X&J Trading NZ Limited v Wayne and Nancy Limited

[2019] NZHC 3013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2461

[2019] NZHC 3013

BETWEEN

X&J TRADING NZ LIMITED

First Applicant

PAIRUA VILLAGE HOLDING LIMITED
Second Applicant

AND

WAYNE AND NANCY LIMITED

First Respondent

AND

WEIBIN JIANG

Second Respondent

Hearing:	On the papers
Appearances:	H L R McDermott for the applicants
Judgment:	19 November 2019

JUDGMENT OF PALMER J

The judgment was delivered by me on Tuesday 19 November 2019 at 2.30pm.

Pursuant to Rule 11.5 of the High Court Rules

……………………………… Registrar/Deputy Registrar

Solicitors:
Righteous Law, Auckland

X&J TRADING NZ LIMITED v WAYNE AND NANCY LIMITED [2019] NZHC 3013 [19 November 2019]

AND  LING XIE

Third Respondent

AND  BEREBORN TRADING LIMITED

Fourth Respondent

AND  DAHUA GROUP LIMITED

Fifth Respondent

ANDNEW SAVE ASIAN FRESH SUPERMARKET LIMITED

Sixth Respondent

AND  VICTORXIE TRADING NZ LIMITED

Seventh Respondent

What is alleged to have happened?

[1]    The applicants make several without notice applications to the High Court. The alleged context, according to the evidence filed by Ms Yue Li, is a complex set of commercial arrangements and events. In summary:

(a)Ms Yue Li became  a  49  per  cent  shareholder  and  director  of  X&J Trading NZ Ltd (X&J) and a 51 per cent shareholder and director in Pairua Village Holding Ltd (Pairua) with Ms Ling Xie in 2018. X&J was to purchase Wayne and Nancy Ltd’s butchery store within a supermarket operated by Dahua Group Ltd. Pairua was to operate a meat processing factory to supply X&J and other butcheries.

(b)Ms Li and Ms Xie entered a joint venture agreement between themselves, another person, X&J and Pairua.1 In 2019, X&J agreed to lease a butchery from New Save Asian  Fresh  Supermarket  Ltd  (New Save) in Newmarket, Auckland. It was operated by X&J and Pairua in joint venture. Ms Li and Ms Xie divided the tasks between themselves. Ms Li was the financial controller.

(c)On 8 July 2019, Ms Xie changed the X&J email account password, advised Ms Li she was removed as financial controller of X&J, moved Pairua’s refrigerator and stock, and requested the factory staff to relocate.2

(d)After that, Ms Li alleges, among other things:

(i)Ms Xie made untoward payments using X&J and Pairua funds.3 ANZ froze the companies’ bank accounts on Ms Li’s advice.4 Ms Xie continued to place orders in Pairua’s and X&J’s names.5 Ms Li kept the cash account book and money in her solicitor’s

1      Joint Venture Agreement, 22 January 2019, exhibit “G” to affidavit of Yue Li, 2 October 2019.

2      Affidavit of Yue Li, 2 October 2019, at [33]–[36].

3      Affidavit of Yue Li, 2 October 2019 at [39]–[40].

4 Affidavit of Yue Li, 2 October 2019 at [44].

5      Affidavit of Yue Li, 2 October 2019, at [46], [57].

trust account, from which staff salary payments were made for the companies.6

(ii)In July 2019, allegedly at Ms Xie’s request, New Save advised it terminated the contract with X&J and Weibin Jiang would take over.7 Dahua Group Ltd denied X&J had any rights regarding operation of the butchering in their supermarket.8

(iii)Ms Xie is utilising the assets of X&J at the butchery in the premises of Dahua Group Ltd, and that company holds sales revenue from the butchery on a constructive basis for X&J.9

Applications to bring proceedings and for service

[2]    First, Ms Li applies for leave to bring the proceedings in the name of X&J and Pairua by derivative action. Under s 165(4) of the Companies Act 1993, notice of the application must be served on the companies. Under s 165(5), once served, X&J and Pairua will need to inform the Court whether or not they intend to bring the proceedings so that the Court can consider whether to grant this application.

[3]    Second, Ms Li applies for directions as to service on the plaintiffs and defendants at their registered offices, for companies, and addresses specified on the Companies Office website, for directors. I make the directions sought.

Application for freezing orders

[4]    Third, Ms Li applies for freezing orders to prevent funds in the bank accounts of the second, third, fourth and seventh defendants  from  being  removed  from  New Zealand, or disposed of, dealt with, or diminished in value, whether in or outside New Zealand. She seeks the same orders in respect of all equipment and plant relating to an operation of a butchery retail store and/or processing plant possessed by the second, third, fourth and seventh defendants. Ms McDermott, for Ms Li, submits the

6 Affidavit of Yue Li, 2 October 2019, at [64].

7      Affidavit of Yue Li, 2 October 2019, at [51], [53].

8 Affidavit of Yue Li, 2 October 2019, at [61].

9      Affidavit of Yue Li, 2 October 2019, at [71] and [74](a).

application should be considered without notice to the respondents due to the “urgent need to have this matter resolved before the respondents can further disperse the funds and assets of X&J and Pairua”.

[5]    To obtain freezing orders, Ms Li must satisfy me she has a good arguable case for substantive relief, there are assets to which the order can apply and there is a real risk of their dissipation.10 I must weigh the overall interests of justice. A good arguable case requires “the allegations in the proposed claim are capable of tenable argument and are supported by sufficient evidence, bearing in mind the early stage at which the application is likely to be brought”.11

[6]    Here, the evidence offered by Ms Li may or may not sustain a good arguable case. I am left wondering what other evidence the respondents might adduce that contradicts Ms Li’s evidence. I also note that Ms Li is asking the court to consider the freezing orders without notice, not only to the respondents, but also without notice to the applicant companies themselves. Most importantly, however, I am not persuaded there is sufficient evidence there is a real risk of dissipation of the assets as would justify making the freezing orders sought without notice. There is no evidence suggesting there is a risk of funds moving overseas. The bank accounts of X&J and Pairua are frozen by ANZ. There is no evidence of dissipation of equipment or plant. Other than Ms Li’s uncorroborated expression of belief, there is no evidence the respondents have insufficient funds to pay any judgment debt arising from unwarranted liabilities being incurred on behalf of the companies.

[7]    I am not sufficiently persuaded of the merits of the application for freezing orders to grant them without notice to the respondents. I direct that, once evidence has been filed that the proceeding has been served on the plaintiffs and respondents, it be called in a duty list.

Palmer J

10     Shaw v Narain [1992] 2 NZLR 544 (CA) at 548; High Court Rules 2016, r 32.5(4).

11     Hannay v Mount [2011] NZCA 530 at [22].