Zhang v Westpac New Zealand Limited
[2020] NZCA 138
•4 May 2020 at 10.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA521/2019 [2020] NZCA 138 |
| BETWEEN | YINGQIU ZHANG |
| AND | WESTPAC NEW ZEALAND LIMITED |
| Counsel: | Appellant in person |
Judgment: | 4 May 2020 at 10.30 am |
JUDGMENT OF BROWN J
(Review of Deputy Registrar’s decision)
The application to review the Deputy Registrar’s decision declining to dispense with security for costs is declined. Security for costs of $7,060 is payable by 1 June 2020.
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REASONS
Introduction
Ms Zhang defaulted under mortgages securing loans to the respondent, Westpac New Zealand Limited (Westpac). There was a shortfall after the mortgagee sales. Westpac obtained summary judgment against Ms Zhang for the shortfall and issued bankruptcy proceedings against her. Ms Zhang applied to set aside the summary judgment and the bankruptcy notice and opposed the bankruptcy proceedings.
In a judgment delivered on 25 September 2019 Associate Judge Paulsen declined Ms Zhang’s applications and adjudicated her bankrupt.[1] On 9 October 2019 Ms Zhang filed an appeal against that judgment. By a letter dated 11 October 2019 Ms Zhang was advised by the Registry that security for costs had been set at $7,060 and this was required to be satisfied by 7 November 2019.
[1]Zhang v Westpac New Zealand Ltd [2019] NZHC 2422.
Ms Zhang made application for dispensation from the requirement to pay security for costs. In a decision dated 13 December 2019 the Deputy Registrar declined the application for dispensation. Ms Zhang now seeks a review of that decision.
In a subsequent judgment of 1 November 2019 the Associate Judge dismissed Ms Zhang’s application for leave to appeal in relation to the summary judgment decision and her application for suspension of the order for adjudication.[2] An application to this Court for a stay of execution of the order for adjudication was declined on 20 December 2019.[3]
Relevant principles
[2]Zhang v Westpac New Zealand Ltd [2019] NZHC 2797 (second judgment).
[3]Zhang v Westpac New Zealand Ltd [2019] NZCA 682.
The principles applicable to dispensation from security for costs were reviewed by the Supreme Court in Reekie v Attorney-General.[4] The Court stated that the Registrar should dispense with security if of the view that it is right to require the respondent to defend the judgment under challenge without the usual protection as to costs provided by security.[5] The Court explained:
[35] … we consider that the discretion to dispense with security should be exercised so as to:
(a)preserve access to the Court of Appeal by an impecunious appellant in the case of an appeal which a solvent appellant would reasonably wish to prosecute; and
(b)prevent the use of impecuniosity to secure the advantage of being able to prosecute an appeal which would not be sensibly pursued by a solvent litigant.
A reasonable and solvent litigant would not proceed with an appeal which is hopeless. Nor would a reasonable and solvent litigant proceed with an appeal where the benefits (economic or otherwise) to be obtained are outweighed by the costs (economic and otherwise) of the exercise (including the potential liability to contribute to the respondent’s costs if unsuccessful). As should be apparent from what we have just said, analysis of costs and benefits should not be confined to those which can be measured in money.
[4]Reekie v Attorney-General [2014] NZSC 63, [2014] 1 NZLR 737.
[5]At [31].
The Court also ruled that the review function of the judge in relation to security for costs is to be exercised de novo.[6]
The Deputy Registrar’s decision
[6]At [23].
The Deputy Registrar recorded that Ms Zhang’s application for dispensation was not advanced on the basis of her impecuniosity but rather on three grounds:
(a)the appeal would provide a significant benefit to Ms Zhang, namely enabling her to pursue a claim against a Mr Chenjiang Wu in China;
(b)the appeal has merit on account of the extraordinary circumstance relating to this matter, namely that Chinese law prevents the Official Assignee from enforcing any judgment against Mr Wu in China; and
(c)the appeal involves a matter of public interest because it would educate the public about the difficulty of enforcing judgments in China.
Having correctly cited the relevant principles from Reekie, the Deputy Registrar noted that, unlike most applications to dispense with security for costs, Ms Zhang did not raise impecuniosity as a ground. While acknowledging that Ms Zhang is bankrupt with the consequence that her access to funds will be restricted, the Deputy Registrar recorded that no information had been supplied or offered concerning her financial circumstances or sources of funding. She drew attention to the observation of the Associate Judge in the second judgment of 1 November 2019 that “Mrs Zhang claims that she is impecunious but has never provided any evidence of her finances”.[7]
[7]Second judgment, above n 2, at [24].
So far as the merits of the appeal are concerned, the Associate Judge considered that they simply involve an attempt to relitigate matters already determined in both the decision under appeal and the subsequent decision declining to suspend adjudication. In that regard the Deputy Registrar drew attention to the observation of the Associate Judge in the latter judgment that “Mrs Zhang has not raised any matters that suggest she has any real prospect of success on her appeal from the adjudication order”.[8] The Deputy Registrar considered there was no evidence that a claim against Mr Wu would be heard soon or had a reasonable prospect of success.
[8]At [21].
The Deputy Registrar concluded:
[23] Ms Zhang does not claim impecuniosity as a ground of this application, and it is rare for security to be dispensed with when an appellant has not established their inability to fund it. Further, even if Ms Zhang had shown she was impecunious, I consider security for costs would still be appropriate because the appeal is weak, involves no substantive issue of public interest, and is not one that it seems a reasonable and solvent litigant would pursue.
The application for review
Ms Zhang filed two documents in support of her application for review of the Deputy Registrar’s decision:
(a) on 3 February 2020 a memorandum of review; and
(b) on 24 February 2020 a memorandum in reply to Westpac’s submissions of 12 February 2020.
Her grounds for review are materially different in a number of respects from the grounds considered by the Deputy Registrar. In particular Ms Zhang now contends:
(a)that she is impecunious;
(b)that her appeal has merit both on grounds previously advanced and also on some additional grounds; and
(c)there is a public interest in her appeal because Westpac has allegedly been involved in criminal money laundering.
Discussion
Impecuniosity
Whereas in her initial application considered by the Deputy Registrar Ms Zhang did not provide any information regarding her financial position,[9] in her memorandum of 3 February she states that Westpac had been provided with a statement of financial position in early 2019 and was aware that she was in financial hardship. Westpac’s memorandum in opposition confirms that Ms Zhang had provided a statement of financial position in the context of previous without prejudice discussions but makes the point that the information was both limited and now outdated.
[9]See [8] above.
Ms Zhang also refers to various medical issues which she and her partner have suffered and asserts that she and her parents had suffered financial hardship as a result of the alleged underselling of the mortgaged properties by Westpac.
However the additional information, such as it is, does not establish that Ms Zhang is unable to pay security for costs.
Merits of the appeal
In her memorandum of 3 February Ms Zhang states that “[b]esides all the grounds raised previously” she advances a number of new grounds. First she appears to contend that an allegedly incorrect rezoning of her property under the Auckland Unitary Plan which likely affected its value ought to have been challenged by Westpac. On this issue I accept Westpac’s rejoinder that a mortgagee has no duty to ensure land is appropriately zoned, even assuming the fact of an error by the Council.
Ms Zhang also indicates that she wishes to raise issues concerning breaches of anti-money laundering regulations by Westpac’s Australian parent company and suggests that funds advanced to her by Westpac may have been sourced from criminal activity. Although in her reply memorandum Ms Zhang quotes from a number of press reports concerning the Reserve Bank of New Zealand’s interest in a failure of compliance in Australia with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), there is no evidence to support the contention that the funds advanced by Westpac to Ms Zhang were generated from criminal activity.
So far as Ms Zhang’s claim against Mr Wu is concerned I accept Westpac’s submission that, even if relevant to the issue of security, the proceeding would be unlikely to succeed. In dismissing Ms Zhang’s application to suspend her bankruptcy adjudication, Associate Judge Paulsen observed that there was no evidence that her claim had any reasonable prospect of success.[10]
[10]Second judgment, above n 2, at [12].
Furthermore the claim against Mr Wu was subsequently disclaimed by the Official Assignee as onerous property.[11] As this Court observed in its December 2019 judgment:[12]
The affidavit filed in support of her application does no more than make uncorroborated assertions as to her capacity to enforce a judgment in the third proceeding against a particular third party in China, and her belief that the Official Assignee could not do so. No expert evidence is provided to support that view. And the ability of the Official Assignee to enforce a judgment in the third proceeding in China is not a material factor, in the circumstances where the Official Assignee has disclaimed the rights asserted in that proceeding.
Public interest
[11]Zhang v Wu HC Auckland CIV-2019-404-1327, 22 November 2019 (Minute of Associate Judge Sargisson).
[12]Zhang v Westpac New Zealand Ltd, above n 3, at [11].
In her submissions on public interest in her initial memorandum Ms Zhang stated:
Since Westpac may use the funding that generated from the criminal activity‑money laundering to lend [the] appellant the funding as mortgagee, there will be more borrowers of Westpac in the public interested to know the actual situation of the outcome of this matter and the impact of the property market after such huge bank using suspected criminal related funding on the property market.
I accept Westpac’s submission there is no public interest in the issues raised by Ms Zhang relevant to her application to dispense with security for costs on her appeal. I further note the point that the allegation made does not relate to the respondent in any event.
Conclusion
In my view Ms Zhang’s intended appeal against the order adjudicating her bankrupt is not one which a reasonable and solvent litigant would pursue. I agree with the decision of the Deputy Registrar that it would not be right to require Westpac to defend the judgment under appeal without the normal security for costs. Consequently Ms Zhang has failed to demonstrate that the present case is one which falls within the category where security for costs should properly be dispensed with.
Result
The application to review the Deputy Registrar’s decision declining to dispense with security for costs is declined. Security for costs of $7,060 is payable by 1 June 2020.
Solicitors:
Simpson Grierson, Auckland for Respondent
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