Sheng v Zhan [2018] NZHC 2012 (8 August 2018)

Last Updated: 31 August 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-1669 [2018] NZHC 2012

UNDER	Part 19 of the High Court Rules
IN THE MATTER	of an application under Section 51 of the Trustee Act 1956
BETWEEN	HAILONG SHENG as trustee of the SHENG FAMILY TRUST Applicant
AND	HONG ZHAN as trustee of the SHENG FAMILY TRUST Respondent

Hearing:	On the papers
Appearances:	A F Grant for the Applicant
Judgment:	8 August 2018

JUDGMENT OF JAGOSE J

This judgment is delivered by me on 8 August 2018 at 4.00pm pursuant to r 11.5 of the High Court Rules.

.....................................................

Registrar / Deputy Registrar

Counsel/Solicitor:

A Grant, Barrister, Auckland Ross Holmes, Albany

SHENG v ZHAN [2018] NZHC 2012 [8 August 2018]

[1] As a trustee of the Sheng Family Trust (the ‘Trust’), Mr Sheng brings without notice an application for permission to commence a proceeding by originating application. As required by HCR 19.5(3), the proposed originating application is filed with the application for permission.¹

Background

[2] The proposed originating application seeks an order removing and replacing Ms Zhan – Mr Sheng’s wife, from whom he is separated – as the other trustee of the Trust. The Trust owns property at 8a Jeanette Place in Auckland’s Mairangi Bay. The property was used by Mr Sheng and Ms Zhan as their family home.

[3] Mr Sheng and Ms Zhan are parties to a 1 November 2017 Separation and Relationship Property Agreement, by which they agreed simultaneously to enter into a Trust Agreement to put the property on the market and sell it. The proceeds, after payment of specified liabilities, were to be paid equally to each Mr Sheng and Ms Zhan. Pending the sale, Ms Zhan was entitled to exclusive possession of the property.

[4] The parties were to “act expeditiously and in good faith” to those ends. Mr Sheng complains Ms Zhan has acted otherwise to thwart the sale process. He says the property’s due mortgage and rates payments are not being made, attracting rates penalties and risking the bank’s mortgagee sale of the property (although there is no evidence such mortgagee sale is imminent, or contemplated).

[5] Nonetheless, the application for permission contends the proposed originating application “needs to be determined urgently”, “undue delay or prejudice” would be caused to Mr Sheng if he was required to proceed on notice, and “the interests of justice require the application to be determined without serving notice”. Mr Sheng’s counsel, Anthony Grant, certifies the latter grounds are made out.

1. Although the bulk of the documents was filed on 27 July 2018, the application for permission was not filed until 7 August 2018.

Originating application procedure

[6] The originating application procedure is “generally used for cases where it is not necessary to have full pleadings and interlocutory steps such as discovery for the proper determination of the issues”.² “[A]ppropriate case management directions” can address such interlocutory issues as may arise,³ but the truncated procedure is not to be used “as a shortcut for urgent cases”.⁴

Discussion

—can application properly be dealt with without notice?

[7] There is a prefatory issue, which is whether, on receiving the application for permission without notice, I must determine whether the application can properly be dealt with without notice, which requires I be satisfied as to specified criteria.⁵ In Jones v H W Broe Ltd, McGechan J held it was not “appropriate to make initial application for leave to use the originating application procedure on an ex parte basis” without circumstances bringing it within what is now HCR 7.46(3).⁶

[8] If that was presently the case, despite Mr Grant’s certification, I cannot identify anything to satisfy me the application meets any of the necessary criteria – undue delay or prejudice to the applicant if required to proceed on notice, or the interests of justice in without notice determination. I would therefore either have adjourned the application for determination after service or, if I considered the application had no chance of success, dismissed it.⁷

—may proposed proceeding be commenced by originating application?

[9] However, HCR 19.5(2) expressly provides “[t]he Court’s permission may be sought without notice”. That is to say, the rules specifically acknowledge such an

2. Fisk v X [2014] NZHC 2797 at [18] citing Groves v TSSN Ltd (in Liq) [2012] NZHC 2402, [2013] 1 NZLR 111 at [25], and Hong Kong v Shanghai Banking Corporation v Erceg [2010] NZHC 1352; (2010) 20 PRNZ 652 (HC).

³ Fisk v X, above n 2, at [19].

⁴ Hong Kong v Shanghai Banking Corporation v Erceg, above n 2, at 659.

⁵ HCR 7.46(3).

⁶ Jones v H W Broe Ltd (1989) 5 PRNZ 206 (HC) at 207.

⁷ HCR 7.46(5).

application ‘can properly be dealt with without notice’, without any additional need to satisfy the Court as to HCR 7.46(3)’s specified criteria. The rule’s predecessor – r 458D(1)(e) in the Second Schedule to the Judicature Act 1908, under which McGechan J decided Jones v H W Broe Ltd – made no reference to how the Court’s permission may be sought. McGechan J’s views of the limited availability of originating applications no longer apply.⁸

[10] It is not necessary, on a without notice application for the Court’s permission to commence a proceeding by originating application, for the Court to determine whether the application can properly be dealt with without notice. Rather the issue is whether it is in the interests of justice for the proposed proceeding to be commenced by originating application.⁹

[11] It may be the originating application procedure is an appropriate procedure by which to remove and replace trustees, particularly in circumstances in which a trustee acts contrary to documented agreement with other trustees. Mr Grant refers to precedent.¹⁰

[12] But the proposed originating application here seeks to do more than merely remove and replace Ms Zhan, including requiring Ms Zhan to vacate the property (at odds with her express right of exclusive occupation until sale), and to account to the trustees for use of the property by other than herself (and, presumably, her and Mr Sheng’s two children, although they are not mentioned within that express right).

[13] The proposed proceeding appears to seek some advance on the position established by the 1 November 2017 agreements between the parties. Such would undermine the agreements’ provision of the foundation for Ms Zhan’s removal. It is likely to be necessary to deploy ordinary proceedings’ procedures fairly and justly to determine Mr Sheng’s claim.

8. Commissioner of Inland Revenue v McIlraith (2003) 21 NZTC 18,112 (HC) at [16]; Commissioner of Inland Revenue v Muir [2013] NZHC 2881, (2013) 26 NZTC 21-044 at [16].

⁹ HCR 19.5(1).

¹⁰ Re Estate of Parker [2012] NZHC 569; Gambrill v Saunders HC Auckland CIV-2008-404-2012, 22 March 2011 (a costs judgment, but Doogue AJ mentions at [7] the proceeding was commenced by originating application); and Armstrong v Keenan [2018] NZHC 1196.

[14] In those circumstances, I consider it is not in the interests of justice for the proposed proceeding to commence by way of originating application.

Result

[15] I decline Mr Sheng’s application for permission to commence the proposed proceeding by originating application.




—Jagose J