Zhou v Yue
[2019] NZHC 2167
•2 October 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-2808
[2019] NZHC 2167
BETWEEN WEN ZHOU
Plaintiff
AND
WEIHANG YUE
Defendant
Hearing: 9 August 2019 Appearances:
A Brown for the Plaintiff
D Zhang and E Tie for the Defendant
Judgment:
2 October 2019
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 2 October 2019 at 4.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
K3 Legal Ltd, Auckland Amicus Law, Auckland
ZHOU v YUE [2019] NZHC 2167 [2 October 2019]
[1] In this proceeding, the defendant (Tony) applies for an order dismissing or staying the claims made against him by the plaintiff (Mr Zhou). Tony says that the issues in the proceeding are already the subject of a proceeding (the Family Court proceeding) in the Family Court at Auckland under the Property (Relationships) Act 1976 (the PRA), and it was an abuse of process for Mr Zhou to commence this proceeding.
[2] The proceeding in this Court relates to a property in Blockhouse Bay Road, Auckland (the Blockhouse property), which was subdivided into three lots. One of the lots (Lot C) is held in the joint names of the parties. Mr Zhou contends that Tony holds his one half share of Lot C on trust for Mr Zhou, or that the terms of an oral contract require Tony to transfer his one half share to Mr Zhou. Tony disagrees. He says that he is the beneficial owner of the one half share in Lot C that is registered in his name, subject only to relationship property claims between him and his estranged wife Bonnie, that are still to be resolved in the Family Court proceeding.
[3] Bonnie is Mr Zhou's daughter. She and Tony were married, but their relationship, which began around September 2011, ended in or about January 2017. Bonnie commenced the Family Court proceeding in May 2017, seeking a division of the relationship property. The Family Court proceeding remains pending in the Family Court at Auckland.
[4] Mr Zhou filed the present proceeding in December 2018. In it, he seeks an order vesting Tony's share in Lot C in him. Tony filed a statement of defence in this proceeding on 1 March 2019.
[5] On 26 July 2019 Tony filed the application for orders dismissing or staying the proceeding. That application is opposed by Mr Zhou.
[6]I now give judgment on Tony's dismissal/stay application.
Background
[7] Tony and Bonnie initially lived in an apartment in Hobson Street, Auckland (the Hobson Street apartment). When that property became too small for their needs,
Tony, Bonnie, and Mr Zhou purchased the Blockhouse property. They subdivided the Blockhouse property, and built a new home on Lot C. Lots A and B were sold. When the new dwelling on Lot C was largely completed in mid-2015, Tony, Bonnie, Mr Zhou and his wife all began living in it.
[8] When Tony and Bonnie separated, Tony moved back to live in the Hobson Street apartment for a short period. He left for China in about June 2016.
The Family Court proceeding
[9] Bonnie and Tony have filed a number of affidavits in the Family Court proceeding, addressing, among other things, the ownership of Lot C. Mr Zhou was not a party to the Family Court proceeding, but in the course of an issues conference convened on 4 May 2018 Judge Burns made a direction under s 37 of the PRA that all interested persons, including Mr Zhou, were to be served. Mr Zhou was given 21 days in which to file any notice of response or take any steps in the Family Court proceeding.
[10] In Bonnie's narrative affidavit in the Family Court proceeding, she said that while she and Tony were originally the registered proprietors of Lot C they only held Lot C on trust for Mr Zhou (it was apparently thought that having the names of Tony and herself on the title would help Mr Zhou obtain finance for the project, although it is not clear why that would have been so). She said that it was Mr Zhou who repaid the loan and other costs of the development of the Blockhouse property. On that basis, Bonnie contended that Lot C was not relationship property available for division between herself and Tony.
[11] In his affidavit filed in the Family Court proceeding, Tony denied Bonnie's contentions relating to Lot C. He said that he was invited to be one of the purchasers of the Blockhouse property, and he understood that he (along with Bonnie) would be the true owners of Lot C.
[12] At the conference convened in the Family Court on 4 May 2018, Bonnie and Tony put their respective contentions relating to Lot C to the Court. Judge Burns considered that he did have jurisdiction to resolve the issue of the ownership of Lot C.
His Honour considered that the ultimate question was whether "[Lot C] was acquired during the course of the relationship and does it meet the criteria under s 8 [of the PRA] to be relationship property?"
[13] When the Family Court proceeding was served on him, Mr Zhou responded by filing his own affidavit in the Family Court. In it, he asserted that he is the true owner of Lot C. He set out details of his financial contributions and involvement in the purchasing and developing of the Blockhouse property. He also relied on an affidavit sworn in the Family Court proceeding on 18 January 2018 by his niece (Bonnie's cousin), Ms Rui Gao. Ms Gao's affidavit generally confirmed that Lot C belonged to Mr Zhou.
[14] The Family Court proceeding has continued, with further affidavits filed relating to the ownership status of Lot C. Bonnie also made requests of Tony for discovery. When the discovery issues could not be resolved between the parties, a formal application was filed in the Family Court in March 2019.
Judge Burns' Minute of 4 May 2018
[15] At the issues conference convened on 4 May 2018, counsel for Bonnie argued that the Family Court would not have jurisdiction to completely resolve issues pertaining to the assets as Mr Zhou is a third party whose interests in Lot C are not governed by the PRA.
[16]The judge dealt with that submission as follows:
… With the greatest of respect, I do not agree with that submission. The Family Court does have jurisdiction to deal with whether or not a third party has or does not have interest. The ancillary provisions of s 33 of the Act enables quite wide powers for the Court to make orders impacting on third parties provided that they are joined in and given the right to be heard and are properly considered. In that regard, I make a direction under s 37 of the PRA that all interested persons including Mr Zhou be served forthwith with the proceedings and they are to have 21 days in which to file any notice of response or take any steps in the proceedings. If no steps are taken then those persons served will be regarded as not having any interest in the two assets which are the subject of these proceedings, namely the proceeds of sale of the Hobson Street property and [Lot C].
[17] The judge recorded that there was a wish, apparently not shared by Tony, to transfer the Family Court proceeding to this Court. His Honour expressed some doubt that an order for transfer would be appropriate, and directed that any application should be made formally, with an affidavit setting out the basis for transfer and reference to relevant authorities.
Mr Zhou's statement of claim in this proceeding
[18] Mr Zhou says that by oral agreement made between 24 and 30 June 2013 with Bonnie and Tony it was agreed that Mr Zhou would buy the Blockhouse property. He would pay around 30 per cent of the purchase price, and the balance of 70 per cent would be funded by a mortgage from the ANZ Bank in the names of Tony and Bonnie. Although Tony and Bonnie would be the named mortgagors, the ANZ loan would be repayable by Mr Zhou. Tony and Bonnie would retain and occupy Lot C with Mr Zhou and his wife. The remaining two lots would be sold, and the proceeds used to discharge the ANZ mortgage. Mr Zhou would be responsible for all costs arising from the project.
[19] The property was duly purchased in the names of Tony and Bonnie, as tenants in common in equal shares.
[20]Mr Zhou says that the purchase of the Blockhouse property was funded with a
$660,000 loan from the ANZ Bank, taken out (as agreed) in the names of Bonnie and Tony. The balance of approximately $266,000 was paid by Mr Zhou. Mr Zhou says that he also made payments on the ANZ mortgage during the development, either from his own funds or using funds provided by Tony that were later repaid to Tony from the sale proceeds of Lots A and B.
[21] Mr Zhou says that he oversaw and managed the project. He attached to his statement of claim details of costs associated with the project that he says were paid by him.
[22] Lots A and B in the subdivision were duly sold, yielding a net $1,037,312.97. Mr Zhou says that after payment of some costs, a balance of $987,872.10 was paid into the joint account of Tony and Bonnie. From there, the ANZ loan was repaid,
$10,000 was paid to settle final development and construction costs for the project, and the contributions Tony had made to the development were refunded. The small remaining balance was used to pay rates on a property formerly owned by Mr Zhou in Otorohonga.
[23] Following Bonnie and Tony's separation, Mr Zhou asked them to transfer Lot C back to him. He also registered a caveat over the title to Lot C.
[24] Bonnie transferred her half share in Lot C to Mr Zhou on 7 April 2017, but Tony has refused to transfer his one half share of Lot C to Mr Zhou.
[25] Mr Zhou pleads three causes of action. First, he pleads a resulting trust. He says that the property was purchased with his funds, and that all monetary contributions by Tony were loans that have been repaid. Alternatively, Mr Zhou alleges that he is the beneficiary of a constructive trust arising from his contributions to the Blockhouse property and an alleged common intention that the Blockhouse property was to be his property (subject to him being ultimately responsible for all costs arising on the project). Mr Zhou says that he sold his own assets to fund the purchase of the Blockhouse property, oversaw and managed the project for two years, and sold further assets to fund the project. He contends that it would be unconscionable to permit Tony to resile from his obligation to transfer his one half share in Lot C to Mr Zhou.
[26] Mr Zhou contends that the Family Court has no jurisdiction to make an order transferring to him the half share in Lot C that remains registered in Tony's name, as Mr Zhou was not a party to the relationship between Bonnie and Tony.
[27] Mr Zhou's last cause of action alleges breach of contract by Tony in failing to adhere to the alleged oral agreement.
Tony's defence
[28] Tony says that, for reasons not known to him, the acquisition and development of the property was originally planned to be a joint venture between Bonnie and a third
party. When the third party backed out of the joint venture, Tony was invited to purchase the property jointly with Bonnie.
[29] Tony says that the intention was that he and Bonnie were to have beneficial ownership of the property, and that the funds provided by the plaintiff to Bonnie and himself were gifts. He denies that Mr Zhou agreed to be responsible for all costs arising from the project, and says that while the understanding was that Mr Zhou would help Bonnie and himself with the project financially, they were to be responsible for meeting the project costs.
[30] Tony said that repayments on the ANZ loan were mostly met by him from his own funds. Repayments made by Mr Zhou were intended as part of the gift from Mr Zhou to Bonnie and Tony.
[31] Tony denies that he was reimbursed for payments made by him from the proceeds of the sales of Lots A and B.
[32] Tony acknowledges that Mr Zhou helped arrange for some of the works to be carried out on the project, but he says it was mainly he who was responsible for overseeing and managing the project. He obtained additional funding from Westpac Bank, secured over the Hobson Street apartment, and he also borrowed a further sum of approximately $134,000 from his parents. Overall, Tony says that his total contributions to the project exceeded $1 million.
[33] Tony acknowledges the registration of the caveat on the title to Lot C, but contends that Mr Zhou has no interest in Lot C. He says that the reason that he has not agreed to transfer his one half share in Lot C to Mr Zhou is that he is the legal and beneficial owner of that one half share. Mr Zhou has no interest in it.
[34] Tony says that Lot C is relationship property, and is subject to the exclusive jurisdiction of the Family Court. He denies the existence of the resulting or constructive trusts pleaded by Mr Zhou, and he denies the alleged oral agreement.
[35] Tony pleads affirmatively that the Family Court is now seized of the issue of ownership of Lot C, and that Mr Zhou has been added as a party to the Family Court proceeding.
Relevant provisions of the PRA
Sections 4, 19, 22, 23, 25, 33, and 37 of the PRA materially provide:
4 Act a code
(1)This Act applies instead of the rules and presumptions of the common law and of equity to the extent that they apply—
(a)to transactions between spouses or partners in respect of property; and
(b)in cases for which this Act provides, to transactions—
(i)between both spouses or partners and third persons; and
between either spouse or partner and third persons.
(2)Subsection (1) does not apply where this Act expressly provides to the contrary (such as in subsection (5)).
(3)Without limiting the generality of subsection (1),—
(a)the presumption of advancement does not apply between husband and wife:
(b)the presumption of resulting trust does not apply between spouses, civil union partners, or de facto partners:
(c)the presumption that the use of a wife’s income by her husband with her consent during the marriage is a gift does not apply between husband and wife.
(4)Where, in proceedings that are not proceedings under this Act, any question relating to relationship property arises between spouses or partners, or between either or both of them and any other person, the question must be decided as if it had been raised in proceedings under this Act.
…
19 Effect of Act while property is undivided
Except as otherwise expressly provided in this Act, nothing in the Act shall—
(a)affect the title of any third person to any property, or affect the power of either spouse or partner to acquire, deal with, or dispose of any property or to enter into any contract or other legal transaction whatsoever as if this Act had not been passed; or
(b)limit or affect the operation of any mortgage, charge, or other security for the repayment of a debt given by either spouse or partner over property owned by him or her and every such instrument shall have the same effect as if this Act had not been passed.
22Jurisdiction
(1)Every application under this Act must be heard and determined in the Family Court.
(2)This section is subject to any other provision of this Act that confers jurisdiction on any other court.
23Who can apply
(1)The following persons may apply for an order under section 25(1)(a) or (b) or an order or declaration under section 25(3):
(a)either spouse or partner, or both of them jointly:
(b)any person on whom the spouses or partners have made conflicting claims in respect of property.
…
25 When court may make orders
(1)On an application under section 23, the court may—
(a)make any order it considers just—
(i)determining the respective shares of each spouse or partner in the relationship property or any part of that property; or
(ii)dividing the relationship property or any part of that property between the spouses or partners:
(b)make any other order that it is empowered to make by any provision of this Act.
(2)The court may not make an order under subsection (1) unless it is satisfied,—
(a)in the case of a marriage or civil union,—
(i)that the spouses or civil union partners are living apart (whether or not they have continued to live in the same residence) or are separated; or
(ii)that the marriage or civil union has been dissolved; or
(b)in the case of a de facto relationship, that the de facto partners no longer have a de facto relationship with each other; or
(c)that one spouse or partner is endangering the relationship property or seriously diminishing its value, by gross mismanagement or by wilful or reckless dissipation of property or earnings; or
(d)that either spouse or partner is an undischarged bankrupt.
(3)Regardless of subsection (2), the court may at any time make any order or declaration relating to the status, ownership, vesting, or possession of any specific property as it considers just.
(4)To avoid any doubt, but without limiting subsection (3), if proceedings under this Act are pending, the court, if it considers it appropriate in the circumstances, may make an interim order under that subsection for the sale of any relationship property, and may give any directions it thinks fit with respect to the proceeds.
(5)This section is subject to the other provisions of this Act.
(6)In proceedings commenced after the death of one of the spouses or partners, this section is modified by section 91.
33 Ancillary powers of court
(1)The court may make all such other orders and give such directions as may be necessary or expedient to give effect, or better effect, to any order made under any of the provisions of sections 25 to 32.
(2)The court may, at any time it thinks fit, extend, vary, cancel, or discharge any order made under any of the provisions of sections 26 to 32, and may vary any terms or conditions upon or subject to which any such order has been made.
(3)In particular, but without limiting the generality of subsections (1) and (2), the court may make any 1 or more of the following orders:
…
(c)an order vesting the relationship property, or any part of the relationship property, in either spouse or partner:
…
(e)an order for the partition or vesting of any property:
(f)in the case of property owned by one spouse or partner, an order vesting the property in both spouses or partners jointly or in common in shares that the court considers just:
…
(j)an order for the transfer of land, or of any interest in land, including a lease, licence, or tenancy:
…
(m)an order varying the terms of any trust or settlement, other than a trust under a will or other testamentary disposition:
…
(6) Any order under this Act may, subject to the provisions of this Act, be made upon such terms and subject to such conditions (if any) as the court thinks fit.
…
37 Persons entitled to be heard
(1)Before any order is made under this Act, such notice as the court directs shall be given to any person having an interest in the property which would be affected by the order, and any such person shall be entitled to appear and to be heard in the matter as a party to the application.
…
The issues to be determined
[37]The following issues fall for determination:
(1)Does the Family Court have jurisdiction to make the vesting or transfer orders Mr Zhou is seeking in this proceeding?
(2)Was the commencement of this proceeding by Mr Zhou an abuse of process?
(3)If the commencement of this proceeding was an abuse of process, should it be stayed, or struck out?
[38]I will address each of those issues in turn.
Issue (1) — Does the Family Court have jurisdiction to make the vesting or transfer orders Mr Zhou is seeking in this proceeding?
Submissions for Tony
[39] Mr Zhang submitted that the Family Court does have jurisdiction to decide the question of ownership of Lot C. He relied on the judgment of Associate Judge Bell in Yeoman v Public Trust in support of the proposition that the Family Court may decide the extent of any interest a third party may have in the property which is in dispute between the relationship partners.1 In Yeoman, a widow sought certain orders in this Court declaring that certain assets in a family trust did not form part of the relationship property, notwithstanding that she had commenced an earlier proceeding in the Family Court in which the same issue was raised. Associate Judge Bell found that, while the High Court did have jurisdiction to make the declaratory orders sought, the fact that the widow had already put the same subject matter (the true ownership of family trust assets) into issue in the Family Court proceeding meant that the proceeding in this Court was a duplicate proceeding.
[40] Mr Zhang also referred in support to the judgments of Judge Robinson in the Family Court in O v O 2 and K v K.3
Submissions for Mr Zhou
[41] Ms Brown submitted that the Family Court would have no jurisdiction to order Tony to transfer his half share in Lot C to Mr Zhou. Section 25 of the PRA, which sets out the orders a court hearing a proceeding under the PRA may make, does not make provision for any such order. Section 25(3) of the PRA, which makes provision for a court hearing a PRA proceeding to make "any order or declaration relating to the status, ownership, vesting, or possession of any specific property as it considers just", is merely ancillary to the primary jurisdiction conferred by s 25(1); it would not permit the Family Court to order Tony to transfer the half share of Lot C to Mr Zhou.4 Section 25 of the PRA is not designed to empower the Family Court to make orders
1 Yeoman v Public Trust HC Tauranga CIV-2009-470-000587, 8 June 2011.
2 O v O [1990] NZFLR 509.
3 K v K (1995) 13 NZFLR 155.
4 Referring to ANZ Bank Group (NZ) Ltd v Wrightson (1992) 9 FRNZ 1, and Jew v Jew [2003] 1 NZLR 708.
vesting third party property. The only court in which Mr Zhou could have sought the relief he now seeks, is this Court.
[42] Ms Brown submitted that Yeoman is distinguishable, as the assets in that case were already in the relevant family trust. There was no reason in that case to question the Family Court's ability to determine in the course of its "inventory-taking" function whether the assets in the trust were relationship property. In this case, it would only be if Tony had sought a declaration that Lot C was his that the matter would be comparable with Yeoman.
Discussion and conclusions on Issue (1)
[43]In my view, the Family Court does have the necessary jurisdiction.
[44] In Yeoman v Public Trust Associate Judge Bell considered that, where an asset is legally owned by one or both of the parties to the relationship, and a third party contends that he or she has an interest in that asset, the Family Court can decide the extent of the third party's interest as part of the inventory stage of its enquiries.5 His Honour referred to the judgment of Judge Robinson in K v K, where the Family Court valued the occupancy rights of the husband's mother and aunt to find the value of the parties' interest in the family home.6 And in O v O Judge Robinson made an order determining that the parties' adult son, who had claimed an interest in the family home and had been directed to be served under s 37 of the PRA, held no interest in the home. The Court in O v O considered that a finding that it had no jurisdiction to determine the son's claim would result in the situation where the court hearing an application under the PRA would be unable to determine the claim of a third party to an interest under a resulting or constructive trust, yet the court hearing the application by the third party to the same matrimonial property in separate proceedings would have to determine the claim as if the question had been raised in proceedings under the PRA. Judge Robinson took the view that he had jurisdiction under s 25(3) of the PRA, together with the provisions of s 33 and s 4(4) of the PRA, to declare the son's interest in the property.
5 Yeoman v Public Trust, above n 1, at [43].
6 K v K, above n 3.
[45] It seems to me that the facts in Yeoman and O v O are not materially different on the jurisdiction issue from those in the present case. The critical point is that legal ownership of Lot C is held by one of the parties, Tony, and at this stage Mr Zhou is simply a claimant to an interest in Lot C. Similarly, legal ownership of the home in O v O was held by the parties to the proceeding under the PRA, and the son was merely a claimant. And in Yeoman the claimant widow was one of the trustees of the trust which owned the property in issue.
[46]Associate Judge Bell concluded in Yeoman:7
… In cases where the trustees are not the relationship partners and the trustees do not accept that a relationship partner has a relevant beneficial interest in an trust asset, the Family Court cannot make determinations at inventory stage that will bind the trustees. Proceedings in another court are required. However where the legal owner of an asset said to be subject to a trust is one of the relationship partners, there can be no jurisdictional objection to the Family Court deciding whether the asset is held on trust. In doing so, the Family Court is undertaking its normal function of identifying relationship property for applications under s 25(1) and (3) of the PRA. It is exercising powers inherent in its jurisdiction to decide applications under [the PRA].
(Emphasis added.)
[47] In my view, the decision of the Court of Appeal in Johanson v Johanson also supports the view that the Family Court has jurisdiction in this case.8 Johanson was concerned with whether s 37 of the PRA provided an appropriate mechanism for joining third party owners of property against which claims had been made by parties to proceedings under the PRA, in a way that the third party owners would be bound by the decision in the PRA proceeding. Richardson J considered that s 37 does not allow the introduction of a third party owner simply on the basis that one or both of the spouses has/have an unresolved claim against that owner. Section 37 fairly covers cases where a third party has an interest over property of the spouses or has a joint interest along with them, but it does not extend to the converse case where it is the third party who owns the property and the spouses are simply in the position of claimants. It would be prejudging a claim by one or both of the spouses against a third party owner to conclude for the purposes of s 37 that the interest of the third party owner "would be affected" by an order under the PRA. Unless and until a constructive
7 Yeoman v Public Trust, above n 1, at [44].
8 Johanson v Johanson (1993) 10 FRNZ 578.
trust or other equitable interest was acknowledged or declared, it could not be said that the third party's land would be affected by an order under the PRA. In those circumstances, an application to issue a notice under s 37 was premature.9
[48] Richardson J also noted that the ancillary powers of the Court set out in s 33 of the PRA, which include (at subs (3)) making "(e) an order for the partition or vesting of any property", may well extend to partition not only of matrimonial property and separate property of the spouses but also partition of property jointly owned by one or both of the spouses and a third party.10 His Honour's judgment thus expressly contemplated an ancillary order being made under s 33 that would bind a third party.
[49] Concurring judgments in Johanson were given by Casey J and Robertson J. Casey J noted that s 37 applies only to those cases in which there is existing property belonging to either or both spouses in respect of which orders may be made affecting the interests of third parties therein.
[50] I refer also to the judgment of Duffy J in Hau v Hau.11 Her Honour expressly held that orders may be made against third parties under s 33 of the PRA. Her Honour said:12
[41] While the PRA stipulates who can bring a proceeding it does not define those against whom a proceeding may be brought. Section 33(3)(e) of the PRA (and a number of other provisions) are wide enough to allow for orders to be obtained against third parties. Furthermore, s 37 of the PRA expressly provides for third parties to appear and be heard on applications under the PRA.
[42] The open-ended allowance for who may appear and be heard in proceedings under the PRA coupled with the ability under the PRA to obtain orders against third parties informs me that Parliament contemplated proceedings being brought against third parties who at the material times have or had a joint interest in property owned by one or both spouses.
[51] It will be noted that her Honour's view seems to accord with the preliminary view expressed by Judge Burns in his Minute following the May 2018 issues
9 At 580 to 581.
10 At 581.
11 Hau v Hau [2018] NZHC 881.
12 At [41] – [42].
conference, where the Judge appears to have regarded s 33 of the PRA as wide enough to permit all of Mr Zhou's claims to be resolved in the Family Court.
[52] I do not think anything in the judgment of Jew v Jew 13 affects the view that the Family Court has the necessary jurisdiction to make an order vesting Lot C in Mr Zhou if he makes out his claim in that Court. In Jew v Jew, Paterson J took the view that it was "inconceivable" that in enacting s 25(3) the legislature intended to give any court an equity jurisdiction to make status, ownership, vesting or possession orders in respect of third party properties as it considered just. His Honour did not accept that s 25(3) authorised the Family Court to make declarations as to ownership in respect of properties owned by third parties: the "specific property" referred to in s 25(3) must be the property of one or both of the parties.14
[53] In this case, the "specific property" in question is legally owned by Tony, one of the parties to the proceeding under the PRA, and the issue is therefore different from the issue that was before the Court in Jew v Jew (where the assets in issue were ostensibly owned by a family trust).
[54] For all of the foregoing reasons, the answer to Issue (1) is "yes" — the Family Court does have jurisdiction to make the vesting or transfer orders Mr Zhou is seeking in this proceeding. In its "inventory-taking" function, it will decide under s 25(3) whether Lot C is relationship property owned by one or both of Bonnie or Tony, and that determination must inevitably also decide that Mr Zhou either does or does not hold an ownership interest in Lot C (and if he does, to what extent). Mr Zhou has elected to participate in the Family Court proceeding by filing affidavits after he was served, and in so doing he has become a party to the Family Court proceeding. In those circumstances jurisdiction exists under s 33(3)(e) or (j) of the PRA for the Family Court to give better effect to its s 25(3) determination of the "ownership" of Lot C, by ordering the vesting of Lot C in Mr Zhou, or the transfer of Lot C to Mr Zhou, if and to the extent it concludes he is the true owner.
13 Jew v Jew, above n 4.
14 At [40].
Issue (2) — Was the commencement of this proceeding by Mr Zhou an abuse of process?
Submissions for Tony
[55] Mr Zhang submitted that bringing duplicate proceedings constitutes abuse of process for the purposes of r 15.1(1)(d) of the High Court Rules 2016. A proceeding which is an abuse of process may be struck out under that rule or in the Court's inherent jurisdiction.15
[56] Mr Zhang then submitted that the Family Court has exclusive jurisdiction to adjudicate matters under the PRA,16 and that the issues raised by Mr Zhou in this Court are already in issue in the Family Court proceeding. To adjudicate the same matter in two different courts would be a waste of the resources of the court system and could lead to the undesirable outcome of inconsistent findings.
[57] Mr Zhang identified one of the principal issues in the Family Court proceeding as "who is the true owner of Lot C?" A significant part of the evidence so far filed in the Family Court is directed to that issue. This proceeding would have to deal with the exact same questions:
(i)How much, and to what extent, did Mr Zhou pay for the purchase and development costs of Lot C, and what evidence is there to support his contentions?
(ii)What was the understanding of the parties when they each made their contributions to Lot C?
(iii)Was there a loan from Tony to Mr Zhou when Tony made his contributions?
(iv)What was each party's involvement in the development of Lot C, beyond financial contributions?
15 Siemer v Stiassny [2011] NZCA 1 at [14] – [15].
16 Property (Relationships) Act 1976, s 22(1).
(v)Having regard to the answer to those questions, were Tony and Bonnie holding Lot C on trust for Mr Zhou?
[58] Mr Zhang submitted that if this proceeding is allowed to progress, Tony will have to incur two sets of costs. He would be prejudiced for no good reason.
[59] Mr Zhang next submitted that Mr Zhou always intended that the issue of the ownership of Lot C would be resolved in the Family Court. By June 2016, the relationship between Tony and Bonnie had begun to deteriorate, and Mr Zhou was already expressing concern that Tony would claim ownership of Lot C. When Bonnie commenced the Family Court proceeding in April 2017, Mr Zhou intended to rely on Bonnie to defeat Tony's claims in relation to Lot C. To that end, he arranged for Ms Rui Gao to swear her affidavit in the Family Court supporting his case. He was clearly anticipating joining the Family Court proceeding. And when Judge Burns made his order under s 37 of the PRA on 4 May 2018, Mr Zhou filed a notice of response and a lengthy affidavit.
[60] Mr Zhou protests that he had no choice but to participate in the Family Court proceeding, but that cannot be true. If he considered that the Family Court was not the appropriate forum, he could have filed a protest to the jurisdiction or applied to transfer the Family Court proceeding to the High Court. He did not take either of those steps. Having committed to the Family Court jurisdiction, he should not now be permitted to resile from that position.
[61] The fact that Mr Zhou had always intended that the issue of ownership of Lot C be resolved in the Family Court proceeding suggests that his intention in issuing this proceeding was to circumvent the process in the Family Court.
Submissions Mr Zhou
[62] Ms Brown accepted that the issue of ownership of Lot C has arisen in both the Family Court proceeding and in this Court. It follows that the relevant evidence would be similar, if not identical. But duplication of proceedings does not automatically constitute an abuse of process. Whether it will do so in a particular case is a question of fact.
[63] Ms Brown submitted that a decision precluding a third party (such as Mr Zhou) from accessing the justice system via his own avenue because his interests have been raised by other parties in separate proceedings, would not be a decision to be made lightly. The cases of Otis Elevator Co Ltd v Linnel Builders Ltd 17 and Cowley v Shortland Publications Ltd 18 are distinguishable. Otis deals with a claim that had already been stayed in an earlier proceeding so that the issues raised by that proceeding could be determined by way of arbitration. The new application was held to raise the same issues as the cause of action that had been stayed, and was for that reason an abuse of process. That is not the case here. Cowley was a case where an applicant filed a summary judgment application without discontinuing an existing earlier proceeding. The plaintiff in Cowley was also out of time to invoke the summary judgment jurisdiction. That is substantially different from this case, where Mr Zhou is only an interested party in the Family Court, served under s 37 of the PRA regarding one limited issue.
[64] Ms Brown submitted that abuse of process generally carries with it an ulterior motive. Here there is no ulterior motive. Mr Zhou is pursuing his natural right to recover ownership of an asset he says is his property, and he is doing that in the most time and cost-efficient manner that he can.
[65] On the issue of delay in bringing this proceeding, Ms Brown submitted that Mr Zhou has adequately explained in his evidence that the delays have been caused by concerns over the costs of the necessary proceeding. Those concerns have developed over time, when there appeared to be a lack of progress in the Family Court proceeding. Also, any appeal by Tony from a Family Court judgment would cause further delays. Mr Zhou has been concerned that he lacks any real control in the Family Court proceeding. He is not a named party, and the Family Court proceeding involves multiple disputes about other assets in which he has no interest.
17 Otis Elevator Co Ltd v Linnel Builders Ltd (1991) 5 PRNZ 72 (HC).
18 Cowley v Shortland Publications Ltd (1991) 5 PRNZ 76 (HC).
Discussion and conclusions on issue (2)
[66] There is no dispute between the parties that the central issue in this proceeding (who is the true owner of Lot C?) is also in issue in the Family Court proceeding. Nor did Ms Brown contest Mr Zhang's submission that a significant part of the evidence so far filed in the Family Court, including two affidavits filed on behalf of Mr Zhou, has been directed to that issue.
[67] I accept Mr Zhang's submission that Mr Zhou originally intended that the question of ownership of Lot C would be resolved in the Family Court. It was apparently he who arranged for Ms Gao's affidavit to be sworn as early as January 2018, and that affidavit is directed substantially to the question of ownership of Lot C. And when the Family Court directed that Mr Zhou was to be served under s 37, he made no objection; on the contrary, he filed a lengthy affidavit setting out his position on the ownership issue.
[68] In Yeoman v Public Trust, Associate Judge Bell referred to the duplication of issues in this Court and in the Family Court. The particular issue raised in both courts was the ownership of the two disputed properties. And in both Yeoman and this case the claimant elected to participate in a Family Court proceeding before commencing a proceeding in this Court. The Associate Judge referred to the well-established authority against concurrent proceedings on the same subject matter being run in different or the same courts,19 holding that "such double proceedings" constitute an abuse of process under r 15.1(1)(d) of the High Court Rules.20
[69] The widow in Yeoman v Public Trust ran similar arguments to those run in this case for Mr Zhou, namely that the proceeding in this Court could not be an abuse of process because the Family Court did not have the jurisdiction to make the orders sought. Associate Judge Bell noted that that argument had been effectively resolved against the widow on the jurisdiction issue. He found that the defendant was faced with the same issue in two courts, and was not only inconvenienced but also had been
19 At [73] referring to Thames Launches Ltd v Trinity House Corporation [1961] 1 Ch 197, Royal Bank of Scotland v Citrusdal Investments Ltd [1971] 3 All ER 558, Registered Securities Ltd v Yates (1991) 5 PRNZ 68, Otis Elevator Company Ltd v Linnell Builders Ltd (1991) 5 PRNZ 72, and Cowley v Shortland Publications Ltd (1991) 5 PRNZ 76.
20 At [73].
subjected to delay in the resolution of matters requiring the court's decision. The Associate Judge found that the issue of the proceeding in this Court was an abuse of process.
[70] I think the same result must follow in this case. Ms Brown endeavoured to distinguish a number of the authorities referred to by Mr Zhang, but in my view the essential point remains that the same (substantial) issue has been raised in two courts in circumstances where I have found that Mr Zhou has elected to participate in the Family Court proceeding and the Family Court does have jurisdiction to make the orders for vesting or transfer of Lot C that he seeks. Some authorities with additional or different facts might be distinguished, but I think the abuse of process is sufficiently established where a duplicate proceeding has been filed unnecessarily, putting Tony to the expense of filing documents and presenting arguments on the same issue in both courts.
[71] In saying that, I accept that Mr Zhou's intention was not to subject Tony to the extra costs of running two separate proceedings covering the same issues. Mr Zhou commenced the proceeding in this Court in the belief that it was necessary for him to do so, to secure an order vesting Lot C in him. And he did invite Tony to agree to a stay of the Family Court proceeding pending the determination of this proceeding. The issue of delay, on the other hand, is in a different category. It appears that Mr Zhou has been aware of Tony's claims from at least mid-late 2017, but he effectively stood on the side lines, apparently allowing his daughter to run his arguments in the Family Court on the issue of the ownership of Lot C, for roughly a year. In the meantime, all parties would have been running up costs in the Family Court that might perhaps have been avoided if Mr Zhou had filed his claim immediately he became aware of Tony's claims.
[72] Mr Zhou's election to participate in the Family Court proceeding, by filing two affidavits, also counts against him on this issue. It was a matter for him to elect whether or not to participate in the Family Court proceeding once he was served pursuant to the s 37 order, and in my view when he filed the affidavits he elected to accept the jurisdiction of the Family Court and became a party in the proceeding in that Court. Once having made that election, I do not think it was open to Mr Zhou to
resile from the position he had taken, by electing to start a new proceeding in this Court raising the same issue.
[73] Ms Brown submitted at the hearing that Mr Zhou may have no right of appeal if the Family Court decides the issue of ownership of Lot C against him. I do not think that can be right. Having elected to appear in the Family Court proceeding, Mr Zhou is entitled to be heard in the matter "as a party to the application",21 and under s 39 of the PRA a party has the right to appeal to this Court against a judgment given in a Family Court proceeding.22
[74] Having regard to those considerations, I conclude that the answer to Issue (2) is "yes" — the commencement of this proceeding by Mr Zhou was an abuse of process.
Issue (3) — If the commencement of this proceeding was an abuse of process, should it be stayed, or struck out?
Submissions for Tony
[75] Mr Zhang's principal submission was that the proceeding should be struck out. He did not specifically address the alternative of entering a stay of the proceeding in this Court pending the determination of the Family Court proceeding. The distinction between striking out or stay was primarily a concern raised by Ms Brown.
Submissions for Mr Zhou
[76] Ms Brown noted that the Court must first determine whether there has been any abuse of process. If there has not, the Court cannot stay the present proceeding pending the determination of the Family Court proceeding.
[77] If (notwithstanding that submission) the Court did consider that staying this proceeding was an available option, the Court should still exercise its discretion
21 Property (Relationships) Act 1976, s 37(1).
22 Even if Mr Zhou were not considered to be a "party" in the Family Court proceeding, if the Family Court were to hold that he has no interest in Lot C he would presumably qualify as "a person prejudicially affected by the decision". A person prejudicially affected by a Family Court decision also has the right to appeal to this Court under s 39(2) of the PRA.
against granting a stay. The Family Court proceeding is further from being ready to be set down for a hearing than this proceeding. Discovery issues have not yet been resolved in the Family Court: so far only preliminary directions have been made, with conditions on production still to be agreed. Failing agreement, further directions will have to be sought. And even if the parties in the Family Court proceeding agree on appropriate conditions/redactions for discovery purposes, there would still be a possibility that Mr Zhou would need to file his own discovery application. Any application by Mr Zhou would be better made in the High Court than the Family Court, as there would be no need for Bonnie to be concerned with it.
[78] By contrast, the proceeding in this Court already has a clear timetable that should be unaffected by the present application. Standard discovery was due by 30 August 2019, and a second case management conference is scheduled for 10 October 2019. Subject to the determination of this application, it is expected that a trial date can be allocated at the 10 October conference.
[79] Mr Zhou wishes to have his rights separately dealt with in the High Court, it being the only Court that can grant him the relief he seeks. A determination on the issue of ownership of Lot C in this Court may then assist the spouses to resolve their disputes in the Family Court.
Discussion and conclusions on issue (3)
[80] I have already found against Mr Zhou on the jurisdiction and abuse of process issues. In those circumstances, I consider that strike-out and stay are both available options. In Yeoman v Public Trust, Associate Judge Bell considered that an order for stay would be the more appropriate remedy, allowing for the possibility that issues might emerge that could require determination in this Court.
[81] Ms Brown submitted that the proceeding in this Court is closer to setting down stage than the Family Court proceeding. However, I do not think that necessarily means that a determination of issues in this proceeding will necessarily take place before a judgment is given in the Family Court proceeding. If a hearing of this proceeding were to take several days, as I expect would be the case, it would be unlikely that any hearing would be obtained until near the end of 2020, and I have not
been given any advice that a hearing in the Family Court could not be obtained any sooner.
[82] I see no basis to exercise my discretion against ordering either a strike-out of the proceeding or a stay pending determination of the Family Court proceeding. Of those two possible remedies, I think a stay order is more appropriate. It seems to me that one conceivable outcome of the Family Court proceeding (insofar as it affects ownership of Lot C) is that the Family Court might decide that Mr Zhou, did not acquire an interest in Lot C, but leave open the possibility that he may have lent the money to Bonnie and Tony. In those circumstances, Mr Zhou would have a claim against Bonnie and Tony that the Family Court could not determine, and there might be some future utility in Mr Zhou's breach of contract claim in this proceeding (albeit that amendment would be required).23
[83] Any such amendment would only be relevant in the hypothetical situation to which I have just referred, and it would be dependent on a particular outcome in the Family Court that might not occur. It supports my view that the proceeding should not be struck out at this stage, but it does not provide a basis to decline Tony's alternative application for a stay, which in my view must succeed.
Result
[84] The proceeding is stayed pending the determination of questions of ownership of Lot C in the Family Court at Auckland, in proceeding FAM-2017-004-249.
[85] As Tony has been substantially successful on the application for an order striking out or staying the proceeding, I make an award of costs to him on a 2B basis on that application, with disbursements to be fixed by the registrar. Other costs of this proceeding are reserved, to be addressed following the determination of both the Family Court proceeding and this proceeding.
Associate Judge Smith
23 As it is presently pleaded, the claim seeks only a order vesting Lot C in Mr Zhou and costs.
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