Chen v Chen - [2014] NZHC 2788

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3186 [2014] NZHC 2788

BETWEEN
YEN WEI CHEN and KUEI HUAN

CHEN Appellants

AND

SHAN HUA CHEN and WENG YUAN TSAO

Respondents

Hearing: 6 November 2014

Appearances:

G Collecutt for Appellants
R Hesketh for Respondents

Judgment:

10 November 2014

JUDGMENT OF LANG J

This judgment was delivered by me on 10 November 2014 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

CHEN v CHEN [2014] NZHC 2788 [10 November 2014]

[1] This appeal concerns a dispute between two couples who agreed to undertake a joint venture to operate a suburban bakery and takeaway business. The parties had been friends for many years. Their decision to go into business together ultimately proved to be disastrous, and led to litigation in the District Court.

[2] In a judgment delivered on 23 May 2013, Judge Hubble directed the appellants, Mr and Mrs Chen, to pay the respondents, Ms Chen and Mr Tsao, the sum of $29,750.1 That sum represented the bulk of the money that Ms Chen and Mr Tsao had paid to acquire a stake in the business.

[3] Mr and Mrs Chen appeal against that decision on several grounds. The primary ground of appeal is that the Judge failed to decide the case on the basis of the pleadings. Because I have concluded that the appeal must succeed on that ground alone, I do not propose to consider the remaining grounds of appeal.

Background

[4] Mrs Kuei Huan Chen is the owner of two adjoining retail premises in a small suburban shopping centre in Howick. Until May 2009, she and her husband operated a bakery business from one of the premises, and rented the other to a person who operated a takeaway business from it.

[5] In May 2009, the parties agreed that they would join forces to operate both a bakery business and a takeaway business from the premises. Unfortunately, however, they never recorded their agreement in writing and neither party obtained legal or valuation advice.

[6] At joint expense the parties incorporated a company called Alligators Fast
Food Limited. They took equal shareholdings in that company, and were also all directors.

1 Chen v Chen DC Manukau CIV-2010-092-5263, 23 May 2013.

[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…

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 [2014] NZHC 2788
Case: [2014] NZHC 2788
Decision Date: 10 November 2014

CaseChat Overview and Summary

The appeal concerns a business venture between two couples who intended to jointly operate a bakery and takeaway business. Unfortunately, the venture failed, leading to litigation. The respondents, Shan Hua Chen and Weng Yuan Tsao, sought compensation from the appellants, Yen Wei Chen and Kuei Huan Chen, for the $32,500 they had paid to acquire a share in the business. The District Court found in favour of the respondents, ordering the appellants to pay the sum of $29,750. The appellants now appeal, arguing that the Judge failed to decide the case based on the pleadings. The primary issue before the court was whether the Judge decided the case outside the scope of the pleadings, particularly regarding the nature and effect of the agreement between the parties.

The court found that the Judge did indeed decide the case on a basis outside the pleadings. The original notice of claim did not contain any allegations related to a breach of contract, and no evidence was given in relation to it during the hearing. The respondents argued that the notice of claim did mention the existence of a contract, but the court held that pleadings are primarily designed to identify the nature of the claim, ensuring that the opposing party understands the claim and the court decides the case based on the arguments presented. The court also noted that the manner in which the appellants defended the claim suggested that they were not prepared for a breach of contract argument. The appeal was allowed, and the case was directed to be reheard in the District Court. The appellants were successful and would ordinarily be entitled to an award of costs on a Category 2B basis, together with disbursements.

Orders