Chris Chen has been ordered to pay nearly $5.5m after a protracted legal spat involving Matakana Estate. Photo / Supplied
Chris Chen has been ordered to pay nearly $5.5m after a protracted legal spat involving Matakana Estate. Photo / Supplied
A rich businessman must pay his former friends nearly $5.5 million and relinquish the title of a boutique winery following a bitter legal stoush involving two luxury vineyards.
The man's business partner has also been singled out for transferring nearly $3m to his wife in 55 separate electronic banking transactions in a single 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.
Chrissy Lu and her husband have been awarded nearly $5.5m following a legal dispute with their former business partner connected to Matakana Estate vineyard. Photo / Sylvie Whinray
And despite Chen contributing nothing financially to the purchase, a judge found he then failed to transfer the vineyard's 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 a staggering $2m on legal fees - sought an order forcing Chen to relinquish the Matakana vineyard's title, and $3m in damages for the protracted 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.
Matakana Estate north of Auckland was at the centre of a protracted legal dispute involving former business partners. Photo / Supplied
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, immediately 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.
Chris Chen has been ordered to pay his former friends nearly $5.5m and transfer the title of a Matakana vineyard. Photo / Supplied
"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".
Views over Matakana Estate vineyard. Photo / Supplied
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 payments were intended to prejudice and have the effect of causing prejudice to the plaintiffs as creditors."
The decision says Chen introduced the couple to the Matakana business opportunity after learning the vineyard's previous owners were in receivership.
He told the court he had no experience in the wine industry "but was attracted to the idea of living on a property in Matakana surrounded by grapes".
Huang agreed to fund the purchase and Chen would later repay his $1.47m share in three instalments, but the payments were never received.
The couple claimed Chen was responsible for obtaining OIO consent, but the judge ruled he had only offered to help.
Huang - who is mainly based in China while his wife runs the Matakana vineyard and luxury lodge - claimed that in May 2013 Chen's wife Jackie travelled to see him in China claiming Chen urgently needed money or the Waihopai vineyard would be auctioned by receivers.
"Mr Huang's evidence was that Jackie Huang was very upset; she told him that she was suicidal and that she and Mr Chen could be left with nothing."
Concerned that Chen could wind up bankrupt, putting the Matakana assets which were still in Chen's name at risk, Huang agreed to help.
He advanced $1.2m to Chen to stave off the auction. He subsequently advanced a similar amount to Chen towards the Marlborough vineyard, all of which he considered a loan.
Chen, who had been CEO of the Matakana operation and director of the Waihopai vineyard, took time off in 2016 due to "burn out".
The couple then terminated his employment and the business relationship ended.
The couple sent a loan repayment demand to Chen for $4.5m in May 2018 but he refused to pay. Legal action was launched the following year.
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 declined to comment further while the matter was before the court.
Chrissy Lu said she believed Chen took advantage of their friendship and trust, which was central to Chinese business culture.
"Like most Chinese business people, going to the court was a last resort. It has taken us five years of time and energy with significant legal costs to get this outcome.
"While grateful for the result of the trial, it will never compensate us for the lost opportunities and worry over the last 10 years."
