Businessman must pay $5.5m in row over vineyards
Legal stoush involving two luxury properties was protracted and bitter
A rich businessman must pay his former friends nearly $5.5 million and relinquish the title of a boutique winery after a bitter legal stoush involving two luxury vineyards.
His business partner has also been singled out for transferring nearly $3m to his wife in 55 separate electronic banking transactions in a day, despite freezing orders being sought to prevent the money being lost.
He told a court he was travelling overseas to visit a sick relative so wired the money “in case he suffered some sort of accident while away”.
The protracted case relates to Matakana Estate north of Auckland and Waihopai Valley Vineyard in Marlborough.
The plaintiffs — Chinese nationals Jieyu “Chrissy” Lu and her husband Hongzhao Huang — alleged their former business partner, New Zealand citizen Chris Chen, failed to repay a $1.47m loan for his share of the trio’s multimillion-dollar purchase of Matakana Estate in 2011.
Due to foreign investment rules, the couple agreed to put Chen’s name on the title until they could obtain residency and Overseas Investment Office consent — later being fined $20,000 for using an “associate” to skirt the regulations.
And despite Chen contributing nothing financially to the purchase, a judge found he then failed to transfer the title to the couple in breach of a joint venture agreement after the trio’s friendship and business relationship imploded, preventing Lu and Huang from developing the business at significant personal cost.
The couple — who have spent $2m on legal fees — sought an order forcing Chen to relinquish the Matakana vineyard’s title, and $3m in damages for the delays caused by what they described as his “unjustifiable, unconscionable and obstructive actions”.
They also claimed Chen failed to make good on $2.3m in loans advanced to assist his struggling
Waihopai wine business, and sought an order for repayment.
Chen argued the money was not a loan but an investment by the couple into the Waihopai operation and did not need to be repaid.
He also argued he was not liable for the other alleged debt due to a partnership arrangement he claimed had been agreed between the trio but which a judge found had never been formally signed.
A just-released High Court decision says the couple believed Chen secretly hocked off the Marlborough vineyard just days before a High Court trial was due to commence in March last year to “unjustly enrich” himself and the vineyard’s two other shareholders, and prevent the couple recovering any money that was owed.
Justice Gordon agreed, ruling that Chen’s conduct was deliberate, prejudicial and “well beyond” foolish.
The judge said Chen concealed the sale from the plaintiffs who, after learning of the transaction, sought freezing orders against the parties to prevent nearly $7.5m in sale proceeds becoming unrecoverable.
And despite being aware of the freezing orders application, Chen, his brother Don Chen and Yi Lu immediately transferred millions of dollars from their own accounts to various family members and other entities — rendering a significant portion of the money “out of reach of the plaintiffs”.
The judge raised credibility issues against the case’s main players.
Huang had repeatedly “denied what was plainly written in documents which either he had prepared, or which were sent on his behalf ”.
There were inconsistencies in Chrissy Lu’s evidence, who the judge said also made false representations to Immigration NZ.
“Mr Chen does not get a clean bill of health either,” the judge said, referring to his failure to disclose the Waihopai sale and his transfer of the proceeds despite being on notice about the freezing orders.
Chen’s lawyer “referred to that conduct as ‘foolish’ ”, the judge said. “In my view it goes well beyond that.”
Yi Lu — who pocketed nearly $3m from the vineyard’s sale — was also singled out by the judge as “not completely truthful in his evidence”.
“On the same day he received the proceeds of sale of Waihopai’s assets he transferred the funds to his wife. Because of the [self-imposed] limitation on his bank account, limiting individual transfers to the sum of $50,000, he needed to make around 55 electronic transfers. He made all of those transfers in one evening.”
Yi Lu later claimed he was about to travel overseas to visit his ill father, “and he followed his past practice of transferring all his money to his wife in case he suffered some sort of accident while away”.
However the judge said Yi Lu had not made any travel bookings and his explanation “was not credible”.
Justice Gordon found “the concealed sale” of Waihopai’s assets and distribution of proceeds just before the original trial date “bear the hallmark of a transaction undertaken with the intention to render Waihopai and Mr Chen judgment-proof ”.
The judge ruled there was no partnership arrangement in force as claimed by Chen and that Huang’s Waihopai cash advances were loans, not investments.
He also ruled that Chen was in breach of the joint venture agreement by not repaying Huang $1.47m towards the Matakana purchase and failing to transfer the vineyard’s title.
However, the judge ordered Matakana Wines to pay Chen $530,000 for advances he made in 2015-16.
Chen told the Herald he did not agree with the findings and had filed an appeal. He wouldn’t comment more as the case was before the court.