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Alligators Fast Food Ltd v Chen

Alligators Fast Food Ltd v Chen

Case [2018] NZHC 587 29 March 2018

Breach of Contract

Breach of Fiduciary Duty

Misappropriation of Company Funds

Derivative Proceedings

Limitation Periods

Statutory Interpretation

Commercial Law

Company Law

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1276 [2018] NZHC 587

BETWEEN
ALLIGATORS FAST FOOD LIMITED

First Plaintiff

SHAN HUA CHEN
Second Plaintiff

WENG YUAN TSAO
Third Plaintiff

AND

YEN WEI CHEN

First Defendant

KUEI HUAN CHEN

Second Defendant

Hearing: 27 February 2018

Appearances:

Plaintiffs, self-represented, with Hai Feng Zhang (interpreter) D G Collecutt for the Defendants

Judgment:

29 March 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 29 March 2018 at 3:30pm
pursuant to Rule 11.5 of the High Court Rules.

…………………………………
Deputy Registrar

Solicitors:
Shean Singh Barristers & Solicitors (Darsan Singh), Auckland, for the Defendants
Copy for:
D Grant Collecutt, Auckland, for the Defendants

ALLIGATORS FAST FOOD LIMITED v YEN WEI CHEN [2018] NZHC 587 [29 March 2018]

[1] According to an adage, friends should not go into business together. This case bears that out. The second and third plaintiffs, a married couple, and the first and second defendants, also a married couple, used to be friends. Then they went into business. The second and third plaintiffs put money in, but they lost it. That was in 2010. They sued in the District Court. But after years of litigation they have got nowhere. After their proceeding in the District Court was struck out, they began this proceeding in this court on 14 June 2017. They were entitled to do so. They failed in the District Court on procedural grounds. There was no substantive decision on the merits that barred them from starting a new proceeding in this court.

[2] There are cross-applications. The defendants apply to strike out the plaintiffs’ amended statement of claim. The plaintiffs ask for orders under s 165 of the Companies Act 1993, s 7 of the Illegal Contracts Act 1970 and s 164 of the Companies Act 1993. The powers to grant relief under s 7 of the Illegal Contracts Act or to issue an injunction under s 164 of the Companies Act are not within the jurisdiction of an associate judge, except on an application for summary judgment or by consent.1 I will accordingly not deal with them.

The District Court proceeding

[3] There has already been a hearing on the merits in the District Court. It is arguable for the plaintiffs that they may prove in this proceeding facts found by District Court Judge Hubble:2
[1] The plaintiffs and the defendants were close friends, having known each other for over 10 years. The second defendant (Ms K Chen) owns adjoining shop properties at Botany Road, Howick. In number 4A the defendants have been unsuccessful in operating a bakery business and they leased the shop next door to a Thai take-away.

[2] In May 2009 the friends had a discussion which led to a proposal that the plaintiffs would go into an equal partnership with the defendants and operate a take-away business in conjunction with the bakery business in the defendants’ premises at…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Alligators Fast Food Ltd v Chen

Details

AGLC: Alligators Fast Food Ltd v Chen [2018] NZHC 587
Case: [2018] NZHC 587
Decision Date: 29 March 2018

CaseChat Overview and Summary

This case involves a dispute between former friends who went into business together. The plaintiffs, a married couple, allege that the defendants, also a married couple, misappropriated their investment in a take-away business. The District Court dismissed the plaintiffs' claim on procedural grounds, but the plaintiffs brought the matter to the High Court. The defendants sought to have the case struck out as statute-barred. The court held that some causes of action were statute-barred, while others were not. The court held that the plaintiffs could seek leave under s 165 of the Companies Act to bring a derivative proceeding on behalf of the company, but that they would have to do so in the District Court. The court also held that a claim under s 174 of the Companies Act was not subject to the statutory limitation period. The court directed the plaintiffs to choose between bringing a derivative proceeding in the District Court or a personal claim in the High Court.

In Alligators Fast Food Ltd v Chen, the High Court considered a dispute between former friends who went into business together. The plaintiffs alleged that the defendants misappropriated their investment in a take-away business. The District Court had previously dismissed the plaintiffs' claim on procedural grounds, but the plaintiffs brought the matter to the High Court. The defendants sought to have the case struck out as statute-barred. The court held that some causes of action were statute-barred, while others were not. The court held that the plaintiffs could seek leave under s 165 of the Companies Act to bring a derivative proceeding on behalf of the company, but that they would have to do so in the District Court. The court also held that a claim under s 174 of the Companies Act was not subject to the statutory limitation period. The court directed the plaintiffs to choose between bringing a derivative proceeding in the District Court or a personal claim in the High Court. The court noted that the parties had brought unnecessary procedural complications to the case, and invited the defendants to reflect on whether their obstructionist tactics were in their best interests.

Orders