Han v Xue [2024] NZHC 64 (2 February 2024)

Last Updated: 8 February 2024

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

CIV-2021-404-1717 [2024] NZHC 64

UNDER	Part 18 of the High Court Rules 2016
IN THE MATTER	of a declaratory order pursuant to the Declaratory Judgments Act 1908
BETWEEN	WENNING HAN First Plaintiff YUNYUE ZHU Second Plaintiff
AND	JINXING XUE Defendant Continued ...

Hearing:	6 December 2023
Appearances:	K H Morrison and R Zhou for Wenning Han M G Kirkland for Yunyue Zhu R J Hollyman KC and IFA Hawkins for Jinxing Xue
Judgment:	12 December 2023
Reasons:	2 February 2024

JUDGMENT OF GAULT J

This judgment was delivered by me on 2 February 2024 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

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

HAN v XUE [2024] NZHC 64 [2 February 2024]

Continued ...

	CIV-2023-404-2444
BETWEEN	WENNING HAN Plaintiff
AND	STUART DOUGLAS ROBERTSON First Defendant ETHNIQ KRASNIQI Second Defendant MANU BHANABHAI Third Defendant DYER WHITECHURCH Fourth Defendant

• [1] In CIV-2021-404-1717, a proceeding brought under Part 18 of the High Court Rules 2016, the plaintiffs seek declaratory relief under the Declaratory Judgments Act 1908 that a loan agreement, guarantee and mortgage are unenforceable. These documents were executed in 2018 when a development of 13 terraced houses at 4A and 10 Abbotts Way, Remuera (the development) was at risk of being sold by a mortgagee. The defendant has counterclaimed seeking payment. This proceeding has a five-day trial commencing on 19 February 2024, which has been allocated since 29 April 2022.

• [2] By interlocutory application dated 18 October 2023, the first plaintiff (Mr Han) seeks orders:

(a) that this proceeding be consolidated and/or heard together with proceeding Han v Robertson (CIV-2023-404-2444) filed in the Auckland High Court on 18 October 2023;

(b) that the trial scheduled for this proceeding commencing on 19 February 2024 be vacated.

• [3] The second plaintiff in CIV-2021-404-1717 (Mrs Zhu, Mr Han’s mother-in- law) is separately represented but supports the first plaintiff’s interlocutory application.¹

• [4] The defendant (Mr Xue) opposes the interlocutory application.

• [5] In Han v Robertson, Mr Han has commenced claims in deceit, breach of fiduciary duties and knowing assistance against four new defendants in respect of actions relating to the development that preceded the 2018 documentation in issue in CIV-2021-404-1717.

• [6] At the date of the hearing, the Han v Robertson proceeding had been served on the four defendants but statements of defence were not due. In relation to the

1. On 26 January 2024, I made an order declaring that Mr Kirkland and Ms Chan have ceased to be counsel and solicitor on the record respectively for Mrs Zhu.

interlocutory application, timetable orders had been made for these defendants to file any opposition by 13 November 2023. The first and second defendants (Mr Robertson and Mr Krasniqi) had taken no steps. The third and fourth defendants (Mr Bhanabhai and his law firm, Dyer Whitechurch, who received the funds paid by the purchasers of lots in the development) abided the decision of the Court.

• [7] At the hearing on 6 December 2023, I discussed with counsel the need for an early decision given the February 2024 trial date and I indicated that due to other commitments before the vacation I may need to give a results only judgment. That proved to be the case and on 12 December 2023 I gave my decision dismissing the application, with reasons to follow.

• [8] These are my reasons.

Factual background

• [9] Mr Han and Mr Xue were friends and business partners.

• [10] Mr Han claims that in 2016 Mr Krasniqi introduced the development to Mr Han, and the opportunity to buy one of the lots. The development was held by Abbotts Investments Limited (AIL), a company under the directorship and shareholding of Mr Robertson. Mr Krasniqi allegedly told Mr Han that Mr Robertson was a respected professional trustee, known for safeguarding interests in numerous projects and companies.

• [11] Mr Han says the terms proposed by Mr Krasniqi and Mr Robertson for the purchase of lots within the development were that each purchaser was to make an initial payment of $700,000 for the purchase of the property. The initial funds from each purchaser would enable the property to be purchased without a mortgage and for the development to commence. Each purchaser was obliged to provide further funds to complete the development of the lots.

• [12] Mr Han’s family eventually agreed to buy two lots. Whether or not introduced by Mr Han, Mr Xue also came to know about the development and agreed initially to buy five, and later 10, of the 13 lots.
• [13] On 30 September 2016:

(a) on behalf of his father who had purchased one lot, Mr Han transferred

$200,000 to Dyer Whitechurch as solicitor for AIL. Mr Krasniqi was to transfer the remaining $500,000 as repayment for an earlier loan given by Mr Han.

(b) Mr Cai, Mr Han’s nephew, had also purchased a lot and transferred

$690,000 to Dyer Whitechurch.

(c) Mr Xue transferred $3,400,000 to Dyer Whitechurch as payment for his initial five lots.

• [14] From these payments, Dyer Whitechurch received a total of $4.29 million. Mr Han says the Dyer Whitechurch trust account ledger now received does not record receiving:

(a) the $500,000 Mr Krasniqi said he would pay towards Mr Han’s father’s lot, or the $700,000 Mr Krasniqi was required to pay for his own lot.

(b) a further $350,000 Mr Xue claims to have paid to Dyer Whitechurch.

• [15] Mr Han says he understood the funds paid in September 2016 went to pay the deposit for the purchase of the property by AIL on behalf of all the purchasers of the lots on 15 February 2017, and the remaining funds received went to settle the purchase in April 2017.

• [16] In March/April 2017, upon acquiring a further five lots in the development, Mr Xue was required to pay a further $3,500,000 to Dyer Whitechurch. However, the Dyer Whitechurch trust account ledger only records receiving a payment of

$2,000,000. Mr Han says that Mr Xue has not provided source evidence that he paid

$3,500,000; he has simply denied knowledge of the trust account ledger.

• [17] Mr Han alleges that unknown to him until mid-2018 (and Mr Xue also says without his knowledge) Mr Robertson had arranged for a mortgage to be registered

over the property, and the loan to AIL was in default. The development was at risk of being sold by the mortgagee, when Mr Han says the property was meant to have been purchased mortgage-free and all the purchasers of the individual lots would be funding the development costs.

• [18] Mr Han and Mr Xue did not want to lose the property and money that had been paid towards the purchase of lots in the development. They (and Mrs Zhu) characterise their actions in response differently:

(a) Mr Han says he tried to contact Mr Krasniqi and Mr Robertson to resolve matters but was unable to get to any resolution. Mr Han says Mr Xue in the meantime had been contacted directly by the mortgagee and offered to purchase the debt. Mr Han says it remains unknown how the mortgagee knew to contact Mr Xue – this is unexplained in Mr Xue’s evidence. Mr Han claims that Mr Xue appears to have known more about Mr Krasniqi and Mr Robertson’s dealings than he has let on. Mr Han says the amount Mr Xue claims to have paid for his lots is significantly more than what is recorded as having been received by AIL – in other words, Mr Xue seems to have acquired his ten lots for a lot less than agreed. Mr Xue denies these matters. Mr Han says he and Mr Xue engaged in negotiations with Mr Robertson and Mr Krasniqi and eventually arranged to purchase the property from the mortgagee for $3,897,000, with Mr Xue providing $3,690,000 and Mr Han providing $208,996.26. Mr Han says that Mr Xue’s willingness to assist was not unconditional – as a result of his other business dealings with Mr Han in Jordan, he had significant leverage over Mr Han. During the few months after the mortgage default was discovered, Mr Xue allegedly placed significant pressure on Mr Han to sign various agreements. These various agreements in total had Mr Han acknowledging loans to Mr Xue of around $8.5 million, when Mr Xue had not advanced any funds to Mr Han. Mr Han’s position is that he signed these agreements under duress. These loans included a loan agreement for $3,500,000 guaranteed by Mrs Zhu and secured against Mrs Zhu’s Remuera property. It is this loan agreement, guarantee and

mortgage that the plaintiffs in CIV-2021-404-1717 seek to have declared unenforceable.

(b) Mrs Zhu says she guaranteed the loan on the basis that Mr Han was receiving a cash advance of $3,500,000 from Mr Xue and she would not have done so if she had been aware it was to secure an existing obligation.

(c) Mr Xue says that to protect his investment he had to purchase the development land from the mortgagee. In doing so, he suffered loss. He says that Mr Han accepted responsibility for a share of this loss and promised to make good the loss by repaying Mr Xue the sum that he had paid to purchase the development land and secure the development. In return, Mr Xue promised to respect Mr Han’s investment in the development. In October 2018, the parties agreed to record the key elements of their arrangement in writing. The terms of the agreement dated 16 October 2018 were that Mr Han had to (re)pay Mr Xue

$3,500,000 in two years (October 2020). The parties referred to this as a ‘loan agreement’ although money was not intended to be advanced to Mr Han. The advance was Mr Xue’s funding of the purchase of the development land. Mrs Zhu agreed to guarantee Mr Han’s obligations under the loan agreement and mortgage her property in Remuera to Mr Xue by way of security. In 2020, when Mr Han failed to make payment, Mr Xue sought to enforce his rights under the loan agreement, the guarantee, and the mortgage, and issued demand letters and notices under the Property Law Act 2007 in respect of the mortgaged property. In August 2021, Mr Han and Mrs Zhu issued CIV-2021-404-1717 seeking to avoid paying the debt owed or losing the Remuera property. Mr Xue brought counterclaims to enable him to enforce his rights.

• [19] Mr Han says that it was not until he received non-party discovery from Dyer Whitechurch in CIV-2021-404-1717 that the following became known:

(a) Mr Krasniqi’s associated company, Tower City Holdings Limited, had purchased the property on 14 February 2017 for $7,100,000. On the same day, it sold part of the property (4A Abbotts Way) to a company associated with the vendor for $600,000 and the remaining part (10 Abbotts Way) was sold to AIL for $8,000,000. Dyer Whitechurch acted for all three entities.

(b) The $4,290,000 received by Dyer Whitechurch for AIL on 30 September 2016 was recorded as having been paid by AIL as the deposit for its purchase.

(c) On 14 or 15 February 2017, AIL and the purchaser of 4A Abbotts Way together borrowed $4,400,000 from Kensington Finance, which was secured by a mortgage over the property.

(d) In total, cash funds totalling $8,690,000 were obtained from this transaction. The original purchase price was arguably a net amount of

$6,500,000, being $7,100,000 less $600,000.

• [20] Mr Han also says it transpired that the Kensington Finance loan was refinanced to the De Latour Family Trust in November 2017 and the new loan was similarly secured against the property.

• [21] Mr Han says that what Mr Robertson and Mr Krasniqi did, and what Mr Xue’s knowledge and/or involvement was, is crucial to the Court’s determination of the issues in CIV-2021-404-1717. The application of the funds received and the reason for the transactions are wholly unclear. Dyer Whitechurch’s trust account ledger does not shed light on how these funds were applied. As well as the mortgage, it was not known to Mr Han at the time that AIL would be purchasing the property from Mr Krasniqi’s company on a back-to-back sale on the same day and for a higher purchase price.

Applicable principles

• [22] Rule 10.12 provides:

10.12 When order may be made

The court may order that 2 or more proceedings be consolidated on terms it thinks just, or may order them to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them, if the court is satisfied—

(a) that some common question of law or fact arises in both or all of them; or

(b) that the rights to relief claimed therein are in respect of or arise out of—

(i) the same event; or

(ii) the same transaction; or

(iii) the same event and the same transaction; or

(iv) the same series of events; or

(v) the same series of transactions; or

(vi) the same series of events and the same series of transactions; or

(c) that for some other reason it is desirable to make an order under this rule.

• [23] Rule 10.13 provides:

Rule 10.12 applies even though—

(a) the relief claimed in the proceedings is not the same; or

(b) 1 or more of the proceedings—

(i) is pending in the court in the exercise of its admiralty jurisdiction; or

(ii) is brought under the provisions of an Act conferring special jurisdiction on the court.

• [24] The starting point is that separate proceedings are heard separately.² However, if one of the threshold requirements in r 10.12 is satisfied,³ the discretion to make orders is a wide one, to be exercised broadly in the interests of justice.⁴ Among the factors which will favour an order (if grounds are made out) are the savings that will be achieved in time and cost to the parties, in judicial resources, and removing the risk of inconsistent decisions.⁵

• [25] I also note the objective of the High Court Rules is to secure the just, speedy and inexpensive determination of any proceeding (or interlocutory application).⁶

Discussion

• [26] I make two preliminary, related points. First, only the parties in CIV-2021-404-1717 participated in the hearing. CIV-2023-404-2444 had not progressed even to the stage of statements of defence. Secondly, a r 10.12 application must be determined on the basis of the pleaded issues. The Court on such an interlocutory application is not in a position to assess contested evidence.

• [27] Mr Hollyman KC, for Mr Xue, submitted that the threshold in r 10.12 was not met. He submitted that CIV-2021-404-1717 relates solely to the loan agreement and that preceding events are irrelevant. However, I consider that there is sufficient overlap between the two proceedings to meet the threshold. The circumstances and dealings between Mr Han and Mr Xue leading to the loan agreement are relevant given the claims and counterclaims. Although there is currently no overlap of defendants in the two proceedings,⁷ and I do not accept Ms Morrison’s submission that the two proceedings arise out of the same set of facts given the claims in CIV-2023-404-2444, I accept there are some common factual issues in the two proceedings – for example, the events that led to Mr Han’s acquisition and the amounts actually paid to Dyer

2. Aventis Pharma SA v Pharmaco (NZ) Ltd HC Auckland CIV-2010-404-001670, 3 November 2010 at [11].

³ Fairway Holdings Ltd v McCullagh [2019] NZCA 353 at [5].

4. At [6], citing Regan v Gill [2011] NZCA 607 at [10] approving Medlab Hamilton Ltd v Waikato District Health Board [2007] NZHC 1780; (2007) 18 PRNZ 517 (HC) at [8].

⁵ Medlab Hamilton Ltd v Waikato District Health Board [2007] NZHC 1780; (2007) 18 PRNZ 517 (HC) at [8].

⁶ High Court Rules 2016, r 1.2.

7. It was suggested that, depending on discovery, Mr Xue may be joined as a defendant in CIV-2023-404-2444.

Whitechurch. I also consider that, in terms of r 10.12(b), the rights to relief claimed arise out of the same series of events or the same series of transactions. The events of 2016/2017, including Mr Xue’s knowledge of them, provide important background to and context for the events of 2018. This overlap can be characterised as a series of events or transactions relating to the same development. I accept there is a sufficient common thread.

• [28] Even so, I declined to exercise my discretion to make an order that the two proceedings be heard together, or sequentially with CIV-2023-404-2444 heard first, and with evidence admissible in both proceedings (consolidation was not pursued).⁸ I make five points.

• [29] First, the factual overlap should not be overstated given the different claims against the new defendants in CIV-2023-404-2444 and the uncertainty as to any defences raised (accepting that the issues in CIV-2021-404-1717 include duress, misrepresentation, lack of consideration and whether money was advanced to repay the mortgage giving rise to Mr Xue’s loss).⁹ On the current statement of claim in CIV-2023-404-2444, I do not accept Mr Kirkland’s submission for Mrs Zhu that Mr Xue’s loss is the common spine in the two proceedings. Further, overlap is not created simply by saying there needs to be a determination in respect of who stole the money. As Mr Hollyman submitted, whether money was stolen does not arise in CIV-2021-404-1717. The allegations in CIV-2023-404-2444 are considerably broader. As Mr Hollyman characterised it, this new proceeding may be seen as an adjunct. This is most evident in paragraph 6.13 of the statement of claim where Mr Han pleads against the new defendants that he has suffered loss including if he is held liable under the agreements he signed under duress at the request of Mr Xue.

• [30] Secondly and relatedly, the risks of inconsistent findings as to Mr Xue’s loss or involvement in wrongdoing, and the risk of staggered appeals, are overstated.

8. Nor were the other alternatives mentioned in written submissions pursued, including that some causes of action be heard together (as in Callplus Ltd v Telecom New Zealand Ltd (2000) 15 PRNZ 14 (HC)) or that CIV-2023-404-2444 be heard first and findings on common issues apply to both.
9. I accept the plaintiffs could amend their pleading to clarify that they do not accept that the amounts pleaded were paid.

It cannot be assumed at this stage that Mr Xue will be joined as a defendant in CIV-2023-404-2444.

• [31] Thirdly, timing. Ms Morrison, for Mr Han, acknowledged it was regrettable that the orders sought require vacating the February fixture, but she submitted that an application to join additional defendants and amend the claim would have raised the same issues. That may be so but, in any event, delaying the determination of CIV-2021-404-1717 shortly before trial weighs against hearing the two proceedings together. Given that CIV-2023-404-2444 is at such an early stage, the delay in CIV-2021-404-1717 would be very substantial – likely two years. The plaintiffs brought confined proceedings under Part 18 in August 2021 in response to Mr Xue’s enforcement steps, and they obtained the February 2024 fixture in April 2022. The CIV-2023-404-2444 proceeding and this application were only filed on 18 October 2023. I acknowledge the delay in getting access to Dyer Whitechurch’s file – received on 18 May 2023 – but if, as submitted, Mr Xue contributed to this delay so as to suggest he does not want his involvement in the wrongdoing known prior to enforcing the loan agreement, that is further reason for the plaintiffs to have acted more quickly. In any event, Dyer Whitechurch’s non-party discovery was received nearly five months before the CIV-2023-404-2444 proceeding and this application were filed. I acknowledge there were changes in personnel at, and communication difficulties with, Mr Han’s previous lawyers but this does not adequately explain the further delay or Mr Han’s suggestion that he understood the wider dispute was already before the Court until he engaged Meredith Connell in September 2023.¹⁰

• [32] Next, at this early stage in CIV-2023-404-2444, significant efficiencies in time and cost of a single trial at a much later date cannot be assumed. Vacating the February trial would inevitably result in wasted costs (which I acknowledge could be awarded against the plaintiffs given their delay). It would also result in wasted Court time.

• [33] Finally, and overall, while the fair and just disposal of proceedings may well take precedence over the most efficient disposal, the prejudice to Mr Xue of vacating the scheduled trial of CIV-2021-404-1717 in February outweighs the prejudice to

¹⁰ Also, Mr Krasniqi was discharged from bankruptcy on 11 August 2023.

Mr Han and Mrs Zhu. At trial, they will be able to test Mr Xue’s knowledge of and involvement in the 2016/2017 events. They have obtained Dyer Whitechurch’s trust account ledger and, if necessary, could issue a subpoena to obtain further information at trial. I also record that despite the broadened scope of the February trial, no counsel suggested that the week allocated would be insufficient. Mr Xue is entitled to keep the February fixture.

• [34] Separately, I mention the plaintiff’s alternative suggestion of a stay. Rule 10.12 provides for a proceeding to be stayed whereas a stay of execution was also suggested. As Mr Hollyman submitted, that is premature but such a stay application would be open to the plaintiffs following an adverse judgment if there are grounds.

Result

• [35] The interlocutory application is dismissed.

• [36] Mr Xue is entitled to costs. If costs cannot be agreed, I will receive memoranda not exceeding three pages within 20 working days and determine costs on the papers.

Gault J

Solicitors / Counsel:

Ms K H Morrison, Ms N E Copeland and Mr B Zhou, Meredith Connell, Auckland Mr M B Kirkland, Barrister, Dunedin

Ms T Chan (second plaintiff’s instructing solicitor), Teresa Chan Law Ltd, Dunedin Mr R J Hollyman KC, Barrister, Auckland

Mr J A McMillan and Ms IFA Hawkins (defendant’s instructing solicitor), Dentons Kensington Swan, Auckland