Liu v Kang - [2023] NZHC 1263

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-1018

[2023] NZHC 1263

BETWEEN
MINYING LIU

First plaintiff

AND

YUHUAN LI

Second plaintiff

AND

WETEX KANG

First defendant

AND

MANUKA WHENUA HOLDING LIMITED

Second defendant

AND

1668 HONEY LIMITED

Third defendant

AND

HONEY SCIENCE MANUKA HONEY LIMITED

Fourth defendant

AND

1201 OKAU ROAD LIMITED

Fifth defendant

AND

NORTH HONEY LIMITED

Sixth defendant

Hearing: On the papers

Counsel:

B J Norling and A Cherkashina for plaintiffs

Date of judgment:

26 May 2023

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 26 May 2023 at 4.00pm, pursuant to Rule 11.5 of the High Court Rules.

…………………………
Registrar/Deputy Registrar

LIU v KANG [2023] NZHC 1263 [26 May 2023]

[1] As duty judge, I have Minying Liu’s and Yuhuan Li’s 25 May 2023 without notice interlocutory application for freezing orders in support of this proceeding.

Background

[2] In this proceeding, the plaintiffs contend to be shareholders in the defendant companies, of each of which the first defendant, Wetex Kang, is said to be the sole director of (and directly or indirectly also a shareholder) in the defendant companies. The plaintiffs assert a variety of issues with their investments of nearly $1 million in the defendant companies, whose affairs they allege are being conducted prejudicially to them in terms of s 174 of the Companies Act 1993 and otherwise in breach of trust and their contract or property rights. They seek the defendants acquire their shares, and otherwise financial relief in various and substantial sums.

[3] On the present application, the plaintiffs seek to freeze all Mr Kang’s assets in New Zealand, including his interests in identified real estate, shares in identified companies, any proceeds from their sales and all bank and other accounts held directly or indirectly by him, as well as all the assets of the defendant companies. The application is expressed as being for ‘interim’ interim freezing orders, and “not to frustrate the sale of any assets for fair market value, … [or] to preclude the payment of ordinary expenses”. The plaintiffs rely on evidence of Mr Kang allegedly “selling down the defendant companies’ properties without obtaining [their] consent”.

Law on freezing orders

[4] Freezing orders may be ordered if I am satisfied, having regard to all the circumstances, there is a danger a prospective judgment in the plaintiffs’ favour will be wholly or partly unsatisfied because the value of the defendants’ assets are alienated from them in some manner.1

[5] Freezing orders are “a valuable protective measure for those commencing civil proceedings”,2 for which the plaintiffs must show “a good arguable case on an accrued

1 High Court Rules 2016, r 32.5(4).
2 Hannay v Mount [2011] NZCA 530 at [20], referring to Deutsche Schachtbau-und Tiefbohrgesellschaft MBH v Shell International Petroleum Co Ltd (trading as Shell International Trading Co) [1990] 1 AC 295 (HL) at 317.

or prospective cause of action”.3 By ‘good arguable case’ is meant establishment of…

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 Liu v Kang

Details

AGLC: Liu v Kang [2023] NZHC 1263
Case: [2023] NZHC 1263
Decision Date: 26 May 2023

CaseChat Overview and Summary

In the case of Liu v Kang, Minying Liu and Yuhuan Li, the plaintiffs, filed an application for freezing orders against Wetex Kang and several companies, the defendants. The plaintiffs, who claim to be shareholders in the defendant companies, allege that the defendants have conducted the companies' affairs prejudicially and in breach of trust and contract. They seek the acquisition of their shares and substantial financial relief. The plaintiffs' application sought to freeze all of Mr Kang's assets in New Zealand, including real estate, shares, bank accounts, and the assets of the defendant companies. The court was required to determine whether there was a good arguable case for the freezing orders and if there was a danger that the defendants' assets would be alienated in a way that might frustrate the plaintiffs' judgment.

The court found that the plaintiffs had presented a good arguable case based on the allegations of prejudice, breaches, and loss, as well as potential breaches of director duties. However, the court was not satisfied that there was a danger of alienation of the defendants' assets, as the evidence only demonstrated dispositions in the ordinary course of business, without any indication of an attempt to render the defendants judgment-proof. The court also noted that the plaintiffs had not pointed to conduct that might frustrate any judgment in their favour. Consequently, the court dismissed the plaintiffs' application for freezing orders.

The court emphasised that freezing orders require more than mere dispositions of assets; there must be a real risk that assets will be put beyond the plaintiffs' reach for satisfaction of their prospective judgment. The court also highlighted that the plaintiffs must point to conduct that prospectively may frustrate any judgment in their favour, rather than merely conduct that may justify such a judgment.

Orders