Young and Another v Zhang

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeCourtney J
Judgment Date21 December 2017
Neutral Citation[2017] NZCA 622
Date21 December 2017
Docket NumberCA646/2016

[2017] NZCA 622

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Kós P, Courtney and Toogood JJ

CA646/2016

Between
Jinyue Young
Appellant
and
Hsiang-Fen Ying
Second Appellant

and

Zie Zhang
Respondent
Counsel:

Appellants in Person

No appearance for Respondent

Civil Procedure — Appeal against a High Court decision which refused to set aside a consent order and imposed for contempt of court on the second appellant in breaching court orders — second appellant director of company in failed sale agreement — aiding and abetting a company to breach Court orders

Held: Litigants who claimed to have been ill and exhausted when they executed a legal document did not have to call independent evidence to prove that. In the absence of such evidence, they were reliant on whether the judge accepted their account. That assessment was a matter for the Judge and there were no grounds to interfere with it. The settlement terms were sufficiently clear that Y and JY could reasonably have been expected to have understood them. There was no basis on which to impugn the settlement agreement and therefore no grounds on which to reopen issues relating to the underlying sale and purchase agreement.

The terms of the consent order were completely clear, it was not open to a party charged with contempt to assert that the order was invalid. Y's argument that she was not in contempt because she had not been served with the sealed consent order was untenable. As a matter of law, orders were effective from the time they were made and Y had notice of the consent order. However, the consent order bound only KDIL. Y was not a party to the proceeding when the consent order was made, but because Y's actions caused had KDIL to breach the consent order she still committed a contempt. A person who aided and abetted the breach of a court order was guilty of criminal contempt (even though the principal contemnor would be guilty of civil contempt). That included a director not bound by an order against the company. Although the HC had erroneously treated Y's conduct as a civil contempt, the finding of contempt was necessarily of criminal contempt.

Y had not been warned of the risk of self-incrimination as required by s62(1) Evidence Act 2006 (“EA”) (claiming privilege against self-incrimination in court proceedings). The remedy under s30 EA (improperly obtained evidence) only applied to criminal proceedings. The proceedings in which the finding of contempt was made were civil proceedings. Y had deliberately sold the property to another purchaser prevent KDIL from complying with the consent order. Whether her intention was to flout the consent order or simply protect KDIL's assets does not matter. Y's contempt was the single act of procuring the sale to the other party. Her other conduct, such as the liquidation of KDIL, was not a direct breach of the consent order. A fine of $7,500 was appropriate.

The appeal against the refusal to set aside the consent order was dismissed. The appeal against the finding of contempt was dismissed. The appeal against the penalty imposed was allowed. The penalty was quashed and a fine of $7,500 substituted.

  • A The application for leave to adduce further evidence is declined.

  • B The appeal against the refusal to set aside the consent order is dismissed.

  • C The appeal against the finding of contempt is dismissed.

  • D The appeal against the penalty is allowed. The penalty is quashed and a fine of $7,500 substituted.

  • E There is no order for costs.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Courtney J)

Introduction
1

This appeal has its origins in a sale and purchase agreement that failed to settle. The vendor was King David Investments Ltd (KDIL), of which the second appellant, Ms Ying, was the sole director and shareholder. The purchaser was the respondent, Ms Zhang. The dispute was eventually settled and the terms of settlement recorded in a settlement agreement. The agreement required a consent order, which Duffy J made in a minute of 5 July 2016. The consent order required KDIL to transfer the property to Ms Zhang. Ms Ying and her husband, Mr Young, applied to set aside the consent order. By the time their application was heard KDIL had sold the property to a third party and was in liquidation.

2

In the decision presently under appeal, Palmer J refused to set aside the consent order and imposed on Ms Ying a fine of $10,000 for contempt of court in breaching court orders. 1 Mr Young and Ms Ying appeal. The grounds of appeal against Palmer J's refusal to set aside the consent order are that the Judge erred in:

  • (a) disregarding the evidence that Ms Ying and Mr Young were affected by illness and exhaustion when they signed the settlement agreement;

  • (b) rejecting their evidence as to their misunderstanding of the settlement agreement; and

  • (c) treating their original defences to the claim for specific performance as having been superseded by the settlement agreement/consent order.

3

Ms Ying's grounds of appeal against Palmer J's finding of contempt and imposition of a fine are that:

  • (a) Ms Ying was not bound by the order until she had been served with the sealed order and, had she been served with the order promptly, KDIL would not have sold the Hoteo Avenue property when it did;

  • (b) the order was ambiguous; and

  • (c) the penalty was inappropriate.

Background
4

KDIL owned a residential property in Hoteo Avenue, Papatoetoe. It was subject to a mortgage in favour of Hong Kong Shanghai Banking Corporation Ltd (HSBC) as partial security for a loan of $880,000. On 14 April 2013 Ms Ying signed an agreement for sale and purchase under which KDIL agreed to sell the Hoteo Avenue property to Ms Zhang (the agreement). Mr Young also signed the agreement, although he was not a director of KDIL.

5

Ms Ying and Mr Young regretted the decision to sell the Hoteo Avenue property and attempted to extract KDIL from the agreement. They maintain that KDIL subsequently offered to settle the sale but Ms Zhang failed to perform. That account seems unlikely because Ms Zhang eventually issued proceedings against KDIL for specific performance and against Mr Young for damages for interfering in the contract between her and KDIL. Ms Ying was not named as a party to that proceeding.

6

KDIL was represented in the proceedings by Mr Duckworth. Mr Young, who is a practising solicitor, was unrepresented. The trial commenced on 4 July 2016. At the end of the first day Mr Duckworth was pessimistic. That night Ms Ying gave him written instructions as to the terms on which KDIL was prepared to settle, namely that it would perform the sale and purchase agreement but Ms Zhang had to pay penalty interest under the agreement and that each party would pay their own legal fees.

7

The next day there were settlement negotiations which resulted in the parties signing a handwritten settlement agreement prepared by Ms Zhang's lawyer under which:

  • (a) KDIL would transfer the Hoteo Avenue property to Ms Zhang by 13 September 2016;

  • (b) KDIL would pay Ms Zhang $220,000 by way of set-off from the purchase price; and

  • (c) costs would lie where they fell.

The overall effect of the agreement was that KDIL would transfer the property in return for a net payment of $149,000 (already having received a deposit of $30,000). These terms were recorded in the consent order.

8

For reasons that are not clear, Ms Zhang did not serve the sealed consent order on KDIL until 22 September 2016. Ms Ying and Mr Young ascribed some significance to this but, as we come to later, it is immaterial.

9

In the months following the making of the consent order Ms Ying and Mr Young tried unsuccessfully to extract KDIL from the settlement agreement. They variously asserted that they had signed the settlement agreement in a state of illness and exhaustion, had not properly appreciated the contents of it, had been pressured, that the interpreter present had not accurately translated the document and that the terms of the agreement were not what they had agreed to. Ms Zhang did not accept that there was any ground on which to release KDIL from the agreement.

10

On 12 July 2016 Mr Young and Ms Ying requested that the Chief High Court Judge arrange for their signatures to be withdrawn from the agreement and to continue the hearing. The Chief High Court Judge advised he could not do so.

11

KDIL then took steps to divest itself of another property it owned, this one in Wintere Road, Papatoetoe. On 19 July 2016 it gifted that property to Ms Ying's and Mr Young's children. They, in turn, agreed to sell the property to a third party. Settlement was to be 10 October 2016.

12

On 25 July 2016 Mr Young and KDIL applied to set aside the consent order. The application was not properly filed and so not acted on by the court.

13

On 26 July 2016 KDIL applied for an order that the caveat initially lodged by Ms Zhang over the Hoteo Avenue property lapse. Ms Zhang, inexplicably, took no steps to oppose the application and the caveat lapsed.

14

Having heard nothing in relation to the application to set aside the judgment, Mr Young and KDIL filed an appeal against the consent order. In a minute dated 29 August 2016 this Court advised that it did not have jurisdiction to consider the appeal and that the proper course was to apply to set the order aside. 2

15

The following day, 30 August 2016, KDIL sold the property to Topcut Property Ltd, a bona fide purchaser for value without notice of Ms Zhang's interest. The purchase price was $655,000 and the settlement date was 12 September 2016, the day before KDIL was required by the consent order to transfer the property to Ms Zhang. KDIL settled the sale to Topcut on 12 September 2016 and applied the proceeds to reduce the loan secured by way of the mortgage in favour of HSBC. On 13 September 2016 Ms Zhang's lawyer sent a notice to settle.

16

On 11...

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