Yang v Chen

• Jurisdiction: New Zealand
• Judge: ALLAN J
• Judgment Date: 01 May 2012
• Neutral Citation: [2012] NZHC 848
• Docket Number: CIV 2007-404-1751
• Court: High Court
• Date: 01 May 2012

Between

Limin Yang and Liu (Jasmine) Yang

Plaintiffs

and

Paul (Yu Po) Chen

Defendant

Between

Dacha International Limited

Plaintiffs

And

Rotorua International Villas Limited

Plaintiffs

And

Top International Limited

Plaintiffs

and

Paul (Yu Po) Chen

First Defendant

And

Heard Park Limited

Second Defendant

And

Choon Khiaw Chin

Third Defendant

[2012] NZHC 848

CIV 2007-404-1751

CIV 2008-404-4287

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application for imposition of contempt penalties — defendant transferred assets and derived benefits of sale proceeds in breach of court orders — Court held defendant to be in contempt — defendant not in New Zealand for the past two years — had instructed counsel previously and gave evidence — however, presently not represented by counsel — whether the court had jurisdiction to impose sanction when contemnor not in jurisdiction — whether contemnor had notice of the court's orders — what was the appropriate level of penalty to be awarded.

Counsel:

P J McPherson and G J Luen for plaintiffs

No appearance for defendants

JUDGMENT NO.7 OF ALLAN J

1 In my judgment No.5. given on 3 October 2011, I held Mr Chen to have been in contempt of certain interlocutory orders of the Court. 1 I directed that if the plaintiffs wished to proceed to a penalty hearing, then their counsel was to seek an appropriate fixture.

2 Prior to delivery of judgment No.5, but after the argument was concluded, the Court was advised that Mr Hucker no longer has instructions from Mr Chen, and he was accordingly granted leave to withdraw. Thereafter, Mr Chen has remained unrepresented.

3 On 2 November 2011, the plaintiffs by their solicitors having advised the Court that they wished to proceed to a penalty hearing, I directed that they file and serve a synopsis of submissions in support of the suggested penalties on or before 16 November 2011. Such submissions were duly filed. I directed also that any synopsis of submissions in opposition was to be filed and served on or before 30 November 2011. I indicated that, if there were no submissions in opposition, I would issue a penalty decision without a further hearing.

4 Mr Chen has not filed any submissions in opposition. The Court is told he has been in China since early 2010 at the latest. He gave his evidence in the substantive trial of these proceedings by way of videolink from Beijing. I am satisfied that he proposes to take no further part in the proceeding. He has been adjudicated bankrupt here and there is nothing to suggest that he will return to New Zealand in the foreseeable future.

5 I therefore deal with the plaintiffs' application for the imposition of the contempt penalties on the papers. But I direct that a copy of this judgment be e- mailed to each address to which previous documents in the proceeding have been sent, namely paulyupochen@gmail.com, Queen City Law, Auckland: marcus@queencitylaw.co.nz and luckymachee@gmail.com.

Background

6 By way of brief background, it is convenient to reproduce part of the procedural history recorded in my judgment No.5:

[2] This complex litigation went to trial in 2010. In my judgment No.2, delivered on 5 October 2010, I set out the factual background and the issues in the case in some detail. It is unnecessary to repeat now what I said then. But a brief explanation is required in order to place the present applications in their proper context.

[3] In 2003, Mr and Mrs Chen established a personal and business relationship with Ms Yang, and her husband Mr Liu. Because Mr Liu was based predominantly in China, it fell to Ms Yang, who lived in New Zealand, to liaise with the Chens (but particularly Mr Chen) in the course of carrying forward certain joint business activities. Mr Chen became a director of certain companies in which Ms Yang (and for a time Jasmine) were shareholders. Regrettably a dispute arose between the Chens on the one hand, and Ms Yang and Mr Liu on the other.

[4] The Chens considered that in the course of various joint projects entered into by Mr Lui and Mr Chen, the latter had become beneficially entitled to certain shares and assets hitherto owned by Ms Yang, or companies in which she was the shareholder. Thereafter, Mr Chen dealt with certain assets on the basis that they were effectively owned by him.

[5] All of this was extensively canvassed during a long trial which commenced on 26 April 2010 and concluded on 18 June 2010. In my judgment of 5 October 2010, I upheld the claim of Limin and Jasmine Yang, finding that, notwithstanding Mr Chen's claim to be entitled to act as he did, the shares and assets concerned remained the beneficial property of the plaintiffs. I held also that Mr Chen had never been a beneficial owner of the shares, and that he held them in trust for the plaintiffs.

[6] At a relatively early stage of the litigation, the plaintiffs' solicitors obtained by consent a Mareva order, restraining Mr Chen from dealing with the assets of certain companies, pending further order of the Court.

[7] In reliance on information subsequently obtained, both during the interlocutory stages of the proceedings and at trial, Ms Yang now contends that Mr Chen dealt with certain Rotorua properties in breach of the Mareva injunction and that he is accordingly in contempt of court. Ms Yang seeks a declaration to that effect on the footing that an appropriate penalty be determined following a further hearing. There are similar allegations about the circumstances in which a mortgage over an Auckland building owned by Top International Ltd (Top International) was discharged, and separately, as to the adequacy of Mr Chen's disclosure of certain bank accounts.

7 At [80] of my judgment No.5, I found Mr Chen to have been in contempt of Court in respect of the following matters:

• (a) Failing to take any or any sufficient steps to prevent the transfer to his mother in law of the Rotorua properties owned by the second plaintiff, following the making of the consent freezing order on 4 April 2007;

• (b) Subsequently procuring the sale of the Kiwi Hotel and applying the net proceeds of sale for his own benefit, contrary to the terms of the freezing order of 4 April 2007;

• (c) Authorising, or failing to prevent, the application of part of the proceeds of the sale of the Greys Avenue property owned by Top International in favour of Heard Park Ltd;

• (d) Failing to ensure that Heard Park Ltd accounted to Top International for the amount of the term deposit set up with Westpac, utilising part of the proceeds of sale of the Greys Avenue property;

• (e) Failing to comply with the terms of the freezing order of 4 April 2007 by omitting to disclose particulars of the bank accounts referred to at [67] above;

8 In order to gain a complete appreciation of the relevant factual matrix, it is necessary to read Judgment No.2 and Judge No.5 together. However, in summary, the contempt findings relate to three separate matters. The first concerns Mr Chen's dealings with certain Rotorua properties owned by the second plaintiff. The properties included a hotel and a number of residential properties. On 4 April 2007, a consent freezing order was made in respect of the assets of Top International Ltd, Rotorua International Villas Ltd and Dacha International Ltd. Mr Chen knew of the freezing order. He had instructed his counsel to consent to it.

9 At the time at which the order was made, Mr Chen had taken steps to procure the transfer of certain assets out of the name of Rotorua International Villas Ltd, into the name of his mother-in-law.

10 The findings of contempt in [80](a) and (b) of my judgment No.5 related to Mr Chen's failure to prevent further steps being taken to perfect these transfers.

11 The second group of contempt findings recorded at [80](c) and (d) relates to a completely different transaction; namely the sale by Top International Ltd of a commercial property at Greys Avenue, Auckland. To enable that sale to occur, the freezing order of 4 April 2007 was varied by consent on 16 May 2007, by providing that the net proceeds of sale should be paid into the trust account of a named firm of solicitors and held pending further order of the Court. The solicitors concerned had been instructed by or on behalf of Mr Chen. I held in Judgment No.5 that, contrary to the terms of the varied freezing order, $200,000 derived from the sale proceeds was placed on term deposit in the name of Heard Park Ltd, an investment company controlled by Mr Chen. Subsequently, the term deposit was broken and the proceeds were paid to the cheque account of Heard Park Ltd, and applied by that company for the benefit of Mr Chen or his interests.

12 The third contempt finding recorded in [80](e) of my Judgment No.5, is concerned with Mr Chen's failure, when providing an affidavit disclosing his bank accounts, to reveal all of the relevant accounts. In [67] of my Judgment No.2, I found that three particular accounts were not disclosed at the time. They included an ANZ bank account in the name of Rotorua International Villas Ltd, from which $1,555,116.76 was withdrawn on 5 April 2007, the day after the initial freezing order.

Jurisdiction

13 The Judicature Act 1908 confers on the Court power to impose sanctions upon those who fail to comply with or wilfully breach its orders. Section 56C of that Act provides:

56C Contempt of Court

• (1) If any person—

  • (a) Assaults, threatens, intimidates, or wilfully insults a Judge, or any Registrar, or any officer of the Court, or any juror, or any witness, during his sitting or attendance in Court, or in going to or returning from the Court; or

  • (b) Wilfully interrupts or obstructs the proceedings of the Court or otherwise misbehaves in Court; or

  • (c) Wilfully and without lawful excuse disobeys any order or direction of the Court in the course of the hearing of any proceedings— any constable or officer of the Court, with or...