Zheng v Deng - [2024] NZHC 586

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002730

[2024] NZHC 586

BETWEEN
LU ZHENG

First Plaintiff

ORIENT CONSTRUCTION LIMITED
Second Plaintiff

AND

DONGLIN DENG

First Defendant

BIN JIANG
Second Defendant

ORIENT HOMES LIMITED

Third Defendant

.../intituling cont over

Hearing: 11 March 2024

Counsel:

DK Wilson for Plaintiffs

JD Turner for First Defendant

Judgment:

19 March 2024

JUDGMENT OF DOWNS J

(Taking an account of the partnership)

This judgment was delivered by me on Tuesday, 19 March 2024 at 11.30 am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:
Advent Ark Lawyers, Auckland.
McVeagh Fleming Lawyers, Auckland. DK Wilson, Auckland.

ZHENG v DENG [2024] NZHC 586 [19 March 2024]

EVERSOLID CONSTRUCTION LIMITED
Fourth Defendant

HONGLAN LIU
Fifth Defendant

D & R HOMES LIMITED
Sixth Defendant

YAN JIN
Seventh Defendant

TONG ZHU
Eighth Defendant

YAOKUN CHEN
Ninth Defendant

The issue

[1] This judgment addresses six disputes arising from the taking of an account of a partnership between Lu Zheng and Donglin Deng. Their partnership ended 31 May 2015.

Background

[2] I held no partnership existed.1 The Court of Appeal2 and Supreme Court3 corrected that. Important to both Courts was a document entitled, “Principles in Separation”.

[3] The case returns to this Court as Mr Zheng and Mr Deng have been unable to reach agreement between themselves. Mr Zheng and Mr Deng were also unable to reach agreement about an expert to take an account of their partnership. So, I must do that, hence this judgment.

[4] At my direction, the original forensic accountants—Tina Payne for Mr Zheng, and Andrew McKay for Mr Deng—prepared reports, conferred, and then prepared a joint statement identifying areas of agreement and disagreement. I record my gratitude to them. Many areas that might otherwise have been contentious have not been. I also record my gratitude to counsel. They sensibly agreed the parties should split the difference in relation to several, smaller items. This leaves the six disputes addressed here.

Analysis

Item 7

[5] Mr Zheng and Mr Deng agreed Orient Construction Ltd, or OCL, would belong to Mr Zheng and Eversolid Construction Ltd, or ECL, would belong to Mr Deng. However, after 1 June 2015, Mr Zheng retained control of ECL’s bank account for a

1      Zheng v Deng [2019] NZHC 3236 [10 December 2019].
2      Zheng v Deng [2020] NZCA 614, [2021]
3      Deng v Zheng [2022] NZSC 76, [2022] 1 NZLR 151.

time. In this period, Mr Zheng made five transfers of money from ECL to himself. Mr Zheng also made three deposits to ECL (of much smaller sums).

[6] As a result of this sequence, Mr Zheng says Mr Deng owes him $3,550.66, whereas Mr Deng says Mr Zheng owes him $102,996.26. The amount in dispute in relation to item 7 is thus $106,546.92.

[7]The experts’ competing contentions can be succinctly stated:

(a)Ms Payne says Mr Zheng’s transactions in relation to ECL are consistent with him conducting…

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 Zheng v Deng

Details

AGLC: Zheng v Deng [2024] NZHC 586
Case: [2024] NZHC 586
Decision Date: 19 March 2024

CaseChat Overview and Summary

This judgment from the High Court of New Zealand addresses a dispute between Lu Zheng and Donglin Deng, former partners in a business venture. The primary issue was the final accounting of their partnership, which ended on 31 May 2015. After the Court of Appeal and the Supreme Court ruled that a partnership existed between the parties, the matter returned to the High Court for the resolution of outstanding financial disputes. The court was tasked with resolving six specific items of contention, including the valuation of company shares and other financial transactions post-dissolution.

The court examined the financial transactions involving Orient Construction Ltd (OCL) and Eversolid Construction Ltd (ECL), the respective companies of the plaintiffs and defendants. The parties disagreed on the proper accounting of funds transferred between these companies post-dissolution. The court found that Lu Zheng owed Donglin Deng a total of $110,000, considering items 10 and 11, while Deng owed Zheng $3,550.66 regarding item 7. Regarding items 8, 13, and 14, the court determined that neither party owed the other money, except for a debt of $36,764 from Zheng to Deng concerning item 13. The court preferred the analysis of the forensic accountant appointed by Zheng, Tina Payne, over that of Andrew McKay, appointed by Deng, as it provided a more coherent and comprehensive understanding of the financial transactions.

The court also considered the valuation of Deng's shares in OCL, which he transferred to Zheng. The court found that the value of these shares, considering the company's ongoing projects and goodwill, was $36,764, and thus Zheng owed Deng this amount. The court declined to estimate the value of Deng's shareholding based on OCL's goodwill, as it would amount to an outright guess. The final orders of the court are yet to be determined, with a telephone conference scheduled to discuss next steps, including the allocation of costs.

Orders