Ye v Deng
[2017] NZHC 227
•22 February 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-1005
CIV-2016-404-1022 [2017] NZHC 227
BETWEEN HUIFANG YE
Plaintiff
AND
JIE DENG
First DefendantPUBLIC TRUST Second Defendant
Hearing: 8 February 2017 Appearances:
N W Woods for Ms Deng
R Reed and K M H Austin for Ms YeJudgment:
22 February 2017
JUDGMENT OF PALMER J
This judgment is delivered by me on 22 February 2017 at 11.00 am pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Solicitors:
Rice Craig, Papakura
Prestige Lawyers Ltd, Auckland
YE v DENG & ANOR [2017] NZHC 227 [22 February 2017]
Summary
[1] Ms Jie Deng and Ms Huifang Ye have both been married to Mr Jun Xie who died in 2013. There are questions at Chinese, New Zealand and United States law about the validity and length of each marriage, which are said to overlap. As administrator of Mr Xie’s estate in New Zealand, Ms Ye has applied for the return of property from Ms Deng (the property application). Ms Deng has applied to recall Ms Ye’s appointment as administrator (the recall application).
[2] The trial of this proceeding is in May 2017. This judgment deals with three interlocutory applications:
(a) I decline Ms Deng’s application to strike out, or for summary judgment in, Ms Ye’s property application. I am not sufficiently certain there is no merit in it to strike it out, or award summary judgment to Ms Deng, at this stage.
(b)I grant Ms Deng’s application to stay Ms Ye’s property application pending determination of the recall application because there is little demonstrated prejudice, and significant potential efficiencies, from so doing.
(c) I decline Ms Ye’s application for discovery from Ms Deng in the
property application at this stage, since it is now stayed.
Factual context
Mr Xie and Ms Deng
[3] Ms Deng married Mr Xie in China in 1985. In 1991 their daughter, Shelley Deng, was born. In 1995 they moved to New Zealand. They separated later in 1995 and the marriage was dissolved in New Zealand in 1998. The dissolution was not registered in China. Ms Deng says the dissolution was part of a business tactic, the non-registration was intentional and she continued to have a de facto relationship with Mr Xie in New Zealand.
[4] In 2000, Mr Xie incorporated Sincessta International Corporation (NZ) Ltd (Sincessta NZ) in New Zealand as a holding company for a Chinese cotton manufacturing company. Sincessta International Corporation Limited (Sincessta BVI) is a related company incorporated in the British Virgin Islands.
[5] Ms Deng pleads that, on 13 April 2003, Mr Xie and she jointly purchased a property in Warren Avenue, Three Kings, Auckland, for Ms Deng and Shelley Deng to live in. On 24 March 2009 Ms Deng and Mr Xie asked the Public Trust to transfer the property to a trust for the benefit of Shelley at the then market value of $540,000. The Public Trust understood Ms Deng and Mr Xie were married. Trust documents were signed in June 2009 and the transfer was effected in February 2010. The debt was forgiven by the trustees in June 2012. Mr Xie moved back to China. He executed the Deeds of Forgiveness of Debt at the Consulate-General in Shanghai.
Mr Xie and Ms Ye
[6] Ms Ye met Mr Xie in 1999. Ms Ye started working with Mr Xie in 2001 at
Sincessta. Ms Ye says she started a de facto relationship with Mr Xie in China in
2004. They had a wedding celebration in China in May 2011. Their son, Bowen Xie, was born in the United States in January 2013. They married in Las Vegas in March 2013. There is a question as to whether the marriage is recognised at Chinese law.
Mr Xie’s death and aftermath
[7] Mr Xie died in a car accident in China on 10 August 2013. He died intestate.
[8] In December 2013 the Wuzhong District People’s Court, Suzhou City, in China dismissed an appeal by Ms Ye and her son for a right to take part in the distribution of the estate’s assets, because of uncertainty about her status.
[9] Some of Mr Xie’s estate is in New Zealand, including 65 per cent of the shares in Sincessta NZ and 70 per cent of the shares in Sincessta BVI. Ms Deng holds the other 30 per cent of the Sincessta BVI shares. Some of the estate is in China, including several properties.
[10] Sometime after his death Ms Deng transferred Mr Xie’s shareholding in Sincessta BVI into her own name and transferred the signing authority with the bank, in the British Virgin Islands, from Mr Xie’s name into her own name. The bank account had balances of over $5 million as at 31 July 2013. Ms Ye also alleges Ms Deng took possession of two Chinese properties of Mr Xie. Ms Deng alleges Ms Ye unlawfully removed chattels worth $500,000 from Ms Deng’s family home with Mr Xie in China, unlawfully purported to remove seven directors of Sincessta and appoint herself and her brother as directors under a new constitution and drafted a fake document between Ms Deng and Mr Xie.
[11] On 9 July 2014 Ms Ye applied to the High Court of New Zealand for letters of administration to Mr Xie’s estate as the surviving spouse. The application was granted on 4 August 2014.
[12] On 15 December 2014 Ms Ye applied in China for recognition of the
dissolution of Mr Xie’s marriage to Ms Deng. No decision has yet issued.
Legal proceedings
[13] Unsurprisingly, this situation has resulted in New Zealand legal proceedings:
(a) On 16 May 2016, as administrator of the estate, Ms Ye filed the property application. As it currently stands this application seeks return, from Ms Deng to the estate, of any estate assets received by Ms Deng including the Sincessta BVI shares, any funds removed from Sincessta BVI’s bank accounts, the signing authority (or damages) and, in the fourth cause of action against the Public Trust as well, an order the Warren Avenue property is held on resulting trust for the estate. There are four causes of action: fraudulently obtaining part of the estate; knowing receipt; the tort of conversion; and unconscionability in the transfer of the Warren Avenue property.
(b)On 20 May 2016, Ms Deng filed the recall application, to recall Ms Ye’s appointment as administrator. She challenges the validity of Ms Ye’s marriage to Mr Xie arguing that, at Chinese law, Ms Deng
was still married to him. Ms Deng says the Chinese courts have jurisdiction to determine the marriage in relation to intestate succession. She contends Ms Ye misled the High Court of New Zealand in applying for letters of administration. Ms Deng seeks Ms Ye’s replacement by an independent administrator.
[14] As an interim measure, Ms Deng has undertaken not to deal with the Sincessta shares, or to withdraw or otherwise deal with funds held in Sincessta’s bank accounts other than on the terms set out in the undertakings.
[15] This judgment deals with three interlocutory applications.
Issue 1: Should the property application be struck out?
[16] Ms Deng and the Public Trust apply to strike out the fourth cause of action in Ms Ye’s property application or be granted summary judgment in the proceeding as a whole.
[17] Ms Reed, for Ms Ye, takes a procedural point that the amended application is really two applications, which do not comply with r 12.4 of the High Court Rules. She may be correct, but r 1.5 provides that failure to comply the rules does not nullify any step taken in proceedings. I deal with the applications on their merits.
[18] Ms Reed also submits that the amended application does not have a legal foundation since an Amended Statement of Defence has not been filed. Mr Woods’ response is that Ms Deng’s amended application reflects her position that there is no case to answer and that it is only if it is unsuccessful a Statement of Defence will be needed. I understand Mr Woods’ logic, though my Minute No 3 dated 26 October
2016 (at [10](f)] directed Ms Deng to file any amended Statement of Defence by
18 November 2016. In any case, the Amended Statement of Defence is not necessary to resolve the amended application.
[19] Rule 15.1 of the High Court Rules provides for strike out:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(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.
(2) If the court strikes out a statement of claim or a counterclaim under subclause (1) it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1) the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court's inherent jurisdiction.
[20] In Attorney-General v Prince and Gardner the Court of Appeal said that, to be struck out under the equivalent of r 15.1(1)(a), causes of action must be “so clearly untenable that they cannot possibly succeed”.1 In Commissioner of Inland Revenue v Chesterfields the Court of Appeal stated that:2
The grounds of strike out listed in r 15.1(1)(b)-(d) concern the misuse of the court’s processes. Rule 15.1(1)(b), which deals with pleadings that are likely to cause prejudice or delay, requires an element of impropriety and abuse of the court’s processes.3 Pleadings which can cause delay include those that are prolix; are scandalous and irrelevant; plead purely evidential matters; or are unintelligible. In regards to r 15.1(1)(c), a “frivolous” pleading is one which trifles with the court’s processes, while a vexatious one contains an element of impropriety.4 Rule 15.1(1)(d) – “otherwise an abuse of process of the court” – extends beyond the other grounds and captures all other instances of misuse of the court’s processes, such as a proceeding that has been brought with an improper motive or are an attempt to obtain a collateral benefit. An important qualification to the grounds of strike out listed in r 15.1(1) is that the jurisdiction to dismiss the proceeding is only used sparingly. The powers of the court must be used properly and for bona fide purposes. If the defect in the pleadings can be cured, then the court would normally order an amendment of the statement of claim.
1 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 264. Approved by a minority of the Supreme Court in Couch v Attorney-General [2008] NZSC 45 at [33].
2 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] 2 NZLR 679 at [89].
3 McGechan on Procedure at [HR15.1.03].
4 At [HR15.1.04].
[21] Ms Deng and the Public Trust emphasise that Ms Ye’s fourth cause of action was significantly amended. Initially it was an allegation Mr Xie did not consent to the transfer of the Warren Avenue property, no consideration was given and a resulting trust should be declared. Once evidence was provided undermining the factual basis for these allegations the cause of action was amended to plead an unconscionable bargain on the basis Mr Xie was vulnerable due to lack of proficiency in English. Ms Ye filed an affidavit about her belief as to the facts concerning that transaction, of which she had no personal knowledge. She also provided evidence (in Chinese) that has been translated to depose either that Mr Xie did not speak English fluently or that he did not speak English frequently.
[22] Mr Woods seeks to argue Ms Ye’s application is not bona fide and should be struck out as an abuse of process. He also submits the extent and effect of the pleaded disadvantages cannot individually or cumulatively amount to Mr Xie being in need of “special protection”. He says Ms Ye’s speculative allegation about his English fails to put at issue the extent to which Mr Xie understood the essential nature and effect of the transaction. Ms Reed emphasises Ms Ye’s obligation to seek return of the assets of the estate and the Public Trust’s own evidence that the transfer was made on the basis of misinformation.
[23] As noted, the courts are sparing in striking out for abuse of process. For the purposes of the strike out application Mr Woods accepts, as he must, that the material facts pleaded must be taken as true. That includes, at paragraph [63] of the Second Amended Statement of Claim, the pleading “[the Deceased was had (sic) insufficient English and was not provided adequate explanation of the legal implications of the trust and the disposition of Warren Ave in his language of fluency
– Mandarin Chinese”. Paragraph [64] provides more details. The pleading, on its face, supports the cause of action pleaded. Amending a pleading is not a ground for it being struck out. And it is capable of being further amended. There is no direct evidence of lack of Ms Ye’s bona fides in bringing the proceeding. Ms Deng’s real complaint is that the facts pleaded about the fourth cause of action in the property application are wrong. But that is a matter of fact that must be proved at trial.
[24] Ms Ye must think carefully before advancing the fourth cause of action at trial. If, once all the evidence is in, she does not offer a sufficient factual basis for the claim and the court considers her pleading is an abuse of its process, then she will face a costs order. A court may well entertain awarding indemnity costs and would be reluctant to take the money out of the estate. But that is not a basis on which the claim can be struck out at this stage.
Issue 2: Should summary judgment be awarded in the property application?
[25] Rule 12.2(2) of the High Court Rules provides “the court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed”. The Court of Appeal has stated that, for a summary judgment application to succeed, “the Court must be left without any real doubt or uncertainty” and:5
The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341(PC). In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[26] The application for summary judgment concerns the whole of the property proceeding. But Mr Woods, for Ms Deng, directs his arguments primarily at the fourth cause of action which is the only cause of action founding a claim against the Public Trust. Ms Reed, for Ms Ye, submits summary judgment cannot be sought in relation to only one of four causes of action.
[27] Ms Reed is correct that the wording of r 12.2(2) requires the defendant to satisfy the court that none of the causes of action can succeed. That contrasts with r 12.2(1), which explicitly allows summary judgment for a plaintiff in relation to a cause of action or a particular part of a cause of action. The contrast does not assist
Mr Woods’ focus on the fourth cause of action but he emphasises that the Public
5 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
Trust only faces the fourth cause of action. If he succeeds then the Public Trust would have satisfied the court that none of the causes of action it faces can succeed. That may be a tenable reading of r 12.2(2). But, as I explain below, I am not satisfied the fourth cause of action cannot succeed.
[28] Mr Woods submits:
(a) Ms Ye has no knowledge of the circumstances of the Warren Avenue transaction and the file note of the Public Trust is not a reasonable ground on the basis of which to assert an unconscionable bargain. But the file note makes clear the Public Trust understood Mr Xie and Ms Deng to be married, which, at New Zealand law, they were not. That may have affected the way in which the Public Trust approached the legal protections and advice offered to the parties.
(b)Ms Deng had no connection with the execution of the Deeds of Forgiveness of Debt which were prepared by the Public Trust and they do not change her ownership of the Warren Road property. But it appears she has the benefit of the use of the property.
(c) There is no inconsistency between Ms Ye’s evidence that Mr Xie thought of the property as his own, after the transfer, and the status of being a settlor of a family trust. But, even if that is so, Mr Woods concedes it is possible Mr Xie may have said different things to different people.
(d)No conduct is identified in Ms Ye’s pleading which establishes Mr Xie suffered a serious disadvantage from the transaction. But the transaction put his property beyond his ownership and forgave others its cost.
[29] I agree the evidence currently offered by Ms Ye in support of her claim about the property is not particularly strong. The evidence as to Mr Xie’s marital status, with both Ms Ye and Ms Deng, will be further explored at trial. At present, I do not
consider there is sufficient certainty for summary judgment to be granted here in relation to the fourth cause of action, let alone the other causes of action which Mr Woods’ submissions did not address.
Issue 3: Should the property application be stayed?
[30] Ms Deng applies to stay Ms Ye’s property application pending determination of the recall application. Mr Woods, for Ms Deng, submits:
(a) Ms Deng’s undertaking to preserve the Sincessta shares and funds means there no prejudice will be suffered if a stay is granted. She offers further an undertaking that, after the removal proceeding is finally determined, she will forthwith transfer the shares and funds to the new administrator, irrespective of who it is.
(b)The issues in the property proceeding are not relevant to the removal proceeding.
(c) Success of the removal proceeding may have implications for whether the property proceeding would continue to be maintained, since a new administrator may decide not to do so.
(d)Costly expert evidence will be necessary to determine the jurisdictional issues in the property proceeding relating to the Sincessta funds held under British Virgin Islands law.
(e) Ms Ye has not shown the caution expected of administrators in issuing the property proceedings in the face of impending challenges to her own status. The proceeding is said to be an abuse of process.
[31] Ms Reed, for Ms Ye, submits the property proceeding is genuine and that
Ms Ye has every intention of prosecuting it to a successful conclusion.
[32] I grant the stay application because there is little prejudice, and there are significant potential efficiencies, from so doing. Ms Deng will need to abide by her undertakings.
Issue 4: Should discovery and interrogatories be ordered?
[33] Ms Ye applies for particular discovery and an answer to interrogatories in relation to the property application. Ms Deng resists on the grounds that the discovery required would be of limited relevance and its cost, including that of translation, would not be proportionate.
[34] I have now stayed the property application. The application may change in scope and may not even proceed, depending on the outcome of the removal application. It is not sensible to subject the parties to the cost and distraction of discovery in the property proceedings until it is clear whether and in what shape it will be maintained. I therefore decline to grant the application for discovery and interrogatories at this stage. It may be made again if and when the property proceedings recommence.
Result
[35] In summary:
(a) I decline Ms Deng’s application to strike out, or for summary judgment in, Ms Ye’s property application;
(b)I grant Ms Deng’s application to stay Ms Ye’s property application pending determination of the recall application; and
(c) I decline to grant Ms Ye’s application for discovery from Ms Deng in
the property application at this stage.
[36] I consider all parties have had some success and some failure with these interlocutory applications. Accordingly, costs will lie where they fall.
[37] I remind the parties that an indicative timetable for the substantive hearing of the removal proceeding for two weeks commencing 1 May 2017 was set in Minute No 3 of 26 October 2016 (at [12]). I confirm that timetable. If the parties seek any variation to it they must file a (preferably joint) memorandum within five working days of the delivery of this judgment.
Palmer J