Niu v Power Dekor Flooring Limited

[2015] NZHC 2234

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-1184 [2015] NZHC 2234

BETWEEN

JUNWEI NIU

Plaintiff

AND

POWER DEKOR FLOORING LIMITED First Defendant

POWER DEKOR LIMITED Second Defendant

DI SHA
Third Defendant

MIN SU

Fourth Defendant

Hearing:	14 and 15 September 2015
Counsel:	R S Pidgeon for plaintiff R O Parmenter for defendants
Judgment:	16 September 2015

JUDGMENT OF WHATA J

This judgment was delivered by me on 16 September 2015 at 4:00pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Re-delivered at 4:00pm on 18 September 2015 as per minute of Whata J dated 18 September 2015

Solicitors:           Grant Sidnam, Auckland

Daniel Overton & Goulding, Auckland

Counsel:            R S Pidgeon, Auckland

R O Parmenter, Auckland

NIU v POWER DEKOR FLOORING LIMITED & ORS [2015] NZHC 2234 [16 September 2015]

[1]      The plaintiff, Junwei Niu, sought relief pursuant to s 174 of the Companies Act 1993 in respect of various alleged actions by Di Sha, in his role as director of Power Dekor Flooring Limited (“Dekor Flooring”).   In short, Mr Niu claimed amongst  other  things  that  Mr Sha  transferred  the  assets  of  Dekor  Flooring  to Power Dekor Limited (“PDL”) in breach of his fiduciary duty as director to Dekor Flooring.  He also makes various other claims relating to the management of Dekor Flooring.

Background

[2]      Jun Wei Niu is a shareholder in Dekor Flooring.   Di Sha is also director and shareholder of that company and of Power Dekor Limited (PDL).

[3]      In 2012, Di Sha and Mr Niu agreed to acquire the assets of Power Dekor Oceania Limited (in liquidation) through Wish Investment Limited which was subsequently incorporated as Dekor Flooring on 3 February 2012. The main function of the company was to retail “Power Dekor” products sourced by Mr Sha and his wife through their connections to the Power Dekor group in China.  Mr Niu and his wife contributed $115,000 to the new venture, while Mr Sha also contributed $25000 through the proceeds of the sale of his car.  Mr Niu was initially the sole director and shareholder, while Mr Sha was the CEO and his wife the book keeper. Mr Niu was also employed by the company as a sales person.

[4]      The company traded well, with good sales growth in the period 2012 to 2013 (about 61 per cent). But in October 2013 the company underwent a substantial transformation. Mr Niu was removed as a signatory to the company’s bank account, and  on  31  October  2013,  he  executed  a  director’s  resolution  recording  the assignment of 390 shares to Mr Sha and his resignation as a company director. Mr Niu’s employment with the company also ended about this time.

[5]      These events were preceded by the incorporation of PDL by Mr Sha in August 2013 and the registration of the trademark “Power Dekor” in the name of that company on 3 September 2013. PDL then appears to having assumed trading of the  Power  Dekor  products  in  late  2013.  Records  indicate  that  PDL  continued

where Dekor Flooring left off, with good sales growth in the period 2013-2014 (about 53 per cent).

Outcome

[6]      The matter was heard by me but during the course of the proceedings the parties were able to reach agreement so that the following orders could be made by consent:

(a)      A declaration Mr Di Sha breached his fiduciary duty as a director of Dekor Limited when he transferred the assets of Dekor Limited to PDL.

(b)The third defendant is liable to Junwei Niu in the sum of $100,000 together with costs of $8,000 including disbursements.

[7]      I am satisfied that the orders as sought should be made having regard to the principles laid down in Latimer Holdings Limited v Sea Holdings New Zealand Limited,1  and in light of a director’s fiduciary duty to the company as stated in the seminal decision of Regal (Hastings) Ltd v Gulliver.2

[8]      There shall be orders by consent accordingly.

Whata J

1      Latimer Holdings Limited v Sea Holdings New Zealand Limited [2005] 2 NZLR 328 (CA)

at [65]–[66], [69]–[72] and [113].

2      Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 (HL), see especially page 158 per Lord Porter.