Zhang v Meng

[2022] NZHC 2641

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-508

[2022] NZHC 2641

UNDER

the High Court Rules 2016

BETWEEN

JUNHUI ZHANG and WEI XU

Plaintiffs

AND

XING MENG and HUIMIN GUAN

Defendants

Hearing:	12 October 2022
Appearances:	CL Holland for the Plaintiffs S Maloney for the Defendants
Judgment:	12 October 2022

JUDGMENT OF WOOLFORD J

(Application to rescind order for joinder)

Solicitors:           Righteous Law (C L Holland), Auckland

Heritage Law (D Liu), Auckland

ZHANG v MENG [2022] NZHC 2641 [12 October 2022]

[1]    This interlocutory hearing concerns the interpretation of the phrase “on the papers” as it was used by Associate Judge Andrew in a minute dated 6 May 2022 (first minute) in the present proceeding. In that minute, Associate Judge Andrew directed that:

(a)The plaintiff is to file and serve, by 20 May 2022, either:

(i)An amended statement of defence and counterclaim without additional parties; and/or

(ii)A formal application for leave to join the additional parties.

(b)The defendants are to file and serve their statement of defence to any counterclaim or notice of opposition (as the case may be) by 3 June 2022;

(c)The Court will then determine any application for leave to join additional parties on the papers.

[2]    On 20 May 2022, the plaintiffs filed an interlocutory application to add parties, a reasonably lengthy affidavit from one of the plaintiffs, Wei Xu, and a five page memorandum of counsel.

[3]    In response, the defendants filed a notice of opposition, dated 3 June 2022, together with a short affidavit from one of the defendants, Huimin Guan, dated 7 June 2022. The defendants did not file a memorandum or submissions.

[4]    On 12 July 2022, Associate Judge Andrew issued a second minute in which he granted the plaintiffs’ application to add parties. He stated:

[2]   I am satisfied that the grounds for the orders sought have been made  out (r 4.56). The presence before the Court by these additional parties may be necessary to adjudicate on and settle all questions involved in the proceedings. There may also be some efficiency in resolving all outstanding disputes between the parties and there is arguably a close connection between the proposed counterclaims and the purchase of the property and the payment of the deposit, the essential matters at dispute in the main proceedings.

[5]    Two days later, on 14 July 2022, counsel for the defendants filed a memorandum seeking recall of the second minute granting joinder of the parties on the basis that the first minute did not refer to the filing of submissions. The defendants submit that although the Court said it would determine the application on the papers, that was not an order made by consent. No submissions were filed by the defence because none were directed by the Court. Without further reference to the parties, the Court ruled in favour of the plaintiffs on the basis that the plaintiffs had made out the grounds of their application. The Court made no reference to the matters raised in opposition.

[6]    The defendants have now filed an interlocutory application for orders extending the time to apply for an order rescinding the order for joinder made by Associate Judge Andrew and rescinding the order for joinder. It is this application which has been set down for hearing today. The application is opposed by the plaintiffs.

[7]The grounds of the plaintiffs’ opposition are as follows:

(a)The first minute specifically records at 1(c) that the Court will determine any application for leave to join additional parties “on the papers.”

(b)The defendants failed to file the correct application.

(c)Counsel for the defendants had sufficient opportunity to make an application pursuant to r 7.49 of the High Court Rules (HCR) to rescind or vary, or pursuant to r 11.9 HCR, to recall the first minute and elected not to do so.

(d)The  first  minute  was  produced  after  a  meeting   between Associate Judge Andrew and counsel in Chambers.

Discussion

[8]    Although the plaintiffs submit that the defendants incorrectly relied on r 11.9 when initially making their application to recall the second minute, they have now made application to rescind the orders made in the second minute under r 7.49. The plaintiffs acknowledge that r 7.49 is an appropriate pathway to challenge the orders. The defendants’ initial reliance on r 11.9  is not  material  to their application under   r 7.49.

[9]    Nor is it material that the defendants “elected” not to make an application pursuant to r 7.49 when they had sufficient opportunity to do so.

[10]   The crucial question is whether the term “on the papers” sufficiently informs counsel that any application and opposition filed substitutes the requirement for timetabling of submissions and of any oral hearing. The plaintiffs submit that counsel well understood that any application and/or opposition should sufficiently detail the parties’ arguments.

[11]   The High Court Rules do not expressly specify when a hearing will be required for an interlocutory application. McGechan on Procedure states that there are only two circumstances in which the Court should dispense with a hearing:1

There need not be a hearing of an interlocutory application if every respondent has advised in writing that the application is consented to or is not opposed. In addition, even if the orders are opposed, it would be appropriate to dispense with a hearing if the parties consented. In every other case, a hearing will ordinarily be required for an opposed interlocutory application under pt 7.

[12]   The plaintiffs point out, however, that McGechan recognises the lack of clarity in the rules relating to when a hearing is required. They refer to Party Bus Company Limited v Attorney-General,2 in which Miller J accepted he had erred in not having a hearing but stated that on occasion the objective of the rules could be met by a decision on the papers, in particular, when the Judge was already familiar with the file and the application was of a narrow compass.

1      McGechan on Procedure (online ed, Thomson Reuters) at [HR7.34.04].

2      The Party Bus Company Limited v Attorney-General [2012] NZHC 445.

[13]   While Associate Judge Andrew had heard and determined a summary judgment application for the recovery of land, the joinder of three plaintiffs and one defendant greatly widened the issues in the proceeding to include the formation and collapse of a joint venture, an investment by the defendant into the proposed second plaintiff, the provision of a motor car for use by the defendants, the non-payment for stock and the damage caused to and rental outstanding on two retail outlets. The four plaintiffs now claim a total sum exceeding $1 million from the defendants. The application to join three plaintiffs and one defendant was therefore not of narrow compass.

[14]   The plaintiffs further submit, with respect to the authors of McGechan, that there are not only two circumstances in which the Court should dispense with a hearing. The Court may also dispense with a hearing where there is no expectation of a hearing. The plaintiffs submit such an expectation was established from the first minute. Whatever the expectation of the parties, there was no consent recorded to a hearing on the papers. It appears consent was not sought.

[15]   Under r 7.49 a party affected by an interlocutory order or decision may apply to the Court to vary or rescind the order or decision if the party considers that the order or decision is wrong.

[16]   McGechan on Procedure states that r 7.49 will generally be engaged in the following circumstances:3

(a)Where there was not full argument at the initial hearing;

(b)If some relevant point of evidence was overlooked;

(c)If there has been a material change in circumstances; or

(d)Some other special circumstances have arisen.

3      McGechan on Procedure, above n 1, at [HR7.49.01].

[17]   The factors relevant to the Court’s discretion to rescind or vary an order under r 7.49 are:4

(a)Whether the order was made in Court or in Chambers;

(b)The amount involved.

(c)Whether there were significant legal or jurisdictional issues.

(d)The nature of the hearing that resulted in the order sought to be varied or rescinded.

(e)In particular:

(i)Whether the issues were fully argued.

(ii)Whether further evidence or other matters are placed before the Court that justify a reconsideration of the order.

[18]   The threshold for recission is lower than that for recall. If the issues were not subject to full argument before the order was made, all that the application must show is that the matter could benefit from further and more extensive argument and consideration of the issues in dispute.5

[19]   I am of the view that the issues were not fully argued because the order was made on the papers without the benefit of a hearing or submissions from the defendants. The reasons given by Associate Judge Andrew are brief and make no reference to the defendants’ notice of opposition and affidavit in opposition.

[20]   This is not a case where the plaintiffs’ application for joinder was sure to succeed or that the defendants’ opposition was utterly without merit and completely misconceived. Joinder is not granted as of right. There are significant legal and factual hurdles which a plaintiff seeking joinder must overcome. Here, I agree with the

4      At [HR 7.49.04](3).

5      Strathmore Group Ltd v Fraser (1990) 3 PRNZ 665 at 668.

defendants that at a minimum where the plaintiff seeks to join additional plaintiffs, the plaintiff must establish that each plaintiff has a claim to relief arising out of the same transaction, matter, event, instrument, document, a series of documents, enactment, or by-law and that there is a common question of law or fact which would arise if the plaintiff brought a separate proceeding.6

[21]   Where a plaintiff seeks to join new defendants, the plaintiff must establish that it has a right to relief against each defendant arising out of the same transaction, matter, event, instrument, document, series of documents, enactment, or by-law. Even if these matters are established, the Court may deny the application if joinder may prejudice or delay the hearing of the proceeding.

[22]   There is merit in the defendants’ submission that the plaintiffs’ application and supporting affidavit do not disclose clear grounds for joinder. The parties sought to be joined are companies which do not claim any right or relief in respect of, or arising out of, the transaction underlying the substantive proceedings (the oral agreement to sell the plaintiffs’ property to the defendants). There is no common question of law or fact that would arise if the new parties were to bring their claims by way of separate proceedings.

[23]   I therefore conclude that the defendants’ application today should be granted. The joinder order was made without hearing and the matter could clearly benefit from further and more extensive argument in consideration of the issues.

[24]   The applications for extension and rescission are granted. The following timetable orders are now made to advance the plaintiffs’ application for joinder to a hearing:

(a)The plaintiffs’ submissions and authorities in support of the application for joinder are to be filed and served 10 working days after today’s date.

6      McGechan on Procedure, above n 1, at [HR4.2.02].

(b)The defendants’ submissions and authorities in opposition to joinder are to be filed and served 10 working days after the plaintiffs’ submissions.

(c)The application for joinder is to be determined on the papers – only with express consent of both parties. The defendants expressly consent. The plaintiffs are to indicate whether they consent with 10 working days. If they do not consent, the application is to be set down for a one hour hearing at the earliest available time.

Woolford J