Xu v Merchant Finance Limited [2024] NZCA 600 (18 November 2024)

Last Updated: 25 November 2024

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA397/2024 [2024] NZCA 600

	BETWEEN	RU XU AND KARL EDWARD LITT Applicants
	AND	MERCHANT FINANCE LIMITED First Respondent GDL MORTGAGES LIMITED Second Respondent WEIPING GE Third Respondent

Court:	Mallon and Ellis JJ
Counsel:	Applicants in person D K Wilson for First Respondent M J W Lenihan for Second and Third Respondents
Judgment: (On the papers)	18 November 2024 at 10.00 am

JUDGMENT OF THE COURT

The application for extensions of time is declined.
____________________________________________________________________

REASONS OF THE COURT

(Given by Ellis J)

• [1] The applicants, Ru Xu and Karl Edward Litt (who are married), seek an extension of time to appeal against three decisions of Fitzgerald J in the High Court:

(a) a “reasons for ruling” given on 24 June 2021;^[1]

(b) a substantive judgment dated 21 December 2021;^[2] and

(c) a costs judgment dated 12 August 2022.^[3]

• [2] More specifically, as at the date the extension application was filed:^[4]

(a) 712 days had passed since the reasons for ruling decision;

(b) 585 days had passed since the substantive judgment (and 500 days since a subsequent quantum decision); and

(c) 438 days had passed since the costs judgment.

• [3] The application is opposed by the three respondents: Merchant Finance Ltd (Merchant), GDL Mortgages Ltd (GDL) and Weiping (Bernie) Ge (Mr Ge).
• [4] All parties were legally represented in the High Court. The applicants are now self-represented.^[5]

Background

• [5] Our summary of the relevant background is taken from Fitzgerald J’s costs judgment:^[6]

[1] The plaintiff (Merchant Finance) advanced a one-year loan to the defendants [Ms Xu and Mr Litt], secured by the defendants’ property. The defendants were unable to repay or refinance the loan at the end of its term and Merchant Finance eventually sold the property by mortgagee sale in June 2019. It then brought these proceedings seeking recovery from the defendants of the balance due under the loan, after having credited the net sale proceeds from the mortgagee sale. Merchant Finance sought recovery of a shortfall of approximately $548,000.

[2] In response to Merchant Finance’s claim, the defendants raised a number of affirmative defences and counterclaims. These included that the loan agreement be reopened and the defendants granted relief on the basis of oppression under the Credit Contracts and Consumer Finance Act 2003 (CCCFA); alleged breaches by Merchant Finance of the Fair Trading Act 1986 (FTA); alleged breaches by Merchant Finance of the responsible lender principles under the CCCFA; and alleged breaches by Merchant Finance of its disclosure obligations under the CCCFA.

[3] The defendants also brought a third party claim against the third parties [GDL and Mr Ge] (which I will refer to collectively in this judgment as Mr Ge), on the basis that if the defendants were liable to Merchant Finance, such losses were recoverable by the defendants from Mr Ge. The defendants claimed that in acting as the mortgage broker on the loan, Mr Ge breached the CCCFA and FTA (these claims brought on the basis that Mr Ge acted as Merchant Finance’s agent), and that he also breached his duty of care to the defendants under the Financial Advisers Act 2008 (FAA).

• [6] Fitzgerald J explained the outcome of the substantive proceeding as follows:^[7]

[4] In my substantive judgment delivered in December 2021, I dismissed Merchant Finance’s claim on the basis that there had been significant disclosure failures under the CCCFA and in particular, a failure by Merchant Finance to give correct initial disclosure. As a result of that failure, and pursuant to s 99 of the CCCFA, Merchant Finance was prohibited from recovering from the defendants the costs of borrowing, being interest and default interest. I dismissed the defendants’ other claims against Merchant Finance. I also dismissed the defendants’ claims against Mr Ge, finding that he was not the agent of Merchant Finance for the purpose of the CCCFA and FTA claims, and that he had not breached his obligations under the FAA.

[5] Rather than being due a shortfall from the defendants, in a second judgment determining quantum, I ordered that Merchant Finance refund to the defendants a sum of approximately $146,000, being the “excess” recovered by it following the mortgagee sale, once interest and default interest were excluded from the amounts remaining due under the loan.

• [7] It will be observed from the above that the applicants could not fairly be termed the losing party in the High Court, although they did not succeed on all matters.
• [8] The costs decision itself had some complexity. But by way of summary, Fitzgerald J made the following orders:^[8]

(a) a costs award against Merchant Finance in favour of Ms Xu and Mr Litt in an amount of $45,000, plus disbursements of $8,362.45;

(b) a costs award against Merchant Finance and in favour of Mr Ge in an amount of $19,387.33, being one-third of Mr Ge’s claim for scale costs and disbursements; and

(c) an order that Ms Xu and Mr Litt were to contribute an amount of $15,000 to Mr Ge’s costs award (to be paid to Mr Ge directly).

• [9] The Judge also recorded, for the purposes of s 46 of the Legal Services Act 2011, that but for Ms Xu (and Mr Litt) being legally aided, she would have made a costs award against them in favour of Mr Ge of $38,774.67, being two-thirds of Mr Ge’s claim for costs and disbursements.^[9]
• [10] For completeness, we record that the “reasons for ruling” decision that the applicants seek to appeal related to an application by the applicants made during the trial (and after the close of pleadings date) to amend their pleadings. In (small) part, Fitzgerald J granted the amendment application.^[10]

Extensions of time: legal principles

• [11] Rule 29(1) of the Court of Appeal (Civil) Rules 2005 (the Rules) provides that a party must bring an appeal within 20 working days after the date of the decision against which they wish to appeal. Rule 29A of the Rules provides as follows:

29A Extension of time for appealing

(1) If the appeal period prescribed by an enactment or the period prescribed by rule 29(1) or (2) has expired, a party who wishes to appeal may make an interlocutory application for an extension of time in which to appeal.

...

(3) If the Court or a Judge grants an extension of time, the party wishing to appeal must bring the appeal—

(a) within the time specified by the Court or the Judge when granting the extension; or

(b) if no time is specified by the Court or the Judge, within 20 working days after the day of the decision granting the extension of time.

• [12] In Almond v Read, the Supreme Court identified considerations relevant to determining an application for an extension of time.^[11] These are: the length of delay; reasons for the delay; the conduct of the parties (particularly the applicant); any prejudice or hardship that arises to the respondent or others with a legitimate interest in the outcome; and the significance of the issues raised by the proposed appeal, both to the parties and generally. The merits of the proposed appeal are also in principle relevant, but can be overwhelmed by other factors. The merits will not generally be relevant where there is an insignificant delay, and any consideration must, in the context of an application for an extension of time, be relatively superficial.^[12] The ultimate question however is what the interests of justice require.^[13]

The application for extensions of time in this case

• [13] It is evident from the material filed by Ms Xu that the focus of the applicants’ proposed appeal is not on the merits or otherwise of Fitzgerald J’s various decisions but on new material, which she says has only recently come to light. The focus appears now to be on the alleged acts or omissions by Ms Bibiana Lee, who acted as Merchant’s solicitor in relation to the mortgagee sale.
• [14] The applicants say:

(a) They are “unable to specify the particular part of the judgment we are intending to appeal due to the fact there is non-clarity of the property settlement”, which they say is due to Ms Lee “acting with a conflict of interest, non-disclosure issues, and [because she] provided perjury to the Court”.

(b) Their specific grounds of appeal are based on the “new evidence” provided by Ms Lee, which they say includes her disclosure of acting with a conflict of interest; that Ms Lee gave the Court contradicting statements; and that the “special return of IR373” contains a significant amount of false and illegally obtained information and is a fraudulent document.

• [15] As far as we can ascertain, the “new evidence” referred to largely comprises an affidavit by Ms Lee dated 11 April 2022 which (the applicants say) was “discovered at the case closing stage, but still has missing information to identify the true situation of the property settlement”. They also refer to the “special return IR373 provided by [Ms] Lee after the case was closed”. They say this document reveals that Ms Lee illegally settled the mortgagee sale transaction as if it was a normal property transaction, in breach of the Goods and Services Tax Act 1985. They say the evidence shows Ms Lee did not tell the Court the truth, that IR373 contained false information, and that because IR373 was filed three years late and one day prior to Ms Lee’s affidavit, “it is obvious that [Merchant] and [Ms] Lee were colluding” in deciding to file the document.
• [16] The applicants submit the Judge’s substantive decision was made on the basis that the mortgagee sale was “managed and controlled properly by trustworthy lawyers” but the reality is that Ms Lee acted with a conflict of interest, maliciously concealed facts during the trial, and misled the Judge and outcome of the trial.
• [17] The applicants say this Court should grant an extension of time so they can “bring [Ms] Lee into the proceedings” and request more documents to be discovered. The Court can then “identify the truth of the transaction”, there can be clarity as to the mortgagee sale process and settlement, and the applicants can work out “which part of [their] legal rights had been abused as the original property owners of this unlawful mortgagee sale and property transaction”. They can then correctly quantify their losses and damages caused by the deception of Ms Lee.
• [18] An extension of time is vehemently opposed by the respondents.

Discussion

• [19] It is our clear view that it would not be in the interests of justice to grant extensions of time, for the reasons that follow.
• [20] First, the applicants appear to be seeking to reopen the High Court proceedings on an entirely new factual and legal basis, not to appeal the extant decisions. Ms Lee was not a party to the proceedings in the High Court and would not be a party to any appeal.
• [21] Secondly, the delay is significant, and the reasons given for it, inadequate. Ms Lee’s affidavit was over two years old at the time the extension application was filed. The respondents are entitled to finality in relation to the claims and counterclaims as they were brought and determined. They would undoubtedly suffer prejudice if the matter were to be reopened now.
• [22] Thirdly, there is no basis on which we could conclude that the proposed appeals have merit, given they do not appear directly to engage, or take issue, with any specific aspects of Fitzgerald J’s decisions. As noted earlier, the applicants were in fact successful in a number of respects in the High Court and to that extent would have no right of appeal in relation to those matters.^[14] We also record for completeness that the allegations now made by the applicants are strongly denied by both Merchant and Ms Lee and have no connection with GDL and Mr Ge.
• [23] Lastly, the “reasons for ruling” related to an interlocutory decision, which can only be appealed with leave. Leave has neither been sought nor obtained.^[15]

Result

• [24] The application for extensions of time is declined.

Solicitors:
Loo & Koo, Auckland for First Respondent

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^[1] Merchant Finance Ltd v Xu CRI-2019-404-1860, 24 June 2021 [reasons for ruling decision].

^[2] Merchant Finance Ltd v Xu [2021] NZHC 3589 [substantive judgment]

^[3] Merchant Finance Ltd v Xu [2022] NZHC 1991 [costs judgment].

^[4] The application was filed on 19 June 2024.

^[5] Mr Litt was declared bankrupt in 2020 (after the proceedings commenced) and Merchant’s claim against him was halted in accordance with s 76(1) of the Insolvency Act 2006. The claim then continued against Ms Xu only. Mr Litt has, however, since been discharged.

^[6] Costs judgment, above n 3.

^[7] Footnotes omitted.

^[8] Costs judgment, above n 3, at [43].

^[9] At [43(d)].

^[10] Reasons for ruling decision, above n 1, at [4]–[5] and [22].

^[11] Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801 at [38].

^[12] At [39].

^[13] At [38].

^[14] Philip A Joseph Joseph on Constitutional and Administrative Law (5th ed, Thomson Reuters, Wellington, 2021) at [21.7.1]

^[15] Senior Courts Act 2016, s 56(3).