Zheng

[2023] NZHC 202

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-57

[2023] NZHC 202

IN THE MATTER

of an application under s 382 of the Companies Act 1993 and r 19.5 of the High Court Rules 2016

BETWEEN

SHIJIA ZHENG

Applicant

Hearing:

On the papers

Appearances:

P Dacre KC for Applicant

G S Caro for Registrar of Companies

Judgment:

16 February 2023

JUDGMENT OF LANG J

This judgment was delivered by me on 16 February 2023 at 3 pm.

Registrar/Deputy Registrar Date……………

Solicitors:

P Dacre KC, Auckland

Ministry of Business, Innovation & Employment, Auckland

RE ZHENG [2023] NZHC 202 [16 February 2023]

[1]                 In this proceeding the applicant, Mr Shijia Zheng, applies for leave to apply against disqualification from managing a company. As counsel for the Registrar of Companies points out, the order that Mr Zheng actually seeks is to be granted leave to be a director of the following companies:

ANCO Construction Limited ANCO International Limited

ANCO Properties Development Limited KCC Construction Limited

KCC Holding Limited

HLG Construction Limited HLG Holdings Limited

[2]I grant Mr Zheng leave to amend his application to reflect that fact.

Jurisdiction

[3]                 The application is necessary because, following a lengthy Judge-alone trial, Mr Zheng was convicted in October 2022 on two charges of obtaining by deception under s 240 of the Companies Act 1993.1 His convictions triggered the operation of s 382(1) of the Companies Act 1993 (the Act), which automatically prohibited him from acting as a director of any company and from taking part, directly or indirectly, in the management of any company for a period of five years.

[4]                 It is well established that the prohibition imposed by s 382 is not intended to be a punitive measure. Rather, the policy underlying the section is the protection of the public from further harm at the hands of the offender.2 In Re Weston, Asher J observed:3

[8]        The fundamental question that the Court must ask is whether the public will be at risk if leave is granted. The onus of satisfying the Court is on the applicant. The presumption behind s 382 is that those convicted of the particular stated offences will pose an unacceptable risk to the public if they

1      R v Zhang [2022] NZHC 2541.

2      Re Minimix Industries (1982) 1 NZCLC 98, 381; Ramsay v Sumich [1989] 3 NZLR 628 (HC) and

Re Weston HC Auckland CIV-2006-404-773, 18 August 2006, Asher J.

3      Re Weston, above n 2.

have a significant role in companies. The logic is that if they have been guilty of misconduct in the recent past, there is a risk that they will be guilty of misconduct in the future. The nature of the particular qualifying offence is relevant. If the offence has involved a deliberate act of dishonesty, this may indicate more of a propensity towards offending than if the misconduct has been of a lesser standard of culpability. While errors due to deliberate dishonesty generally indicate a disposition not suited to a managerial role errors due to poor judgment or greed that fall short of dishonesty may not carry the implication with the same force.

[9]        Weight can be given to the personal position of the applicant, and any hardship to him or third parties. However, this is to be balanced against the primary object of protecting the public. The Court is unlikely to be particularly swayed by circumstances particular to an applicant, that might otherwise provoke sympathy, if the public remains at clear risk. The exercise that the Court carries out is different from a sentencing exercise. Protection of the public is the object, and not punishment or deterrence. Factors personal to an offender that might persuade a Court to impose a lesser penalty may not be persuasive if the public remain at significant risk. Even if innocent third parties may suffer as a consequence of leave not being granted, this may not prove persuasive. The Court still has an overriding concern that the public are protected. The Court may consider the business history of the applicant to see whether fraud or losses to the public are a feature of that business history. The Court will also look at the most recent conduct of the applicant. That is also relevant to see whether the qualifying offending is likely to reoccur. In the end the Court must look forward and consider whether the applicant has satisfied it that there is an acceptable prospect of rectitude on the part of the applicant or, to put it the other way, no unacceptable risk of misconduct.

Decision

[5]                 The offending that led to Mr Zheng’s convictions related to donations he made to the National Party in 2017 and 2018 in breach of disclosure requirements imposed by the Electoral Act 1993. Mr Zheng breached those requirements by transferring funds to friends and members of his family, who then gave the money to the National Party by way of donations. In that way the public disclosure of the total amount provided by Mr Zheng was avoided. This deceived the National Party Secretary and led to incorrect disclosure by the party to both the Electoral Commission and the public. As counsel for the Registrar of Companies points out, the offending was unusual in that the immediate victim of the offending was the beneficiary of the payments made.

[6]                 In sentencing Mr Zheng to five months community detention Gault J noted that the aggravating features of the offending were the extent of the harm and the level of

premeditation and planning required to implement the scheme.4 By way of mitigation the Judge took into account the fact that Mr Zheng has no previous convictions and, prior to the present offending, he had been of good character and standing in the community.5

[7]                 The companies of which Mr Zheng seeks to be a director have more than 25 employees. They have around 60 housing projects currently under construction. Their combined turnover was in excess of $20 million last year. The Registrar accepts that there is nobody else within Mr Zheng’s family with the necessary experience and knowledge to be appointed as director of those companies.

[8]                 Like the Registrar, I consider there is little risk, if any, to persons dealing with the companies if Mr Zheng is granted leave to continue in his position as their director. Furthermore, the offending had nothing to do with the companies other, perhaps, than that they may have provided the means by which Mr Zheng acquired the funds that he arranged to be transferred to the National Party. In those circumstances it is appropriate that he be permitted to act as a director of the companies.

Result

[9]                 The application for leave to act as director of the nominated companies is granted. I make an  order  under  s  382(1)  of  the  Companies Act  1993  granting Mr Zheng leave to act in that capacity.

Lang J

4      R v Zhang [2022] NZHC 3168 at [69].

5 At [75].