Liao v Zheng - [2020] NZHC 920

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002148

[2020] NZHC 920

BETWEEN
HONGBING LIAO

Plaintiff

AND

CHAO ZHENG (AKA PETER CHAO ZHENG)

Defendant

Hearing: 20 April 2020

Appearances:

R Rao for Plaintiff K Sun for Defendant

Judgment:

6 May 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 6 May 2020 at 3.00 pm
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

Date……………………..

LIAO v ZHENG [2020] NZHC 920 [6 May 2020]

Introduction

[1] The plaintiff, Mr Liao, seeks summary judgment against the defendant, Mr Zheng, for recovery of $457,760.06 (plus interest and costs) pursuant to a guarantee under a general security agreement (GSA). Mr Liao claims that he paid the monies by way of a shareholder’s advance (the advance) to Good Value Group Ltd (GVG Ltd), a company formed by the parties in October 2012, as the vehicle through which Mr Liao would become a partner in Mr Zheng’s existing door-to-door sales business.

[2] Mr Zheng opposes summary judgment on the grounds that the documents signed by the parties were a sham, and that they are thus void and did not reflect the mutual intention of the parties. Mr Zheng alleges dishonest conduct by Mr Liao. He says that Mr Liao claims to have acquired a 50 per cent stake in his business without paying any purchase price to him. Mr Zheng also relies on the defence of non est factum.

[3] The critical issue I must determine is whether the defences of Mr Zheng are so inherently improbable and/or lacking in credibility that I can safely conclude that Mr Liao, as the plaintiff, has demonstrated that Mr Zheng has no defence to the claim.

Factual background

[4] Mr Zheng was the sole beneficial owner of Good Value Import Ltd, a company incorporated in January 2009. The business owned several trucks outfitted to be mobile retail stores selling consumer goods such as electronics and clothing. Whether the business was profitable is in dispute.

[5] Mr Zheng says that on or about October 2012 he and Mr Liao verbally agreed that Mr Liao would purchase a 50 per cent stake in the business for the purchase price of $200,000 (the verbal agreement).

[6] On 30 October 2012, the parties signed a Shareholders’ Agreement and the GSA. The documents were prepared by a solicitor, Mr Kevin Lo.

[7]The recital to the Shareholders’ Agreement reads:

The parties propose:

A.Forming a company, to be known as Good Value Group Ltd (“the company”) for the purposes of carrying out a door-to-door sale and hire purchase business;

B.The parties wish to record their agreement on certain matters relating to their respective shareholdings in the company.

[8]Clause 5.1 reads:

5Shareholder Advances

5.1Each party shall, on the commencement date, contribute to the company in the following manner:

(a)For Harvey (Liao): by way of shareholder advance the sum of
$200,000 secured by general…

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 Liao v Zheng

Details

AGLC: Liao v Zheng [2020] NZHC 920
Case: [2020] NZHC 920
Decision Date: 6 May 2020

CaseChat Overview and Summary

In the High Court of New Zealand, Liao v Zheng involved a dispute over the validity of a guarantee under a general security agreement. The plaintiff, Mr. Liao, sought summary judgment against the defendant, Mr. Zheng, for recovery of $457,760.06 plus interest and costs. Mr. Liao claimed that he had paid this amount as a shareholder's advance to Good Value Group Ltd (GVG Ltd), a company formed by the parties in October 2012. Mr. Zheng opposed the summary judgment on the grounds that the documents were a sham and did not reflect the mutual intention of the parties. He also raised the defence of non est factum. The court needed to determine whether Mr. Zheng's defences were so inherently improbable or lacking in credibility that Mr. Liao had demonstrated that Mr. Zheng had no defence to the claim.

The court found that there were significant factual disputes between the parties, including the financial status of the business, the role of the solicitor who drafted the documents, and the nature of the agreements. The court also noted that Mr. Zheng's claims of being misled due to poor English ability and cultural differences provided some justification for his delayed response. The court concluded that the plaintiff had not demonstrated that Mr. Zheng had no defence to his claims. As a result, the application for summary judgment was dismissed. The court made directions for standard discovery and set a date for the case to be called in the chambers list.

Orders