Lam v Mo - [2018] NZHC 2920

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE

CIV-2013-485-1736

[2018] NZHC 2920

BETWEEN MAN FUNG LAM, YUET MING BETTY WONG and MORAL DRAGON LIMITED
Plaintiffs

AND

CHIU CHEUNG MO and LILY YUET HA WONG

First Defendants

AND

SUNLINK DEVELOPMENTS LIMITED

Second Defendant

AND

PLIMMERTON HEIGHTS

CONSTRUCTION LIMITED
Third Defendant

AND

STEVEN WEE HONG LEE

Fourth Defendant

Hearing: 14 May 2018

Appearances:

R J B Fowler QC for Plaintiffs

M R C Wolff and S P Gunatunga for First, Second and Third Defendants
No appearance for Fourth Defendant

Judgment:

9 November 2018

JUDGMENT NO 2 OF WILLIAMS J

LAM & ORS v MO & ORS [2018] NZHC 2920 [9 November 2018]

Introduction

[1] By judgment dated 16 May 2017 I ordered the second and third defendants to give an account in accordance with pt 16 of the High Court Rules 2016.1 An account-taker was appointed and duly completed her report on 15 December 2017. Following that report the parties remained in disagreement over the following matters:

(a)entertainment costs;

(b)wages, salaries and remuneration payments;

(c)legal fees attributable to the second and third defendants;

(d)unsold sections;

(e)plaintiff’s responsibility for losses in the Plimmerton development;

(f)account-taker’s fees;

(g)off-sets.

[2] These matters were the subject of a further hearing on 14 May 2018. At that hearing counsel pragmatically suggested that I make in-principle rulings on each of the contested items and leave it to the parties to settle monetary figures for reference back to the Court in due course. I adopt that approach accordingly and turn now to address each item separately.

[3] For ease of reference, in this judgment I refer to the plaintiffs as Mr Lam, the first defendant as Mr Mo, the second defendant as Sunlink and the third defendant as Plimmerton.

1 Lam v Mo [2017] NZHC 997, [2018] NZCCLR 2 at [219].

Entertainment costs

[4] This item related to entertainment costs claimed by Mr Mo through the companies.

The parties’ positions prior to the hearing

[5] The total entertainment costs claimed by Mr Mo were $139,000. The account-taker noted these to be high. The account-taker recorded that, in line with Inland Revenue policy, half of these costs should be treated as personal drawings by Mr Mo.2

[6] Mr Mo agreed. Mr Mo’s accountant, Mr Lang, suggested that the nature of property development is that extensive interaction is required with contractors, lenders, surveyors, builders and potential customers before work can even begin. He submitted that generally 100 percent of entertainment expenses can be claimed by directors and that the costs in this case were legitimately incurred and in accordance with general trade practices.

[7] Mr Lam’s accountant, Mr Taylor, suggested that the project was straightforward and entertainment costs would only be required over five years of the project. An independent agent was required to facilitate sales meaning that Mr Mo would not have needed to incur these costs to make sales. Mr Lam suggests that at best
$1,000 per annum…

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 Lam v Mo

Details

AGLC: Lam v Mo [2018] NZHC 2920
Case: [2018] NZHC 2920
Decision Date: 9 November 2018

CaseChat Overview and Summary

In the High Court of New Zealand, the case of Lam and others versus Mo and others was heard. The plaintiffs, Man Fung Lam, Yuet Ming Betty Wong, and Moral Dragon Limited, were contesting several financial matters with the defendants, Chiu Cheung Mo, Lily Yuet Ha Wong, Sunlink Developments Limited, Plimmerton Heights Construction Limited, and Steven Wee Hong Lee. The primary issues were disagreements over entertainment costs, wages and salaries, legal fees, unsold sections, losses in the Plimmerton development, account-taker's fees, and off-sets.

The court found that entertainment costs claimed by Mr Mo were legitimate, and the account-taker's assessment of $69,258 was reasonable. Regarding wages and salaries, the court accepted that the wages paid to staff were a legitimate company expense, but Mr Mo's salary was considered appropriate. Legal fees incurred in defence of the proceedings were shared two-thirds to Mr Mo personally and one-third equally between Sunlink and Plimmerton.

As for the unsold sections, the court was unable to determine the proper treatment at this stage, and suggested that the matter should be separately agreed in a pragmatic business fashion. The court ruled that the losses attributable to Plimmerton were to be borne by the joint venture. Account-taker's fees were to be paid by Sunlink, as directed in the substantive judgment. Offsets claimed by Mr Mo were deemed irrelevant, and Mr Lam was entitled to interest in the usual way.

The court made the following findings: 50% of entertainment costs are payable by Mr Mo, wages paid to staff are a legitimate company expense, Mr Mo's salary was appropriate, legal fees will be shared between the parties, Plimmerton's losses are losses of the joint venture, account-taker's fees are payable by Sunlink, the offsets claimed by Mr Mo are irrelevant, and Mr Lam is entitled to interest in the usual way. The parties were directed to make final calculations based on these findings and submit the appropriate joint memorandum and draft orders within 15 working days of the judgment.

Orders