Chen v Chen - [2017] NZHC 242

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-1733 [2017] NZHC 242

BETWEEN
SHAN-HUA CHEN AND WENG YUAN

TSAO Appellants

AND

YEN WEI CHEN AND KUEI HUAN CHEN

Respondents

Hearing: 21 February 2017

Appearances:

No appearance of S Chen

Appellant Tsao in person (Mr H Zhang McKenzie friend) D G Collecutt for the Respondent

Judgment:

21 February 2017

ORAL JUDGMENT OF MUIR J

CHEN v CHEN [2017] NZHC 242 [21 February 2017]

Introduction

[1] This is an appeal from a minute/direction made by District Court Judge Lovell-Smith on 25 July 2016 in which she struck out the plaintiffs’ case for non- compliance with orders of Judge Cunningham dated 16 May 2016.

Background

[2] There is a long and desultory history to the plaintiffs’ claim. It has its genesis in arrangements between former friends in 2009/2010. The respondents, Mr and Mrs Chen, were the owners of retail premises in Howick. They ran a bakery from part of these premises. It was not particularly successful. They discussed with Ms Chen and Mr Tsao the idea of the appellants running a takeaway business from the same premises with the result that the business would operate as a bakery during the day and a takeaway business at night. Arrangements to that effect were ultimately agreed between the parties. A company was incorporated, Alligators Fast Food Ltd (AFFL), of which the appellants and respondents were shareholders and directors.

[3] In a judgment between the parties delivered by this Court on

10 November 2014, Lang J described what followed in the following terms:1

[7] Ms Chen and Mr Tsao were required to pay the sum of $32,500 in order to acquire a one-half share in the venture. They duly paid Mr and Mrs Chen an initial deposit in the sum of $3,000, and then made another payment subsequently in the sum of $29,750.2 Mr and Mrs Chen used that money for their own purposes.

[8] Both parties provided the company with the sum of $2,000 to provide it with initial working capital. The company then began operating the business.

[9] The parties soon fell out, and this led to Ms Chen and Mr Tsao walking away from the business a short time after it opened. Thereafter Mr and Mrs Chen continued to operate the business without their input or assistance. They subsequently sold the business to a third party

1 Chen v Chen [2014] NZHC 2788.
2 This payment included the sum of $250 being their share of the cost of incorporating the company.

[4] In so describing what occurred, Lang J must be taken as having accepted the conclusion reached by Judge Hubble in the District Court that the nature of the arrangement was to value the new business at $65,500 with Mr and Mrs Chen’s capital contribution comprising the bakery business and Ms Chen and Mr Tsao acquiring their interest in the company for cash.3 If that was indeed the nature of the arrangement then the appropriation by Mr and Mrs Chen…

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 Chen v Chen

Details

AGLC: Chen v Chen [2017] NZHC 242
Case: [2017] NZHC 242
Decision Date: 21 February 2017

CaseChat Overview and Summary

The appeal in Chen v Chen was heard by Muir J in the High Court of New Zealand, Auckland Registry. The appeal concerned a decision by Judge Lovell-Smith of the District Court to strike out the plaintiffs' case for non-compliance with orders made by Judge Cunningham. The plaintiffs, Shan-Hua Chen and Weng Yuan Tsao, were appealing this decision. The background to the case involved a long-running dispute between the plaintiffs and the respondents, Yen Wei Chen and Kuei Huan Chen, regarding the operation of a bakery and takeaway business. The plaintiffs had initially brought their claim in the District Court but were advised that their claims should be brought in the High Court under the Companies Act 1993. Despite this, the plaintiffs continued to pursue their case in the District Court, leading to multiple orders and directions from the court regarding the need for proper pleadings and compliance with the court's rules.

The legal issues before the court were whether the District Court was justified in striking out the plaintiffs' case for non-compliance with Judge Cunningham's orders and whether the High Court had jurisdiction to review the District Court's decision. The court found that the District Court was justified in striking out the case as the plaintiffs had failed to comply with clear and specific orders to file proper pleadings and an application to join the company as a party. The court held that an "unless order" was appropriate in this case given the long history of the proceedings, the multiple warnings given to the plaintiffs, and their failure to comply with the court's directions. The court also found that there was no basis for the High Court to invoke its inherent jurisdiction to review the District Court's decision.

In the result, the appeal was dismissed, and the respondents were awarded costs on a 2B basis. The court encouraged the parties to resolve their dispute through more efficient means, ideally avoiding the need for further court proceedings.

Orders