Zheng v Deng

[2020] NZHC 2387

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002730

[2020] NZHC 2387

BETWEEN

LU ZHENG

First Plaintiff

ORIENT CONSTRUCTION LIMITED
Second Plaintiff

AND

DONGLIN DENG

First Defendant

BIN JIANG
Second Defendant

ORIENT HOMES LIMITED

Third Defendant

.../intituling cont over

Hearing:	On the papers
Judgment:	14 September 2020

JUDGMENT OF DOWNS J

This judgment was delivered by me on Monday, 14 September 2020 at 3 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

D Zhang, Auckland.

McVeagh Fleming, Auckland.

ZHENG v DENG [2020] NZHC 2387 [14 September 2020]

EVERSOLID CONSTRUCTION LIMITED

Fourth Defendant

HONGLAN LIU
Fifth Defendant

D & R HOMES LIMITED
Sixth Defendant

YAN JIN

Seventh Defendant

TONG ZHU
Eighth Defendant

YAOKUN CHEN
Ninth Defendant

The issues and arguments

[1]        Mr Zheng sued Mr Deng and eight other defendants. I found against Mr Zheng.1 I later ordered he pay Mr Deng costs of $258,137.41; which includes disbursements of

$122,385.41.2     Mr Zheng has appealed both decisions to the Court of Appeal.    The

appeals are to be heard 3 November 2020. Mr Zheng seeks a stay of the costs decision until the Court of Appeal has decided both appeals.

[2]        Mr Zheng contends if he pays Mr Deng costs his appeals may be compromised, because even if successful, he would  unlikely  recover  any  money  from  Mr  Deng. Mr Zheng says Mr Deng has no significant assets and Mr Deng “keeps a low asset profile in order to avoid creditors’ claims”.3 Mr Zheng also says the appeals are “genuinely arguable” and involve an important question of law under s 4(2) of the Partnership Act 1908.4 Mr Deng says Mr Zheng’s concerns about payment are speculative and there is no reason he should not be paid costs, as ordered, after Mr Zheng’s claim was roundly rejected.

Principle

[3]Rule 20.10 of the High Court Rules governs the application. It reads:

20.10 Stay of proceedings

(1)   An appeal does not operate as a stay—

(a)of the proceedings appealed against; or

(b)of enforcement of any judgment or order appealed against.

(2)   Despite subclause (1), the decision-maker or the court may, on application, do any 1 or more of the following pending determination of an appeal:

(a)order a stay of proceedings in relation to the decision appealed against:

(b)order a stay of enforcement of any judgment or order appealed against:

(c)grant any interim relief.

(3)   An order made or relief granted under subclause (2) may—

1      Zheng v Deng [2019] NZHC 3236.

2      Zheng v Deng [2020] NZHC 959.

3      Mr Zheng’s written submission of 31 August 2020 at para 22.

4      At para 30.

(a)relate to enforcement of the whole of a judgment or order or to a particular form of enforcement:

(b)be subject to any conditions for the giving of security the decision- maker or the court thinks just.

[4]        A party seeking a stay pending appeal must persuade the Court their appeal would be fruitless in the absence of a stay, for, a successful litigant is entitled to the benefits of his, her, or its forensic success.5 In this context, Courts keep a broad eye on the interests of the justice, typically with reference to a host of considerations including the apparent strength of the appeal, and the overall, balance of convenience.6

Analysis

[5]With a caveat to which I return, I am not persuaded a stay is appropriate.

[6]        First, Mr Zheng has not established his appeal would be compromised without a stay. Mr Zheng says Mr Deng has no assets.7 However, Mr Deng says he is the sole director and shareholder of Eternity Construction  Ltd,  and  it  owns  two  properties. Mr Deng also says he and his wife are trustees and beneficiaries of a trust that owns the family home.   Mr Zheng offers no reason to reject Mr Deng’s reply.   His assertion    Mr Deng keeps a low asset profile to avoid creditors’ claims is just that—assertion. Moreover, the argument the appeal would be compromised overlooks the inconvenient point Mr Zheng sued Mr Deng for a lot of money, presumably believing Mr Deng could pay.

[7]        Second, while the merits of the appeal are for the Court of Appeal, not me; several matters arise. Mr Zheng’s primary claim was that he and Mr Deng had a fiduciary relationship in the form of a partnership. However, Mr Zheng adduced little, if any, evidence of mutual loyalty, reliance, or trust. Mr Zheng’s claims also relied heavily on his testimony, which I rejected. I gave reasons for doing so. Credibility determinations typically attract appellate deference. The Partnership Act issue appears arguable but was not terribly important to the case.

5      Philip Morris (New Zealand) Ltd v Liggett & Myers Tobacco Co (New Zealand) Ltd

[1977] 2 NZLR 41 (CA).

6      Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd  [1999] 3 NZLR 239, (1999) 13 PRNZ 48 (HC).

7      Mr Zheng says he has searched the Companies Register and LINZ Register.

[8]        Third, Mr Deng was successful, and the claim would have been expensive to defend. The statement of claim contained eight poorly pleaded causes of action. Related events were over many years. The appeal is on the horizon, a point rightly advanced by Mr Zheng. However, the Court of Appeal’s decision may not be available until early next year. It is a very busy, intermediate appellate Court. Moreover, I ordered Mr Zheng pay Mr Deng’s costs in May 2020.

[9]        Fourth, taken together, the overall balance of convenience favours Mr Deng, not Mr Zheng.

[10]      The foreshadowed caveat is this. My costs decision includes $122,385.41 for disbursements, of which $100,906.52 relates to Mr Deng’s forensic accountant. I considered the disbursement reasonable given Mr Zheng’s heavy trial emphasis on a set of internal accounts; his related calling of a forensic accountant; and some late evidence from that expert, to which Mr Deng’s expert responded. Reasonable minds could disagree about the reasonableness of the disbursement and Mr Deng acknowledged this amount could be held on trust, albeit as an alternative submission.

Result

[11]      Mr Zheng must still pay Mr Deng’s costs, but $100,906.52 is to remain in the trust account of Mr Deng’s instructing  solicitors  until  further  order  of  the  Court  or  Court of Appeal.8 The application for a stay is otherwise dismissed.

……………………………..

Downs J

8      Mr Zheng says the trust account should be maintained by “neutral” hands. There is no reason to believe Mr Deng’s instructing solicitors will not comply with their obligations.