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Li v EJ Holdings Limited [2020] NZHC 146 (13 February 2020)

Last Updated: 5 March 2020

JUDGMENT OF GORDON J

This judgment was delivered by me

on 13 February 2020 at 2.00 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors: Righteous Law, Auckland

Carson Fox Legal, Auckland

Counsel: W McCartney, Auckland

LI v EJ HOLDINGS LTD [2020] NZHC 146 [13 February 2020]

Introduction

[1] This is an application by the plaintiff, Ning Li, for a freezing order against all four defendants.

Background

[2] Ms Li lives in China. She claims she invested $780,000 in the first defendant, EJ Holdings Ltd (EJ Holdings). In her affidavit in support of the application, Ms Li says that in around 2016, a person by the name of Kenghong Li, who had been her classmate at school in China, told her that he had a furniture business called EJ Holding [sic] Ltd in New Zealand.

[3] She says Mr Li wanted her to invest in EJ Holdings and asserted that it would support her daughter’s application to New Zealand schools if Ms Li had a business in New Zealand. Mr Li told her that the third defendant, Fansheng Meng, was the director of EJ Holdings and that Mr Meng and the fourth defendant, Shaoying Sun, were the shareholders of EJ Holdings.¹

[4] Ms Li says that from about January 2017 to April 2017 Mr Li sent her documents about EJ Holdings. He told her that EJ Holdings would import furniture from China to New Zealand and sell it under the trading name of “Heyday”. She says that Mr Li convinced her that investing in EJ Holdings was a good investment opportunity and advised her to transfer the money to his personal bank account in China to avoid any complicated international money transfer procedures, and also for the convenience of EJ Holdings’ accountant.

[5] Ms Li says because of their pre-existing relationship and the trust she held in Mr Li, she transferred RMB¥3,600,000 in total (approximately NZ$750,000) to Mr Li’s personal bank account in China between 19 March 2017 and 8 May 2017.

[6] She says Mr Li told her that in exchange she would receive 20 per cent of the shares in EJ Holdings. She says that of the $750,000 she transferred RMB¥2,400,000 (approximately NZ$500,000) to Mr Li’s bank account before she came to Auckland

¹ Companies office documents show that Mr Li was also a shareholder.

to sign the shareholder agreement. She transferred the remaining RMB¥1,200,000 (approximately NZ$250,000) after signing the agreement.

[7] Ms Li says she flew to Auckland at the end of April 2017 with her father for the purpose of signing the relevant documents. On 1 May 2017, she attended with her father at the law firm of Park Legal. Mr Li had told her he had engaged Xinhua Chen from that firm to draft the shareholder agreement and share transfer agreement. Mr Li and Mr Meng were also there. Mr Sun was not present. She was advised by Mr Li that he was in Christchurch and he would sign later.

[8] Ms Li says she was told that her 20 per cent of the shares in EJ Holdings was to come from 10 per cent each of Mr Meng’s and Mr Sun’s shares.

[9] Ms Li says that on 15 June 2017 Mr Meng came to China to source a supply of stock for the furniture shop to be operated by EJ Holdings. She says she went with Mr Meng and Mr Li to purchase the stock. She says the stock was paid for by Mr Li from his personal account. In his affidavit in opposition to the application, Mr Meng says Mr Li was not present. He also says that the $750,000 Ms Li had agreed to pay to EJ Holdings for her shares had not been received by the company. Mr Meng says he paid the manufacturer a deposit for the furniture using EJ Holdings’ funds. The furniture was then shipped back to New Zealand.

[10] In about September 2017, Ms Li was paid a dividend of $NZ37,500 from EJ Holdings. She says the money was transferred from Mr Meng’s personal bank account. Mr Meng says that EJ Holdings had still not received Ms Li’s $750,000. However Mr Li insisted she should be paid and that there was nothing to worry about as he had Ms Li’s money in China. He is said to have told Mr Meng there was just a problem transferring it to New Zealand.

[11] In the following year, in August 2018, Ms Li says Mr Meng told her that EJ Holdings was experiencing cashflow problems and instructed her to pay the rent for the premises. She transferred $30,000 to EJ Holdings’ bank account. She says she does not know where the money went or what it was used for. Mr Meng acknowledges
there were cashflow problems (he was still waiting for Ms Li’s $750,000) and he asked Ms Li to pay back the $37,500. He says she paid back $30,000.

[12] Also in August 2018 Ms Li says she heard that Mr Li had fled New Zealand with EJ Holdings’ money. Ms Li asked Mr Meng if this was true. He confirmed it was and said he believed that Mr Li had tricked more than 30 people out of more than NZ$7 million and that he believed Mr Li had also used money taken from E J Holdings for gambling in the casino.

[13] Ms Li says she asked Mr Meng several times to provide her with the financial statements for EJ Holdings and he either rejected her requests or simply did not reply. She annexes to her affidavit one email from her to Mr Meng dated 10 December 2018 asking for EJ Holdings “financial [sic] document from 01 May 2017 up to now”. She says she asked Mr Sun also, but he refused to disclose anything.

[14] Ms Li’s position, in summary, is that when Mr Li was enticing her to invest, he was acting as the agent for EJ Holdings and Mr Meng and Mr Sun. She also says that at that time she believed that “Heyday was just the trading name of EJ Holdings Ltd”. She now believes, however, that the business presented to her was a complete fabrication. She believes EJ Holdings has never traded and instead the business was operated by the second defendant, Heyday International Ltd (Heyday International). She believes her investment funds were used by Mr Li and Mr Meng to finance their own business venture, Heyday International,² and that EJ Holdings is a shell company which has never traded.

[15] The defendants’ position in opposing the application is, in short:

(a) Mr Li was not acting as agent of EJ Holdings or Mr Meng or Mr Sun in his dealings with Ms Li;

(b) EJ Holdings, Mr Meng and Mr Sun are still waiting for payment for the shares; and

2. Mr Meng was the sole director and sole shareholder of Heyday International. Mr Li was neither a director or shareholder.
   • (c) EJ Holdings was trading and continues to trade under the trading name of Heyday.

The statement of claim

[16] In her statement of claim, Ms Li pleads four causes of action:

(a) Prejudice to a minority shareholder (against EJ Holdings, Mr Meng and Mr Sun);

(b) Breach of fiduciary duty as directors (against Mr Meng and Mr Sun);

(c) Conversion, following the sale of EJ Holdings’ stock (against Heyday International, Mr Meng and Mr Sun);

(d) Unjust enrichment, said to arise from a fiduciary relationship (against Heyday International, Mr Meng and Mr Sun).

[17] Ms Li seeks a range of remedies under each cause of action:

(a) For the return of her investment and the payment for rent;

(b) An order the directors are liable for penalties under the Companies Act 1993 and that penalties should be paid to her;

(c) An order that EJ Holdings and the directors pay Ms Li her share of the value of the stock of the company;

(d) An order for an account of profits and an order that she has an equitable interest in any profits made from the sale of the assets of EJ Holdings.

[18] Ms Li claims interest under the Money Claims Act 2016 for each of these remedies and also seeks costs.

Application

[19] On 24 September 2019, Ms Li filed her statement of claim with a notice of proceedings and an interlocutory application without notice for a freezing order.³ The application was accompanied by an affidavit of Ms Li, an affidavit of a person who had translated some documents from Mandarin to English,⁴ an undertaking by Ms Li as to damages⁵ and a draft freezing order. The proposed assets to be the subject of the freezing order are expressed widely:

(a) All physical assets of the defendants;

(b) All bank account deposits of the defendants;

(c) All furniture stock held in the warehouse by the defendants.

Test

[20] The test for granting a freezing order is set out in r 32.5 of the High Court Rules 2016. The applicant must show:

(a) She has a good arguable case on an accrued cause of action;

(b) There are assets to which an order can apply;

(c) There is a danger that a prospective judgment will be wholly or partly unsatisfied because there is a real risk the assets of the prospective judgment debtor:

(i) might be removed from New Zealand; or,

(ii) might be disposed of, dealt with or diminished in value.

³ On 26 September 2019 the Court directed that the application should proceed on notice.

4. The person who translated the documents is a legal executive employed by the solicitors for Ms Li. The defendants did not take issue with the translation process.

⁵ High Court Rules 2016, r 32.2(5).

[21] If the applicant is able to establish a good arguable case and the relevant danger, the Court then determines the application on the balance of convenience.⁶

Is there a good arguable case?

[22] A good arguable case is established if 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.⁷

[23] Ms McDermott submits “there is a serious question to be tried.” She submits the defendants have acted without authority, become unjustly enriched, converted assets and breached their obligations to Ms Li. She also submits that Mr Meng has acted in breach of his duties as a director and that such actions have caused losses and damages to Ms Li.

First Cause of Action: Prejudiced Shareholder

[24] Ms Li is a minority shareholder in EJ Holdings. Mr Meng is a director of EJ Holdings and was so when Ms Li became a shareholder in the company. Mr Sun was not a director at the time but was appointed as a director on 1 March 2019. The statement of claim alleges EJ Holdings, Mr Meng and Mr Sun operated EJ Holdings in a way that was prejudicial to Ms Li because it was unfairly detrimental to her, did not meet her reasonable expectations and was oppressive.

[25] It is further alleged that these three defendants did not provide a copy of financial statements with an auditor’s report following her request and within 10 working days. The statement of claim refers to cost but there is nothing to suggest a charge was demanded. This appears to recite part of s 207F of the Companies Act 1993 (the Act).

⁶ Murren v Schaeffer [2018] NZCA 318 at [17].

7. McGechan 32.2.03 citing Dotcom v Twentieth Century Fox Film Corp [2014] NZCA 509 at [18] and [31]; Hannay v Mount [2011] NZCA 530 at [20]-[22]; Wing Hung Printing Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754.

[26] The statement of claim alleges Ms Li’s investment in EJ Holdings was lost as a result of these actions and alleges “any actions ... in breach of the terms of their duties owed to the plaintiff would cause monetary loss the plaintiff.”

[27] In oral submissions in response to a question from the Court, Ms McDermott clarified that this cause of action was brought under s 174 of the Act. Section 174 provides:

174 Prejudiced shareholders

(1) A shareholder or former shareholder of a company, or any other entitled person, who considers that the affairs of a company have been, or are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, or are likely to be, oppressive, unfairly discriminatory, or unfairly prejudicial to him or her in that capacity or in any other capacity, may apply to the court for an order under this section.

(2) If, on an application under this section, the court considers that it is just and equitable to do so, it may make such order as it thinks fit including, without limiting the generality of this subsection, an order—

(a) requiring the company or any other person to acquire the shareholder’s shares; or

(b) requiring the company or any other person to pay compensation to a person; or

(c) regulating the future conduct of the company’s affairs; or

(d) altering or adding to the company’s constitution; or

(e) appointing a receiver of the company; or

(f) directing the rectification of the records of the company; or

(g) putting the company into liquidation; or

(h) setting aside action taken by the company or the board in breach of this Act or the constitution of the company.

(3) No order may be made against the company or any other person under subsection (2) unless the company or that person is a party to the proceedings in which the application is made.

[28] The statement of claim does not specify what actions taken by EJ Holdings or Mr Meng and Mr Sun are prejudicial. Examples of prejudicial conduct are set out in s 175 and include failure to comply with many provisions of the Act, such as those
dealing with dividends, offers by a company to acquire its own shares, special offers to acquire shares, alteration of shareholder rights and major transactions. The pleadings do not disclose any relevant prejudice of this kind. There is the further difficulty for Ms Li in relation to Mr Sun because he was not a director until 1 March 2019.

[29] Moreover, Ms Li believes these three defendants have the money she invested in EJ Holdings. If this belief is correct, she has suffered no loss because she has the shareholding in EJ Holdings. She has received what she bargained for. The pleadings do not disclose any other prejudice, discrimination or oppressive conduct. It is unlikely a failure to provide accounts under s 207F would amount to oppressive conduct.

[30] I do not consider that Ms Li has established that she has a good arguable case under this cause of action.

Second Cause of Action: Breach of Directors’ Duties

[31] I address this cause of action in two parts, reflecting some difference between the statement of claim and oral submissions on behalf of Ms Li.

[32] In the statement of claim, it is alleged Mr Meng and Mr Sun were in a fiduciary relationship with Ms Li. However, the two directors owe a fiduciary duty to the company not to its shareholders.⁸ To Ms Li they have a duty to act fairly.⁹ The fiduciary duty claimed does not exist. Mr Meng and Mr Sun also have a duty to operate the business in good faith and in the best interests of EJ Holdings.¹⁰

[33] The pleadings allege Mr Meng and Mr Sun were parties to Mr Li’s fraud on Ms Li:

(a) “... by allowing Li to act on their behalf and make statements that were not true to the plaintiff”;

8. John Farrar and Susan Watson (eds) Companies and Securities Law in New Zealand (2nd ed, Brookers, Wellington, 2013) at 403.

⁹ Section 174, Companies Act 1993.

¹⁰ Section 131, Companies Act 1993.

(b) “... made representations to the plaintiff to induce her into investing a sum of $750,000.00 in the first defendant.

[34] Ms Li also alleges Mr Meng and Mr Sun represented to Ms Li that Mr Li was their representative and the representative of EJ Holdings, that EJ Holdings operated a furniture business trading as Heyday and that there would be benefits to her if she invested in their business should she want to enrol her daughter in a New Zealand school in the future. It is pleaded that all of these representations were made by the defendants to Ms Li through Mr Li.

[35] On this cause of action, Ms McDermott relied primarily on the inconsistency between Mr Meng’s evidence that the money from Ms Li was not received by EJ Holdings and the schedule to the shareholders’ agreement, entered into in May 2017, which acknowledges receipt of some of the money. The schedule states “$500,000 has been paid to the Company” with a further $250,000 due to be paid. Ms Li’s evidence is that she paid $750,000 to Mr Li’s personal bank account in China between March and May 2017. Mr McCartney, on behalf of the four defendants, described the shareholders’ agreement as an “unsatisfactory document,” and I am inclined to agree. The signatories to it did not receive independent advice and its terms were not recorded in the signatories’ first language.

[36] Ms McDermott also points to a message sent by Mr Meng to Ms Li’s father referring to payment of money by Mr Li to EJ Holdings. However, it is not clear what money was paid (the translation refers paying “money back to the company” rather than transferring new funds from Ms Li to the company). Ms Li’s evidence is clear that she paid the amount into Mr Li’s personal account in China on his instructions, purportedly at the direction of the company accountant.

[37] Otherwise, Ms McDermott insists that Mr Meng and Mr Sun need to prove a negative. That is, they both show they were not a party to the fraud and that EJ Holdings did not receive her funds. There is no evidence they received payment and Mr Meng and Mr Sun deny it. They also deny they were parties to Mr Li’s fraud and there is no evidence to connect them to it. Ms Li’s views are based largely on representations made to her by Mr Li. While Mr Meng refers in his affidavit to a police
investigation and that he initiated a police complaint, the police investigation proceeds independently of any other proceedings. The significance Ms McDermott attaches to the absence of information from the police about their investigation is misplaced.

[38] Ms McDermott also refers to a “Company Introduction” document dated 7 April 2017 given to Ms Li. The document was prepared by Mr Meng and refers to 10 per cent reserve shares held for her. Ms McDermott submits that this is evidence of Mr Li’s agency. Mr Meng’s position is that he did draft the document. He accepts that his signature is on his document. However, he says it has been altered after he signed it and also points to a discrepancy in the extent of Mr Li’s investment in the company. He denies knowing Ms Li received the document.

[39] The manner in which Ms Li received the company introduction is uncertain. In her initial affidavit, Ms Li said it was given to her by Mr Li. However, in her reply affidavit, Ms Li alters her position and now says the company introduction was given to her by Mr Meng via a messaging service. No messages accompanying the introduction have been produced.

[40] In oral submissions Ms McDermott said that this cause of action was founded on s 131 and the following sections of the Act. She acknowledged that Mr Sun could not be liable on the allegation that Mr Li was acting as an agent for the company because he was not a director at the relevant time. However, she submitted the pleadings dealing with the failure to provide information was a breach of directors’ duties on Mr Sun’s part.

[41] Sections 131 to 138A establish directors’ duties under the Act. Subject to three exceptions, none of which is relevant here, s 131 provides that a director must act in good faith and in what the director believes is the best interest of the company. Section 132 deals with the exercise of power in relation to employees when a company is ceasing all or part of its business. There is nothing before me to indicate this duty is relevant. A director must exercise a power for a proper purpose pursuant to s 133. Section 134 requires a director, and the company of which he or she is a director, to comply with the Act and the constitution of the company. Reckless trading is not permitted under s 135. A director cannot agree to a company incurring an obligation
unless the director has reasonable grounds, at that time, to believe the company can perform the obligation when required to: s 136.

[42] A director is subject to a duty of care when exercising powers or performing duties as a director under s 137. The director must exercise the care, diligence and skill a reasonable director would exercise in the circumstances taking into account the nature of the company and decision and the responsibilities of the director (this is not an exhaustive list). A director can rely on advice from employees, experts and, in some circumstances, other directors, so long as he or she acts in good faith, makes proper inquiry where necessary and it not aware of any reason why this advice should not be relied on: s 138. Section 138A creates an offence where a director exercises powers or performs duties in bad faith and believing the action is not in the best interest of the company knowing it would cause serious loss. The maximum penalty for committing such an offence is a term of imprisonment of up to five years or a fine not exceeding $200,000.

[43] The pleadings in support of this cause of action focus on the representations made by Mr Li to Ms Li. Ms Li has been unable to establish, even at this preliminary stage of the proceedings, that Mr Li’s representations were made on behalf of Mr Meng or as agent for EJ Holdings. The company introduction might be evidence of the agency Ms Li alleges but her evidence on the manner in which she received it has not been consistent. It could be little more than a tool in Mr Li’s alleged fraud. In the absence of certainty about how Ms Li received it, information she could supply, and in light of Mr Meng’s evidence, the company introduction alone is not sufficient to establish a good arguable case that Mr Meng was a party to Mr Li’s alleged fraud. It does not establish that Mr Li’s representations were made on behalf of and with the knowledge of Mr Meng. In consequence, Mr Meng took no action which might constitute a breach of directors’ duties.

[44] There is the question of the failure to provide financial statements under s 207F. Presumably EJ Holdings prepares accounts for the purposes of the Inland Revenue Acts so this provision likely applies. The directors should have provided this information and their failure to do so is a breach of the duty in s 134 to comply with the Act. However, Mr Meng denies he did not provide information to Ms Li. He states
that he has no record of receiving her request and s 207F is predicated on receipt of a request. The supporting evidence of her requests is her email of 10 December 2018 and an exchange the previous month with Mr Sun where she appears to suggest they request financial statements of Mr Meng. Her affidavit states she asked Mr Meng “several times” for the financial statements but her evidence contains only one request and Mr Meng responds that he did not receive it. It is possible that Ms Li could establish a minor breach of the directors of their duties but the evidence is disputed.

Third Cause of Action: Conversion

[45] Conversion is the interference with property, without lawful justification, in a manner inconsistent with the rights of another and depriving that person of the use and possession of it.¹¹ The statement of claim alleges Heyday International, Mr Meng and Mr Sun have committed the tort of conversion “as they have intentionally disposed of goods and or assets that do not belong to them by disposing of them.”

[46] It is a basic requirement of the tort that Ms Li prove the property belongs to her. While the statement of claim refers frequently to duties, her rights in the furniture which is said to have been sold by Heyday International (as opposed to EJ Holdings) are not established. Ms Li claims no interest in the furniture and acknowledges that it is the assets of EJ Holdings. In the absence of a right or interest, she cannot establish conversion. That is a matter for EJ Holdings.

[47] Moreover, the evidence indicates EJ Holdings continues to conduct its business as a furniture retailer through the trading name Heyday. Conversion can only occur where there is interference with property without lawful justification. However, there is no evidence that Heyday International is interfering with EJ Holding’s property. The company introduction document appended to Ms Li’s affidavit, given to her by Mr Li, refers to Heyday branding or Heyday as a trading name. The relationship between EJ Holdings and Heyday (as a trading name) is also reflected in Mr Meng’s solicitor’s email to the real estate agent in 2016 that the document assigning the lease should be in the name of EJ Holdings. The email states:

¹¹ Helson v McKenzies (Cuba Street) Ltd [1950] NZGazLawRp 70; [1950] NZLR 878 (CA) at 903 (per Northcroft J).

[Mr Meng] has also requested to nominate the following entity for the assignment.

EJ HOLDINGS LIMITED (Trading as HEYDAY FURNITURE & THINGS AUCKLAND.

[48] This was prior to Mr Li presenting a proposal to Ms Li.

[49] Ms Li has not established a good arguable case under this cause of action.

Fourth Cause of Action: Unjust Enrichment

[50] To establish unjust enrichment, Ms Li must prove:¹²

(a) A defendant has been enriched by receipt of a benefit;

(b) Ms Li has suffered a corresponding deprivation;

(c) There is no justification for the enrichment.

[51] This cause of action pleads a fiduciary relationship, but this has not been established and that part of the cause of action can be disregarded. Nor is there evidence that Heyday International has been enriched through the receipt of a benefit by virtue of Heyday International having sold EJ Holdings’ stock and that it has retained the revenue from those sales. The evidence pointed to by Ms McDermott is advertising material of a business engaged in the sale of furniture. That advertising material refers to “Heyday Furniture & Things”, which is the trading name for EJ Holdings. Furthermore, Ms Li has not established she has suffered a corresponding deprivation. The party who would suffer the deprivation if Heyday International were selling furniture which are the assets of EJ Holdings would be EJ Holdings and it is a matter for EJ Holdings to pursue any claim.

[52] Ms Li has suffered a loss, because she paid funds to Mr Li, a person who is not a party to these proceedings. Her claim in unjust enrichment is against Mr Li, not the defendants in this proceeding.

¹² Gillies v Keogh [1989] NZCA 168; [1989] 2 NZLR 327 (CA) at 332 (per Cooke P).

[53] Ms Li has not established a good arguable case under this cause of action.

Assets to which the order can apply

[54] The financial statements of EJ Holdings for the years ended 31 March 2018 and 31 March 2019 show inventory (stock) at a value of $256,800 and $249,800 respectively. There is no evidence as to assets of the other defendants.

Risk of dissipation

[55] The requirement to establish a real risk of dissipation is central.¹³ Mere assertion by the applicant that a respondent might dissipate assets, unsupported by solid grounds, is insufficient.¹⁴ The applicant must point to circumstances from which “a prudent, sensible, commercial [person] can properly infer a danger of default”, a test which is “not unduly exacting”.¹⁵

[56] Ms McDermott identifies the risk of dissipation in the following terms:

(a) Mr Meng is attempting to sell the assets of EJ Holdings through a WeChat group;

(b) The defendants appear to have provided financial records with the intentions (sic) to mislead the plaintiff;

(c) The defendants have misled Ms Li with regard to the entities involved (i.e. that Heyday International is selling assets belonging to EJ Holdings);

(d) The defendants have refused to provide full disclosure to Ms Li, as a shareholder of EJ Holdings, of the affairs of that company.

¹³ McGechan at HCR 32.2.03(3)(a).

14. McGechan at HCR 32.2.03 (3)(b), Mogilin v Jo HC Auckland CIV-2011-404-1584, 26 August 2011 at [34] and Bank of New Zealand v Hawkins [1989] NZHC 198; (1989) 1 PRNZ 451 at 454.

¹⁵ McGechan at HCR 32.2.03(3)(c) citing Raukura Moana Fisheries Ltd v The Ship Irina Zharkikh

[2001] 2 NZLR 801 (HC) at [122].

[57] On the first point, the defendant’s evidence is that EJ Holdings is selling the furniture as part of its normal business practice. It is, after all, in the business of selling furniture. The advertisements Ms Li relies on do not provide evidence of a risk of dissipation. I have already determined that the evidence Ms Li relies on does not indicate Heyday International is selling EJ Holdings’ assets (stock).

[58] The company introduction includes repeated reference to “Heyday International Ltd”. However, the status of this document remains unclear. Mr Meng says it was altered after he signed it and that he did not know it was received by Ms Li. Ms Li initially states Mr Li gave her this document and subsequently that Mr Meng gave it to her. Other than this document, Ms Li does not establish a trading connection between Heyday International and EJ Holdings. Mr Meng states “Heyday” is a trading brand of both companies and that Heyday International operated the store in Christchurch (now closed) and EJ Holdings operate the stores in Auckland. He further says that his intention was to merge the Heyday International store into EJ Holdings. This did not occur, as the store was closed.

[59] In the circumstances, I am not inclined to speculate on the content of the document and the reference to “Heyday International” in the headers. What can be said is that this document appears to have been for the purposes of establishing a commercial relationship between the parties. That relationship has not ended as Ms Li remains a shareholder in EJ Holdings and the company continues to trade. It is not evidence that Heyday International is selling EJ Holding’s stock and does not demonstrate a risk of dissipation by the defendants.

[60] The remaining points may indicate poor practice by directors of the company towards a shareholder but they do not suggest a risk of dissipation of the assets.

[61] As to the two individual defendants, Mr Meng states he is a New Zealand citizen who has lived in New Zealand for 19 years and is not intending to leave. Mr Sun is a permanent resident who has lived in New Zealand for 13 years. He has a young child and owns property in Christchurch. He does not intend to leave the jurisdiction, remove assets and disposing of assets owned by him or EJ Holdings or Heyday. The Court is not in a position to make factual findings on competing evidence
when the deponents were not cross-examined. But Ms Li has not pointed to any solid grounds to support her submission that there is a risk of dissipation.

Result

[62] Ms Li has not established a good arguable case on any of her four causes of action. Nor has she satisfied me of there is a danger assets will be dissipated by the defendants.

[63] The application is refused.

Costs

[64] I reserve costs. If the parties are able to agree costs, counsel should file a joint memorandum within 20 working days of the date of this judgment. If costs cannot be agreed, the defendants are to file and serve their memorandum within five working days of the date for the joint memorandum. Ms Li is to file and serve her memorandum within a further five working days. Memoranda should not exceed four pages (excluding any attachments). I will determine costs on the papers.








Gordon J