Zhang v Zhai [2015] NZHC 1080 (20 May 2015)

Last Updated: 15 June 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-6491 [2015] NZHC 1080

BETWEEN	SHAOHE ZHANG Plaintiff
AND	XIAOJUN ZHAI AND AIDONG ZHONG Defendants

Hearing:	20 May 2015 (by telephone conference)
Appearances:	E St John and D Liu for Plaintiff CS Henry for Defendants
Judgment:	20 May 2015

JUDGMENT (NO. 4) OF TOOGOOD J

_{[Re-imposition of stay of execution pending appeal]}

This judgment was delivered by me on 20 May 2015 at 3:30 pm

Pursuant to Rule 11.5 High Court Rules

_{Registrar/Deputy Registrar}

ZHANG v ZHAI [2015] NZHC 1080 [20 May 2015]

[1] On 8 September 2014, I issued a judgment in this proceeding (“the second judgment”) directing the defendants to transfer a property at 24A Margan Avenue, New Lynn, Auckland (“the New Lynn property”) to the plaintiff.¹ The orders required the defendants, within seven days of the judgment, to settle the transfer of title to the property to the plaintiff whom I had held, in a judgment delivered on

_{16 May 2014 (“the principal judgment”), to have equitable title.}²

Appeal and stay

[2] In the second judgment, I held that it was appropriate to grant a stay of execution of the orders requiring settlement of the transaction on the condition that the defendants would maintain the momentum in prosecution of an appeal against the principal judgment which had been commenced in the Court of Appeal in June

2014. The conditions of the stay were that the case on appeal should be filed within one month of the date of the second judgment and that the defendants would seek a hearing of the appeal at the earliest date available. I have since been informed by counsel that the appeal is due to be heard on 9 July 2015.

Plaintiff ’s application to lift the stay

[3] The plaintiff applied subsequently for an order setting aside the stay, principally on the ground that the defendants were in serious default of their obligations to the ANZ Bank New Zealand Limited (“the Bank”) which holds a registered mortgage security over the New Lynn property. On 19 March 2015, the Bank had issued notices to the defendants under s 119 of the Property Law Act 2007, which notices provided that if each default had not been, or could not be, remedied on or before 8 May 2015, all amounts secured by the mortgage would become

_{payable and that the Bank’s power of sale would be exercisable.}

¹ _{Zhang v Zhai [2014] NZHC 2156.}

² Zhang v Zhai [2014] NZHC 1026, [2014] 3 NZLR 69.

[4] I determined that I should allow the defendants an opportunity to remedy their default under the mortgage so as to ensure that the Bank would not be in a position to exercise its power of sale. That would require the defendants not only to remedy the present defaults but to give an appropriate undertaking to the Court that they would not default on any obligations pending the disposition of the appeal.

[5] I accepted an undertaking from the plaintiff that, if the stay was lifted, he would not “sell, convey, transfer, mortgage, pledge, exchange or otherwise dispose of the property” until the appeal was determined and that he would transfer the property back to the defendants immediately should their appeal succeed.

Orders made on 24 April 2015

[6] On 24 April 2015, I issued Judgment (No. 3)³ in which I made an “unless” order setting aside the stay of execution of the second judgment. In terms of the order, the stay was to be set aside unless the defendants:

(a) before 5:00 pm on 30 April 2015, filed and served an undertaking to the Court to pay all arrears of interest and other sums due to the mortgagee by 5:00 pm on 5 May 2015; and

(b) on or before 5:00 pm on 5 May 2015, paid all arrears of interest and other sums due to the mortgagee; and

(c) by 5:00 pm on 6 May 2015, filed and served an affidavit confirming that the payments had been made and undertaking that the defendants

_{would comply with their obligations under the mortgage in future.}

³ Zhang v Zhai [2015] NZHC 836.

[7] On 30 April 2015, by email timed at 10:35 am, the defendants filed and served the affidavit undertaking that they would pay all arrears of interest and other sums due by 5:00 pm on 5 May 2015. The second-named defendant confirmed by affidavit sworn on 5 May 2015, that all arrears due to the bank had been paid and undertook that both she and the first-named defendant would comply fully with their obligations under the mortgage pending disposition of the appeal. The original of this affidavit was not filed until 7 May 2015 but Mr Henry sent a memorandum to the Court by email at 4:04 pm on 6 May 2015 indicating that the affidavit had “been prepared and executed but, due to some logistical confusion, will be available for filing and service only after 5:00 p.m. today.” Mr Henry requested extension of the time for filing and service until 5:00 pm on Thursday, 7 May 2015 on the basis that such extension would cause no prejudice to the plaintiff.

[8] At the time Mr Henry’s memorandum was received by email I was in court, in Napier; the memorandum was not referred to me before 5pm. Even if it had been referred to me by then, taking steps to prevent the “unless” order from taking effect would have required a recall of Judgment (No. 3); amending it; and releasing the amended judgment. It is unlikely there would have been time for the Court to take those steps, particularly as it is doubtful that I would have been prepared to do so without first hearing from the plaintiff.

Stay lifted by operation of the unless orders

[9] The defendants had complied in substance with the Court’s conditions for the maintenance of the stay (the arrears having been paid and the defendants having given the undertakings to continue to comply with the conditions of the mortgage) but they did not do so within the time required. The outcome in law was that the order setting aside the stay took effect on 6 May 2015 according to its terms.

[10] Because the defendants had taken the steps necessary to remove the threat of a mortgagee sale of the New Lynn property, and the hearing of the appeal is reasonably imminent, it would seem to be unjust for the Court to permit the plaintiff to take advantage of the setting aside of the stay and to demand that the legal title to the property be transferred to him. But the law and justice do not always meet in the same place. As matters stand, the plaintiff is entitled in law to execution of the second judgment and he applied for orders against the defendants for contempt of Court for breach of the Court’s orders of 8 September 2014 requiring them to settle the transaction.

[11] I issued a Minute to the parties on 15 May 2015 addressing the plaintiff’s application and expressing some preliminary views. I said I was inclined to re- impose the stay pending the disposition of the defendants’ appeal upon the conditions that the defendants continue to prosecute the appeal diligently and that, at all times, they comply fully with their obligations under the mortgage to the Bank pending disposition of the appeal.

[12] Subsequently, Mr St John filed a memorandum on behalf of the plaintiff indicating that the plaintiff would not oppose the re-imposition of the stay so long as the Court addressed the plaintiff’s concerns about costs. I have heard from counsel by telephone conference.

Orders

[13] I make orders accordingly.

[14] The orders made at [30](a) and (b) of the second judgment shall be stayed

pending the disposition of the defendants’ appeal upon the conditions that:

(a) the defendants continue to prosecute the appeal diligently; and that

(b) at all times, they comply fully with their obligations under Mortgage No. 5265546.4 registered against Certificate of Title 78277, North Auckland Registry pending disposition of the appeal.

[15] I reserve questions of costs for the exchange of memoranda addressing the matters raised in paragraph 6 of Mr St John’s memorandum dated 19 May 2015 and such other costs matters as counsel consider relevant:

(a) The plaintiff shall have until 12 June 2015 to file and serve a memorandum as to costs, including as to whether the costs order made on 8 September 2014 shall be stayed.

(b) The defendants shall have until 3 July 2015 to file and serve a memorandum in reply.

(c) Costs and the related stay issue shall then be determined on the papers unless the Court directs otherwise.

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Toogood J