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Chen v Huang [2024] NZCA 38 (1 March 2024)

Last Updated: 4 March 2024

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA
CA429/2022
[2024] NZCA 38



BETWEEN

XIAOLIN CHEN
First Appellant

WAIHOPAI VALLEY VINEYARD LIMITED
Second Appellant

YI LU
Third Appellant

DON CHEN
Fourth Appellant

JINPING HUANG
Fifth Appellant

QI YANG
Sixth Appellant

ADELAIDE EDUCATION GROUP PTY LIMITED
Seventh Appellant


AND

HONGZHAO HUANG
First Respondent

JIEYU LU
Second Respondent

MATAKANA WINES LIMITED
Third Respondent

Hearing:

1 and 2 November 2023

Court:

Wylie, Mander and Muir JJ

Counsel:

A R B Barker KC, S R G Judd and P W G Ahern for Appellants
M D O’Brien KC and M D Pascariu for Respondents

Judgment:

1 March 2024 at 11 am


JUDGMENT OF THE COURT

  1. Leave is granted to the respondents permitting them to adduce by way of further evidence [1] and [2] of Ms Lu’s affidavit of 27 October 2023. Leave is declined to the respondents to adduce in evidence the remainder of the affidavit.
  2. The first appellant is granted leave to amend his prayer for relief as set out in [245] of this judgment.
  1. The respondents are granted leave to amend their prayer as set out in [246] of this judgment.
  1. The appeal is allowed in part:
(a) The award of equitable damages made in respect of the first, second and third causes of action is set aside.

(b) The principal sum awarded in respect of the fourth cause of action is reduced from $2,376,261, to $1.2 million.

(c) The principal sum awarded in respect of the fifth cause of action is reduced from $2,376,261, to $1,176,271.

(d) The orders made in respect of the seventh cause of action are set aside.

(e) The orders made in respect of the eighth cause of action are amended, by setting aside the direction that Waihopai pay Mr Huang, Ms Lu and Matakana Wines $2,376,271. In all other respects, the relief granted in respect of the eighth cause of action is upheld.

  1. The orders for the payment of interest in respect of Mr Chen’s third counterclaim and in respect of the respondents’ fourth, fifth, sixth and eighth causes of action are set aside.
  2. Interest on each relevant cause of action/counterclaim is awarded pursuant to s 24(2)(b) of the Interest on Money Claims Act 2016, from the date of each advance to the date of judgment at the rate of 5 per cent per annum and from the date of judgment to the date of payment pursuant to ss 10 and 12 of that Act.
  3. In all other respects the appeal is dismissed.

H There is no order as to costs.
__________________________________________________________________

REASONS OF THE COURT

(Given by Wylie J)

Table of Contents
Para No
Introduction
The factual background
The parties
The Chen interests (the appellants)
The Huang interests (the respondents)
2006-2012
2013
2014-2016
2017
2018-2021
The pleadings
The High Court judgment
Credibility
The status of the payments made by Mr Huang/Ms Lu
Was there a partnership?
Estoppel
Misrepresentations
The JV agreement
The causes of action pleaded
The Matakana causes of action
The Counterclaims
The Waihopai claims
The affirmative defences
Summary
The appeal
Analysis
Was there an Integration Scheme and/or a partnership based on such a scheme?
Submissions
Relevant law
What did the parties say and do?
Mr Huang’s initial investment and the Integration Scheme documents
The conduct of the parties from 2014 to 2016
The conduct of the parties following the breakdown of their relationship in 2017
The OIO correspondence and interview
Mr Chen’s actions in selling Waihopai and distributing its assets
Conclusion
Other issues related to the alleged partnership
If there was a partnership, was it vitiated by misrepresentations or misleading conduct?
If the Integration Scheme or partnership was agreed and was not vitiated, is the appropriate remedy to order an accounting?
If the Integration Scheme or partnership was not agreed or it was vitiated, what are the appropriate remedies?
Should Mr Huang and Ms Lu be permitted to adduce further evidence?
Should all three parties to the JV agreement be required to perform the terms of the agreement and if so when, or should the assets remain with the respondents?
The submissions
The JV agreement
The applicable law
The Matakana land — Chinese law
Has the JV agreement been cancelled?
The consequences of non-cancellation
Should the damages award against Mr Chen for the increased building costs of the proposed Matakana development due to delay be set aside?
Submissions
Analysis
Were the payments made by the respondents in relation to the Waihopai Vineyard loans to Mr Chen only, or to both Mr Chen and Waihopai?
Submissions
Analysis
Should the orders made against the third to seventh appellants under s 348 of the Property Law Act be set aside?
Submissions
Analysis
Should the interest award to the respondents on the Waihopai claims be set aside?
Submissions
Analysis
Applications for leave to amend claims to seek interest
Costs
Result

Introduction

The factual background

The parties

The Chen interests (the appellants)

The Huang interests (the respondents)

2006–2012

[30] In 2006 Mr Huang came to Auckland for business. By that stage he and Ms Lu were in a relationship. Ms Lu acted as his interpreter while he was here. She introduced Mr Huang to Mr Chen.

Matakana Villa Lots

[31] At about that time Mr Chen was interested in buying a property in Matakana, north of Auckland. He had been introduced to the land by Paul Vegar, a real estate agent. Mr Chen says that Mr Vegar explained that the land was owned by his family company. It adjoined land owned by the Vegar family’s Matakana Estate winery at 568 Matakana Road. Mr Chen says he discussed this with Yi Lu.

[32] The land for sale at Matakana was, at that stage, bare land and was in seven lots numbered 8 to 14. Mr Chen says Mr Vegar’s proposal was that his companies would plant grapes on the properties except for an area reserved to build a house on each lot. The Vegars would maintain the vines and use the grapes in their winery and the purchasers of the lots would pay a small amount to the Vegars for maintenance. The neighbouring properties (Lots 4–7) would continue to be owned by the Vegars. The Matakana Estate winery itself was on Lot 4.

[33] Mr Chen’s evidence was that at the time he had no experience in property investment or in the wine industry but was attracted to the idea of living on a property in Matakana surrounded by grapes. Mr Chen discussed this idea with Mr Huang and Ms Lu while Mr Huang was in New Zealand and they went to see the properties together.

[34] The upshot was that in late 2006 Mr Chen’s wife, Jackie Huang, purchased Lot 8 and his brother, Don Chen, purchased Lot 14. Yi Lu’s wife purchased Lot 9 and Yi Lu’s brother-in-law purchased Lot 13. Mr Huang purchased Lots 11 and 12, and Ms Lu purchased Lot 10. Ms Lu’s evidence was that Mr Chen and Yi Lu borrowed from Mr Huang to fund their purchases. There was evidence of at least some repayments by Mr Chen.

[35] Additionally, Mr Huang, Ms Lu, Mr Chen and Yi Lu entered into a written agreement signed and dated 15 March 2007 relating to all seven lots. It appears from that agreement that the parties intended to work together to develop the seven lots and in particular to build a lodge. They commissioned an architect to prepare concept plans but otherwise the 15 March 2007 agreement was not advanced.

[36] ... The parties referred to [the lots they had purchased] as ... the “villa” lots. ...

Waihopai

[37] Mr Chen said at about the time he was introduced by Mr Vegar to the villa lots, Mr Vegar and his brother Peter talked to him and Yi Lu about investing in a new vineyard development in Marlborough on land owned by a company associated with the Vegar family. Mr Huang and Ms Lu were not involved in the acquisition that followed.

[38] Mr Chen says that the Vegars’ proposal was that he and Yi Lu would buy the land and the Vegars would provide services to develop the then bare land as a vineyard and to manage and maintain the vineyard including by arranging to sell the grapes. The Vegars’ initial proposal was for a property in Waihopai Valley. That was replaced by another offer by the Vegars for a different piece of land nearby under essentially the same arrangement. The replacement property was known as Kintyre, a name that appears on a number of the documents. The company name Waihopai reflected the land in the original proposal made by the Vegars.

[39] On 11 October 2006 Waihopai purchased the Kintyre property from the Vines Development Company Ltd, one of the Vegars’ companies, for $5.2 million. Waihopai then entered into two contracts: a Vineyard Management Agreement with the Vines Development Company Ltd and a Grape Supply Agreement with Goldridge Estate Ltd. The latter was a company also owned by the Vegars. Both contracts were later assigned to another Vegar family company, Savvy Vineyards 3550 Ltd (Savvy).

[40] Waihopai was planted with grapes in 2007 and 2008 and it began supplying grapes to Savvy, some of which were sold by Savvy to the ... Matakana Estate winery.

Chateau Kiwi

[41] Also in 2006, Mr Chen and others started a business called Chateau Kiwi which exported New Zealand wine to China. Wine was purchased from a number of New Zealand wineries, including the ... Matakana Estate winery, and sold at a number of Chateau Kiwi outlets in cities and towns in China.

[42] Chateau Kiwi Headquarters, the name used for the franchisor, franchised the brand to 15 to 20 franchisees in China. From 2009 Ms Lu was a franchisee in her home town of Zhongshan, China.

Willow Flat

[43] The friendship between the two couples (Mr Huang and Ms Lu, and Mr Chen and Jackie Huang) continued. In 2009, Mr Huang and Ms Lu visited Marlborough with Mr Chen and looked at another piece of bare land owned by a Vegar family company at Willow Flat. It was 21.60 hectares in area. The Vegars were selling the land on the same basis as they had sold the land to Waihopai in 2006, including the vineyard development, vineyard management and grape supply agreements. Ms Lu was very keen to invest in a vineyard. Mr Chen referred her to his then lawyer, Brad Botting, who gave her advice on the sale and purchase agreement and the three other agreements. Ms Lu waived privilege in that correspondence. The advice was comprehensive and raised a number of issues and risks with proceeding with the transaction, including the risk of losing the deposit. ...

[44] Notwithstanding Mr Botting’s advice, Ms Lu signed the agreement for sale and purchase and paid the deposit of $114,500, not to the Vegars’ solicitor, nor to the vendor company, but to another company owned by the Vegars. Ms Lu incorporated Kiwi Club for this venture. She was the sole director with 100 per cent shareholding. It appears from Ms Lu’s evidence that her concern at the time was to obtain residency and she hoped that the purchase of Willow Flat would fast track her residency application through the immigration consultant she was using at the time. However, her residency application did not succeed, the company to which Ms Lu paid the deposit went into liquidation, and Ms Lu lost the deposit. ...

Long-term business visa application – Ms Lu and Mr Huang

[45] After the failed immigration application, Ms Lu and Mr Huang engaged a new immigration consultant. In May 2011 they applied to Immigration New Zealand (INZ) for a long-term business visa. Ms Lu was the principal applicant. The application was based on a business plan under which Ms Lu intended to set up a business in New Zealand to export wine to China. She relied on her experience as a franchisee of Chateau Kiwi in Zhongshan, China and ownership of the villa lots in Matakana.

...

Acquisition of Matakana Estate

[47] In or around 2011 Mr Chen became aware that the corporate owners of Matakana Estate were in liquidation and receivership and that the winery and land (Lots 4–7) [the Matakana land] were for sale. Mr Chen says this created a potential problem for the owners of the villa lots because the Vegar companies had set up the development on the villa lots and continued to manage those properties. He says the receivership was also a potential problem for Waihopai because some of the grapes Waihopai produced were supplied to Matakana Estate indirectly through Savvy.

[48] Mr Chen says he could not afford to purchase the Matakana land and winery business himself, so he discussed the issue with Mr Huang and Ms Lu in September 2011.

[49] The Matakana land and winery business were being sold in three parts:

(a) Three lots were being sold together as a package (Lots 5, 6 and 7). Those lots were used for growing grapes;

(b) Another lot was being sold separately (Lot 4). This lot (the winery lot) contained the main winery buildings used for the Matakana Estate business; and

(c) The Matakana winery business itself was being sold together with the stock.

[50] Mr Huang agreed to provide all of the funding to buy the Matakana land and winery business. The plan was that Mr Huang, Ms Lu and Mr Chen would own and operate the business together. It was agreed Mr Huang would lend Mr Chen his contribution towards the purchase and Mr Chen would repay Mr Huang.

[51] Mr Huang and Ms Lu did not have residency at that stage; they lived in China and were accordingly both “overseas persons” not eligible to purchase the Matakana land under the overseas investment rules. It was decided that Mr Chen would buy the land in his own name and the business through his company Matakana Wines; Mr Huang and Ms Lu would acquire 65 per cent of Matakana Estate (55 per cent to Mr Huang and 10 per cent to Ms Lu) once they had approval from the [Overseas Investment Office (the OIO) under the OIA]. Mr Chen would have a 35 per cent share for his contribution of $1.47 million loaned to him by Mr Huang which was to be repaid on specified future dates.

[52] On 30 September 2011 Mr Chen entered into an agreement to purchase Lot 4 for $1.2 million and an agreement to purchase the winery business for $950,000. The agreement for the purchase of the winery business was later varied and the purchase price was ultimately $1,400,938.94.

[53] On 21 October 2011 Mr Huang, Ms Lu and Mr Chen entered into and signed a “Joint Venture Contract” which, ... all parties agree was superseded by the later JV agreement.

[54] The 21 October 2011 agreement contemplated a total purchase price of $3.5 million dollars to be paid by Mr Huang. Mr Chen would later pay $1.4 million and Ms Lu would later pay $350,000. Mr Huang would therefore have a 50 per cent share, Mr Chen would have 40 per cent and Ms Lu would have 10 per cent.

[55] On 26 October 2011 the purchase of Lot 4 settled. Mr Huang paid the full purchase price and Mr Chen acquired the land in his name.

[56] On 2 November 2011, as part of the agreement reached with Mr Huang and Ms Lu, Mr Chen entered into an agreement to purchase Lots 5, 6 and 7 for $1.25 million. That transaction settled on 27 March 2012. Mr Huang again provided the funds for the purchase. As agreed, Mr Chen acquired the land in his own name and the business assets were acquired by Mr Chen’s company, Matakana Wines.

The JV agreement

[57] After all the transactions had settled Mr Huang prepared an updated and more formal version of the 21 October 2011 agreement with the assistance of his lawyers in China. The agreement was in the Chinese language and was signed in China on 19 April 2012 by Mr Huang, Ms Lu and Mr Chen. ...

[58] I will discuss the terms of the JV agreement later in this judgment. For present purposes the following summary suffices:

(a) The cost of acquisition of the Matakana Estate project was agreed at $4.2 million;

(b) $1.47 million of this was to be treated as a loan from Mr Huang to Mr Chen, repayable in three instalments on particular dates between 2013 and 2015;

(c) Mr Huang was to have a 55 per cent share, Ms Lu 10 per cent and Mr Chen 35 per cent;

(d) Due to the requirement for Mr Huang and Ms Lu to obtain [OIA] consent, Mr Chen would acquire the assets as nominee of the three parties, but the actual buyers were Mr Huang, Ms Lu and Mr Chen; and

(e) Mr Chen would be appointed [Chief Executive Officer (CEO)] of the business.

[59] The parties took possession of the Matakana land and winery business from February 2012 and continued to employ the existing chief winemaker. Mr Chen was employed as the CEO and General Manager of Matakana Wines.

...

Amended INZ application – Ms Lu and Mr Huang

[61] In mid-2012 Mr Chen transferred all the shares in Matakana Wines to Ms Lu’s company, Kiwi Club. ...

[62] ... [T]he transfer was documented on 29 June 2012 and registered with the Companies Office on 10 September 2012.

[63] On 28 June 2012 Ms Lu was appointed a director of Matakana Wines.

[64] On 23 October 2012 Mr Huang and Ms Lu’s immigration adviser wrote to INZ to amend their immigration application to rely on the Entrepreneur Plus category. This category requires the applicant to be a self‑employed entrepreneur who owns and operates their own business. The letter and subsequent formal application said that Ms Lu was the sole owner of Matakana Wines and was responsible for managing the business.

2013

This plan may reject [Mr] SUN’S investment, or [Mr] SUN’S investment may belong to Yi LU.

I’m in the company, I can tell you.

Establish a 3-way decision making board of directors and a platform for the Matakana Estate brand, make good use of Yi LU’s sales network in China, [Mr] CHEN’s operations and management in New Zealand and Mr Huang’s advantages amongst high-end communities, and reach our goal of taking our assets to the next level.

The above figures are approximations, accurate figures will need to be confirmed. A new joint venture agreement should be signed in relation to the Matakana Integration Scheme, and local Auckland lawyer(s) should be employed to draft and witness the legal documents.

[Mr Chen]:

Mr HUANG, funding has arrived, all of it arrived! The lawyer will arrange for us to take back the vineyard tomorrow.

[Mr Huang]:

Thank you for the trouble of having to do the practical arrangements.

[Mr Chen]:

Now it feels like we are a real wine company, with the back up to do promotions. Success is the only option for Matakana !

[Mr Huang]:

Still need an estate, more efforts required !

Ho[w] are you! Attached is the <<Matakana Estate Integration Scheme>> which has just been sorted[.]

Both versions recorded the capital in Waihopai at $8.435 million and Mr Chen’s 60 per cent share of that capital at $5.061 million. These figures had been provided by Mr Chen. The documents also recorded that the equity or shareholding ratio in the integrated entity would be Mr Chen, 30 per cent, Jackie Huang 10 per cent, Mr Huang 44 per cent and Ms Lu, 16 per cent. One draft referred to the payment of $1.2 million made by Mr Huang the previous day as “[t]he NZD 1.2 million first advanced payment from Alex Huang to acquire [Waihopai]”. The other draft contained a similar statement.

I have sent the Matakana Estate integration plan to everyone’s mailboxes, please make amendments.

[Waihopai] Vineyard has been officially taken back on 28 June. Matakana also officially owns [Waihopai] vineyard, from now on it will be promoted as the Matakana Marlborough vineyard.

Please see attached the newly organised <<Matakana Estate Integration Scheme>> first draft and its attachment(s), please check you have received it! If you have questions about the attachment(s) you can enquire with the corresponding contact person, mr Huang, will arrive at Auckland on 9th August to discuss this integration scheme with [other] shareholders. Thank you!

How are You! Attached is the <<Matakana Estate Integration Scheme>> which has just been translated ... Wishing you success in business!

(a) Mr Huang and Ms Lu ceasing to be overseas persons for the purposes of the OIA or the partnership being otherwise permitted to own the assets.

(b) Each of the Chen group and the Huang group, or the parties who formed those respective groups, acquiring ownership or an unconditional right to acquire ownership of the assets which were to form part of their initial capital.

(c) Each party procuring all consents and approvals required from third parties for the transfer to the partnership of those assets forming part of that party’s initial capital.

(d) The parties approving the form of the partnership agreement and the constitution for the general partner.

Settlement was to be the later of 40 working days from the date of satisfaction of the conditions, or 20 working days after the partnership was registered as a limited liability partnership. The draft provided that the parties would, prior to settlement, incorporate a limited liability company for the purposes of being the general partner, procure the preparation of a partnership agreement and each execute all necessary documents.

2014–2016

2017

2018–2021

(a) Mr Chen discharged a loan secured against his home;

(b) Don Chen made various payments, including to his family and to the seventh appellant, AEG; and

(c) Yi Lu transferred the sale proceeds to his wife, Qi Yang, the sixth appellant.

The pleadings

(a) There was a counterclaim against Mr Huang and Ms Lu for alleged breach of the JV agreement and the Integration Scheme. Mr Chen asserted that he and Mr Huang had agreed that Mr Chen was to receive an interest in the company incorporated in China — Matakana (Zhongshan) Wines Ltd. Mr Chen said that Mr Huang and Ms Lu failed to provide any interest in the company to him and that they had failed to account to him for its profits. Mr Chen sought specific performance and an account of the profits made by Matakana Zhongshan Ltd.

(b) Mr Chen alleged breach by Ms Lu of the JV agreement and/or the Integration Scheme.

(c) Mr Chen alleged that Matakana Wines had failed to repay him advances that he had made to that company between 8 May 2015 and 29 March 2016, in the total sum of $540,000. He sought judgment in this sum, together with interest.

(d) Mr Chen alleged that at all material times he was the registered proprietor of the Matakana land, that a written deed of lease had been entered into between the parties to the effect that Matakana Wines agreed to least part of the Matakana land and that Matakana Wines had failed to pay the rental and other outgoings due under the lease.

(e) Waihopai alleged that it had repaid $120,000 to Ms Lu in October 2016, in repayment of an advance of $100,000 she had earlier made to the company and by way of a further advance of $20,000 to Ms Lu. Repayment of the further advance was sought, with interest.

(f) Mr Chen and Jackie Huang sought a declaration of partnership. They asserted that since on or about 25 June 2013, they, together with Mr Huang and Ms Lu, had been partners in the Integration Scheme partnership. They sought declarations they were in partnership and that the partnership had been dissolved, together with an order for the taking of the accounts of the partnership.

Mr Huang and Ms Lu for their part denied these various allegations and filed an affirmative defence to the sixth counterclaim (declaration of partnership), alleging misleading and deceptive conduct by Mr Chen.

The High Court judgment

Credibility

The status of the payments made by Mr Huang/Ms Lu

(a) The advances made by Mr Chen and Yi Lu to Waihopai were by way of loan.

(b) An investment in Waihopai by another person, Lucy Wang, was by way of loan.

(c) An indirect advance from Mr Jiang (a personal friend of Yi Lu) made via Yi Lu, was by way of loan, as were other advances from Yi Lu’s family and friends.

(d) The $2 million paid out to take Waihopai out of receivership was recorded as a loan in Waihopai’s board of directors’ resolution and in a deed of acknowledgment of debt, signed by Mr Chen and Mr Lu.

(e) It would be inconsistent to treat Mr Huang’s proportion of the $2 million advance ($1.2 million) recorded in the deed of acknowledgment of debt differently from the funds contributed by Yi Lu ($800,00).

(f) The $2 million advance was recorded in Waihopai’s accounts from 2014 onwards as a loan.

(g) The later advances from Mr Huang and Ms Lu were recorded in Waihopai’s accounts as loans.

Was there a partnership?

(a) Mr Huang and Mr Chen had previously entered into formal written agreements with each other, noting that in 2007 they signed a written agreement in relation to the intended development of the Matakana villa lots. In October 2011, they entered into a joint venture agreement, which was later superseded by the more formal JV agreement in April 2012. These agreements were in writing, prepared with legal assistance, witnessed, signed and fingerprinted by each of the three individuals involved. Additionally, Mr Chen had a written employment agreement in his capacity as General Manager of Matakana Wines. The Judge considered that the history of the business relationships between the parties indicated that each expected negotiations to conclude with a formal, written and signed agreement.[32]

(b) The value of Mr Chen’s financial interest in Waihopai had not been confirmed. This was not a mere detail but rather a critical issue going to the heart of the Integration Scheme. Both Mr Huang and Mr Chen agreed that Mr Chen did provide Mr Huang with financial forecasts. It was Mr Huang’s position however that he wanted to see the underlying financial accounts. Under cross‑examination, Mr Chen accepted that he did not give Mr Huang a copy of Waihopai’s accounts. While he asserted that Mr Huang did not ask for them, Mr Chen did agree that it would have been normal for Mr Huang to want to see them.[33]

For these various reasons, the Judge concluded that the parties were not in agreement on the Integration Scheme as at 23 January 2014 and there was no partnership agreement.[34]

Estoppel

Misrepresentations

The JV agreement

The causes of action pleaded

The Matakana causes of auction

(a) pursuant to a constructive trust (the first cause of action); and

(b) in accordance with the JV agreement:

(i) pursuant to fiduciary obligations owed by Mr Chen (the second cause of action); and

(ii) pursuant to contract (the third cause of action).

The Judge dealt with these matters in reverse order.

... in cases involving a foreign element in which an English court is asked to treat a defendant as a constructive trustee of assets which he has acquired through a misuse of his powers, the relevant questions are: (i) what is the proper law which governs the relationship between the defendant and the person for whose benefit those powers have been conferred, (ii) what, under that law, are the duties to which the defendant is subject in relation to those powers, (iii) is the nature of those duties such that they would be regarded by an English court as fiduciary duties and (iv), if so, is it unconscionable for the defendant to retain those assets.

The counterclaims

The Waihopai claims

The affirmative defences

Summary

(a) There was no partnership agreement based on the Integration Scheme or otherwise.

(b) The advance of $1.2 million and the subsequent advances totalling $1,176,261 made by Mr Huang and Ms Lu to Mr Chen and/or Waihopai were loans.

(c) The business relationship between Mr Huang, Ms Lu and Mr Chen was governed by the JV agreement dated 19 April 2012.

(d) Mr Chen had breached the JV agreement by failing to make the payments required for his share of Matakana Estate and by failing to transfer title to the Matakana land to Mr Huang and Ms Lu.

(e) Mr Huang and Ms Lu succeeded on the first to eighth causes of action (inclusive). The ninth cause of action did not require determination.

(f) Mr Chen succeeded in part on his third counterclaim. The other five counterclaims failed.

Matakana claims (first to third causes of action): relief in favour of [Mr Huang and Ms Lu]

[348] I grant the following relief on the first, second and third causes of action:

(a) A declaration that Mr Chen holds the Matakana land on a constructive trust for Mr Huang and Ms Lu (first cause of action);

(b) An order requiring Mr Chen to transfer the title to the Matakana land, unencumbered, to Mr Huang and Ms Lu (first, second and third causes of action); and

(c) An order for equitable damages against Mr Chen in the sum of $3 million in favour of the plaintiffs as a consequence of the delay suffered by the plaintiffs in developing the Matakana land (first, second and third causes of action).

Matakana claims (third counterclaim): relief in favour of Mr Chen

[349] I make an order that the third plaintiff, Matakana Wines, pay Mr Chen the sum of $530,784.00.

(a) Fourth and fifth causes of action: judgment in the sum of $2,376,261 in favour of Mr Huang and Ms Lu against Mr Chen or, in the alternative, against Waihopai, together with interest on that sum from the date on which each of the individual advances making up that sum was made, calculated under s 12 of the Interest on Money Claims Act.[92]

(b) Sixth cause of action: in the alternative, judgment in favour of Mr Huang and Ms Lu for moneys had and received by all appellants in the sum of $2,376,261 together with interest on that sum on the basis set out immediately above.[93]

(c) Seventh cause of action: in the further alternative, an order under s 348 of the Property Law Act requiring Jackie Huang, Don Chen and AEG each to repay the funds received by them through prejudicial dispositions back to Mr Chen and an order requiring Mr Chen to pay Mr Huang and Ms Lu $2,376,261. The Judge awarded interest on this sum in the same terms as described above.[94]

(d) Eighth cause of action: as a further alternative, an order under s 348 of the Property Law Act requiring Mr Chen, Yi Lu, Don Chen, Jackie Huang, Qi Yang and AEG to repay the proceeds of the sale of Waihopai’s assets received by them to Waihopai and an order requiring Waihopai to pay the respondents $2,376,261 together with interest in the terms described above.[95]

The appeal

4.1. Should all three parties to the [JV agreement] be required to perform the terms of that agreement and if so when, or should the assets remain with the respondents?

4.2. Should the damages awarded against the first appellant, Mr Chen, for increased building costs of the proposed Matakana development due to delay, be set aside?

4.3. Were the payments made by the respondents in relation to the [Waihopai Vineyard], loans to Mr Chen only or to both Mr Chen and [Waihopai]?

4.4. Should the orders made against the third [to] seventh appellants under s 348 of the [Property Law Act] be set aside?

4.5. Should the interest award to the respondents on the Waihopai [c]laims be set aside?

4.6. Should Mr Chen be granted leave to amend his third counterclaim to seek interest under the [Interest on Money Claims Act] on amounts owing to him by the third respondent and if leave is granted, should interest be awarded?

(a) Should Mr Huang and Ms Lu be granted leave to amend their prayer for relief in respect of the fourth to eighth causes of action to seek interest under the Interest on Money Claims Act?

(b) Should Mr Huang and Ms Lu be permitted to adduce further evidence on questions of fact by way of an affidavit sworn by Ms Lu on 27 October 2023?

Analysis

Was there an Integration Scheme and/or a partnership based on such a scheme?

Submissions

Relevant law

[50] The question whether negotiating parties intended the product of their negotiation to be immediately binding upon them, either conditionally or unconditionally, cannot sensibly be divorced from a consideration of the terms expressed or implicit in that product. They may have embarked upon their negotiation with every intention on both sides that a contract will result, yet have failed to attain that objective because of an inability to agree on particular terms and on the bargain as a whole. In other cases, which are much less common, the intention may remain but somehow the parties fail to reach agreement on a term or terms without which there is insufficient structure to create a binding contract. ...

[51] A contract is not legally incomplete merely because consequential matters have been omitted, particularly when they relate to questions of contingency and risk allocation. The parties may have thought it unnecessary to the essence of their bargain to reach agreement upon such matters or it may have been difficult or even impossible to predict what might arise in the future, particularly under a long-term contract. It may therefore have been thought satisfactory — and it would often be more economically efficient — to leave such matters to be worked out if necessary in the course of the performance of the contract.

[52] But even where the parties are ad idem concerning all terms essential to the formation of a contract — the basic structure of a contract of the type under negotiation is found to have been present in the terms which have been agreed — they still may not have achieved formation of a contract if there are other unagreed matters which the parties themselves regard as a prerequisite to any agreement and in respect of which they have reserved to themselves alone the power of agreement. In such cases, what is missing at the end of the negotiation is the intention to contract, not a legally essential element of a bargain. ...

[53] The prerequisites to formation of a contract are therefore:

(a) An intention to be immediately bound (at the point when the bargain is said to have been agreed); and

(b) An agreement, express or found by implication, or the means of achieving an agreement (eg an arbitration clause), on every term which:

(i) was legally essential to the formation of such a bargain; or

(ii) was regarded by the parties themselves as essential to their particular bargain.

A term is to be regarded by the parties as essential if one party maintains the position that there must be agreement upon it and manifests accordingly to the other party.

[54] Whether the parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively. In considering whether the negotiating parties have actually formed a contract, it is permissible to look beyond the words of their “agreement” to the background circumstances from which it arose — the matrix of facts. This can include statements the parties made orally or in writing in the course of their negotiations and drafts of the intended contractual document.

(a) A written partnership agreement is not required and a partnership can be implied from the circumstances.[115]

(b) The focus is on the substance of the parties’ arrangements as revealed by their conduct over time.[116]

(c) The evidence of the parties must be assessed against the contemporaneous documents and the nature of the relationship which emerges from those documents.[117] There is however nothing unusual about the absence of express evidence from one or other party about matters such as mutual loyalty, reliance and trust, or the absence of reference to these concepts in contemporaneous documents.[118]

(d) Any internal accounts between the parties can provide evidence of what they agreed, even if unusual or idiosyncratic and even if inconsistent with external accounts.[119]

(e) Documents recording the principles for separating their interests based on the terms of the partnership is strong evidence of a partnership.[120]

(f) It is not inconsistent with a partnership for one or more of the partners to hold shares in a company on behalf of the partnership.[121]

(g) The court should not give undue weight to the use, or absence, of particular language or terminology, especially when dealing with documents translated from another language.[122]

(h) The focus should be on the conduct of the parties over time, viewed objectively, rather than on the possible meaning of particular words used.[123]

What did the parties say and do?

(a) Mr Chen (and Mr Barker) asserted that Mr Huang acknowledged on 23 February 2013 that he would invest in Waihopai.

(b) In cross-examination at trial, Mr Chen said that the parties reached agreement on the integration of their business interests in May 2013.

(c) In his pleadings, Mr Chen asserted that he, Jackie Huang, Mr Huang and Ms Lu, had been partners since on or about 25 June 2013.

(d) Mr Barker in his submissions before us relied on one of the documents exchanged on 26 June 2013 and asserted that it was the foundation for the alleged partnership.

In our view, this apparent confusion is telling. It is for Mr Chen, as the party asserting that there was a partnership, to prove, on the balance of probabilities, when the bargain between the parties is said to have been agreed and when the intention to be bound by that bargain was manifested.

Mr Huang’s initial investment and the Integration Scheme documents

(a) The letter of intent with Mr Sun was clearly a proposal only. It was headed “Letter of Intent”; Mr Chen, Yi Lu, his brother-in-law and Don Chen, were inviting Mr Sun to join them in establishing a new company to restructure Waihopai. It recorded what the new company’s equity would be following any restructure — $8,425,000 — and that Mr Sun’s investment had to be no less than $500,000.

(b) Mr Huang’s vineyard reform suggestions were also just that — suggestions. Clause 3 expressly recorded that “[i]f Mr HUANG buys 20% shares from [Mr] CHEN,” then the share structure would be as was set out in the document: Mr Huang with 20 per cent of shares and Mr Chen with 40 per cent. Clause 5 was headed “Issues”. It set out a number of matters which needed to be clarified. For example, the timetable for usage of the funds. While we have endeavoured to avoid putting undue weight on particular words used, the document was, in our view, nothing more than an exploratory proposal. That this was the case is clear from what followed thereafter.

(c) The position was not altered by Mr Huang’s WeChat message of 23 February 2013, noted above at [18]. The English translation of that email was “I’m in the company, I can tell you”. We agree with the Judge that the explanation of that English translation advanced by Mr Huang — “I’m in the company, can communicate via phone” — was [124]sonable,124 given the tenor of the documents that followed. We consider it more likely than not that Mr Huang was saying no more than that he was at work but could communicate with Mr Chen by phone if required.

(a) A number of the drafts expressly recorded that they were “suggestions” only.

(b) The drafts referred to an integration “scheme”, to what investors could do and what they might obtain after any integration.

(c) The draft sent on 11 March 2013 was referred to in the accompanying email as being “newly amended”.

(d) The various drafts each made suggestions for a share structure following the injection of additional funds and integration of the respective businesses. There were variations between each draft. Figures included in the documents were updated as matters progressed.

(e) It was expressly recorded in the draft sent on 27 May 2013 that a cash increase was “planned”, that the figures set out in the document were approximations and that accurate figures needed to be confirmed. As noted at [22], it was also recorded that a new joint venture agreement should be signed and that a local lawyer or lawyers should be employed to draft and witness these documents. A question was posed. Mr Huang asked “... can the funds be combined and paid to a company, and the company will lend it to the [Waihopai] company, then repaid to the bank, this will pave the way and provide reasoning for getting the management rights back next time”.

The NZD 1.2M first advanced payment from [Mr] Huang to acquire [Waihopai] Estate, less the amount of his additional share, the rest 0.193M should return back to him from the operating revenue of integrated Matakana Estate.

The other version was in similar terms.

(a) The email from Ms Huimin attaching the two June iterations of the Integration Scheme, set out above at [27], contained the words “... which has just been sorted”.

(b) One version of the 26 June 2013 draft started with the following words:

On the basis of the JOINT VENTURE CONTRACT (see Annex 1 for details), in order to give light to each party’s special advantage, [Mr] Chen, [Mr] Huang and [Ms] Lu decide to reintegrate MATAKANA ESTATE. Concrete operations as follows.

(c) As noted at [29], on 1 July 2013, Mr Chen sent a WeChat message to Mr Huang, Ms Lu and Jackie Huang, telling them that Waihopai had been officially taken back from the receivers, that Matakana officially owned Waihopai and that from then on, it would be promoted as the Matakana Marlborough Vineyard.

(d) As noted at [31], on 11 October 2013, Mr Chen forwarded to Ms Huimin legal advice that Waihopai had received in relation to its dispute with Savvy.

(e) As noted at [32], on 22 October 2013, Ms Huimin sent an email to Mr Huang, Mr Chen, Jackie Huang and Ms Lu, attaching the translated version of the Matakana Estate Integration Scheme draft, asking that parties confirm that they had received it, and “wish[ed] [them] success in business”.

(a) On 26 June 2013, Mr Huang sent a WeChat message to Mr Chen, Jackie Huang and Ms Lu, in which he recorded that he had sent the Matakana Estate integration plan to their respective mailboxes. He asked them to “please make amendments” — see above at [28].

(b) While Mr Chen maintained, through Mr Barker, that the partnership was agreed on or about 26 June 2013, he does not say which version of the Integration Scheme circulated on the 26 June 2013 formed the basis for the alleged partnership. The versions differ. One version is more detailed than the other. One was apparently accompanied by a number of annexures (although, as we understand it, only one annexure was discovered and produced in evidence).

(c) Both versions relied on values provided by Mr Chen. While it seems that Mr Chen did provide some financial information to Mr Huang, there is nothing to suggest that he complied with Mr Huang’s requests and provided Waihopai’s accounts by 26 June 2013.

(d) Neither of the 26 June 2013 drafts was expressly accepted or signed by any of the parties.

(e) On 2 August 2013, Ms Huimin sent an email to Mr Huang, Ms Lu, Mr Chen and Jackie Huang, attaching one of the 26 June 2013 Integration Scheme documents. The text of the covering email has been set out at [30]. We agree with the Judge that the expression “first draft” indicates that there was not then agreement on the Integration Scheme or on any resulting p[128]nership.128 So do the words “newly organised” and the invitation to discuss the attachments with Mr Huang when he was in this country.

(f) As noted in [32], on 22 October 2013, Ms Huimin sent an email to Mr Huang, Ms Lu, Mr Chen and Jackie Huang, attaching a translated version of one of the 26 June 2013 Integration Scheme drafts. Mr Chen promptly emailed Mr Botting from China, saying that he would be back in New Zealand at the end of the month and that he wanted Mr Botting to draft an agreement for the shareholders of Matakana Wines.

(g) On 5 November 2013, Mr Chen forwarded the email from Ms Huimin dated 22 October 2013 and the attached translated version of the Integration Scheme draft to Mr Botting.

(h) Mr Chen accepted under cross‑examination that, at this point, it was his and Mr Huang’s intention to get a document drafted up under New Zealand law by a New Zealand lawyer for the parties to consider. Mr Botting prepared a draft. He sent the draft to Mr Chen for comment.

(i) Mr Botting then returned a revised draft of the heads of agreement to Mr Chen on 23 January 2014. We have discussed the draft heads of agreement above at [34]. They were conditional on a number of matters and they imposed various obligations on the parties. As Mr Botting recorded in his covering email, the document itself was not complete. He required a place of residence for Mr Huang, a date by which the conditions were to be satisfied and an address for service for notices on Mr Huang and Ms Lu. He also advised Mr Chen that Mr Chen’s accountant’s sign off was required, before making firm commitments, as there might be significant tax losses and/or imputation credits which the entities involved might lose if the shareholdings changed. He recorded that if Mr Chen wished, this could be added as a condition.

[76] Guānxi is a complex term with multi-faceted meanings. Guānxi may be understood as “interpersonal connections”, “social capital”, or the “set of personal connections which an individual may draw upon to secure resources or advantage when doing business or in the course of social life”. Important bases of guānxi for an individual include kinship and co‑working. As will be apparent from our reasons, the relationship between Messrs Zheng and Deng (and those they worked with) is consistent with these concepts: in particular, the apparent significance to them of family relationships and pre-existing friendships in terms of whom they did business with and the relative dearth of formal agreements. For this reason, an understanding of guānxi provides some support for Mr Zheng’s case.

The conduct of the parties from 2014–2016

(a) A “Meeting contents summary” dated 21 March 2015 signed by Mr Huang, Ms Lu, Mr Chen and Jackie Huang. This document referred to sales goals for the year July 2015 to June 2016 and the need to undertake further market development. It was noted that Waihopai Vineyard was starting to produce an income, but that a profit analysis would need to wait until the end of the year. There was a reference to the management and beautification of Matakana Estate and to Matakana Zhongshan Ltd’s financial reports. It was recorded that slight adjustments to the Matakana Estate management structure were required. As Mr Barker pointed out, Mr Huang’s explanation under cross-examination for this document was unconvincing.

(b) The Memorandum of Corporate Trusteeship — noted above at [40]. One translation of this document recorded as follows:

To resolve [Waihopai’s] investing and financing matters, the original shareholders [Mr Chen], [Yi Lu] invited [Mr Huang] to join as a new shareholder with a cash contribution. Each investing party confirms that the updated shareholding structure for [Waihopai] will be amended as follows: [Mr Chen] represents 24%, [Mr Huang] represents 36%, Yi Lu 40%, and at the appropriate time the registration procedures for amending the company shareholders will be handled.

It was signed by Mr Chen, Yi Lu, Mr Huang and Ms Lu on 23 March 2015. Mr Barker submitted that its clear intent was to protect the interests of all investing parties, including Mr Huang, and to record the agreement between them as to the ownership of the company and the status of their respective investments.

The conduct of the parties following the breakdown of their relationship in 2017

Based on the Matakana Estate Assets Integration Agreement signed by [Mr Huang] (includes [Ms] Lu) and [Mr Chen] (includes [Jackie] Huang) in 2013 ...

This suggests that there was a version of the Integration Scheme signed in 2013. No such document was produced at trial. The Judge recorded that, to Mr Chen’s credit, he had not seized on this reference to say that there was in fact a signed version of the Integration Scheme.[134] Mr Barker argued before us that the significance of the reference was more that it confirmed that Mr Huang and Ms Lu thought that the Integration Scheme had been agreed. He also pointed to various other documents which he argued were only consistent with all parties believing that the separation of their interests should be in accordance with the Integration Scheme.

The OIO correspondence and interview

[Waihopai]

  1. During early 2013, [Waihopai] was placed into Receivership by its bank which was caused by the difficult trading conditions created by the management and supply contracts with the Vegars. The bank remained supportive of [Mr Chen] and Yi Lu and agreed to take it out of Receivership if new shareholder funds were introduced in order to reduce the Bank's lending facility by $2m. [Mr Chen] and the other shareholders could only raise $800,000 and went to other friends and acquaintances to raise the balance. [Mr Chen] advises that he secured loans for the balance from acquaintances in China but then thought that he should perhaps inform [Mr Huang] and [Ms Lu] given their connection with Matakana and that his vineyard supplied some grapes to Matakana. On hearing the proposed arrangement, [Mr Huang] said he would help them out and provide the balance of the funds to bail the company out of Receivership. [Mr Huang] advanced $1.2m to [Mr Chen] and with the other funding provided by the shareholders, [Waihopai] came out of Receivership.
  2. Following the bailout of [Waihopai], [Mr Huang] put forward a proposal that their respective loans and investments in Matakana and Waihopai be amalgamated in what was termed the “Matakana Estate Integration Scheme”. We believe the OIO has already been provided with a copy of this document. [Mr Chen] does not believe this was signed as a formal agreement needed to be prepared.
  3. At the end of 2013, [Mr Chen] arranged for his lawyer, Brad Botting, to start drafting an agreement. Attached is a draft Heads of Agreement between [Mr Chen] and his wife, and [Mr Huang] and [Ms Lu] called the Matakana Wine Limited Partnership. Similar to the Integration Scheme, this agreement would have brought together under a 60/40 ownership of [Mr Chen’s] (and his brother's) interest in [Waihopai], and their respective interests in the Matakana properties. This agreement was conditional on obtaining consents under the Overseas Investment Act if required at the time. [Mr Chen] believes a copy of the draft was emailed to [Mr Huang] and/or [Ms Lu] in January 2014 but does not think it was advanced any further or signed.
  4. Approximately 10 months after coming out from under Receivership, [Waihopai] became embroiled in lengthy and very costly High Court litigation in relation to the disputed management and supply contracts with the Vegars[.] Additional money was required to fund the litigation that went to a full hearing. The shareholders of the company, along with [Mr Huang], contributed funds, at least some of which were loaned to the company via [Ms Lu] and secured by an unregistered second mortgage, with a caveat registered against the vineyard property. [Waihopai] was mainly successful in the High Court case, but both sides appealed. To avoid more legal costs, the dispute was finally settled and although it was expensive for the company the Vegars finally have no involvement with that vineyard.
(a) agreed with an assertion made by the investigating officer that the $1.2 million received from Mr Huang was a loan;

(b) confirmed that Mr Huang had advanced $1.2 million to him as stated in para 23 of the letter cited above at [164];

(c) agreed that the integration proposals were merely a “sort of a future plan”; and

(d) agreed with his barrister’s description of the integration proposals as being:

... sort of the vision, or whatever, [of] how they were going to put it together. ... [A] concept scheme ... it’s a scheme, an integration of a scheme.

Mr Chen’s actions in selling Waihopai and distributing its assets

Conclusion

Other issues related to the alleged partnership

If there was a partnership, was it vitiated by misrepresentations or misleading conduct?

If the Integration Scheme or partnership was agreed and was not vitiated, is the appropriate remedy to order an accounting?

If the Integration Scheme or partnership was not agreed or it was vitiated, what are the appropriate remedies?

Should Mr Huang and Ms Lu be permitted to adduce further evidence?

(a) Following delivery of the High Court judgment, Mr Chen transferred title of the Matakana land to Ms Lu and Mr Huang. Mr Chen owed $793,971.18 to a bank, the ASB, which was secured under a mortgage he had registered over the Matakana land. Mr Chen claimed that he was unable to repay this debt and Ms Lu and Mr Huang had to refinance the mortgage. After crediting Mr Chen with the $530,784.00 owed to him by Matakana Wines, as determined by the Judge (see above at [114]–[115]), Ms Lu and Mr Huang assumed liability for the remaining sum outstanding.

(b) The proposed development of the Matakana land as required under the retrospective consent granted by the OIO.

Should all three parties to the JV agreement be required to perform the terms of the agreement and if so when, or should the assets remain with the respondents?

The submissions

The JV agreement

This Agreement is concluded within the territory of the People’s Republic of China and is governed by and construed in accordance with the laws of China.

The applicable law

The Matakana land — Chinese law

A party to a contract may terminate/cancel/dissolve the contract under any of the following circumstances:

...

(2) prior to the expiration of the period of performance, the other party expressly states, or indicates through its conduct, that it will not perform its main obligation;

(3) the other party delayed performance of its main obligation, and after such performance has been demanded, fails to perform within a reasonable period;

(4) the other party delays performance of its obligations, or breaches the contract in some other manner, rendering it impossible to achieve the purpose of the contract;

...

Has the JV agreement been cancelled?

(a) Article 94 of Contract Law Act makes it clear that, when the circumstances set out in that provision apply, the parties have a discretion whether or not to terminate, cancel or dissolve the contract. There was no evidence adduced to suggest that Mr Huang and Ms Lu decided to terminate the JV agreement or that they took any steps to that end. Further there was no evidence adduced as to what is required under Chinese law to cancel a contract. While circumstances have arisen which would entitle Mr Huang and Ms Lu to cancel the JV agreement under Chinese law, there is no evidence suggesting that they have done so.

(b) Similarly, under New Zealand law, it is clear both at common law and under the Contract and Commercial Law Act 2017 that a contract is not automatically cancelled where it is breached.[144] The innocent party has an election. The innocent party may either treat the contract as cancelled or affirm the contract by treating it as still in force. If the innocent party chooses to keep the contract on foot, the status quo is preserved intact. The contract remains in force for the benefit of both sides.[145]

(c) The respondents in their pleading did not allege that the JV agreement had been cancelled. Rather they sought to enforce it by seeking an order that Mr Chen transfer the Matakana land to them.

The consequences of non-cancellation

Should the damages award against Mr Chen for the increased building costs of the proposed Matakana development due to delay be set aside?

Submissions

Analysis

(a) In his evidence, Mr Hanlon said that he had been “instructed that ... [the respondents] would have been able to commence works on approximately 23 September 2020, allowing one week for the transfer of the land to [them]”. The date 23 September 2020 was one week after the OIO consent was granted.

(b) There was no evidence from the respondents either that they intended to start work on 23 September 2020 or that they were able to do so. There was, by way of example, no evidence in relation to the financing of the proposed development, the obtaining of any resource consents required or the obtaining of other regulatory approvals, for example building permits. There was no evidence regarding possible opposition to the development by neighbours or others. We were told by Mr Judd that some of the land included in the master plans for the proposed development was not owned by the respondents. This assertion was not disputed by Mr Pascariu.

(c) Ms Lu in her evidence-in-chief simply complained that Mr Chen’s breaches of the JV agreement had delayed her and Mr Huang’s plans and that they had suffered loss. She gave no greater detail. Rather she referred to the evidence of somebody called Alex Shi. However, Alex Shi was not called as a witness.

Were the payments made by the respondents in relation to the Waihopai Vineyard loans to Mr Chen only, or to both Mr Chen and Waihopai?

Submissions

Analysis

Should the orders made against the third to seventh appellants under s 348 of the Property Law Act be aside?

Submissions

Analysis

Should the interest award to the respondents on the Waihopai claims be set aside?

Submissions

Analysis

(1) This section applies to the period before the date of a money judgment if the judgment is given for an amount under, or for breach of, a contract entered into before the coming into force of this Act.

(2) Where this section applies to a period before the date of a money judgment,—

(a) the court may not award interest under Part 1 for the period; but

(b) the court may—

(i) award interest on all or part of the amount of the money judgment at a rate not exceeding the rate prescribed for the purposes of this section, calculated in the manner (with or without compounding) that the court directs; or

...

(iii) determine not to award interest ...

(1) A court may not award interest under a section of this Act for a period unless the party who claims interest under the section for that period specifies the section and, as far as possible, the period in that party’s statement or notice of claim or counterclaim.

...

(2) If a party claims interest under section ... 24,—

(a) the party must specify in that party’s statement or notice of claim or counterclaim the amount or rate of interest claimed; and

(b) the court may not award interest—

(i) exceeding the amount claimed under paragraph (a); or

(ii) at a rate exceeding the rate claimed under paragraph (a).

...

(4) Nothing in this section prevents a court from making an award of interest where the court has at any time made or accepted an amendment to a statement or notice of claim or counterclaim in accordance with the rules of court and where that statement or notice of claim or counterclaim, as amended, complies with the requirements in subsections (1) and (2).

Interest on the above amount in accordance with s 10 of the Interest on Money Claims Act 2016 from the date of advance or such other date as the Court thinks fit; ...

Applications for leave to amend claims to seek interest

Interest of $498,777.53 to 15 July 2021 plus further interest on any amounts outstanding at a rate of 15% per annum until date of payment.

(a) the amendment is in the interests of justice;

(b) it will not significantly prejudice the other party; and

(c) it will not cause significant delay.

(a) interest pursuant to s 24(2)(b) of the Interest on Money Claims Act from the date of each advance to the date of judgment, at 5 per cent per annum; and

(b) interest from the date of judgment to the date of payment pursuant to ss 10 and 12 of the Interest on Money Claims Act.

(a) interest pursuant to s 24(2)(b) on the Interest on Money Claims Act, from the date of each advance as identified in sch 1 to the statement of claim, to the date of judgment, at 5 per cent per annum; and

(b) interest from the date of judgment to the date of payment pursuant to ss 10 and 12 of the Interest on Money Claims Act.

Costs

Result

(a) The award of equitable damages made in respect of the first, second and third causes of action is set aside.

(b) The principal sum awarded in respect of the fourth cause of action is reduced from $2,376,261, to $1.2 million.

(c) The principal sum awarded in respect of the fifth cause of action is reduced from $2,376,261, to $1,176,271.

(d) The orders made in respect of the seventh cause of action are set aside.

(e) The orders made in respect of the eighth cause of action are amended, by setting aside the direction that Waihopai pay Mr Huang, Ms Lu and Matakana Wines $2,376,271. In all other respects, the relief granted in respect of the eighth cause of action is upheld.






Solicitors:
Morrison Kent, Auckland for Appellants
Hamilton Locke, Auckland for Respondents

[1] Huang v Chen [2022] NZHC 1888 [High Court judgment].

[2] At [25].

[3] At [29].

[4] Overseas Investment Act 2005, s 7 definition of “overseas person”, para (2).

[5] Before us, Li Yu’s advance was treated by the parties as amounting in total to $800,000. This sum presumably included the monies paid into Mr Botting’s trust account by Mr Sun.

[6] This document is referred to as both the “Memorandum of Corporate Trusteeship” and the “Memorandum of Company Trusteeship” by the parties. The former title was used in oral submissions and we adopt the same.

[7] Huang v Waihopai Valley Vineyard Ltd HC Auckland CIV-2019-404-304, 24 February 2021 (Minute of Duffy J); and Huang v Waihopai Valley Vineyard Ltd [2021] NZHC 348.

[8] High Court judgment, above n 1, at [108].

[9] Deng v Zheng [2022] NZSC 76, [2022] 1 NZLR 151 [Deng (SC)].

[10] High Court judgment, above n 1, at [168], citing Deng (SC), above n 9, at [78(d)].

[11] At [109].

[12] At [119].

[13] At [121].

[14] At [122].

[15] At [127].

[16] At [127].

[17] At [129].

[18] At [130].

[19] At [131].

[20] At [133]–[134].

[21] At [135]–[137].

[22] At [140].

[23] At [144].

[24] At [151].

[25] At [152].

[26] At [152]–[153].

[27] At [154].

[28] At [155]–[167].

[29] At [168].

[30] At [169], citing Zheng v Deng [2020] NZCA 614, [2021] NZCCLR 30 [Deng (CA)]; and Deng (SC), above n 9.

[31] High Court judgment, above n 1, at [172].

[32] At [173].

[33] At [174].

[34] At [175].

[35] At [176].

[36] At [178].

[37] At [180]–‑[185].

[38] At [185].

[39] At [186].

[40] At [187]–[203].

[41] At [203].

[42] At [214].

[43] At [217].

[44] At [219]–[224].

[45] At [224]–[226].

[46] At [228].

[47] At [232].

[48] At [233].

[49] At [234].

[50] At [235]–[236].

[51] At [240].

[52] At [241].

[53] At [244].

[54] At [245]–[251].

[55] At [253] and [256].

[56] At [258].

[57] At [279].

[58] At [279].

[59] At [284]–[285].

[60] At [286].

[61] At [288].

[62] At [289]–[290].

[63] At [291], citing Arab Monetary Fund v Hashim QB 15 June 1994, quoted in Kuwait Oil Tanker Co SAK v Al Bader [2000] EWCA Civ 160, [2000] 2 All ER (Comm) 271 at [192].

[64] At [294]–[295].

[65] At [300]–[304].

[66] At [306].

[67] At [307], citing Lankow v Rose [1994] NZCA 262; [1995] 1 NZLR 277 (CA) at 294 per Tipping J, with whom Cooke P, Hardie Boys, Gault and McKay JJ agreed.

[68] High Court judgment, above n 1, at [308]–[310].

[69] At [312].

[70] At [318].

[71] At [319].

[72] High Court judgment, above n 1, at [320] and [322], citing Hadley v Baxendale (1854) 9 Exch 341, (1854) 156 ER 145 (Exch).

[73] High Court judgment, above n 1, at [323]–[324].

[74] At [328]–[331].

[75] At [332]–[335].

[76] At [339].

[77] At [343].

[78] At [346].

[79] At [347].

[80] At [355].

[81] At [356].

[82] At [203] and [357].

[83] At [360].

[84] At [362].

[85] At [363].

[86] At [382].

[87] At [384].

[88] At [387].

[89] At [390].

[90] At [392]–[394].

[91] At [406]–[411].

[92] At [395]–[396].

[93] At [397]–[398].

[94] At [399]–[401].

[95] At [402]–[404].

[96] Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4].

[97] At [16].

[98] At [13]. See also Deng (SC), above n 9, at [71].

[99] See High Court judgment, above n 1, at [121].

[100] Partnership Act 1908, s 4. The Partnership Act was repealed as from 21 April 2020 by s 85 of the Partnership Law Act 2019. The 2019 Act took effect from 21 April 2020.

[101] Partnership Act, s 5.

[102] P R H Webb (ed) Laws of New Zealand — Partnership and Joint Ventures (online ed, LexisNexis) at [4].

[103] At n 1.

[104] At n 1, citing Matthews v Matthews HC Auckland CP 7/00, 22 August 2003 at [84].

[105] Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand [2001] NZCA 289; [2002] 2 NZLR 433 (CA) per Blanchard J for himself, Richardson P, Keith and McGrath JJ.

[106] Ambridge Investments Pty Ltd (in liq) v Baker [2010] VSC 59 at [195], citing PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd [2007] VSCA 310, (2007) 20 VR 487 at [62] per Ashley JA; aff’d Baker v Ambridge Investments Pty Ltd (recs app) (in liq) [2011] VSCA 334 at [194]. See also Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd [1995] NSWCA 166; (1995) 7 BPR 14,551 (NSWCA) at 14569–14570.

[107] See, for example, Carruthers v Whitaker [1975] 2 NZLR 667 (CA) at 671‑–673; Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd [1981] 2 NZLR 385 (CA) at 388–389; and Wallace v Studio New Zealand Ltd [2021] NZCA 392, (2021) 22 NZCPR 408 at [50]–[51].

[108] Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 279, referring to Carruthers v Whitaker, above n 107.

[109] Clark v Libra Developments Ltd [2007] NZSC 16, [2007] 2 NZLR 709 at [51] per Chambers J; and Deng (CA), above n 30, at [93].

[110] Deng (CA), above n 30, at [92], referring to Aldridge v Paterson [1914] NZGazLawRp 84; (1914) 33 NZLR 997 (SC) at 1006.

[111] Davies v Newman [2000] All ER (D) 620 (Ch) at [8].

[112] Deng (SC), above n 9; and Deng (CA), above n 30.

[113] See Zheng v Deng [2019] NZHC 3236; Deng (CA), above n 30, at [127]; and Deng (SC), above n 9, at [68]–[69].

[114] Deng (SC), above n 9, at [68]; and Deng (CA), above n 30, at [99]–[100].

[115] Deng (CA), above n 30, at [33].

[116] Deng (SC), above n 9, at [78(d)]; and Deng (CA), above n 30, at [89].

[117] Deng (SC), above n 9, at [72], [73] and [77].

[118] Deng (CA), above n 30, at [119].

[119] Deng (SC), above n 9, at [60], [68] and [73]; and Deng (CA), above n 30, at [101] and [111]‑[112].

[120] Deng (SC), above n 9, at [61] and [68]; and Deng (CA), above n 30, at [102].

[121] Deng (SC), above n 9, at [64]; and Deng (CA), above n 30, at [96], [103], [111] and [113].

[122] Deng (CA), above n 30, at [87]–[88], [105] and [107].

[123] Deng (SC), above n 9, at [78(d)]; and Deng (CA), above n 30, at [89] and [105]–[107].

[124] High Court judgment, above n 1, at [152].

[125] High Court judgment, above n 1, at [154]–[155].

[126] At [158]–[159].

[127] At [159].

[128] At [162].

[129] Deng (SC), above n 9 (footnotes omitted).

[130] Deng (CA), above n 30.

[131] High Court judgment, above n 1, at [173].

[132] At [185].

[133] Some accounts were made available in late 2015, but Mr Huang considered that they were unsatisfactory and he requested more information.

[134] High Court judgment, above n 1, at [190].

[135] Erceg v Balenia Ltd [2008] NZCA 535 at [15]; Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 192–193; and Paper Reclaim Ltd v Aotearoa International Ltd (Further Evidence) (No 1) [2006] NZSC 59, [2007] 2 NZLR 1 at n 1, referring to Rae v International Insurance Brokers (Nelson Marlborough) Ltd.

[136] Airwork (NZ) Ltd v Vertical Flight Management Ltd [1999] 1 NZLR 641 (CA) at 649–650.

[137] High Court judgment, above n 1, at [287]–[291] and [306].

[138] Maria Hook and Jack Wass The Conflict of Laws in New Zealand (LexisNexis, Wellington, 2020) at [1.28] and [4.143].

[139] At [4.210].

[140] Commerce Commission v Viagogo AG [2019] NZCA 472, [2019] 3 NZLR 559 at [50].

[141] Hook and Wass, above n 138, at [4.210].

[142] Schumacher v Summergrove Estates Ltd [2014] NZCA 412, [2014] 3 NZLR 599 at [37].

[143] Hook and Wass, above n 138, at [4.216].

[144] Contract and Commercial Law Act 2017, s 37.

[145] Harbutt’s Plasticene Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447 at 464–465 per Lord Denning MR; and see Steven Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, Lexis Nexis, 2022) at [18.3.1].

[146] High Court judgment, above n 1, at [311]–[318].

[147] At [319]–[324] and [348(c)]. Strictly we doubt that the damages were “equitable” damages. Rather they were common law damages for breach of the JV agreement. However nothing turns on this.

[148] Clarkson v Whangamata Metal Supplies Ltd [2007] NZCA 590, [2008] 3 NZLR 31 at [49].

[149] Thomas Cullen v R [2013] NZCA 328 at [19]; and R v Turner [1975] QB 834 at 840 (CA).

[150] High Court judgment, above n 1, at [352]–[353] and [355].

[151] At [353]. This figure was not challenged before us.

[152] At [123]–[138].

[153] High Court judgment, above n 1, at [134].

[154] High Court judgment, above n 1, at [399].

[155] At [402]–[403].

[156] Interest on Money Claims Regulations 2019, reg 4.

[157] High Court Rules 2016, r 1.9(1).

[158] Rule 1.9(2).

[159] Elders Pastoral Ltd v Marr [1987] NZCA 18; (1987) 1 NZPC 91, (1987) 2 PRNZ 383 at 385.

[160] Davern v QBE Insurance (Australia) Ltd [2023] NZHC 3543.

[161] At [16].

[162] At [23], referring to Harvey v Harvey [2021] NZHC 2405; Harvey v Harvey (No 2) [2021] NZHC 3508; Leondale Ltd v Boyd [2021] NZHC 470; Plumbco New Zealand Ltd v Plumbco Commercial and Civil Ltd [2023] NZHC 690; Plumbco New Zealand Ltd v Plumbco Commercial and Civil Ltd [2023] NZHC 1819; and Swenson v Lawton [2022] NZHC 3544, [2022] NZFLR 847.

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