Huang v Chen

[2021] NZHC 3232

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-000304

[2021] NZHC 3232

BETWEEN

HONGZHAO HUANG

First Plaintiff

JEYU LU
Second Plaintiff

MATAKANA WINES LIMITED
Third Plaintiff

AND

CHRIS CHEN

First Defendant

WAIHOPAI VALLEY VINEYARD LIMITED

Second Defendant

……………………………………Contd/2

Hearing:	25 November 2021
Appearances:	M O’Brien QC and M Pascariu for Plaintiffs T J Herbert for Defendants
Judgment:	29 November 2021

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Monday, 29 November 2021 at 4:30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:           Anderson Creagh Lai (M Pascariu), Auckland Counsel: M O’Brien QC, Auckland

T J Herbert, Auckland

HUANG v CHEN [2021] NZHC 3232 [29 November 2021]

YI LU

Third Defendant

DON CHEN
Fourth Defendant

JINPING HUANG
Fifth Defendant

QI YANG

Sixth Defendant

ADELAIDE EDUCATION GROUP PTY LIMITED
Seventh Defendant

[1]        This proceeding has a three-week fixture which has been set down for hearing commencing on 16 May 2022.

[2]        On 22 July 2021, the first defendant, Mr Chen, filed a second amended statement of defence and counterclaim, which included five counterclaims.

[3]        The plaintiffs object to the jurisdiction of the Court to  hear and determine  Mr Chen’s first and fifth counterclaims. They seek orders staying the first counterclaim on the basis that New Zealand is forum non conveniens and the People’s Republic of China is the proper forum for determination of the claim and striking out the fifth counterclaim on the basis that it is an “employment relationship problem” that the High Court has no jurisdiction to determine.

Relevant background

[4]        The following relevant background is largely taken from the synopsis of submissions by plaintiffs’ counsel.

[5]        The parties entered into a joint venture agreement in China on 19 April 2012. The joint venture agreement:

(a)Is expressly governed in accordance with the laws of China;

(b)Concerned the purchase and operation of land and an associated winery in Matakana, Auckland;

(c)Provided that the parties would incorporate a company through which the winery would operate, namely Matakana Estate Limited;

(d)Provided that Mr Chen was to be the Chief Executive Officer of Matakana Estate Limited; and

(e)Provided that a wholly owned subsidiary of Matakana Estate Limited would be incorporated in China.

[6]        Although the joint venture agreement referred to Matakana Estate Limited, the parties ultimately decided to use the third plaintiff, Matakana Wines Limited (MWL), for that purpose. MWL had been earlier incorporated by Mr Chen, who initially held all the shares in the company and was its sole director.

[7]Pursuant to the joint venture agreement:

(a)On 28 June 2012, the second plaintiff, Ms Lu, was appointed a director of MWL and became its managing director in September 2012;

(b)On 1 September 2012, Mr Chen was appointed as the general manager of MWL pursuant to an employment agreement of the same date, although Mr Chen says he was the Chief Executive Officer; and

(c)On 10 September 2012, Mr Chen transferred 100 per cent of the shares in MWL to Kiwi Club Limited, a company of which Ms Lu is the sole shareholder and director.

[8]        The parties exchanged documents and had discussions concerning the integration of the plaintiffs’ interests in the Matakana land business with Mr Chen’s interest in the assets of the second defendant, Waihopai Valley  Vineyard Limited.  Mr Chen says that this resulted in an integrated agreement that superseded the joint venture agreement. The plaintiffs say that no agreement was reached, and the joint venture agreement remains in place.

[9]        MWL is the sole shareholder of Matakana Zhongshan, a Chinese limited liability company incorporated in China on 14 August 2012. Matakana Zhongshan was set up to market and distribute wine it receives from MWL.

[10]      MWL and Mr Chen  entered  into  a  written  employment  agreement  dated 1 September 2012. Between September 2012 and May 2017, Mr Chen received a salary from MWL in payment of his General Manager or Chief Executive Officer role. This  salary  was  initially  $50,000  per  annum  before  increasing  by  agreement to

$82,000  per annum  from  March  2013  and  $130,000  per annum  from  July 2013.

Throughout his employment, MWL paid all PAYE tax on Mr Chen’s behalf. Mr Chen disputes the salary levels, and says he was paid more.

[11]      On 15 November 2016, Mr Chen proposed a salary increase to $200,000 per annum to be back dated to 1 July 2016. MWL did not accept the proposed salary increase. On 1 December 2016, following a loss of trust and confidence in Mr Chen, Kiwi Club Limited decided to terminate his employment as general manager of MWL.

First counterclaim

[12]      The first counterclaim alleges that it was expressly agreed that Mr Chen would receive a 40 per cent interest in Matakana Zhongshan, including 40 per cent of the share capital and 40 per cent of any profits made by the company. The company allegedly made a profit in 2014/2015, but the first and second plaintiffs have failed to provide any interest to Mr Chen and/or account to him for any profits.

[13]      Under the doctrine of forum non conveniens, a Court that has jurisdiction over a party in accordance with its own laws may decline to exercise that jurisdiction on the basis that it is not the appropriate venue for the litigation, and considerations of justice require the claim to be litigated in another jurisdiction.

[14]      Here, the first plaintiff says that Mr Chen’s interest (if any) in Matakana Zhongshan is to be determined in accordance with either the joint venture agreement or the integrated agreement. Both are governed by Chinese law. Furthermore, ownership of shares in China is determined by reference to the company’s share register. This too is in China. Finally, the first plaintiff says that the relief sought by Mr Chen, the transfer of shares and an account of profits, would have to be enforced in China.

[15]      I am, however, not persuaded that it is not convenient to hear the counterclaim in the New Zealand proceedings, having regard to the principles set out in Spiliada Maritime Corp v Cansulex Ltd (The Spiliada).1 Although governed by Chinese law, the  joint  venture  agreement  is  pleaded  by  the  plaintiffs  in  this  proceeding. The

1      Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460, [1986] 3 All ER 843 (HL) [The Spiliada].

plaintiffs’ first cause of action alleges that Mr Chen has breached it. It is therefore front and centre of the New Zealand proceeding.

[16]      Mr Chen seeks a decree of specific performance and an account of profits. His counsel points out these are both in personam remedies, which would be enforceable against the plaintiffs. Two of the plaintiffs are domiciled in New Zealand and all three have submitted to New Zealand’s jurisdiction. If specific performance is not possible, Mr Chen could apply to have the decree converted into an order for damages.

[17]      Counsel for the plaintiffs concedes that if Mr Chen redrafted the first counterclaim as a claim for damages, then the plaintiffs’ protest to jurisdiction may fall away. However, at present it is not drafted as such.

[18]      There is no suggestion that there is any existing litigation between the parties in China. Considerations of cost and convenience support New Zealand as the appropriate forum. Although living in China, the first plaintiff, Mr Huang, has already indicated he intends to come to New Zealand to give evidence in the proceeding. The second plaintiff and Mr Chen are domiciled in New Zealand. All issues could, and therefore should, be resolved in one hearing in New Zealand.

Fifth counterclaim

[19]      The fifth counterclaim alleges that it was expressly agreed that Mr Chen would be the Chief Executive Officer of the third plaintiff and that he would be remunerated at a rate agreed with the first and second plaintiffs. Mr Chen alleges that termination of his employment was wrongly procured by the first and second plaintiffs. As a result, he has not been paid the salary to which he was entitled both before and after his termination.

[20]      Section 161 of the Employment Relations Act 2000 provides that the Employment Relations Authority has the exclusive jurisdiction to make determinations about employment relationship problems generally. These problems are expressly stated to include matters about the recovery of wages or other money under s 131. Section 131 provides that where there has been a default in payment to

an employee of wages or other money under an employment agreement, the employee may seek recovery in the Authority.

[21]      The plaintiffs say that, in an apparent attempt to skirt around the Authority’s exclusive jurisdiction under s 161, Mr Chen has pleaded the fifth counterclaim against the first and second plaintiffs as a breach of the joint venture agreement and integrated agreement.

[22]      The plaintiffs submit that by providing that Mr Chen was to be the Chief Executive Officer of MWL, the joint venture agreement itself points to an employment relationship. Further, the joint venture agreement is entirely silent on the matter of Mr Chen’s remuneration for his role. Rather, this is governed by his employment agreement with MWL under which Mr Chen was paid a salary and MWL paid PAYE tax on his behalf. The plaintiffs therefore submit that the fifth counterclaim is an employment relationship problem and concerns the recovery of allegedly unpaid wages. It is said to clearly fall within the exclusive jurisdiction of the Authority to determine.

[23]      In this case, I am persuaded that the fifth counterclaim seeks to make a determination about an employment relationship having regard to the principles set out in FMV v TZB.2 Counsel for Mr Chen submits that the written employment agreement between himself and the third plaintiff was a sham and only put in place by the second plaintiff to assist in her application for New Zealand residency. That is, however, a matter quintessentially within the jurisdiction of the Employment Relations Authority.

[24]As stated by the majority in FMV v TZB:3

In enacting s 161(1), the legislature specifically chose not to ground the [Employment Relations] Authority’s jurisdiction in the way claims might be pleaded or traditionally categorised. It used a non-technical term “problem” to ensure legal form did not distract the decisionmaker from focusing on the factual substance of the difficulty confronting the parties.

2      FMV v TZB [2021] NZSC 102.

3 At [92].

[25]The majority continued:4

This necessarily means that if a controversy can be framed in terms of one or more of the examples in s 161(1)(a)–(qd), it must be brought in the [Employment Relations] Authority as an employment relationship problem.

[26]      Section 161 provides that the Employment Relations Authority has exclusive jurisdiction to make determination about employment relationship problems generally, including:

(a)disputes about the interpretation, application, or operation of an employment agreement;

(b)matter related to a breach of an employment agreement;

…

(g)       matters about the recovery of wages or other money under s 131.

[27]      I am of the view that Mr Chen’s counterclaim can be framed in terms of the above examples. It therefore must be brought in the Employment Relations Authority.

Result

[28]      The plaintiffs’ application to stay the first defendant’s first counterclaim is dismissed. The plaintiffs’ application to strike out the first defendant’s fifth counterclaim is granted.

[29]The parties being equally successful, costs are to lie where they fall.

Woolford J

4 At [94].