Lian International Investment (NZ) Limited v Gao HC Auckland CIV-2011-404-006064

[2011] NZHC 1179

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-006064

BETWEEN  LIAN INTERNATIONAL INVESTMENT (NZ) LIMITED

First Plaintiff

ANDPEIPEI XU Second Plaintiff

ANDCHEN XI GAO (AKA HELEN GAO) First Defendant

ANDSHU HUA YAO (AKA STEVE YAO) Second Defendant

ANDS & H LINCOLN LIMITED Third Defendant

Hearing:         3 October 2011

Appearances: C S Henry for Plaintiffs

No appearance for Defendants

Judgment:      3 October 2011 at 5:00 PM

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 3 October 2011 at 5:00 pm

pursuant to R 11.5 of the High Court Rules.

Registrar / Deputy Registrar

Date………………………

Solicitors:           Ben Liu & Co, P O Box 77031, Mount Albert, Auckland 1350

Fax: [phone]

Counsel:             C S Henry, P O Box 616, Orewa 0946

Fax: [phone]

LIAN INTERNATIONAL INVESTMENT (NZ) LTD V GAO HC AK CIV-2011-404-006064 3 October 2011

[1]      The first plaintiff, Lian International Investment (NZ) Limited (Lian), runs a bar and entertainment business in Ponsonby known as “Sponge Bar” and “Chicane”. The second plaintiff is a director and shareholder of Lian and acted on its behalf on the purchase of the business from the third defendant, S and H Lincoln Limited. The first  and  second  defendants,  Helen  Gao  and  Steve Yao,  were  the  directors  and shareholders of Lincoln.

[2]      The  plaintiffs  assert  that  Lian  purchased  the  business  in  reliance  on information provided by the defendants’ agent and, in particular, on financial information in the form of oral representations and computer-generated printouts to the effect that the business produced average weekly sales exceeding $20,000 and annual  profit  of  $200,000.    There  was  another  relevant  representation  alleged, namely that the financial printouts provided had been derived from data recorded on the business’ sales system which could not be altered.

[3]      Lian took over the business on 12 September 2011 and in the three weeks since that time the plaintiffs have been concerned to find that weekly sales are well under $20,000; in fact, roughly half that figure.   Secondly, they have identified suspicious entries in the sales recording system suggesting that the defendants had been recording fictitious sales which had the effect of inflating the sales figures.

[4]      The plaintiffs have filed proceedings seeking damages for misrepresentations under the Contractual Remedies Act 1979, an order for recision, damages for misrepresentation under the Fair Trading Act 1986 and damages for conspiracy to injure by unlawful means.  Pending disposition of the substantive claim the plaintiffs have applied for freezing orders in respect of the defendants’ assets and ancillary orders. They say that Ms Gao and Mr Yao intend to leave New Zealand permanently and when that happens there will be no realistic prospect of there being assets in New Zealand to satisfy any judgment ultimately obtained against them.

[5]      Freezing orders to preserve assets in the face of risk of dissipation can be made under r 32 of the High Court Rules.  Before making such an order the Court must be satisfied that there is a good arguable case against the person whose property would be the subject of the order, there must be assets in respect of which the order

can attach and there must be a real risk that the property will be moved out of the jurisdiction or dissipated.[1]  As is the case with any form of injunction regard must be had to the interests of justice and exercising the discretion.

[1] Shaw v Narain [1992] 2 NZLR 544.

[6]      I am satisfied that there is a good arguable case.   Lian’s claim, of course, turns on the alleged representations regarding the weekly turnover.   These were made orally and the only evidence in support of them is that of Ms Xu.  However, viewed in the context of the other evidence that has been placed before me I am satisfied that there is at least an evidential basis for that assertion.

[7]      Ms Xu has attached to her affidavit statements made by staff members to the police.  They include a statement from the managerMr Zeng.  He alerted Ms Xu to suspicious transactions in November 2009 of $23,000 and $31,200 in cash. Investigations have shown other similarly suspicious transactions, including three of approximately $1,000 each the day before the business was handed over.   These three transactions of $1,050, $1,129 and $1,011 were made in the name of the previous owner Ms Gao, and two of the staff.

[8]      Ms Xu has given evidence that strongly supports her fear that Ms Gao and

Mr Yao are intending to leave New Zealand permanently.  In her affidavit 3 October

2011 Ms Xu recounts a conversation she had with Ms Gao and Mr Yao in which she asked about their reasons for selling the business.   They told her that they had obtained permanent residence visas for Canada and were planning to move there. They told her that they had sold their house in West Harbour and were living upstairs above the business pending the sale of the business and then planned to rent or live in  a  motel  temporarily  for  the  month  following  sale  when  they  had  agreed  to continue attending the business for training purposes.   Ms Xu is also aware from visiting one of her staff that Ms Gao and Mr Yao had sold some furniture to him.

[9]      On 23 September 2011 Ms Xu overheard Ms Gao and Mr Yao make bookings with a shipping company to ship their belongings and saw Mr Yao making scanned copies of their passports.  Ms Xu refers to a further conversation she had with Ms

Gao about when she and Mr Yao intended leaving New Zealand and was told that

they  intended  to  leave  as  soon  as  the  training  period  provided  for  under  the agreement finished.  That date would be 12 October 2011.  Finally, in the last week Ms Gao and Mr Yao have stopped coming into the business daily to arrange training and have asked whether Ms Xu and the other partners involved in the business are sufficiently familiar that they can leave New Zealand earlier than planned.

[10]     The only assets that Ms Gao and Mr Yao are known to have in New Zealand are bank accounts with the ASB bank and the BNZ bank.  Ms Xu has identified one account held by Mr Yao at the BNZ, 02-0152-0088988-00.  She does not know the account numbers of the other accounts.

[11]     I am satisfied on the evidence that there is a good arguable case against the defendants and that there is a real risk that any monies still held in New Zealand bank accounts in the name of any of the defendants will be moved overseas and dissipated, leaving the plaintiffs with no assets against which to execute a judgment in the event that they succeed on the substantive claim.  Because there is evidence that the defendants are likely to move overseas at any time, the risk of dissipation is not only real but imminent.

[12]     I therefore make the following orders:

(a)       Freezing the funds held in the BNZ bank account 02-0152-0088988-

00 held in the name of one or more of the defendants;

(b)      Freezing the funds held in any other BNZ bank account or in any ASB

bank account in the names of any or all of the defendants;

(c)       Requiring the defendants to attend the High Court and be examined as to their assets in New Zealand and overseas;

(d)      The plaintiffs are entitled to costs on the application on a 2B basis.

P Courtney J