgage over her home. I do not accept the evidence, at least at present, shows a common intention to vary the ETA to excuse non-compliance; indeed, the ETA itself provides that variation of the agreement required the “written consensus of both parties”. It follows that the contract, applied strictly and in accordance with its terms, provided Mr Huang with the right to cancel the ETA, and to keep the funds Mindy had paid to him prior to the date of cancellation.

[45]   That is not the end of the inquiry, however. Section 43 of the CCLA allows the Court to grant relief to avoid injustice in exactly this kind of situation. Mindy had paid around 60 per cent of the sum owing under the ETA. It was a considerable sum, yet it appears Mr Huang intends those funds to be forfeited entirely. If Mr Huang were before the Court, there would (at least as the evidence stands) be a strong case for an award under s 43(3)(a).6

5      Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR at [30] citing American Cynamid Co v Ethicon Ltd [1975] AC 396 (HL); Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR (CA) at 142; and National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] UKPC 16, [2009] 1 WLR 1405 at [16]–[17].

6      I make no comment about the possible size of such an award. That would need to await a more detailed evidential analysis.

[46]   Ben has not persuaded me he is in the clear. It is true he was not a party to the ETA, and that Mr Huang had cancelled that agreement before Ben purchased the shares. But the evidence discloses at least two possible scenarios which explain Ben’s acquisition of the shares.

[47]   The first possibility is that Ben knew Mr Huang had received about 60 per cent of the purchase price, and that the sum Ben agreed to pay for the shares was far lower than the sum Mindy was obliged to pay under the ETA (and indeed was less the sum Mindy still owed). That finding would require the Court to reject some of his evidence, for example that he was unaware of the payments made by Mindy or the relevant correspondence between Justin, Mr Huang and Mindy. Nonetheless, it may be open to the Court to infer that Ben, as Anfu’s accountant, was familiar with the relevant background.

[48]   It is notable that the cost to Anfu of acquiring Westside’s management rights had been RNB/CNY4.65 million, or well over NZD1 million, all of which had been funded by Mr Huang. In the absence of evidence to the contrary, that sum can be considered a reasonable proxy for the fair value of the shares. It follows that while the ETA may, to some degree, have sought to build in the outstanding Ances debt, the great majority of the consideration due under that agreement can be linked with the value of the management rights. The trial Judge may well infer that Ben was aware of the underlying value of the asset he was purchasing.

[49]   If the Court made those findings, it would mean Ben knew he was acquiring 100 per cent of the shares in Anfu for only about 25–30 per cent of their value. On this scenario, he would have knowingly, and substantially, benefited from Mindy’s part performance of the contract. In those circumstances the Court may wish to consider orders under s 43(3)(c)-(e) of the CCLA. Ben could not expect to invoke the protection of s 46, or avoid accounting for that benefit in equity.

[50]   A second possibility, which is somewhat more benign from Ben’s perspective, is that he honestly believed the ETA had been validly terminated by Mr Huang, and that Mindy had no legitimate claim to the shares. On a strict reading of the ETA, that would not have been an unreasonable conclusion, and in his evidence Ben says that

this is what he thought had occurred. The Court might find that, having terminated the ETA with Mindy, Mr Huang decided to wash his hands of Anfu, and was prepared to offload the shares at a substantial discount so he could move on.

[51]   Nonetheless, the terms of Ben’s contract with Mr Huang show he was aware there may be an ongoing dispute about the ownership of the shares, and that he could be vulnerable to a claim by Mindy. There would have been no need for the contract to refer to Mr Huang retaining liability for “claims and debts caused by payments under the [ETA]” if Ben and Mr Huang were confident that all matters associated with the ETA had been finally concluded. Indeed, one reading of that clause is that Ben took the shares knowing Mindy’s part performance of the ETA may result in legal action.

[52]   Even on this more benign scenario, it would be open to the Court to find that Ben took advantage of the collapse of the ETA to acquire the shares at a bargain price, and that he considered the possibility of legal action by Mindy a risk that was worth running.

[53]   There may well be other interpretations too, and the evidential picture may look very different at trial. But it is possible, especially if Mr Huang remains unserved and does not appear, that the Court will insist that Ben, as the current shareholder, must account to Mindy for a sum that recognises the contribution she has made to the asset he now holds. It would then be open to Ben to recover any losses by invoking the indemnity clause in his contract with Mr Huang.

[54]   It follows that Mindy has demonstrated a serious question to be tried under the CCLA. The same facts may also establish Mindy’s equitable causes of action. Depending on the trial Judge’s view of the facts, the Court may conclude she acquired a beneficial stake in at least some of Anfu’s shares, and accordingly that Ben holds some or all of the shares on trust for her. It is inappropriate to comment, at such a preliminary stage, on the strength of her case, but there is undoubtedly a tenable resolution of the issues of fact and law on which Mindy’s claim may succeed.7

7      See Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n 5, at 133.

Balance of convenience

[55]   Despite the existence of a serious question to be tried, the balance of convenience tells decisively against the relief Mindy seeks.

[56]   The only factor which favours interim relief is the possibility — and I put it no higher than that — that the trial Judge may rule in Mindy’s favour and conclude that damages are not an adequate remedy. In those circumstances, the Judge may consider orders under ss 43(3)(c)-(e) of the CCLA and/or in equity. But that outcome is only one of several possibilities. Ben may successfully defend the claim and even if he is unsuccessful the Judge may conclude an award of damages is sufficient.

[57]   I reject Mindy’s submission that she will suffer unfair or illegitimate prejudice if the Anfu shares are not assigned to her immediately. Her contention that she needs the shares to provide her with a revenue stream between now and trial, and that in the absence of that income she will suffer the irremediable harm of being forced to return to China, does not withstand scrutiny.

[58]   First, Mindy is in New Zealand on a visitor visa. It is common ground she cannot work in this country. Mr Idoine had the difficult task of persuading me that she does not propose to work for or manage Westside, and will not draw a wage, but Westside will undoubtedly remain sufficiently profitable for her to draw down and live off Anfu’s profits. A simple shareholding in a small business is not a particularly reliable way of obtaining an income, and it does not appear Westside was consistently profitable when Mindy was running (or “supervising”) it last time.

[59]   Second, for a person on a visitor visa, returning home is not irremediable prejudice. It is not prejudice at all; everyone in New Zealand on a visitor visa undertakes to return home when their visa expires. Moreover — given no-one on a visitor visa is allowed to undertake any activity for gain or reward — holders of a visitor visa do not have any legitimate expectation that they will be able to derive an income while in New Zealand.8

8      See definition of “work”: Immigration Act 2009, s 4.

[60]   Third, I am not satisfied Mindy requires an income from the Anfu shares to live between now and trial. Ms Jirkowsky, for Mindy, notes that Mindy’s family may support her if Westside goes through a lean patch. She also owns a home in Christchurch which has between NZD300,000 and NZD500,000 in equity. The availability of that equity to support an undertaking as to damages is one of the factors on which Mindy relies to support her injunction application. She also acknowledges the need to provide security to back a guarantee to Westside’s lessor.

[61]   A far more straightforward way of using Mindy’s equity to see her through to trial will be to draw down on it to the extent necessary. The same can be said of her family support. It would be far simpler for Mindy to access whatever support she can if she needs additional funds before trial.

[62]   Fourth, Mindy acknowledges that if she were to receive the Anfu shares, she would still have to pay the balance owing under the ETA. At today’s exchange rate, that sum is around $480,000, even ignoring the (potentially significant) interest and penalties to which Mr Huang may be entitled under the ETA.

[63]   During argument I floated with counsel the possibility of resuscitating the ETA between now and trial, with Mindy receiving the shares on an interim basis but continuing to make the payments she would have been obliged to make under the ETA. She would also have to execute the mortgage over her property as the ETA required, as security for the final series of payments.

[64]   Mr Idoine acknowledges Mindy has no expectation she will receive the shares free and clear. She had, after all, paid only about 60 per cent of the purchase price, and if the ETA had not been cancelled Mr Huang would still have been entitled to the remaining 40 per cent. Mindy was paying off the shares at around NZD20,000 per month. Mr Idoine accepts it would be reasonable for her to continue to do so if I made the orders she seeks, though he argues the funds should go into a trust account rather than to Ben as vendor in place of Mr Huang.9

9      Mr Idoine submits that if funds were paid to Ben he might use the money as a “fighting fund” in this litigation. That is not a relevant factor, and is certainly not a reason to deprive Ben of funds he might otherwise be entitled to. If Ben were to receive funds under a judicially-revived ETA, it

[65]   After seeking further written submissions from counsel, it is clear that temporary revival of the ETA is impractical. It would disrupt the running of the motel, would impose a further, and unnecessary, series of complications, and the other practical problems, most obviously Mindy’s inability to work in New Zealand, would remain.

[66]   It follows I have not had to examine Ben’s other defences, most notably his contention Mindy was required to submit to arbitration rather than pursue proceedings in this Court. And I have not attempted to examine Ben’s contention that there is nothing unconscionable about Mr Huang’s retention the monies paid by Mindy under the ETA given her outstanding debts which date back to the operation of Ances. Those matters, if relevant at all, can be canvassed at trial.

Overall interests of justice

[67]   Ben has acknowledged, through counsel, that he holds the shares on trust for whomever prevails in this litigation. He and his wife say, and I have no reason to doubt it, that Westside is currently running well. Mindy has not established that it is necessary for her to take control of Anfu’s shares to “save” it as a viable business.

[68]   Westside is currently Ben’s responsibility, and he must, given his position as trustee, manage it with a view to maximising the value of the shares for whomever the Court ultimately decides is entitled to them. I am not persuaded it is necessary, as matters stand, to direct a change in the shareholding or management of Westside between now and trial.

Costs

[69]    Ben has been successful, and my initial inclination is that he is entitled to costs on a 2B basis, but I will be happy to receive memoranda if the parties cannot agree. If the parties do seek a ruling on costs, Ben is to file a memorandum within 10 working days of the issue of this judgment, Mindy may file a memorandum within a further 10 working days, and costs will be determined on the papers.

would be entirely understandable if he chose to use the money to fund his defence to the present claim.

Result

[70]Mindy’s application for an interim injunction is dismissed.

Boldt J

Solicitors:

Anthony Harper, Auckland for Applicant

Taylor Shaw, Christchurch for First Respondent