Bian v Elim Properties Limited

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2085

[2021] NZHC 3302

UNDER

Part 18 of the High Court Rules 2016

IN THE MATTER

of section 174 of the Companies Act 1993

BETWEEN

QIANGZHONG BIAN

Plaintiff/Applicant

AND

ELIM PROPERTIES LIMITED

First Respondent/First Defendant

YANG ZHANG
Second Respondent/Second Defendant

ZUOMING JIANG

Third Defendant

Hearing:

25 November 2021

Appearances:

J Langston for the Plaintiff/Applicant

D Broadmore and M Smol for the Respondents/Defendants

Judgment:

3 December 2021

JUDGMENT OF GORDON J

This judgment was delivered by me on 3 December 2021 at 3 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:           Shieff Angland, Auckland

Buddle Findlay, Auckland

BIAN v ELIM PROPERTIES LTD [2021] NZHC 3302 [3 December 2021]

[1]    The applicant, Quiangzhong Bian, the second respondent, Yang Zhang, and the third respondent, Zuoming Jiang, are the shareholders of the first respondent, Elim Properties Ltd (Elim). Mr Zhang is the sole director of Elim.

[2]    Mr Bian seeks an interim injunction restraining the respondents from diluting his shareholding in Elim until his substantive claim under s 174 of the Companies Act 1993 (the Act) is heard. In his substantive claim, Mr Bian pleads that the affairs of Elim have been, are being and are likely to be, conducted in a manner that is oppressive, unfairly discriminatory and unfairly prejudicial to him in his capacity as a shareholder of Elim.

[3]    Mr Bian holds a 33 per cent shareholding in Elim but he says the respondents have embarked on a scheme designed to dilute his shareholding, to alter the balance of power and reduce his voting and profit entitlements with his shareholding being reduced to seven per cent. Mr Bian says this dilution cannot be compensated by way of damages.

[4]    The respondents say that in circumstances where Mr Bian was demanding repayment of advances he made to Elim, the steps taken by the respondents were not prejudicial and were in the best interests of Elim.

Background

[5]    Elim was incorporated on 8 September 2017. The shareholders and their shareholdings are:

(a)Mr Zhang: the Companies Office records Mr Zhang’s shareholding at 43 shares (43 per cent);

(b)Mr Bian: the Companies Office records Mr  Bian’s  shareholding  at 33 shares (33 per cent); and

(c)Ms Jiang: the Companies Office records Ms Jiang’s shareholding at 24 shares (24 per cent);

(together referred to as: the shareholders).

[6]    Out of Mr Zhang’s shareholding of 43 shares, he holds nine shares on trust for Ms Jiang, which brings her legal and beneficial interest in the shares to 33 per cent.

[7]    Mr Bian says that Elim was incorporated as a vehicle consequent upon the shareholders’ prior oral agreement to purchase and  develop  a  property  together. Mr Bian says the shareholders each brought  different  skills to the development.   Ms Jiang would be mainly responsible for the initial funding, Mr Bian was responsible for providing the professional and technical advice, and Mr Zhang was responsible for…