He v Chen [2023] NZHC 119 (17 February 2023)

Last Updated: 25 May 2023

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

CIV-2014-404-003369 [2023] NZHC 119

BETWEEN	YAO WEI HE Plaintiff
AND	ZHIXIONG CHEN Defendant

Hearing:	14 November 2022
Appearances:	Plaintiff in Person C Jiang for the Defendant
Judgment:	17 February 2023

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 17 February 2023 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Tompkins Wake, Auckland

HE v CHEN [2023] NZHC 119 [17 February 2023]

Introduction

[1] Mr He and Mr Chen have been entangled in a dispute since 2012 arising out of the collapse of an export business that sold goods from New Zealand to China.

[2] This proceeding was brought by Mr He on 23 December 2014. It has been through a series of procedural twists and turns and was due to be heard on 9 May 2022 until the trial was vacated on Mr He’s application. It is now set down for trial in February 2024.

[3] Mr Chen seeks to strike out Mr He’s claims for want of prosecution under r 15.2 of the High Court Rules 2016. Alternatively, under r 15.1, because there are no arguable causes of action and/or the proceeding is an abuse of process.

[4] The central issue is whether justice can be done after the considerable time that has elapsed since the events in question and with incomplete documentary evidence.

Background and prior litigation

[5] In approximately 2010 Mr He and Mr Chen established an export business venture. To implement the venture, they incorporated a company called New Zealand Products International Ltd (NZPIL). Mr Chen and Mr Chen’s son (Mr Chen Jnr) were directors. The company ceased trading in 2012 and was placed into liquidation by the Court on 22 May 2014. The Official Assignee was appointed as liquidator.

[6] Not long before the company was put into liquidation, the Court of Appeal dealt with an application by Mr He to bring a derivative action in the company's name under s 165 of the Companies Act 1993 (Act) against the Chens. It is helpful to set out the Court’s description of the background:¹

Background

[2] NZPIL was incorporated on 18 June 2010. Mr He and Mr Chen Jnr are its de jure directors. Mr He and his wife hold 50 per cent of the shares in NZPIL. The balance 50 per cent of the shares are held by the Chen interests through a trustee company and Mr Chen Jnr and his wife.

¹ He v Chen [2014] NZCA 153 [2014 Court of Appeal judgment].

[3] Prior to the incorporation of NZPIL Mr He carried on a business which involved the purchase of New Zealand made dairy and health supplements in retail stores in New Zealand and the export of them for sale into Hong Kong and China through Mr He's contacts in those markets.

[4] Mr He and Mr Chen Snr were known to each other. Mr He says that Mr Chen Snr suggested that they establish a commercial joint venture (CJV) to exploit the opportunity identified by Mr He. Mr Chen Snr proposed that he provide finance to increase the scale of the operation. Mr He says that Mr Chen Snr suggested that his son, Mr Chen Jnr, be a director and the Chen interests would hold 50 per cent of the shares in the joint venture company. Mr He agreed. NZPIL was incorporated to give effect to that agreement.

[5] Mr He says that Mr Chen Snr then advanced sums totalling $300,000 to him for the purposes of the CJV. Mr Chen Snr does not agree. He says that the $300,000 advanced to Mr He was a personal loan, which Mr He is liable for.

[6] Mr He says Mr Chen Snr also convinced him to take a minority shareholding in another company, Hong Kong Dairy International Limited (HKDIL), on the basis that company would be used to expand the business to include sales of New Zealand seafood and wine through Mr Chen's Snr's contacts in Hong Kong. HKDIL was incorporated in Hong Kong. Mr He says that from February 2011 onwards, Mr Chen Snr required all NZPIL's exports to be sold to HKDIL for distribution.

[7] Mr He alleges that Mr Chen Snr has breached the terms of the CJV in a number of ways. Of particular relevance for present purposes is Mr He's allegation that, while he was in Hong Kong between 19 December 2011 and 26 February 2012, he discovered that Mr Chen Snr had been operating a business in competition to NZPIL. Mr He says that, unknown to him, Mr Chen Snr had been operating the same business as NZPIL and HKDIL and storing the product at two of HKDIL's three warehouses in Hong Kong.

[8] Further, when Mr He accessed NZPIL's bank accounts on 6 February 2012 the accounts disclosed that the Chens had transferred almost all of NZPIL's receipts to themselves, including a GST refund of in excess of

$370,000 on 13 January 2012. Mr He says on learning that he transferred

$80,000 out of an account of NZPIL's to his own personal account.

[9] Mr He also says that Mr Chen Snr incorporated a further Hong Kong company, New Zealand Milk Powder Limited (NZMPL) at about this time (in January 2012). He also refers to a further company incorporated by Mr Chen Snr in New Zealand, Dairy New Zealand International Ltd, although no specific allegations are made concerning that entity.

[10] Unsurprisingly, the relationship between the parties has broken down entirely. Mr He threatened to take proceedings against Mr Chen Snr in October 2012, but ultimately brought the application for leave to bring a derivative action in the name of NZPIL against both Mr Chen Snr and Mr Chen Jnr.

[11] NZPIL is no longer trading. Mr Chen Jnr has applied for it to be placed in liquidation. Mr He opposes its liquidation.

[7] Mr Chen issued proceedings on 14 September 2012 against Mr He for recovery of the $300,000 (the debt proceeding). The proceeding was eventually heard in the High Court in 2015.² Mr Chen successfully established that Mr He was indebted to him personally for $300,000. Moore J rejected Mr He’s defence that the advance was in fact made on a trust-related basis to NZPIL. His Honour’s decision was upheld on appeal.³

[8] As noted, Mr He sought leave to bring a derivative action in NZPIL’s name as the basis for a counterclaim against Mr Chen. This Court refused to grant the leave he sought.⁴ He appealed unsuccessfully to the Court of Appeal.

[9] On 22 March 2017, Mr Chen served a bankruptcy notice on Mr He based on the debt proceeding judgment. Mr He brought an application to set aside the bankruptcy notice, which was struck out.⁵

[10] By this stage Mr He was self-represented. He filed a long and convoluted amended statement of claim on 14 March 2017.

[11] In May 2017, Mr He applied to consolidate this proceeding with the bankruptcy proceeding. That application was declined by Brewer J on 15 June 2017.⁶

[12] Mr He also applied for without notice freezing orders in this proceeding. This application was dismissed by Toogood J on 15 August 2017.⁷ On 8 September 2017,

Mr He sought a stay of Toogood J’s judgment. That application was dismissed.⁸

[13] In November 2017, Mr He, who had previously paid security for costs of

$10,000, agreed to pay an additional sum of $20,000 as security for steps up to and including inspection of discovery. He asked to be given until 30 April 2018 to pay the additional security. Consent orders followed, including an order that Mr Chen was not

² Chen v He [2015] NZHC 1593 [2015 High Court judgment].

³ He v Chen [2016] NZCA 340 [2016 Court of Appeal judgment].

⁴ Chen v He [2013] NZHC 2033 [2013 High Court judgment].

⁵ He v Chen [2017] NZHC 1933 [2017 High Court judgment].

⁶ He v Chen HC Auckland CIV-2014-404-3369, 15 June 2017 (Minute of Brewer J).

⁷ 2017 High Court judgment, above n 5.

⁸ He v Chen HC Auckland CIV-2014-404-3369, 14 September 2017 (Minute No 2 of Toogood J).

required to take any further steps until Mr He had paid the additional security for costs.⁹

[14] Mr He later paid the judgment sum in the debt proceeding, bringing the bankruptcy proceedings to an end.

[15] On 19 November 2018, Mr Chen applied for summary judgment or an order striking out Mr He’s first amended statement of claim. On 12 February 2019, Mr He filed a second amended statement of claim in response to Mr Chen’s application. It was substantially the same as the first amended statement of claim.

[16] In a judgment reissued on 30 October 2019, Associate Judge Sargisson declined to order summary judgment or strike-out but, holding that Mr He’s statement of claim was unacceptably prolix, gave Mr He a final opportunity to re-plead by 22 November 2019. After successfully seeking an extension of time to 28 February 2020, Mr He, who by then had engaged legal counsel, filed a second amended statement of claim on 28 February 2020.¹⁰ Following negotiations between counsel, Mr He agreed to file a third amended statement of claim on 21 December 2020, removing aspects that had already been determined or were time- barred.

[17] A two week trial was scheduled to begin on 9 May 2022. However, on 15 March 2022, Mr He filed a notice of change of representation, again becoming self- represented. Mr He applied for an adjournment of the trial, and on 28 April 2022 the trial was vacated by Lang J. A new trial is set down for February 2024.

Mr He’s claims11

[18] Mr He’s first cause of action against Mr Chen is for breach of their alleged joint venture agreement, including by taking more than 50% of the profits from the

9. He v Chen HC Auckland CIV-2014-404-3369, 23 November 2017, (Minute of Associate Judge Doogue).

¹⁰ This was in fact the third amended statement of claim but is described as the “second amended statement of claim”, apparently disregarding the statement of claim Mr He prepared and filed himself on 12 February 2019. I adopt that description.

¹¹ Third Amended Statement of Claim dated 21 December 2020.

joint venture, not acting in its best interests, and competing with the joint venture. Mr He contends that Mr Chen has misappropriated around $1.7 million from the bank accounts of NZPIL and further sums in stock. Mr He attaches a schedule to his statement of claim which comprises his analysis of the Chens’ advances to and withdrawals from NZPIL.

[19] His second and third causes of action are for breach of fiduciary duty and money had and received, by establishing Dairy New Zealand International Ltd (DNZIL) and HK Milk Powder Limited (HKMPL), and operating those companies in competition with NZPIL and the joint venture.

[20] In relation to these three causes of action Mr He seeks a “taking of account” of the financial activities of the joint venture, Mr Chen and “his agents”.

[21] The fourth cause of action reframes the same allegations against Mr Chen as oppressive, unfairly discriminatory, or unfairly prejudicial behaviour in breach of s 174 of the Act. Mr He seeks compensation under s 174(2)(b) of the Act.

[22] The fifth cause of action is for breach of trust and concerns a separate transaction. Mr He alleges that in August 2007 he and Mr Chen agreed that Mr He would invest HKD 800,000 with Mr Chen in Hong Kong for five years, that Mr Chen would pay Mr He a commission on land sales in Hong Kong and China, and Mr He would allow Mr Chen to open a bank account in Mr He’s name in Hong Kong. Mr He claims that in September 2007 he transferred HKD 800,000 into an account under his name, controlled by Mr Chen’s niece. He says that aside from receiving the sum of CNY 50,000 for the expenses of the joint venture, no investment funds have been returned to him.

Legal principles

Dismissal for want of prosecution – r 15.2

[23] Under rule 15.2 of the High Court Rules 2016, an opposite party may apply to have all or part of a proceeding dismissed or stayed, and the court may make such

order as it thinks just if the plaintiff fails to prosecute all or part of the plaintiff’s proceeding to trial and judgment.¹² The defendant must show that:¹³

(a) the plaintiff has been guilty of inordinate delay;

(b) the plaintiff’s delay is inexcusable;

(c) the delay has seriously prejudiced the defendant.

[24] The overriding consideration is always whether justice can be done at trial despite the delay.¹⁴

[25] In relation to the first factor of “inordinate delay”:

(a) This expression means “...a period of time which [has] elapsed which [is] materially longer than the time which was usually regarded by the Courts and the profession as ... acceptable.”¹⁵

(b) Delay prior to commencement of proceedings, by itself, cannot constitute inordinate and inexcusable delay. However, further delay after commencement of proceedings will be looked at more critically and will more readily be regarded as inordinate and inexcusable than if the proceeding had been commenced earlier.¹⁶

(c) The defendant must show prejudice caused by the post commencement delay.

¹² High Court Rules 2016, r 15.2

13. Lovie v Medical Assurance Soc NZ Ltd [1992] 2 NZLR 244 (HC) at 248 citing NZ Industrial Gases Ltd v Andersons Ltd [1970] NZLR 58.
14. Fitzgerald v Beattie [1976] 1 NZLR 265(CA) at 269 at 268; and CC v Giltrap City Ltd [1997] NZCA 330; (1997) 11 PRNZ 573 (CA) at 579.

¹⁵ Tabata v Hetherington [1983] TLR 764 (CA); and Robert Osborne (ed) McGechan on Procedure

(online ed, Thomson Reuters) at [HR15.2.02(1)].

¹⁶ Lovie v Medical Assurance Soc NZ Ltd [1992] 2 NZLR 244 at 253.

[26] In relation to the second factor, significant delays should always be explained fully. This is because “until a credible excuse is made out”, the natural inference will be that delay is inexcusable.¹⁷

[27] In terms of the third factor, the Courts have held that in most (if not all) cases some prejudice results from the mere passage of time, dimming of memories, or physical change.¹⁸ Generally, the Court looks for something more and has found particular prejudice in the following circumstances:

(a) there are no or incomplete records, where there will be a high degree of reliance on oral testimony;¹⁹ or

(b) where witnesses are no longer available and their oral evidence is of significance;²⁰ or

(c) distress and worry to a defendant from the prospect of the proceedings hanging over their head for an inordinate time.²¹

[28] In terms of the consideration of overall justice, all factors, including pre-issue prejudice and delay, are relevant to that assessment.

No arguable claim and/or abuse of process – r 15.1

[29] The established jurisprudence for strike-out on the basis of no arguable cause of action includes:²²

¹⁷ Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229, at 268; [1968] 1 All ER 543 (CA) at 561.

¹⁸ NZ Industrial Gases Ltd v Andersons Ltd [1970] NZLR 58 (CA) at 63.

¹⁹ Scottwood Charitable Trust v Bank of New Zealand (2001) 15 PRNZ 534 at 542 where bank records were no longer available; and Phillips v Dacre HC Christchurch CP317/91, 6 March 1996 at 7.

²⁰ R H & P L Papps Ltd v Amity Inns Ltd HC Christchurch, CP295/91, 19 September 1997 at 7.

²¹ Braniff v Fernyhough HC Wellington CP502/85, 8 May 1991 at 13–14.

²² A-G v Prince [1998] 1 NZLR 262, (1997) 16 FRNZ 258, [1998] NZFLR 145(CA) at 267; endorsed

by the Supreme Court in Couch v A-G [2008] NZSC 45 at [33].

(a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.

(b) The cause of action or defence must be clearly untenable.

(c) The jurisdiction is to be exercised sparingly, and only in clear cases.

(d) The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.

(e) The Court should be particularly slow to strike out a claim in any developing area of the law, particularly where a duty of care is alleged in a new situation.

Should the proceeding be dismissed for want of prosecution?

[30] Mr Chen submits that Mr He has been responsible for multiple delays in the proceeding. These delays include failing to serve his briefs of evidence in accordance with timetable directions, resulting in the May 2022 fixture being vacated. Mr Chen submits that Mr He’s reasons for the adjournment are inexcusable, given he had over a year to prepare for trial.

[31] Mr Chen emphasises that when the matter goes to trial in February 2024, the proceeding will have been on foot for more than nine years, and the evidence at trial will relate to events that occurred between 12 and 17 years prior. He submits that this period is significantly longer than the time which is usually regarded by the courts and the profession as an acceptable period of time.

[32] Mr Chen acknowledges that where practical and pragmatic, he agreed to adjournments and sought to deal with matters by consent and with reference to realistic timeframes. However, he submits that Mr He is responsible for most of the delays in this proceeding, and most recently, loss of the trial fixture.

[33] Mr Chen submits that he is seriously prejudiced by Mr He’s delay, due to the stress and worry generated by the proceeding and his ability, based on the available evidence, to negate Mr He’s allegations.

[34] Mr Chen points out that the events which are the subject of the current proceeding range from 2007 to early 2012. Mr He relies on the following:

(a) oral conversations with Mr Chen in 2007, in relation to an “investment” agreement;²³

(b) oral conversations with Mr Chen from April to the end of June in 2010, which allegedly gave rise to the joint venture agreement;²⁴

(c) oral conversations in January, February and October 2011;²⁵ and

(d) events relating to the termination of the alleged joint venture occurring in early 2012.²⁶

[35] Further, Mr Chen submits that Mr He’s delay means that the documentation for the accounting exercise Mr He seeks is unavailable. NZPIL’s financial and accounting records were not retrieved from NZPIL’s former accountants and the Official Assignee until 2021. He submits that the minimal records handed over will not enable either Mr He to prove his case, Mr Chen to disprove Mr He’s allegations, or for the Court to order a “taking of account of the financial activities” of the joint venture.

[36] More specifically, Mr Chen argues that it is not possible to establish or verify the amount and nature of payments Mr He, Mr Chen, or Mr Chen’s alleged agents respectively advanced to NZPIL (including making purchases for NZPIL, or making payments for NZPIL), transfers from NZPIL back to those same parties, or amounts

²³ Third Amended Statement of Claim, above n 11 at [82]–[84].

²⁴ Third Amended Statement of Claim, above n 11 at [19]–[25].

²⁵ Third Amended Statement of Claim, above n 11 at [42], [45] and [51]–[53].

²⁶ Third Amended Statement of Claim, above n 11 at [59]–[62].

available for distribution to Mr He and Mr Chen Jr following the liquidation of NZPIL or termination of the allegation joint venture.

[37] Further, Mr Chen submits that because Mr He has failed to seek discovery from HKDIL, or the companies that allegedly competed with NZPIL, it is unlikely, given the passage of time that the documents will still exist.

[38] In relation to the fifth cause of action, Mr He’s alleged investment of HKD 799,000 in 2007, Mr Chen submits that Mr He has failed to disclose the full bank statements for the account into which the investment funds were paid.

[39] Mr Chen also submits that several of the conversations and events Mr He alleges involved witnesses who are now based overseas. He says that it is unclear whether they will be available or willing to give evidence at the February 2024 trial. Furthermore, the events involved are over a decade ago, and the witnesses’ memories will more than likely have dimmed.

[40] Finally, Mr Chen says that it is inexplicable why Mr He has chosen not to pursue Mr Chen Jr, his co-director at NZPIL, or Mr Chen’s alleged agents. He says any such claims are now time-barred.

[41] In summary, Mr Chen submits that because of Mr He’s inexcusable delay, the quality of evidence has deteriorated to the point that it is beyond the capacity of the judicial system to decide the case fairly.²⁷

[42] In response, Mr He submits that all his requests for extensions and adjournments have been properly sought and granted by the Court or consented to. He points out that he has never had an ‘unless order’ issued against him by the Court. He submits that Mr Chen has contributed to the delays, including by applying to strike out his brief of evidence and first amended statement of claim, opposing his application for leave to bring a derivative action, and opposing his application to have the debt proceeding consolidated with this proceeding. He submits that he explained

²⁷ Scottwood Charitable Trust v Bank of New Zealand (2001) 15 PRNZ 534 at [37].

his reasons for requiring an adjournment of the 2022 trial in his memorandum to the Court on that occasion.

[43] Critically, Mr He contends that there is sufficient documentation to enable the reconciliation exercise he seeks in relation to NZPIL’s financial position. He states that in addition to the documents he has discovered in this proceeding, he provided additional evidence in the common bundle in relation to the debt proceeding. He maintains that NZPIL’s bank statements and other documents, together with NZPIL’s financial statements, are sufficient to enable the Court to determine his claim that the Chens misappropriated NZPIL’s funds.

Has there been inexcusable delay?

[44] Undoubtedly this proceeding has suffered from extreme delay. A range of factors have contributed to this delay, most materially Mr He’s decision to represent himself at various stages, rather than engage and retain legal counsel. As a result, the proceedings were underway for six years before a compliant statement of claim was filed. Furthermore, Mr He has taken ill-advised procedural steps which have prolonged the proceeding.

[45] Having said that, I note that Mr He’s delay in issuing the current proceedings is explained by the fact that he initially sought leave to bring derivative proceedings on behalf of NZPIL. This was not an entirely unmeritorious course of action. The Court of Appeal found that there was "sufficient evidence to support an arguable claim against Mr Chen Snr for breach of the fiduciary duty he owed NZPIL."²⁸ Ultimately, the Court concluded that the appropriate way for identified company claims to be advanced was through the liquidation process.

[46] Having failed to secure leave to bring derivative proceedings, Mr He commenced this proceeding in December 2014. However, it appears the proceeding did not progress because of the debt proceeding, subsequent appeals of that proceeding, and the ensuing bankruptcy proceeding.

²⁸ 2014 Court of Appeal judgment, above n 1 at [38].

[47] Very little progress was made through 2016 due to adjournments of case management conferences at Mr He’s request while he sought first to engage new counsel and second due to illness of his appointed counsel. However, consent orders were made as a result of a case management conference in November 2016, which provided for discovery by December 2016.

[48] The proceeding appears to have gone off track when Mr He filed a 55 page, non-compliant first amended statement of claim in March 2017. This led to a further requirement for security for costs by Mr Chen and his application for summary judgment or to strike out the statement of claim. Over three years was lost before an acceptable statement of claim was filed in December 2020.

[49] Discovery then followed within a reasonable length of time. In May 2021, Mr Chen and Mr He filed a joint application for non-party discovery of NZPIL’s company records from the company’s former accountants, Gilligan Sheppard, and the Official Assignee. The Official Assignee consented to non-party discovery orders in June 2021. There is no obvious delay or unreasonable behaviour attributable to Mr He in relation to this discovery phase.

[50] Associate Judge Bell directed an issues conference for August 2021 with a view to making timetable directions for the trial. Unfortunately, the issues conference did not take place because of COVID-19 restrictions. It was not until 18 March 2022 that a timetable for the exchange of briefs of evidence and other pre-trial steps was established by consent of the parties. It seems that Mr He was unable to meet this timetable after his counsel retired when Mr He could not pay his fees. Therefore, while Mr He was undoubtedly responsible for the adjournment of the May 2022 trial, it is also true that disrupted case management due to COVID-19 contributed to the late adjournment.

[51] I conclude that while this proceeding has been on foot for considerably longer than the time usually regarded as acceptable, and that Mr He is responsible for a material portion of the delay, it is an oversimplification to attribute all the delay to a failure by him to prosecute his claims.

[52] I turn now to consider the prejudice to Mr Chen from this delay and the overriding question of whether justice can be done at the trial, despite the delay.

Can justice be done?

[53] Mr Chen highlights the fact that Mr He relies on oral conversations between 2007 and early 2012, and that these alleged conversations are now 10 to 15 years old. He submits that recollections will have dimmed, making a fair trial impossible.

[54] I accept that Mr He’s and Mr Chen’s recollections of the conversations between them that led to the joint venture will have deteriorated. However, I am mindful that their respective accounts of their conversations about the joint venture have already been the subject of affidavits and briefs of evidence in earlier proceedings and applications, including the derivative proceeding and the debt proceeding.²⁹

[55] Mr Chen’s claim that most of the financial and accounting records of NZPIL have been destroyed is concerning. Mr Chen submits that this makes it impossible for Mr He to prove, and for Mr Chen to defend the claim that the Chens misappropriated funds from the company or for the Court to order a “taking of account of the financial activities” of the alleged joint venture. An additional concern is that there has been no discovery of financial or accounting records for HKDIL, or the other companies that allegedly competed with NZPIL / HKDIL.

[56] Mr He maintains that it is possible to undertake the necessary reconciliation exercise from the NZPIL bank statements. As noted, he attaches a schedule to his statement of claim in which he purports to establish that the Chens have misappropriate funds, based on the available bank statements.

[57] Against that, Mr Chen submits that the bank statements are not enough, because they do not always record the counterparty, and further, the exercise is incomplete without tax invoices and receipts, because Mr He, Mr Chen and Mr Chen’s alleged agents made purchases and payments on behalf of NZPIL.

²⁹ 2013 High Court judgment, above n 4 at [1]–[2]; Chen v He [2014] NZHC 2699 at [1]; 2014 Court of Appeal judgment, above n 1; 2015 High Court judgment, above n 2; and 2016 Court of Appeal judgment, above n 3.

[58] A detailed review of the evidence is beyond the scope of this judgment. For present purposes I note that a quantity of financial and accounting records for NZPIL has been discovered, including:

(a) Documents discovered by Mr He, including a complete set of bank statements for NZPIL’s two accounts, from 22 June 2010 through to 22 April 2012 when the company ceased trading (around 100 pages), miscellaneous bank deposit/transfer receipts, invoices and freight bills.

(b) Mr Chen’s discovery, around 50 pages, including extracts from NZPIL’s general ledger, NZPIL’s financial statements to 31 March 2011, and a draft balance sheet dated March 2012.

(c) NZPIL’s financial documents provided by the Official Assignee as a result of the non-party discovery order, comprising over 200 pages and including NZPIL’s bank statements from December 2010 to May 2012, draft balance sheets from March 2011 and March 2012, and the general ledger for the company from April 2010 to March 2012.

(d) Discovery from Gilligan Sheppard, comprising NZPIL’s financial statements to 31 March 2011 and a 2011 tax return.

[59] As there is some evidence available, and Mr He’s position is that he can prove his claims with this evidence, I consider that it would be premature to strike out his claim before he has filed his briefs of evidence. It goes without saying that Mr He has the burden of proving his claim at trial. If he is unable to persuade the Court through the available evidence that the Chens misappropriated funds from NZPIL and/or established competing businesses that caused loss to the joint venture, then his claim will fail.

[60] In terms of Mr Chen’s submission that he is prejudiced by the delay because he is unable to disprove Mr He’s claims, he has been on notice of Mr He’s claims against him since at least the derivative proceeding in 2014. Although Mr Chen Jnr was the director of NZPIL rather than Mr Chen, the Court of Appeal has previously

found that Mr Chen actively controlled the company and was a de facto director. It follows that both he and Mr He shared responsibility for securing and discovering the financial and accounting records of NZPIL relevant to Mr He’s claims.

[61] Similarly, Mr Chen, his family or entities associated with him controlled HKDIL and the allegedly competing companies DNZIL and NZMPL. Arguably, Mr Chen should have provided discovery from these companies if they held documents relevant to Mr He’s claims or to Mr Chen’s defence of those claims.

[62] For these reasons, I am not persuaded to strike out Mr He’s claim under r 15.2. Rather, Mr He should be directed to file his briefs of evidence without further delay.

No arguable claim and/or abuse of process – r 15.1

[63] Alternatively, Mr Chen submits that Mr He’s claim should be struck out under r 15.1 because there are no arguable causes of action and/or the proceeding is an abuse of process. He repeats the arguments made in relation to his application under r 15.2, based on the alleged dearth of documents and records available to enable Mr He to prove, himself to disprove, and the Court to determine the claims.

[64] I decline to strike out Mr He’s statement of claim or any of the causes of action under r 15.1, for the same reasons I gave under r 15.2. It would be premature to do so before Mr He has filed his briefs of evidence.

Are the third, fourth and fifth causes of action statutorily barred?

[65] Mr Chen has pleaded affirmative defences under the Limitation Act 1990 and the Limitation Act 2010 to the third, fourth and fifth causes of action. Mr He has not pleaded a reply. Mr Chen applies for these causes of action to be struck out.

[66] The Court can strikeout a plaintiff’s cause of action where it is so clearly statute-barred that the plaintiff’s claim can properly be regarded as an abuse of

process.³⁰ There must be no reasonable possibility that the plaintiff’s claims were brought within time.³¹

[67] I do not accept that the third cause of action (for money had and received) is so clearly statute-barred that it should be struck out at this stage. In the original statement of claim of 23 December 2014, Mr He pleaded that from February 2011 to January 2012 Mr Chen operated businesses in competition with NZPIL in Hong Kong and China.³² The first cause of action for breach of fiduciary duty comprised a claim that Mr Chen breached his fiduciary duty to Mr He by establishing NZDIL and profiting from NZDIL at the expense of NZPIL using information and connections obtained from Mr He.³³ The current third cause of action is essentially a reframing of this allegation into a claim for money had and received.

[68] Similarly, the fourth cause of action for relief under s 174 of the Act pleads essentially the same conduct by Mr Chen but reframed as oppressive conduct by him as a deemed director of NZPIL.

[69] Nor is it clear to me that the fifth cause of action is statute-barred. Mr He alleges that he and Mr Chen agreed that funds invested in 2007 would be returned to Mr He in five years, in 2012, and that they were not returned. This cause of action was in fact the fourth cause of action in Mr He’s original statement of claim filed in 2014. Assuming that pleaded agreement is true, this cause of action does not appear to be statute-barred.

Result

[70] Mr Chen’s interlocutory application to strike out Mr He’s claims is dismissed.

[71] As Mr Chen is the unsuccessful party, he will pay Mr He’s reasonable disbursements in relation to this application, to be fixed by the Registrar.

30. Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721 (SC) at [33]; and Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [39].

³¹ Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [39].

³² Statement of Claim dated 23 December 2014 at [32].

³³ Statement of Claim, above n 32 at [39]–[42].

[72] I make the following directions for the trial:

(a) Mr He is to file and serve his briefs of evidence for the trial by

31 March 2023.

(b) Mr Chen is to file and serve his briefs of evidence by 12 May 2023.

(c) The Registry is to arrange a case management conference for a date after 12 May 2023 to monitor compliance with these directions and to enable further trial directions to be made. The trial estimate will be reviewed at the conference.

Associate Judge Gardiner