Huang v Chung [2015] NZHC 2581 (20 October 2015)

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BETWEEN	TONY JUN HUANG Applicant
AND	CHO HUI CHUNG AKA MAY CHUNG First Respondent CHOU HUI CHUNG and PHILLIP WONG as Trustees of MAY CHUNG FAMILY TRUST Second Respondent CHOU HUI CHUNG and PHILLIP WONG as Trustees of THE BELLS TRUST Third Respondent QI HUANG _{Fourth Respondent}

Hearing:	12 October 2015
Appearances:	G N Illingworth QC and D Liu for Plaintiff N Penman-Chambers for Respondents
_{Date of minute:}	_{20 October 2015}

[1] Mr Huang, and Ms Chung, are former de facto partners. When the relationship began Ms Chung already owned a business (Silverbell) and the commercial building from which that business operated. Over the following approximately twenty years substantial assets were acquired from the revenue and the proceeds of sale of the business. The parties are now enmeshed in litigation over the status of these assets, the total value of which is estimated at between $22m and

[2] Mr Huang asserts that Ms Chung’s assets at the start of the relationship were worth less than $600,000 and that he contributed significantly to the growth of the business, which was operated as a joint enterprise so that the assets are relationship property. He claims that Ms Chung has transferred many of the properties to trusts to put them out of his reach. Ms Chung, however, maintains that the assets she owned at the start of the relationship were worth millions of dollars and does not accept that the increase in the value of the business over subsequent years was due in any significant part to Mr Huang. She asserts that the assets were her separate property which she was entitled to transfer to trusts settled primarily to provide for her children.

[3] There are two proceedings on foot, which are to be heard together. The proceeding under CIV-2014-404-1072 (the 1072 proceeding) was started in the Family Court as an application by Mr Huang for orders under the Property (Relationships) Act 1976 (PRA). The proceeding under CIV-2013-404-4797 (the

4797 proceeding) is brought by Mr Huang against Ms Chung and the trustees of a trust settled by her (the May Chung Family Trust).

(a) Mr Huang’s application in the 4797 proceeding to join as defendants the trustees of two other trusts settled by Ms Chung.

(b) Ms Chung’s application in the 1072 proceeding for an order that a question of fact be determined before trial; and

[5] The defendants in this proceeding are Ms Chung in her personal capacity and her solicitor, Philip Wong, as trustees of the May Chung Family Trust, which Ms Chung settled in 1998. The trustees are Ms Chung herself and Mr Wong. The beneficiaries are Ms Chung, her children from her first marriage, her children from her marriage to Mr Huang and any children of those children. The trust assets are estimated to be worth about $8m. They include a former family home in Remuera and two commercial properties.

[6] In 2013 Ms Chung settled two further trusts for the benefit of her children. The first is the GBACO Trust, the trustees of which are Unyueen Ying Chung (a daughter from Ms Chung’s first marriage) and Wong & Bong Trustee Co Ltd (the trust company controlled by Mr Wong). The second trust is the Motherlode Trust, the trustees of which are Yuanguan Chung (a daughter from Ms Chung’s first marriage) and Wong & Bong Trustee Co Ltd.

[7] The trustees of the GBACO Trust are the intended third defendants. They are the registered proprietors of a property at Maraetai. The trustees of the Motherlode Trust are the intended fourth defendants. They own a property in Ellerslie. Mr Huang says that funds that were relationship property were gifted to the trustees for these purchases in order to defeat his rights under the PRA. The relief sought includes orders setting aside those dispositions.

[8] Under r 4.56(1)(b)(ii) a defendant may be joined if “the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding”. Mr Illingworth submitted that the presence of the trustees was necessary because of the relief being sought against them in the substantive proceeding. Ms Penman-Chambers opposed the joinder on the ground that Mr Huang’s claim in relation to the properties is already protected by a notice of claim registered against them and that Mr Huang is really seeking relief against Ms Chung

for having disposed of the funds. She argued that the addition of two further parties would add unnecessary complexity and cost to the proceeding.

[9] It is correct that no draft statement of claim has yet been tendered. Mr Illingworth, however, indicated that, in addition to the relief currently sought against Ms Chung in relation to these properties, a claim against the intended defendants could reasonably be expected to include an allegation that they hold the properties as constructive trustees for him

[10] Given that the trustees ostensibly hold the property for Ms Chung’s children, the relief currently sought in respect of those properties and signalled by Mr Illingworth to be sought has the potential to adversely affect those beneficiaries. I therefore consider that it is necessary to have the trustees as parties to the proceeding and accordingly make the order for joinder as sought.

[11] This proceeding was transferred from the Family Court. Mr Huang is the applicant. The respondents include Ms Chung in her personal capacity and Ms Chung and Mr Wong as trustees of the May Chung Family Trust. f the Bells Trust. In this proceeding Mr Huang seeks orders preventing any further dealing with assets owned by the trust and, in addition, the removal of Ms Chung as a trustee of two other family trusts, the Huang and Chung Family Trust, which owns a property in Hobsonville and the H & C Family Trust which, until recently, owned a property at Okura.

[12] Mr Huang says that the de facto relationship commenced some time in 1997 (the date not specified) and that most the property now owned by Ms Chung or the trusts was acquired from the revenue or sale of the business, including the previous and current family homes in Remuera and two other investment properties in Auckland. He seeks orders aimed at identifying relationship property and either setting aside dispositions of property that he claims is relationship property or compensating him.

[13] However, Ms Chung claims that the de facto relationship began in 1999, by which time the May Chung Family Trust had already been established and she already owned one of the homes in Remuera, an apartment in Greenlane, the Silverbell business and the commercial property from which the Silverbell business operated. She claims that all of those assets were and remained separate property, as did the assets subsequently acquired from the revenue or sale of the Silverbell business.

[14] Ms Chung seeks to have the question of when the de facto relationship began decided as a preliminary determination. Under r 10.15 the Court may order that any question be decided separately from any other question before, at or after any trial. The purpose of the rule is to expedite proceedings by limiting or defining the scope

of the trial in advance or obviating the need for a trial altogether.¹It was common

(a) The likelihood of delay in finally resolving the proceeding; (b) The probable length of the hearings if there is a split trial;

(e) A balancing of the advantages to the parties and the public interest in shortening litigation against any disadvantages asserted by parties opposing a split trial;

(f) Demarcation difficulties in defining issues to be addressed at the first trial and those left for the second;

(h) Inadvertent disqualification of a judge who has expressed views at the first trial on matters for decision at the second trial;

(i) Inadvertent findings at the first trial upon matters that are for full evidence and argument at the second hearing;

(k) The duplication of time involved in the Court and counsel “coming up to speed” again for the second hearing;

(m) The need for a second round of discovery or other interlocutories and amended pleadings following the first trial;

(n) Rostering difficulties in ensuring that the same judge is available for the second hearing.

[15] Ms Penman-Chambers, for Ms Chung emphasised the very limited nature of the question to be decided and submitted that determination of it can be expected to significantly reduce and clarify the scope of work required by the forensic accountants. That work is still in its early stages and the task of identifying the value of relationship property to be divided or the level of contribution made in respect of particular properties is made more difficult by the uncertainty as to when the de facto relationship began. If that fact were known then the forensic accountants could be produce a much more focused report for each of the parties at less cost. Finally Ms Penman-Chambers was confident that if this issue were determined the parties were more likely to reach agreement, either wholly or substantially thereby reducing the need for a trial or the amount of trial time required.

[16] In opposition, Mr Illingworth QC pointed out that the property in issue was transferred to the trust in 2003, well after the start of the relationship property, even on Ms Chung’s account, so that the question whether the relationship began in 1997 or 1999 was of little moment in relation to that property. He also opposed the determination of the question on the ground that it required a credibility finding. This would mean that there was the risk of cross-examination on matters that had occurred well after 1999, thereby potentially straying into matters of evidence that would arise for determination at the later hearing. Moreover, there are significant

disputes over subsequent events that will also require findings of credibility. As a result, there is a distinct risk of inconsistent findings, whether or not the same judge determines both the preliminary issue and the substantive trial.

[17] Counsel agreed that a hearing for the preliminary determination of this question would require 2-3 days. There will be at least five witnesses. It is assumed that their evidence will be received in the form of affidavits already filed on this point. However, the nature of the question means that extensive cross-examination, at least of Mr Huang and Ms Chung, is inevitable. Ms Penman-Chambers also acknowledged the possibility of appeal against any determination but pointed out that the prospect of appeal against a straightforward question of fact must be less than that involving a mixed question of fact and law or a question of law. At the least, there is reasonable certainty that only one appeal would be possible.

[18] In comparison, counsel estimate that about two weeks will be required for the trial of the substantive matters. It is evident that at least four of the witnesses who would be required for the preliminary determination would also be required at a substantive trial (Mr Huang, Ms Chung and Ms Chung’s two adult daughters).

[19] Whilst the scope of the proposed preliminary determination is limited, I accept Mr Illingworth’s submission that it will raise questions of credibility that will almost certainly require counsel to explore events that have occurred over a long period of time. This creates a serious risk that counsel and the Judge will stray into areas of inquiry and evidence that could impact on findings in the substantive proceeding. Further, although the risk of appeal may be less in the case of purely factual findings, nevertheless, that risk exists and would significantly increase the cost and delay in ultimately resolving the matter. Nor, for the reasons that Mr Illingworth outlined, does it seem likely that Mr Huang will regard a finding on this question as leading to resolution of the whole, or even a substantial part of, the dispute. For these reasons the application is dismissed.

High Court of New Zealand Decisions

Huang v Chung [2015] NZHC 2581 (20 October 2015)