Yang v Lowndes

[2018] NZHC 2298

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2017-404-2788

[2018] NZHC 2298

BETWEEN

MAXWELL BAOLIN YANG

First Plaintiff

KARARIKI LIMITED
Second Plaintiff

AND

YI WEI LOWNDES

First Defendant

JAMES VERNED DRINNAN
Second Defendant

CHRISTOPHER REX DRINNAN
Third Defendant

DRINNAN PROPERTIES 2015 LIMITED

Fourth Defendant

Hearing:

20 August 2018

Appearances:

G P Blanchard QC and J A Zwi for Plaintiffs J G Ussher for First Defendant

R J Katz QC and N J Foster for Second to Fourth Defendants

Judgment:

31 August 2018

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 31 August 2018 at 4.50 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

Solicitors:	Jeff Ussher, Auckland	Counsel:	G P Blanchard QC, Auckland
Wilson Harle, Auckland	R J Katz QC, Auckland

YANG v LOWNDES [2018] NZHC 2298 [31 August 2018]

[1]    This judgment determines interlocutory applications by the plaintiffs and defendants for particular discovery, and by all defendants for separate trials.1 All applications are opposed.2

[2]    At the outset I record that I declined Mr Ussher’s application to restrict public access to the Court on the ground that the allegations against his client, the first defendant (“Ms Lowndes”), are serious and, although denied, have the potential to affect her professional reputation as a real estate agent. Any fair-minded person reading this judgment will realise that the proceedings are at a very early stage and that all the defendants, including Ms Lowndes, deny all allegations of wrongdoing against them.

Background

[3]    The second plaintiff (“Karariki”) is the registered proprietor of 154 Matakana Road, Warkworth (“the land”). Karariki purchased the land as the nominee of the first plaintiff (“Mr Yang”). I refer to Mr Yang and Karariki together as “the plaintiffs”.

[4]    The gist of the plaintiffs’ claim is that the defendants misled them into purchasing the land, or rather paying the price they did of $5.8 million.

[5]    Prior to the events giving rise to these proceedings, Ms Lowndes had referred Mr Yang to several properties that he might acquire for investment purposes. Mr Yang had acquired some of these properties, and Ms Lowndes herself had taken a share in several.

[6]    Ms Lowndes introduced Mr Yang to the second defendant, James Drinnan, in late March or early April 2015. There is disagreement as to the date of, and what transpired at, the meeting. However, at the latest it had occurred by 6 April 2015 and

1      Interlocutory Application by Plaintiffs for Particular Discovery dated 13 July 2018; Interlocutory Application by First Defendant for Particular Discovery dated 13 July 2018; Interlocutory Application by First Defendant for Separate Determination of Issues/Staged Trial dated 13 July 2018; Interlocutory Application by Second, Third and Fourth Defendants for Particular Discovery dated 13 July 2018; and Interlocutory Application by Second, Third and Fourth Defendants for Separate Determination of Issues/Staged Trial dated 13 July 2018.

2      The notices of opposition are dated 26 or 27 July 2018.

it appears to be common ground that Mr Yang and Mr Drinnan discussed listings of several properties for sale.

[7]    In mid-April, Ms Lowndes telephoned Mr Yang in Beijing and told him about the land in issue. On Mr Yang’s version of events, Ms Lowndes said the vendor would not sell to a Chinese purchaser – a statement the vendor point blank denies making – nor sell for less than $5.8 million. Ms Lowndes is said to have suggested that James Drinnan’s son, Mr Chris Drinnan, the third defendant, would acquire the land for the

$5.8 million that the vendor required, and on-sell it to Mr Yang for the same price, in return for various concessions that Mr Yang would make to the Drinnan interests.  Mr Yang says he agreed on this basis, and agreed to Ms Lowndes purchasing a 10 per cent interest in the land to reward her for bringing the opportunity to his attention.

[8]    Ms Lowndes denies these allegations. She says that she told Mr Yang that he could purchase from Chris Drinnan, and denies saying that the price was non-negotiable or that the vendor would not sell to a Chinese purchaser. She says  Mr Yang asked her to take a 10 per cent share by contributing 10 per cent of the purchase price, which she did.

[9]    By agreement dated 30 April 2015, the vendor agreed to sell and Chris Drinnan to purchase the land for $3.3 million (“first agreement”). By agreement dated 20 May 2015, Chris Drinnan agreed to sell and Mr Yang or nominee to purchase for

$5.8 million (“second agreement”).

[10]   Settlement of both agreements took place on 3 November 2015, with the vendor selling to the fourth defendant (“Drinnan Properties”) as nominee, and Drinnan Properties to Karariki as nominee.

[11]Drinnan Properties applied Karariki’s purchase price of $5.8 million to pay the

$3.3 million due to the vendor and then paid 50 per cent of the net balance to        Ms Lowndes, that 50 per cent being $1,243,617.50. Drinnan Properties retained the other 50 per cent. An obvious question that the defendants will need to answer at trial is why the Drinnan interests would pay such a substantial sum to Ms Lowndes.

[12]   Mr Yang says that, despite his many requests, Ms Lowndes failed to provide him with a copy of the first agreement. Again, this is denied and Ms Lowndes says she was never in a position to provide Mr Yang with a copy. In any event, Mr Yang became suspicious, engaged a private investigator, learned of the $3.3 million purchase price under the first agreement and then commenced proceedings.

[13]   As I have said, the defendants deny all wrongdoing. They contend that Chris Drinnan had been in negotiations with the vendor for some time prior to the execution of the first agreement and their case is that the transaction between Chris Drinnan and Mr Yang was at arm’s length.

Applications for separate trials

[14]   The parties have a two-week trial commencing in June 2019. Out of an abundance of caution, the Court will reserve a further week. So the parties can assume they have three weeks if that should prove necessary.

[15]   The plaintiffs allege nine causes of action, and on several (“fiduciary claims”) they seek either an account of profits, alternatively equitable compensation.

[16]   The defendants seek separate trials as a result of this prayer for relief. In particular, the defendants seek orders that would mean the first, and possibly only, trial would be confined to liability on the fiduciary claims and liability and quantum (if any), on the remaining causes of action, such as under the Fair Trading Act 1986.

[17]   Then, if the plaintiffs succeed on the fiduciary claims, the parties would proceed to the second stage of determining the proper remedy on those claims. Only then would discovery and evidence as to those remedies be given, followed by trial.

[18]   The plaintiffs oppose the making of these orders and wish all matters to be determined at the one trial in June 2019. They seek discovery now of all documents relevant to the remedies that may be open to them. They wish to know what the defendants each did with their 50 per cent share of the profit achieved on the sale to Karariki and whether, and if so how, the defendants invested the funds.

[19]   In support of their application, the defendants contend that giving discovery of the documents sought will be unduly burdensome, costly and invasive, and that they should not be required to bear this burden and cost before the plaintiffs establish liability on the fiduciary claims. Hence their application.

[20]   The defendants’ application is made pursuant to the High Court Rules 2016,  r 10.15 and/or the inherent jurisdiction of the Court.

[21]Rule 10.15 provides:

10.15   Orders for decision

The court may, whether or not the decision will dispose of the proceeding, make orders for—

(a)the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and

(b)the formulation of the question for decision and, if thought necessary, the statement of a case.

[22]   The purpose of an order for separate trials is to expedite the resolution of the issues between the parties. The Court has a broad discretion, although its usual starting point will be that it is best to determine all matters in one trial. The burden of displacing this presumption lies on the applicants, that is the defendants. An order should be made only where there are plainly discernible advantages of doing so.3

[23]   These criteria are usually considered in deciding whether to order separate trials:4

(a)Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?

(b)Will the proceedings be brought to an end?

(c)What potential timesaving does the separate question offer?

3      See generally McGechan on Procedure (online ed, Thomson Reuters) at [HR10.15.04] and [HR10.15.05].

4      Haden v Attorney-General (2011) 22 PRNZ 1 (HC).

(d)How will appeals be dealt with?

(e)Are there any other practical considerations tending one way or another?

Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?

[24]   It is common ground that it will not be difficult to separate the issues at the first trial from those at any second trial that may be required.

Will the proceedings be brought to an end?

[25]The answer to this is yes, if the plaintiffs fail and subject to appeal.

What potential timesaving does the separate question offer?

[26]   The defendants estimate that a combined trial would take 15 days, whereas a trial on the question of liability would take 8.75 days, and any second trial 6 days. This potential time saving is too modest to outweigh the other disadvantages that arise from separate trials.

How will appeals be dealt with?

[27]   The plaintiffs submit, and I accept, that the sum in issue is such that there is likely to be an appeal, whoever prevails in the High Court. In that event, it is preferable that the Court of Appeal have the benefit of the High Court’s factual findings on all issues of liability and quantum.

Are there any other practical considerations tending one way or another?

[28]   I have already referred to the defendants’ submission that giving the discovery the plaintiffs seek will be costly, burdensome and invasive. That consideration tends in their favour. However, two other considerations tend in favour of the plaintiffs.

[29]   First, if I made the order sought, potentially there is a very substantial delay to the plaintiffs in securing their remedy if they succeed on the fiduciary claims. This

delay could be for at least 12 months from the date of judgment on the first trial. At least this period would be required to enable the provision of discovery, factual and expert evidence, and to obtain up to a further week of Court hearing time.

[30]   Secondly, there can be no certainty that the same Judge could preside at both trials. This again is highly undesirable.

Conclusion

[31]   Taking these matters into account, I am not persuaded to grant the defendants’ applications for separate trials. The inconvenience and expense to which the defendants will be put by the orders for discovery that I propose to make (see below) are insufficient to counter the disadvantages and inefficiencies that would arise if the case proceeds as the defendants propose. I dismiss the defendants’ applications for separate trials accordingly.

[32]   I record that Mr Katz QC, for the second to fourth defendants, referred me to several instances in other jurisdictions in which Courts have made orders equivalent to those he sought in this instance. I consider those cases of limited assistance, however. Each application depends on the particular facts and circumstances of the proceedings. There is nothing about this case or the remedies sought that warrants the division the defendants propose.

Plaintiffs’ application for discovery

[33]   As indicated, the plaintiffs’ application for discovery is for those documents evidencing the defendants’ application of the $2.5 million (or thereabouts) that they received on the sale to Karariki. I order the defendants to give the discovery sought. That said, and as discussed at the hearing, I expect counsel to do their best to ensure that the relevant information is provided as efficiently and economically as possible. They should agree the time by which the task will be completed and notify the Court of the same.

Defendants’ applications for particular discovery

[34]   The defendants’ application for discovery is reduced to two matters. There is no issue as to the first which is for any relevant documents on the file of the plaintiffs’ accountant and, indeed, on the file of any other financial adviser of the plaintiffs. Discovery of these documents is to be given as soon as possible and in any event by 4 pm, 28 September 2018.

[35]   The defendants also seek discovery of Mr Yang’s application for citizenship, including documents that he may have provided to Immigration New Zealand in support of his application. The defendants submit that the application is likely to reveal what Mr Yang advised Immigration New Zealand as to the type of investment he proposed to make. The defendants contend this would be relevant to the joint venture Mr Yang alleges in his proceedings.

[36]   The plaintiffs oppose this aspect of the defendants’ application for discovery. They submit that the documents sought are irrelevant to the issues in the proceedings.

[37]   I accept that submission. I am not persuaded that the documents could have any relevance to the pleaded issues before the Court and I decline to order discovery of the same.

Costs

[38]   The plaintiffs are to have one set of costs (including second counsel) on their successful opposition to the defendants’ applications for separate trials, plus any additional disbursements the plaintiffs may have incurred in responding to the two applications.

[39]Costs on the applications for discovery net off and lie where they fall.

Leave to apply

[40]   As requested, I reserve leave to apply. I record, however, that I shall be sitting out of Auckland for the next five weeks. If any contentious issues arise, the parties

will be better served by seeking to have the matter listed in the Duty Judge list, which they may do by memorandum to the case officer.

Peters J