ZHENG v DENG [2020] NZCA 614

ZHENG v DENG [2020] NZCA 614 [3 December 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA37/2020[2020] NZCA 614BETWEEN LU ZHENGFirst AppellantORIENT CONSTRUCTION LIMITEDSecond AppellantAND DONGLIN DENGFirst RespondentORIENT HOMES LIMITEDSecond RespondentCA303/2020BETWEEN LU ZHENGAppellantAND DONGLIN DENGRespondentHearing: 3 November 2020Court: Goddard, Duffy and Nation JJCounsel: D Zhang and E Tie for AppellantsJ D Turner and L X Huang for RespondentsJudgment: 3 December 2020 at 3.00 pmJUDGMENT OF THE COURTA The appeal is allowed.B The judgment of the High Court is set aside insofar as it relates toMr Zheng's claim for a declaration that there was a partnership and theconsequential taking of an account (Mr Zheng's second cause of actionagainst Mr Deng) and Mr Zheng's claim in relation to the payments toMr Deng of $290,000 (Mr Zheng's first cause of action against Mr Deng).C We make an order that an account be taken of the dealings of thepartnership. The proceeding is remitted to the High Court for the takingof that account.D We make an order that such amount as may be due by one party to theother on that account be paid accordingly. Any question of interest onthe net amount due is to be dealt with in the High Court, having regard tothe findings made in the course of taking the account between the parties.E Mr Deng must pay costs to Mr Zheng for a standard appeal on a band Bbasis. We do not certify for second counsel.F We set aside the order for costs made in the High Court. Costs in thatCourt should be determined by that Court in light of the outcome of thisappeal.____________________________________________________________________Table of contentsPara NoBackground [6]The proceedings [20]High Court trial [26]The High Court judgment [29]Findings in relation to partnership/joint venture causes of action [35]Other causes of action in relation to the Bella Vista Project [47]Loan/Unjust enrichment claim in relation to $290,000 [52]Claim by OCL to recover miscellaneous payments [58]Costs judgment [61]Mr Zheng's submissions on appeal [62]Mr Deng's submissions on appeal [78]Discussion [86]A note of caution [86]The test for a partnership [90]Our assessment of the evidence [97]Our response to the Judge's reasons for not accepting Mr Zheng's evidence [104]Terminology used and omitted [105]The relevance of the various companies [110]"Likely impropriety" [114]Excluding RAL from the partnership [115]Discovery of the Principles in Separation document [116]Conclusion [117]The Bella Vista sections [123]The dispute about the $290,000 transferred to Mr Deng [124]Mr Deng's set-off defences [126]The implications of our findings [127]The costs appeal [134]Result [135]REASONS OF THE COURT(Given by Goddard J)[1] The first appellant, Mr Lu Zheng, and the first respondent, Mr Donglin Deng,had a longstanding business association. They carried out a number of propertydevelopment and construction projects. Those projects were conducted throughvarious companies, including the second appellant Orient Construction Ltd (OCL) andthe second respondent Orient Homes Ltd (OHL). The two men agreed to separatetheir affairs with effect from 31 May 2015. The central issues in this appeal are thenature of their business association and what, if anything, remains to be done to effectthat separation.[2] Mr Zheng says that by March 2010 he and Mr Deng were equal partners ina partnership known as the "Orient Group". The partnership conducted propertydevelopment and construction projects using a number of corporate vehicles.Mr Deng denies this. He says there was no overarching partnership: simplya number of companies collectively referred to as the "Orient Group" in which thetwo men had interests that were reflected in their shareholdings and current accountbalances in relation to each of the companies.[3] The parties' records and correspondence are largely in Mandarin Chinese.The terminology and business structures they adopted reflect linguistic and culturalframeworks that do not always align neatly with English language terminology, orwith New Zealand legal concepts and accounting conventions. The High Court wasconfronted with a case in which the familiar language and trappings of partnership —for example, a written partnership agreement, partnership financial statementsprepared in accordance with relevant accounting standards and conventions, anda partnership bank account — were absent. That absence, coupled with the existenceof a number of corporate vehicles through which their projects were carried out, ledthe Judge to the conclusion that there was no partnership.1[4] However, despite those factors, we are firmly of the view that in this case therewas an overarching business carried on by the two men in common with a view toprofit: that is, a partnership. They were equal partners in that partnership.The assets of that partnership included shares held by one or both of them in a numberof the companies that undertook particular projects. The projects were, as Downs Jfound, carried out through those companies. Relevant assets were held by thosecompanies, by one or other of the partners, and (at times) by friends and relativesacting as nominees. But notwithstanding the disparate shareholdings in the relevantcompanies, and the other asset-holding arrangements, we consider that it is clear fromthe parties' dealings that they carried on a joint business in relation to which they hadagreed to share equal responsibility for providing capital, and to share profits andlosses equally.[5] It follows that the appeal should be allowed. A declaration should be madethat there was a partnership. An account should be taken of the partners' mutualdealings. Any balance payable by one partner to the other should be ascertained andpaid. We remit the proceedings to the High Court to enable this to take place.Background[6] Mr Zheng has for many years carried on business as a property developer.Mr Deng's background is as a project manager. They met in 1998. Mr Deng wasinitially employed by Mr Zheng to work on his property development and constructionprojects. It appears that in 2004 Mr Deng ceased to be an employee, and acquired anownership interest in some of the projects that Mr Zheng was involved in. In 2004OHL was incorporated. The initial shareholders were Mr Deng (40 per cent),Mr Zheng (40 per cent) and Mr Jingli Zhu, Mr Zheng's brother-in-law (20 per cent).All three men were appointed as directors of OHL. OHL carried on business asa property developer. The business grew. Mr Zheng, Mr Deng and others formeda number of companies to carry on additional projects. These companies, which1 Zheng v Deng [2019] NZHC 3236 [High Court judgment].were collectively described as the "Orient Group" or "Orient Construction Group",included OCL, OHL and:(a) Orient Construction Group Ltd (OCGL);(b) Albany Apartments Ltd (AAL); and(c) Rosedale Apartments Ltd (RAL).[7] The shareholdings and directorships in these companies changed over time.In some (but not, it seems, all) cases these changes reflected changes in the participantsin particular projects. A table showing the relevant companies, and their directorsand shareholders over the relevant period, is attached as Appendix A. We refer to thecompanies and the participants collectively using the neutral term "the Group".[8] Family members of Mr Zheng and Mr Deng were involved in the business ofthe Group in a number of capacities. As noted above, Mr Zheng's brother-in-lawwas a director and shareholder of OHL. Mr Zheng's two sisters helped with theGroup's administration and accounting at various times. From 2013 onwardsMr Deng's wife, Judy Lin, was involved in keeping accounting records for the Group.The Group shared tools, equipment and an office. Cash was moved around thevarious companies and projects as required. Materials required for a project underthe auspices of one company would not infrequently be purchased by a differentcompany. On occasion, the companies also entered into formal contractualarrangements. For example, RAL was established to carry out a propertydevelopment at 40 Rosedale Road. OCL was a major sub-contractor on this project.[9] In 2007 the Group decided to buy and develop 11 lots of land in Bella VistaDrive, Gulf Harbour. This was referred to as the "Bella Vista Project". InitiallyAAL purchased four lots and OCGL purchased the remaining seven.[10] The Group came under financial pressure during the 2008 Global FinancialCrisis. A number of participants in the Group withdrew between 2008 and 2010.[11] The Group needed funding to complete the Bella Vista Project. Mr Bin Jiangwas introduced to the Group and agreed to contribute capital to this specific project.A short agreement dated 27 April 2008 (the "Bella Vista Agreement") was enteredinto. Its title was variously translated into English from the original Mandarin as"partnership agreement" or "cooperation agreement". 2 It was expressed to beentered into between Mr Jiang and "Orient Construction Group". Mr Zheng andMr Jiang both signed the Bella Vista Agreement. Mr Deng did not. He says he didnot know about it, at least at the time. Mr Zheng says he signed the Bella VistaAgreement on behalf of himself and Mr Deng. The Bella Vista Agreement providedthat "Orient Construction Group (Orient Homes Limited & Albany ApartmentLimited) owns [or occupies] 60%" and "Bin Jiang owns [or occupies] 40%".[12] The Bella Vista Agreement went on to provide, among other matters, that:(a) "Oriental Company" was to select six of the 11 sections "to be settledunder its designated companies", and "Jiang Bin is to select 5 sectionsto be settled under his designated companies or (overseas or local)natural persons' names".(b) Each party was "responsible for trustworthiness and risk of theirrespective designation persons, in event of unexpected losses that partyshall be solely responsible".(c) Various fees and costs, including loan interest "under whoever's name"would be "paid out of project joint expenses". The parties are "jointlyresponsible for direct costs" and "jointly responsible for preliminarycosts, building plans, consents, etc".(d) Upon sale of each property "there is to be immediate accounting ofproceeds (paid out or re-invest)". Oriental Company is responsiblefor, among other matters, "after sale produce accounts for costs andprofit, report to Bin Jiang every two months".2 In the original Mandarin: 合作协议; or in Romanised script: hézuò xiéyì.(e) Oriental Group would be responsible for the development work.There would be joint decision-making on certain specified matters.[13] The references to "Oriental Company" (or in some places, "Oriental Group")in the translated version appear as " 东 方 公 司 " in the original Mandarin. 3As discussed in more detail below at [87], this term can also be translated into Englishas "Oriental Firm" or "Oriental Enterprise".[14] D & R Homes Ltd (DRHL) was incorporated on 13 May 2008. Mr Jiang wasits sole shareholder and director. It appears he used that company as a vehicle forholding some of the Bella Vista sections, as contemplated by the reference in the BellaVista Agreement to "designated companies" that would hold the sections.[15] In 2011, Mr Deng introduced Mr Tong Zhu to Mr Zheng. Mr Deng andMr Zhu knew each other from university. Mr Zhu injected $500,000 into the Group,in part to a newly formed company, Eversolid Construction Ltd (ECL). Mr Zhu wasthe sole shareholder and director of ECL. However it appears that the day-to-daymanagement of ECL and the projects carried out through that company was conductedby Mr Zheng, and (as discussed below) the benefits and risks of those projects werejointly shared by Mr Zheng and Mr Deng. It appears this structure for Mr Zhu'sinvestment was adopted to facilitate Mr Zhu's immigration application.[16] The Bella Vista Project progressed over time. There were various transfersof particular sections, in some cases to third party buyers, but in a number of cases torelations and friends. These transactions typically involved financial support inconnection with the purchase being provided by one or more of the Group companiesto the purchaser. Mr Zheng says that these related purchasers held the sections asnominees for the Group (in a manner consistent with the approach contemplated bythe Bella Vista Agreement references to holding sections through designated persons).The principal reason for the transactions with related parties appears to have been toenable additional funding to be accessed for the Bella Vista Project, in the form ofmortgage advances obtained by the related party purchasers and used to settle the3 In Romanised script: dōngfāng gōngsī."purchases". Although Mr Deng denied that the transfers were anything other thanoutright sales, there is clear evidence that the properties continued to be developed bythe Group after these transfers, and continued to be dealt with for the benefit ofMr Zheng, Mr Deng and Mr Jiang: we return to this below at [123].[17] By 2015, the business relationship between Mr Zheng and Mr Deng was understrain. Accounts differ as to what went wrong. The project at 40 Rosedale Roaddid not go well. OCL poured the concrete without adequate reinforcing.The mistake was not found for some time. It cost more than $100,000 to fix.Mr Zheng says the mistake was Mr Deng's as he did not put the steel in. Mr Dengsays it was Mr Zheng's because Mr Zheng did not order the steel. There were relatedcashflow problems. Ms Lin thought Mr Zheng was exposing the Group to unduerisk. And there were disagreements about other matters. Ultimately Mr Dengdecided, with his wife's encouragement, that he and Mr Zheng should separate theirbusiness interests. Mr Deng told Mr Zheng he wished to do so in May 2015. It iscommon ground they agreed to separate with effect from 31 May 2015.[18] Negotiations followed about the financial consequences of this separation, andhow it should be implemented. The parties had a number of discussions andexchanged correspondence. In June 2015 Mr Zheng sent a document headed"Principles in Separation" to Mr Deng. Mr Deng annotated the document point bypoint in red type, and returned it. Mr Zheng added further annotations in green typeresponding to Mr Deng's comments. Mr Deng then provided a further set ofcomments (again in red). This document is in our view an important guide to thenature of the parties' relationship. It is set out in full in Appendix B, in the originalMandarin and in English translation.[19] Mr Deng says the parties reached agreement on these principles, as a result offurther email exchanges and discussions, and the agreed approach to separation waslargely implemented. Mr Zheng says they were not able to reach a final agreement.A number of points of difference could not be bridged. Mr Zheng says that theagreed approach has been implemented in part, but it remains necessary to carry outa final reconciliation of the parties' mutual dealings. Mr Zheng says that this willreveal that Mr Deng owes him a substantial sum. Mr Deng says that under the agreedapproach to separation, there are in fact amounts due to him that have never been paid.The proceedings[20] Mr Zheng and OCL, a company of which Mr Zheng is now the sole directorand shareholder, commenced proceedings in the High Court against Mr Deng andeight other defendants in connection with the affairs of the Group. The claim wasamended on a number of occasions. The case went to trial on the basis of a secondamended statement of claim (2ASC). The 2ASC pleads that in 2004 Mr Zheng andMr Deng entered into a partnership arrangement, which it refers to as the"Orient Partnership". The 2ASC also pleads the establishment of the Bella VistaProject, which it says was owned as to 60 per cent by the Orient Partnership and as to40 per cent by Mr Jiang (the second defendant). The formation of other companies,to carry out other projects, is also pleaded. The third defendant (OHL) and the fourthdefendant (ECL) are alleged to be companies used as vehicles to advance thepartnership's business objectives. The eighth defendant, Mr Tong Zhu, was (as notedabove) the sole director and shareholder of ECL. Mr Zheng pleads that Mr Zhu wasappointed as director and shareholder of ECL in order to exercise his powers,obligations and rights as director and/or shareholder of ECL for the benefit of theOrient Partnership.[21] The fifth to ninth defendants are alleged to be parties who held assets of theBella Vista Project on trust for the Orient Partnership.[22] Mr Zheng says the RAL venture did not form part of their partnership or jointventure: he and Mr Deng were not equal partners in this particular venture. Rather,as at May 2015, he held 35 per cent, Mr Deng held 5 per cent, and Mr ChenggangZhang held 60 per cent of the shares in RAL.[23] The 2ASC then pleads that there was an agreement to separate their businessinterests with effect from 31 May 2015 and refers to various dealings after that date inconnection with that separation. The 2ASC goes on to plead a number of causes ofaction against the various defendants. The two causes of action that remain relevanton appeal are as follows:(a) A claim by Mr Zheng against Mr Deng for failure to repay an allegeddebt of $290,000. In the alternative, that sum is claimed on the basisof unjust enrichment.(b) A claim by Mr Zheng against Mr Deng for a declaration that theOrient Partnership exists, and for an order for inquiries and the takingof accounts in connection with the business of the partnership and thevarious corporate vehicles through which that business was pursued.Alternatively, Mr Zheng pleads that if there was no partnership, therewas a joint venture which attracts essentially the same fiduciary duties,and their separation requires an account to be taken.[24] There were a number of other causes of action. But they were dismissed inthe High Court, and those aspects of the High Court judgment were not challenged onappeal.4[25] Mr Deng disputes all of the claims made against him and against associatedcompanies and individuals. He says his relationship with Mr Zheng was based onvarious corporate and contractual structures, with no fiduciary elements. There isnothing to account for, land or otherwise. Mr Deng acknowledges the Group keptinternal accounts. However he says he does not understand those accounts, and didnot sign any of them. He denies borrowing money from Mr Zheng, or taking moneyfrom the Group companies' bank accounts without Mr Zheng's consent. He saysMr Zheng owed him money when they separated their business interests, and themoney that came to him reflects this. Mr Zheng agreed to these payments and to thetransfer of certain other assets, including two cars. Mr Deng says Mr Zheng wasa businessman and the dominant personality in their dealings. By contrast, Mr Dengwas a "hands on" project manager responsible for work on the various construction4 The notice of appeal appeared to challenge the High Court's findings on a third cause of action:a claim by OCL against Mr Deng for failure to repay a debt of $57,483.29. However, noargument was advanced before us on this issue: see [130] below.sites. He did what Mr Zheng told him to do. He had no understanding of thecommercial and financial aspects of their dealings.High Court trial[26] The High Court trial occupied some 10 sitting days. Mr Zheng gaveevidence. He called a number of witnesses including his sisters Jenny andMei Zheng, both of whom worked for the Group at various times. He also calledexpert evidence from Ms Tina Payne, a forensic accountant. She was asked toprovide "an expert opinion to demonstrate, if possible, that a partnership existedbetween [Mr Zheng] and [Mr Deng]". She examined various documents in thecommon bundle, including financial records and correspondence. She expressed theopinion that the totality of evidence demonstrated "an equal partnership between[Mr Zheng] and [Mr Deng], with the pooling of their company assets". The Judgeconsidered much of her evidence was inadmissible, for reasons set out below at [37].[27] For the defendants Mr Deng gave evidence, as did his wifeXiaofeng (Judy) Lin. Mr Deng also called expert evidence from Mr Andrew McKay,a chartered accountant with expertise in forensic accounting. Mr McKay gaveevidence about the nature of the arrangements between Mr Zheng, Mr Deng and theGroup.[28] Mr McKay said that "[it] will be a question of legal interpretation as to the typeof arrangement that actually existed it is my opinion that there are somecharacteristics of a partnership and some characteristics of an unincorporated/informal joint venture". Mr McKay said he considered the "more likely" businessarrangement was an informal joint venture because:119.1 The lack of a GST number and registration with the IRD asa Partnership does not help/support the argument that a businesspartnership existed;119.2 The lack of a separate bank account in the partnership name does nothelp/support the argument that a business partnership existed;119.3 Some of the companies within the Orient Group were set upspecifically for a particular property development and someintercompany agreements exist;119.4 The nature of some of the agreements in evidence, Bella Vistadevelopment and 40 Rosedale Road development (i.e. a project)suggests the business arrangements were a series of [joint ventures];and119.5 Mr Deng did not appear to have an active role in the main decisionmaking of the business (Orient Group), rather he acted on instructionfrom Mr Zheng The High Court judgment[29] As the Judge noted, the most important questions before the High Court werewhether a partnership existed between Mr Zheng and Mr Deng; and whether a furtherpartnership existed between Mr Zheng, Mr Deng and Mr Jiang in relation to theBella Vista Project. An equally important and closely related question was whetheran analogous fiduciary relationship existed between these men.5[30] In order to answer these questions, the Judge began by setting out the definitionof a partnership in s 4(1) of the Partnership Act 1908:Partnership is the relation which subsists between persons carrying ona business in common with a view to profit.[31] In his analysis of the relationship between the parties the Judge putconsiderable emphasis on s 4(2) of the Partnership Act, which provides that"the relation between members of any company under the Companies Act 1993 is not a partnership within the meaning of this Act".[32] The Judge recorded that s 5 of the Partnership Act identifies a number ofnon-exhaustive rules for the identification of a partnership. For example, s 5(c)provides that receipt of a share in the profits of a business is prima facie evidence ofa partnership, but is not determinative.6[33] The Judge noted that the inquiry into the nature of a relationship between twoor more persons, and whether it is a partnership, is a mixed question of fact and law.7He referred to the decision of this Court in Clark v Libra Developments Ltd, where the5 High Court judgment, above n 1, at [26].6 At [29].7 At [30].Court emphasised that the question must be "determined by the Court on the basis ofwhat the parties said and did".8 A written agreement is not required; a partnershipcan be implied from circumstance.9[34] The Judge went on to identify the key characteristics of a joint ventureattracting fiduciary obligations. The Judge noted that it is now clear that a jointventure can attract fiduciary obligations when X is entitled to place trust andconfidence in Y, and X is entitled to rely on Y not to act contrary to X's interests.10Findings in relation to partnership/joint venture causes of action[35] The Judge then reviewed the evidence in order to determine whether itsupported the existence of a partnership or joint venture. The Judge considered thatMr Zheng's evidence contained little to support the existence of a partnershipbeginning in 2004. Rather, the Judge said, Mr Zheng was really alleginga partnership with Mr Deng beginning in 2010.11 The Judge considered that thisfocus on the period from 2010 onwards was confirmed by Mr Zheng'sevidence-in-chief:29. This means by March 2010 Mr Deng and I were basically partneringexclusively. We agreed that from now we would be 50/50 partners. Forthe purpose of this proceeding I call it the Orient Partnership. Betweenourselves we in fact never used a proper name for this partnership, but tothe world we continued to use the brand name of Orient ConstructionGroup.30. The old group maintained partnership accounts, its tenth partnershipaccount dated 31 March 2010 reflects the above assets position.This document was made by Mr Deng and myself. We both signed thisdocument. This document can also be taken as the startingpartnership accounts for the partnership between Mr Deng and me. [36] The Judge set out the key passages from Mr Zheng's evidence about the allegedpartnership, and about the Bella Vista Project. He considered that Mr Zheng saidnothing about the characteristics of his relationship with Mr Deng and Mr Jiang thatmight support the existence of partnerships or joint ventures; most obviously, mutual8 At [31], quoting Clark v Libra Developments Ltd [2007] 2 NZLR 709 (CA) at [51].9 High Court judgment, above n 1, at [33].10 At [36], referring to Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [80] per Blanchardand Tipping JJ.11 At [48].loyalty, reliance and trust. Rather, the Judge said, Mr Zheng relied heavily on theinternal accounts prepared by his sisters and by Judy Lin, Mr Deng's wife.12[37] The Judge identified significant problems with the admissibility of theevidence of Ms Payne. He considered that although Ms Payne was a forensicaccountant with considerable experience, she had no relevant expertise in identifyinga partnership. It is doubtful whether there is a body of experts in relation to thisspecific subject, which is a legal conclusion reserved for the Judge.13 However someof Ms Payne's testimony could be reconceived as admissible evidence about the natureof the accounts and what they revealed about the parties' relationship. The Judgenoted that the bi-monthly accounts prepared from 14 June 2010 onwards showedMr Zheng and Mr Deng made equal contributions to the Group and provided evidenceof intent to maintain symmetry of profit. The accounts contained narrations "to theeffect that at the end of each financial year, the profits will be either 'split' orreinvested".14[38] The Judge saw the external accounts prepared in relation to each of the relevantcompanies as a significant factor. Ms Payne acknowledged that she had notconsidered the external accounts of these companies in determining whethera partnership existed. So, the Judge observed:15 Ms Payne had no regard to published financial information about thecompanies, how the rest of the world would view them given this information,or whether the internal and external accounts betrayed inconsistency about thenature of the enterprise.[39] The Judge noted that the internal accounts occupied much trial time.They were not in a standard accounting format. They captured information beyonda typical balance sheet or other financial statement. They did not use conventionaldouble entry book-keeping.1612 At [51].13 At [53]–[54].14 At [56].15 At [58].16 At [60].[40] The Judge went on to record what he saw as the material aspects of theextensive evidence given by Mr Deng. Mr Deng denied the existence ofa partnership or partnerships. He said Mr Zheng was responsible for all financialarrangements, while he only managed projects. Mr Deng said he took directionsfrom Mr Zheng in relation to the Group, even though he was a director of some of thecompanies. He had little understanding of the internal accounts; he relied on his wifeto explain these. He denied signing the accounts.17[41] The Judge then summarised the evidence given by Mr McKay. The Judgeconsidered that although Mr McKay was more mindful of the distinction between hisrole and the court's role than Ms Payne, his evidence also was not substantially helpfulon the question whether a partnership existed. However the Judge considered thatMr McKay's evidence in relation to the internal accounts was well within his expertiseand substantially helpful.18 Because the Judge placed significant weight on theanswers that Mr McKay gave to questions put to him by the Judge, we set out therelevant passage from the notes of evidence in full:Q. Again I just want to pick-up some sentiments that you've expressedand I assure you there are no trick questions on my part. You don'tsee how you could run a business like this on these accounts?A. I don't, not the volumes and values that they're, that are flowing, thecontributions that you see; 50s, hundred thousands, 30 thousands andthen the size of the contracts that need to be run.Q. And you said that you didn't like them? The accounts and youthought that they were unreliable?A. I – yes, because you don't have the full double-entry system. Youcan't see – there's a reason that double-entry bookkeeping exists.Q. Yes and when we talk about the accounts we're talking about theinternal reconciliations?A. Yes, Your Honour.Q. Yes. You said that these contained a running tally of something andyou emphasised the word, something?A. Yes.17 At [62].18 At [65].Q. It's not clear to what that something actually is?A. Only it's trying to run something as Mr Zheng suggesteda contribution and that sort of thing but it's – you try and then say wellthat should – because you don't – we won't, we don't have their indi– like their individual, you need their individual personal balancesheets as well and personal bank statements and personal tax returnsto tie this whole thing together.Q. Yes?A. And it's not that – we don't have it. Neither I nor Ms Payne had allof that.Q. Yes. You also said that the numbers are a moving feast?A. They are a moving feast, particularly that table 10 when we spentmore time looking at it after Ms Payne's evidence last week when wesuddenly went hold on, these are all –Q. Circular?A. Very circular.Q. Yes. You said that this is a bizarre way of accounting?A. It is a bizarre way, Your Honour.Q. Yes. The internal accounts contain no obvious linkage to figures inthe external published financial statements?A. I couldn't see it. I mean I only – and to qualify that I only looked attwo years, two year end ones mostly and I can't follow this so I'm notputtingQ. Yes?A. The time we'd spent on this file is a lot already and then trying tofollow that through and that was through one of my team who canread Mandarin.Q. Yes?A. I cannot.Q. Yes. So forgive me for being blunt. You thought you'd be throwinggood money after bad by trying to make sense of these internalaccounts?A. I did.Q. Tell me whether you disagree with these expressions in relation to theinternal accounts, idiosyncratic at best?A. At best.Q. Enigmatic?A. Definitely enigmatic.Q. Unreliable?A. I would say they're probably unreliable. ...Q. Forgive me for being so direct. Can I have any confidence in thesenumbers?A. I don't have confidence in the numbers and I am sorry, I don't want tosay that but I don't have confidence that all the evidence is here andI'll refer it to myself or Ms Payne to make the correct assessments,especially when we both sort of went oh, there's a whole pile ofcircular transactions here so that means let alone the taxconsequences.Q. One final question. Imagine you're asked to make an importantdecision based on these numbers. Would you feel comfortable doingthat?A. I don't think you're able. I can't, I don't think you're able, will beable to Your Honour.[42] The Judge considered that the claim that partnerships existed relied on theevidence of Mr Zheng and on the internal accounts.19 The Judge gave five reasonsfor not accepting Mr Zheng's evidence:(a) His evidence struck the Judge as "revisionist history".Contemporaneous records, the Judge said, did not refer to partnerships,use that term, or any term like it. The post-separation correspondencewas "strangely silent on the topic of partnerships". Mr Zheng said inhis evidence that the "Orient Group" referred to the partnerships. But,the Judge said, most would think it referred to the Orient Group ofcompanies. The Judge referred to an email sent by Mei Zheng toMr Deng in which she complained about Mr Deng's use of "companyproperty".20 Mr Zheng and Mr Deng typically signed correspondenceas "director".2119 At [68].20 Emphasis in original.21 At [69]–[70].(b) Second, Mr Zheng signed many of the external accounts for the relevantcompanies as true. The Judge considered that the internal accountscould not be reconciled with the external accounts. For example,some of the internal accounts identify off-book assets, in the form ofcompany assets held under personal names. The internal accountsappeared to reveal different holdings to those in the external accounts.Current account contributions in the external accounts did notcorrespond with those in the internal accounts. "Central toMr Zheng's case is the proposition the world was told one thing by theexternal accounts, when the correct position was another. This isunattractive."22(c) Third, Mr Zheng's evidence referred to a number of incidents which theJudge characterised as involving "probable illegality". That includedreferences to movement of money to avoid "problematic taximplications". The Judge noted that ECL had purchased materialsused by OCL. This, the Judge said, would be unremarkable if ECLinvoiced OCL for the materials. It did not. The companiestransferred and used funds between themselves as needed. Thesetransfers were not treated as loans or recorded in the external accounts.It appears that at one point "fictitious" invoices were issued by OHLand ECL to reduce their liabilities to other Group companies to zero.The important point given the burden of proof, the Judge said, was"Mr Zheng's acknowledgement of likely impropriety in connectionwith a claim that has at its heart dissonance between external andinternal accounting".23(d) Fourth, Mr Zheng said Rosedale Apartments was not within eitheralleged partnership. The Judge considered that Mr Zheng had notexplained why he drew this distinction. Nothing about RosedaleApartments' business or operation, the Judge said, stood out as22 At [71]–[73].23 At [74]–[75].different. "Distinguishing this company from others in the allegedpartnerships appears capricious."24(e) Fifth, Mr Zheng failed to discover the Principles in Separationdocument even though he created it, then relied heavily on it duringpost-separation negotiations. He said nothing about it in his brief ofevidence.25[43] The Judge then turned to consider the internal accounts. The Judge noted thatsome of the internal accounts contained entries in relation to Rosedale Apartments.The Judge considered this significant because RAL was not within the allegedpartnerships, which the Judge saw as "wounding the proposition the internal accountsdisclose them".26 (However as we explain below at [98] it is necessary to drawa distinction between the parties' investment in the Rosedale Avenue property throughRAL, and the construction work at Rosedale Apartments carried out by OCL.)[44] The Judge considered that even if Ms Payne was correct that the accountsrevealed an intent to split profits and maintain equal investments, it did not necessarilyfollow that a partnership existed.27 It was necessary to consider the possibility thatthe relationship was confined to the various corporate structures, without any fiduciaryelements over and above the corporate framework. The Judge saw the corporatestructures as inconsistent with the existence of a partnership, because third partieswould have assumed they were dealing with companies and not a partnership.28The Judge also considered that Mr Zheng and Mr Deng could not have been partnerswhile each was a shareholder in the same company because "s 4(2) of thePartnership Act precludes this".29 Because of the importance of these two relatedpoints to the Judge's ultimate conclusion, we set out the relevant passages in full:[80] I begin with the obvious. Mr Zheng conducted his business througha series of companies. He relied—as he was entitled—on the limitation ofliability and corporate veil. If the companies had become insolvent, it isdifficult to imagine Mr Zheng would have accepted creditors' contentions of24 At [76].25 At [77].26 At [78].27 At [79].28 At [80].29 At [84].personal liability. Mr Zheng now wants to have it every which way.As observed, Mr Zheng contends the world was told one thing by the externalaccounts, when the true position was another. Public policy tells against thisargument. Company accounts must be published for good reason. Peopleare entitled to rely on them. Similarly, people are entitled to know whetherthey are dealing with a company or a partnership. The distinctions betweenthe two are not subtle. Mr Zheng told the world he was in business througha group of companies. Absent cogent evidence of partnership or ananalogous fiduciary relationship, he should be held to that.[81] No such evidence exists. As foreshadowed at the beginning of thisjudgment, there is a paucity of evidence about features typically associatedwith fiduciary relationships: mutual loyalty, reliance and trust. Mr Zhengsaid nothing about these. Unsurprisingly, Mr Deng said nothing either. I donot overlook the cooperation between Mr Zheng and Mr Deng across thegroup, or within a company forming part of the group. Nor do I overlook thecooperation between the companies. Each, however, is explicable by themen's roles as directors and shareholders, and the companies' commonprojects.[82] Nothing tangible emerges to imply the existence of relationshipsbeyond those required by the corporate structure, still less relationshipsattracting heightened, fiduciary obligations. Indeed, Mr Zheng's andMr Deng's dealings appear arms-length. Again, even if one assumes anagreement existed between the men to split profits and invest equally—aspects the internal accounts arguably reveal—the preponderance of evidencediscloses a purely contractual arrangement between an experiencedbusinessman and project manager.[83] Moreover, as directors, Mr Zheng and Mr Deng owed duties to theircompanies. Putting each other first as partners sits awkwardly with the men'scorporate responsibilities.[84] I mentioned statutory landscape. Mr Zheng and Mr Deng cannothave been partners while each was a shareholder in the same company becauses 4(2) of the Partnership Act precludes this; see [28]. No partnership couldencompass Orient Construction between 23 July 2013 and 2 April 2016;Orient Construction Group for a nine-day period in October 2008; AlbanyApartments for the same period; and Rosedale Apartments between14 January 2014 and 8 September 2015 (albeit, as observed, Mr Zheng saidRosedale Apartments was not within any partnership). In each period,Mr Zheng and Mr Deng were members of the same company.[85] This is no mere technicality because Orient Construction conductedmuch of the group's business, and it must be removed from the calculus forthe 22-month period immediately preceding the separation. Moreover, by theend of December 2013, Orient Homes and Albany Apartments were inactive,and Orient Construction Group had been deregistered. This combinationleaves a sizable hole in the alleged five-year partnership between Mr Zhengand Mr Deng.(Footnotes omitted.)[45] The Judge went on to say, for completeness, that he accepted the key aspectsof Mr Deng's evidence in relation to the primary role of Mr Zheng, Mr Zheng'sresponsibility for financial arrangements, and Mr Deng's own lack of sophisticationand understanding of the business side of the arrangements. The Judge found thatMr Zheng was "in charge" and "[this] conclusion also tells against the existence ofpartnerships".30[46] The Judge concluded that there were no partnerships. The reasons for findingthere were no partnerships also excluded the prospect of joint ventures: no additionalanalysis was required.31Other causes of action in relation to the Bella Vista Project[47] The Judge then dealt with Mr Zheng's claims that various defendants heldBella Vista lots on constructive trust for Mr Zheng, and that contracts in relation to theBella Vista Project were breached by Mr Deng. These allegations were based on theevidence given by Mr Zheng about transfers of Bella Vista sections to various relatedpersons in order to access additional funding for the project.[48] The Judge noted that these causes of action were variants on, or extensions of,the Bella Vista partnership and joint venture causes of action. They presupposed thatMr Zheng had an interest in the Bella Vista land arising from an agreement withMr Deng and Mr Jiang. The Judge considered that his earlier conclusions that therewere no partnerships precluded such a finding.32[49] The Judge referred to Mr Zheng's argument that the post-separationcorrespondence, including the Principles in Separation document, provided evidencethat he had a personal interest in the land. The Judge accepted that this document30 At [86].31 At [89].32 At [92].and others provided some evidence that Mr Zheng believed he had such an interest.However none of that, the Judge said, constitutes evidence he had such an interest:33(a) Mr Zheng did not buy any of the lots. Companies did — AAL boughtfour and OCGL bought seven.(b) Mr Zheng adduced no evidence he funded or partially funded any ofthe purchases independently of the Group's companies andindependently of the alleged Bella Vista partnership, the existence ofwhich the Judge had rejected.(c) Mr Zheng adduced no tracing evidence in relation to the purchases.(d) Mr Zheng was a director of both AAL and OCGL when thesecompanies transferred the land.[50] The Judge identified two other problems for these causes of action. First, the2ASC did not identify how the alleged constructive trust arose, or what contract wasbreached. A defendant should not be left to guess what a plaintiff's case is.Second, the 2ASC alleged each transfer of land to an individual "constitutestermination of the Bella Vista Project partnership". The Judge noted that the firstsuch transfer occurred on 14 July 2008, when DRHL transferred one of the lots toMr Jiang's wife. So, the Judge said, the 2ASC effectively alleged a partnership from27 April 2008 until only 14 July 2008, and one repeatedly terminated thereafter witheach transfer of land.34[51] The Judge referred to the description of these aspects of the statement of claimby Mr Turner, counsel for Mr Deng, as "nonsense". The Judge said he would not usethis term but did not disagree. These causes of action failed.3533 At [93]–[94].34 At [95]–[96].35 At [97]–[98].Loan/Unjust enrichment claim in relation to $290,000[52] The Judge then dealt with the cause of action alleging that Mr Deng owedMr Zheng $290,000 as a result of advances and/or unauthorised drawings on the bankaccounts of the Group's companies.[53] The Judge considered that the evidence on what was advanced and how therest of the money was obtained was inconsistent with the pleading and was alsointernally inconsistent. The transactions involved were difficult to follow, withmovements of money between various company bank accounts and the personalaccounts of Mr Zheng and Mr Deng in both directions. But, the Judge noted,Mr Zheng did not directly transfer any money to Mr Deng.36[54] It was ultimately common ground between Ms Payne and Mr McKay thatMr Deng had withdrawn $290,000 from the Group in April and May 2015.Mr Zheng characterised this as a mix of authorised and unauthorised advances thatMr Deng was required to repay. Mr Deng said these were payments made to him aspart consideration for the separation of their business interests.37[55] The Judge considered that Mr Deng's evidence found more support in thecontemporaneous evidence than Mr Zheng's. In short, the figure for the alleged loanhad changed repeatedly. Mr Zheng did not refer to the existence of a loan orcomplain about the additional taking of funds in contemporaneous correspondence.The men were actively negotiating terms of their disengagement. Mr Deng accusedMr Zheng of impropriety in July 2015. If Mr Deng had wrongly taken money, onemight have thought that Mr Zheng would respond then. He did not. Indeed he didnot ventilate the allegation of a loan until September 2016. The real reason thatMr Deng was provided with funds was, the Judge considered, that Mr Zheng owedMr Deng large amounts of money at this time.3836 At [104].37 At [107]–[109].38 At [110] and [122]–[123].[56] In summary, the Judge:39(a) Did not accept Mr Zheng's evidence he loaned money to Mr Deng, orhis evidence that Mr Deng took an additional sum. He found thatMr Zheng authorised the transfers in recognition of Mr Deng'sinterests.(b) Found that if this had been a loan from Mr Zheng to Mr Deng, onewould expect Mr Zheng to have put funds into Mr Deng's personalbank account. That was not what happened. Instead, Mr Zheng andMr Deng engaged in a series of bank transfers involving Groupcompanies. This, the Judge said, was consistent with the mendisentangling their business interests and making related payments.(c) Noted that the claim was brought by Mr Zheng, not by OCL.But there was no transfer from Mr Zheng to Mr Deng. OCL, thesource of the funds, was not itself making a claim for the money.[57] The Judge therefore dismissed this cause of action.Claim by OCL to recover miscellaneous payments[58] Finally, the Judge dealt with the cause of action in which OCL claimed$57,423.29 from Mr Deng on the basis of various payments made out of the OCL bankaccount, and various dealings involving the use of two cars and certain expensesincurred by Mr Deng.[59] The Judge considered the evidence did not reveal a debt: it disclosed noagreement Mr Deng would pay or repay any money. Mr Zhang, counsel forMr Zheng, acknowledged the pleading was problematic and relied on an alternativecontention of unjust enrichment. But, the Judge said, the statement of claim did notidentify how Mr Deng unjustly enriched himself at OCL's expense.4039 At [124]–[126].40 At [131].[60] The Judge preferred Mr Deng's evidence that these were consensualarrangements reflecting ongoing work done by Mr Deng for OCL. The variouspayments and benefits received by Mr Deng from OCL were elements of thatarrangement, which did not give rise to any debt or any claim in unjust enrichment.41Costs judgment[61] The Judge held that costs should follow the event in the ordinary way.Certain aspects of the costs claimed by Mr Deng were disputed. Those issues weredetermined by the Judge in a separate costs judgment.42Mr Zheng's submissions on appeal[62] Before us, Mr Zhang submitted that the Judge was wrong to reject Mr Zheng'sevidence, and to prefer that of Mr Deng. As a result, the Judge erred in finding thatthere was no partnership or joint venture. The Judge also erred in finding thatMr Deng was not indebted to Mr Zheng.[63] Mr Zhang challenged each of the five reasons given by the Judge for rejectingMr Zheng's evidence.[64] First, Mr Zhang submitted that the Judge was wrong to put any weight on hisunderstanding that the contemporaneous documentation did not use the terminologyof partnership or the like. As the courts have observed on a number of occasions, thelanguage used by participants in a business venture is not decisive in relation to itscharacter.43 Mr Zheng was not a legal expert. References to the Orient partnershipin internal documents in Mandarin used the term "公司" which can be translated aseither "firm", "company" or "enterprise" (as we noted above at [13]). The use of thisterm is equally consistent with the existence of a partnership. In any event, clearlythe Group was not a single company. This was a simple case of lay people usingparticular words in an ordinary, imprecise manner. Critically, Mr Zhang submitted,a significant body of documentary evidence demonstrated that the way in which the41 At [136].42 Zheng v Deng [2020] NZHC 959 [High Court costs judgment].43 Clark v Libra Developments Ltd, above n 8, at [62] and [149].two participants operated "fits how partnership works, rather than people working fora company".[65] Second, the inconsistencies between the external and internal accounts did nothave the significance ascribed to them by the Judge. The discrepancies had beenexplained. More importantly, the discrepancies were in fact evidence that the twomen operated internally as partners, while to the outside world they carried outparticular projects through particular companies. That is, the existence and contentof the internal accounts confirmed that there was an additional relationship betweenthe two men that operated as an overlay for the various corporate vehicles used bythem.[66] Third, the Judge's reference to evidence about "probable illegality" referred toconduct to which both men were parties. In any event, it was uncertain that theconduct referred to by the Judge was illegal. Its legality was not the subject of theproceeding, nor were the parties given the opportunity to be heard on whether it wasillegal. Mr Zheng was simply being honest in giving evidence about historicalevents. Mr Deng had not provided an alternative explanation for any of these events.That should not be used against Mr Zheng in relation to credibility.[67] Fourth, so far as Rosedale Apartments was concerned, the reason RAL wasexcluded from the partnership was that it was an investment holding company in whichMr Zheng and Mr Deng had uneven shares: 35 per cent and 5 per cent respectively.The investment in this land was operated under a company structure, due to thedifference in their interests and the fact that Mr Jiang was the majority shareholderwith 60 per cent of the shares. It was the unequal nature of their interests in RALthat meant that it sat outside their equal partnership. The references in somepartnership documents to Rosedale Apartments reflected the fact that theRosedale Apartments construction project undertaken by OCL was a partnershipproject: OCL was one of the companies that carried out partnership projects for theirjoint (equal) benefit.[68] Mr Zhang submitted that the Judge's fifth reason for not accepting Mr Zheng'sevidence proceeded on the incorrect premise that Mr Zheng had failed to discover thePrinciples in Separation document. In cross-examination Mr Zheng had said that hedid not recall whether he had discovered it or not. This, Mr Zhang submitted, washardly surprising given the volume of discovery and did not provide a proper basis fora finding that the document had not been discovered. We note that it is now commonground that the document was in fact discovered by Mr Zheng. On appeal Mr Zhenghad sought to adduce further evidence to establish that he had discovered thedocument. That was opposed by Mr Deng. We asked counsel to resolve this issuebetween them, and file a memorandum confirming the position. Counsel forMr Deng now accept that the document was indeed discovered electronically.It follows that this limb of the Judge's reasoning drops away.[69] By contrast, Mr Zhang submitted, there were numerous inconsistencies inMr Deng's evidence. It was evasive in significant respects. Mr Deng was unableto explain a number of events and a number of documents.[70] Mr Zhang submitted that the Judge had erred in law as treating s 4(2) of thePartnership Act as precluding the two parties from being partners while they wereshareholders in the same company. Although s 4(2) of the Partnership Act confirmsthat parties do not become partners merely by virtue of being fellow shareholders inthe same company, that is not to say that fellow shareholders can never be partners inrespect of the company's business. Rather, whether parties who are fellowshareholders are also partners depends on the facts of each case.[71] Mr Zhang submitted that if the Court had focused, as it ought to have, on whatwas actually said and done by the parties, it would have been apparent that they didnot conduct business in a manner which can be explained solely by the Companies Actregime. Their internal dealings did not reflect the various different shareholdings inrelevant companies. Indeed there were several projects on which the parties workedtogether that were operated by companies where the parties were not fellowshareholders and directors. The most notable examples of this were the projectscarried out by ECL, a company which was run by Mr Zheng and Mr Deng as part oftheir joint business, but where the sole shareholder and director was Mr Deng'sacquaintance, Mr Zhu. Mr Zhu's formal approval as director was required for certainmatters; but it was clear from the evidence that the company was under the de factocontrol of the two parties. The expenses and profits of these projects were sharedequally, as reflected in the internal accounts and the Principles in Separationdocument.[72] Mr Zhang also submitted that being fellow shareholders in the same companydoes not operate as a bar to the existence of a joint venture attracting fiduciary duties.[73] In relation to the Judge's finding that there was a "paucity of evidence"demonstrating mutual loyalty, trust and confidence, Mr Zhang submitted that:(a) The Judge erred in focussing on whether there was evidence todemonstrate mutual loyalty, trust and confidence. Those areconsequences that follow from the existence of a partnership.The Judge should have focused on the test for partnership set out ins 4(1) of the Partnership Act. That test is met. The focus shouldhave been on whether the parties were in business together witha common view to profit, based on what the parties said and did.(b) The Judge erred in his assessment of the evidence in relation to thenature of the parties' dealings. In particular, the Judge erred in givingno weight to the internal accounts because of his finding that they were"Byzantine" and "impenetrable", based on the evidence of Mr McKay.Mr McKay's view was based on an incorrect and incompleteunderstanding of the relevant documents. Mr McKay confirmed thathe had not seen all relevant material and had not taken into accountcertain matters. And even if the figures recorded in the internalaccounts were inaccurate, the accounts should not have beendiscounted altogether. They shed important light on the true nature ofthe relationship. Their existence showed that the parties never saw thebusiness relationship as one of being fellow shareholders of a series ofcompanies. They saw themselves as directly being in business witheach other, notwithstanding the corporate vehicles through which theycarried out the work. The internal accounts did not record dealingsbetween companies: rather they showed the amalgamated asset positionof the two men, including a running account of their contributions anddrawings, and an allocation of expenses and revenue for all currentprojects. The accounts clearly disclosed an intention that the partieswould split the overall profit generated by all projects 50/50, regardlessof which company actually generated that profit. This was strongprima facie evidence of a partnership sitting behind the companies.(c) Consistent with the 50/50 division of the profits from joint projects, theevidence showed that each was to receive 30 per cent of the profits fromthe Bella Vista Project, that is, half of the 60 per cent held by themjointly.(d) Importantly, when the parties decided to separate, the negotiation wasnot about who was to take which company. Rather, the negotiationstreated the companies' projects, equipment and staff as collective assetsto be divided between the two men.(e) If, contrary to the submissions set out above, evidence demonstratingmutual trust and loyalty is necessary for a finding that there isa partnership, the Judge erred in finding that such evidence was lacking.The arrangement between the parties could not function unless theywere entitled to repose, and did repose, mutual loyalty, trust andconfidence in each other. In particular, that was necessarily aningredient of the conduct of projects in which one or other was nota shareholder or director of the relevant company, for example ECL.The compiling of the internal accounts required mutual trust andconfidence. Indeed Mr Deng's evidence confirmed that he placedtrust in Mr Zheng to carry out the administration and internalaccounting work. There was sufficient evidence to demonstratemutual loyalty, trust and confidence consistent with either a partnershipor a joint venture attracting fiduciary duties.(f) Finally, and very importantly, the two men expressly agreed that uponseparation they would do a final accounting. The recognition that thisneeded to occur was consistent with the existence of a partnership, withthe two participants' interests in that partnership needing to beseparated.[74] Turning to the $290,000 debt claim, Mr Zhang submitted that the Judge'sreasons for dismissing this claim were wrong in a number of respects. It was notcorrect that the contemporaneous documentation never mentioned a debt. An emailsent by Mr Zheng to Mr Deng on 9 July 2015 referred to giving Mr Deng $200,000because of "[Judy Lin's] poor health". That is more consistent with Mr Zheng'sposition that it was a loan to help Mr Deng out for personal reasons, not part of theprocess to disentangle business interests. Second, the Judge's finding that there wasa debt owed by Mr Zheng to Mr Deng, which the payments to Mr Deng were intendedto reduce, was incorrect, having regard to the email correspondence and the internalfigures. Third, the absence of a demand for repayment did not mean there was noloan. The money was provided in April/May 2015. The reason for the loan was tohelp alleviate financial pressure on Mr Deng. It would have been unrealistic forMr Zheng to demand repayment just a few months later. That is reflected in an emailfrom Mr Zheng sent in September 2016, where he said "[c]onsidering that yourcashflow is tight, I am hesitated to push you too hard". Fourth, there is no reasonwhy a loan cannot be made by way of an intermediary.[75] Mr Zhang submitted that it is uncontroversial that following a dissolution ofa partnership, an accounting is required. Analogous steps are required where a jointventure comes to an end.44 Mr Zhang submitted that orders along the following linesshould be made for an accounting in respect of the partnership at Mr Deng's expense:a. A Chinese speaking chartered accountant should be appointed toundertake the partnership accounting. This accountant must be ableto read and understand Chinese to understand of the [internalaccounts].b. 31/03/2015 [internal account] is to be deemed an accurate reflectionof the partnership position as of 31 March 2015.c. No more adjustments for RAL contribution difference are to be made(since it has been subsumed into the 31/03.2015 [internal account]).44 Chirnside v Fay, above n 10, at [92]–[93].d. The accountant is to review, verify and confirm (and to the extentnecessary, recalculate):i. The unfinished projects' expenses and incomes as set out by[Mr Zheng] in his brief of evidence para 57 and 58;ii. The compensation that should be due to [Mr Zheng] for hisinvestment in the [Bella Vista] Project; andiii. The partnership debts owed to Ms Xiaohui Li and May Zhengand the amount of that [Mr Deng] should pay towards thosedebts.[76] Mr Zheng also sought an account of any profits obtained by Mr Deng asa result of his taking of funds from the partnership, and a finding that Mr Deng oweshim a debt of $290,000 together with an order for repayment of that debt.[77] Mr Zheng also appealed from certain aspects of the costs decision in theHigh Court, in particular the award of a disbursement in excess of $100,000 for thecosts of the expert evidence of Mr McKay. 45 However as the costs appeal isovertaken by the outcome of the appeal, we will not set out the submissions made onthat appeal.Mr Deng's submissions on appeal[78] Mr Turner, counsel for Mr Deng, submitted that there was no reason to departfrom the Judge's factual findings or legal analysis. The Judge's factual findings inrelation to the parties' dealings were not challenged on appeal. An appellate courtshould be slow to differ from a trial judge on findings in relation to the credibility ofwitnesses.[79] Mr Turner submitted the focus of the appeal was on whether a partnership wasformed in 2010 between Mr Zheng and Mr Deng, which lasted through to 2015.The allegation of earlier partnerships formed in 2004 and/or 2008 no longer appearedto be pursued.[80] The Judge had correctly approached the question of whether a partnershipexisted as a mixed question of fact and law. There was no evidential foundation upon45 High Court costs judgment, above n 42, at [10]–[11].which a court could properly conclude a partnership had come into existence.Rather, there was a group of companies which was known as the "Orient Group".Mr Zheng controlled all the projects and made decisions about them. There was nopartnership agreement. There were no annual financial statements prepared byanyone for any partnership. There was no application for a GST number fora partnership between the two men. There were separate records for the variouscompanies. The keeping of internal accounts by Mr Zheng, separate from theexternal accounts for the companies, was not in itself a factor pointing to a partnershipas opposed to some other profit-sharing arrangement.[81] Nor, Mr Turner submitted, was there any evidence to support the existence ofa joint venture or some other fiduciary relationship. There is no written documentestablishing the alleged partnership. There are no pleaded terms of agreementbetween the two men personally. There is no certainty of terms. There was nocogent evidence as to exactly the terms they have agreed upon. As the Judge held,there is a paucity of evidence on mutual loyalty, reliance and trust.[82] If there was a partnership or fiduciary relationship of some kind as at31 May 2015, then it is necessary to look at any agreement the parties made to separatetheir interests, including the Principles in Separation document. In response toquestions from the Bench, Mr Turner accepted that the Principles in Separationdocument did not itself reflect a concluded agreement. He submitted that subsequentemail correspondence had addressed a number of the issues that were unresolved onthe face of the document. But he was constrained to accept that a number of the stepscontemplated by the Principles in Separation document had not been implemented inthe manner proposed. Ultimately, Mr Turner accepted that if there was a partnership,he could not point to a concluded agreement determining the parties' mutual rights andobligations arising out of that partnership following its termination.[83] The submissions for Mr Deng in relation to the $290,000 debt/unjustenrichment claim essentially reflected the findings of the Judge.[84] Finally, Mr Turner noted that in the High Court Mr Deng had pleaded a numberof affirmative set-off defences. Because the Judge found that the claims were notmade out, those set-off claims were not considered. If the appeal were to succeed,it would be necessary to consider those set-off claims.[85] Mr Deng also opposed the costs appeal.DiscussionA note of caution[86] One important feature of the case is that almost all the primary records, and theparties' correspondence, are in Mandarin. Mr Deng and a number of other witnessesgave their evidence in Mandarin, with the assistance of an interpreter. We areconscious that when referring to relevant documents, it is necessary to bear in mindthat the Court is referring to English translations prepared by different people atdifferent times, who may or may not have understood and taken into account the legalnuances of particular words and phrases that they have used. In some cases — forexample, the Bella Vista Agreement referred to above — different translators useddifferent terms in their English translations of the same Mandarin terms. None of thetranslators gave evidence about why they used certain terms rather than others inparticular documents. In these circumstances, a high degree of caution is requiredbefore attributing any significance to the precise terms that appear in the variousEnglish translations. There is a real risk of nuances in expression and context beinglost in translation.[87] For example, as noted above at [11], the title of the Bella Vista Agreement canbe translated as either a "partnership" agreement or a "cooperation" agreement.And, critically, the Collins Chinese-English dictionary confirms that the termfrequently used to refer to the parties' overall business association in documents andemail correspondence — 公司 — can be variously translated as "company", "firm"or "enterprise". It would be wrong to attribute any legal significance to translationsof this term without evidence specifically addressed to whether the term has, in itsoriginal language and original context, a corresponding significance.[88] We are also conscious that language is used in a broader linguistic and culturalsetting, by reference to background assumptions about personal and businessrelationships and the ways in which dealings are normally structured, that the partieswill have shared but that the Court may not be aware of or understand. For example,as the author of a recent report explains:46307 Guanxi often governs the Chinese way of doing business, and is inpart the reason why Chinese people are less likely to conduct businessby using a formal contract and more likely to do so via a "handshake."As Dr Ruiping Ye notes:As written contracts are perceived as evidence fortransactions, and requiring evidence for agreements withone's family or friends would appear to be distrusting, manyharmony-loving Chinese will find it difficult to ask fora written contract with family, friends or close acquaintances.In cases of close relationship, it is honour that binds theparties, rather than the written contract. Nevertheless, eachparty would believe that a binding contract exists betweenthem if the terms of the agreement have been discussed andwords of confirmation have been spoken unequivocally.308 Dr Ye notes that where contracts are drafted, they are generally brief.Dr Ye says that this was "sufficient when the society operated on thebasis of mutual trust and was governed by social pressure" but that itis "increasingly becoming insufficient as modern life becomes morecomplicated" and that "parties who are not assisted by competentlawyers do not necessarily turn their minds towards complex orambiguous matters." This concern, and the challenge that this createsin ensuring the courts are adequately equipped to provide Chineseparties with equal access to justice, is reflected in some of the cases inour case review, and also in our interviews with judges and lawyers.[89] In this case there was no expert evidence about relevant cultural factors toassist the Court. We have done the best we can to be sensitive to the importance ofsocial and cultural context and, in particular, to be cautious about drawing inferencesbased on our preconceptions about "normal" or "appropriate" ways of structuring andrecording business dealings. Rather, we focus on the substance of the parties'arrangements as revealed by their conduct over time.46 Mai Chen Culturally and Linguistically Diverse Parties in the Courts: A Chinese Case Study(Superdiversity Institute for Law, Policy and Business, November 2019) (footnotes omitted).See also the article from which this report quotes: Ruiping Ye "Chinese in New Zealand:Contract, Property and Litigation" (2019) 25 CLJP/JDCP 141 at 157–158. See also the report at[700]–[727] for a discussion on the reasons why there may be a lack of contemporaneousdocumentary evidence in such cases.The test for a partnership[90] It was common ground before us that the question whether the parties hadentered into a partnership was a mixed question of fact and law. The starting pointis s 4 of the Partnership Act, which provides:4 Definition of partnership(1) Partnership is the relation which subsists between persons carryingon a business in common with a view to profit.(2) But the relation between members of any company or associationregistered as a company under the Companies Act 1993 is nota partnership within the meaning of this Act.[91] Some factors that may be relevant to determining whether or not a partnershipexists are set out in s 5:5 Rules for determining existence of partnershipIn determining whether a partnership does or does not exist regard shall behad to the following rules:(a) joint tenancy, tenancy in common, joint property, or part ownershipdoes not itself create a partnership as to anything so held or owned,whether the tenants or owners do or do not share any profits made bythe use thereof:(b) the sharing of gross returns does not of itself create a partnership,whether the persons sharing such returns have or have not a joint orcommon right or interest in any property from which or from the useof which the returns are derived:(c) the receipt by a person of a share of the profits of a business is primafacie evidence that he or she is a partner in the business, but the receiptof such a share or of a payment contingent on or varying with theprofits of a business does not of itself make him or her a partner in thebusiness; and, in particular,—(i) the receipt by a person of a debt or other liquidated amount,by instalments or otherwise, out of the accruing profits ofa business does not of itself make him or her a partner in thebusiness or liable as such:(ii) a contract for the remuneration of a servant or agent ofa person engaged in a business by a share of the profits of thebusiness does not of itself make the servant or agent a partnerin the business or liable as such:(iii) a person being the widow, widower, surviving civil unionpartner, surviving de facto partner, or child of a deceasedpartner, and receiving by way of annuity a portion of theprofits made in the business in which the deceased person wasa partner, is not by reason only of such receipt a partner in thebusiness or liable as such:(iv) the advance of money by way of loan to a person engaged orabout to engage in any business on a contract with that personthat the lender shall receive a rate of interest varying with theprofits, or shall receive a share of the profits arising fromcarrying on the business, does not of itself make the lendera partner with the person or persons carrying on the business,or liable as such:provided that the contract is in writing, and signed by or onbehalf of all the parties thereto:(v) a person receiving by way of annuity or otherwise a portionof the profits of a business in consideration of the sale by himor her of the goodwill of the business is not, by reason only ofsuch receipt, a partner in the business or liable as such.[92] There is limited assistance to be had from the authorities, because the analysisis inevitably highly fact-specific. The warning given by Cooper J inAldridge v Paterson more than 100 years ago remains apposite:47Very little assistance can be obtained from the numerous cases reported inwhich the question of partnership or no partnership has been decided. In allsuch cases the particular facts — what were in effect the respective contracts— were intimately connected with the questions of law.[93] As this Court said more recently, the question "is a legal question to bedetermined by the Court on the basis of what the parties said and did".48[94] It is important to bear in mind the infinite variation in partnership structuresand avoid the assumption that a partnership must have certain characteristics orincidents other than those actually required by s 4(1) of the Partnership Act. As thelearned authors of Lindley & Banks on Partnership say:49There is a danger that what are, in truth, normal incidents or characteristicsof partnership are wrongly perceived as pre-requisites to the existence of thatrelationship, thus distorting the application of [the United Kingdom equivalentof s 4(1) of the Partnership Act].47 Aldridge v Paterson (1914) 33 NZLR 997 (SC) at 1006.48 Clark v Libra Developments Ltd, above n 8, at [51].49 Roderick I'Anson Banks Lindley & Banks on Partnership (20th ed, Sweet & Maxwell, London,2017) at [2-15].[95] As we explain below, that danger appears to have materialised in theHigh Court in this case. For example, the Judge considered that his finding thatMr Zheng was "in charge" pointed against the existence of a partnership.50 But thepartners in a partnership can have very different roles — or for that matter, as in thecase of "sleeping partners", no role — in the management of the business of thepartnership. The fact that one of the parties took sole or primary responsibility forthe financial and commercial aspects of the business activities in which they wereengaged sheds no light on whether they were partners in those business activities.[96] The Judge also appears to have proceeded on the basis of a misapprehensionabout the effect of s 4(2) of the Partnership Act. That provision does no more thanestablish that persons who are shareholders in a company are not by reason of thatrelationship alone partners for the purposes of the Partnership Act. But, importantly,it does not provide that two individuals who are shareholders in the same companycannot also be partners, whether generally or in respect of the ownership of thatcompany. It is not uncommon for a partnership to own shares in one or morecompanies, in connection with the partnership business. Sometimes those shares areheld in the same proportions as the partners' stake in the partnership itself. But thatalignment is not necessary. Shares may be held by one partner, or by a subset of thepartners, on trust for the firm as a whole. And even if they are held by all partners,the shares may be held by each partner on trust for the firm as a whole.Our assessment of the evidence[97] We consider that the evidence, taken as a whole, establishes that Mr Zheng andMr Deng were carrying on a property development and construction business incommon with a view to profit. The business comprised a number of projects,in relation to which they were equal contributors, with an entitlement to an equal shareof any profits and a responsibility to bear an equal share of any losses. Those projectswere carried out through a number of corporate vehicles including OCGL, AAL, OCLand ECL. Although shareholdings in these entities differed, from March 2010 at thelatest the parties proceeded on the basis that they were equal stakeholders in theprojects regardless of the company through which they were carried out.50 High Court judgment, above n 1, at [86].[98] RAL was an exception. The stakes of Mr Zheng and Mr Deng in thisparticular investment vehicle were not equal. Rather, their respective interests werealigned with their shareholding in RAL as set out at [22] above. We accept thesubmission summarised above at [67] that this explains why Mr Zheng rightlydescribed RAL as sitting outside the parties' equal partnership.[99] The internal accounts, which sought to ensure equal contributions to the capitalof the overall venture, and an equal sharing of benefits and burdens from the ventureand the various projects it undertook, provide strong evidence of this relationship.As Ms Payne said in her evidence, and as Mr McKay accepted, the internal accountsmaintained by Mr Zheng reveal an intention to split profits and maintain equalinvestments as between the two men, effectively looking through the corporatestructure for the purpose of determining their mutual entitlements and obligations.The time-consuming exercise of creating and maintaining these accounts would nothave been necessary if the parties' relationship had been confined to their respectiveshareholdings and current accounts with the various companies, as Mr Dengcontended.[100] The Judge was right to say that it does not necessarily follow from thesefeatures of the internal accounts that partnerships existed. 51 But those internalaccounts provide strong evidence in support of the existence of an underlyingrelationship between the two men embracing the various corporate vehicles, and theprojects conducted through them, which was not confined to their respectiveshareholdings and current accounts with the companies.[101] The unorthodox nature of the internal accounts does not tell against theexistence of a partnership. Nor does the contest about their accuracy. A partnershipcan exist even though the partners fail to keep any accounts for the business carriedon by the partnership. It can exist even though any accounts that are kept areidiosyncratic and difficult to understand. A dispute about the accuracy of anyaccounts that are kept, whether in orthodox or idiosyncratic form, also does not tellagainst the existence of a partnership (though it will undoubtedly make it more51 High Court judgment, above n 1, at [79]; citing the Partnership Act 1908, s 5(c).difficult to carry out an accounting following the dissolution of the partnership).The same is true where there are admitted inaccuracies and omissions: that does nottell against the existence of a partnership. Well-kept partnership accounts in anorthodox double-entry format will of course tell in favour of the existence ofa partnership. But the converse is not true.[102] As we indicated earlier, quite apart from the internal accounts, it seems to usthat conclusive evidence that there was a partnership in this case is provided by thePrinciples in Separation document to which both men contributed at the time theyagreed to separate their affairs in mid-2015. In particular:(a) The principles that they are discussing look through the relevantcorporate vehicles to allocate the benefits and burdens of each of theprojects and of the relevant underlying assets and liabilities.(b) An equal sharing approach is adopted in relation to projects carried outby the companies, identified by Mr Zheng as falling within the scopeof the partnership, including companies in which one or other was thesole shareholder, and ECL (in respect of which neither wasa shareholder). In relation to ECL, for example, it was agreed asfollows:[Mr Zheng's proposal]ECL shall belong to Deng. The taxes in the 2014-2015financial year shall be jointly covered by both parties. Thosein the 2015-2016 financial year and afterwards shall becovered by Deng personally.[Mr Deng's response]As the 103 and 50 projects are not finished, they should bejointly covered. ECL shall not be closed until the projects arefinished.[Mr Zheng's response]Agree.(c) The parties agreed that certain unfinished projects would be"jointly owned by both parties".52 This only makes sense againsta backdrop of prior joint ownership of all projects, with these nearlycompleted projects to remain jointly owned until completion, afterwhich the profit would be "split up".(d) The sharing of liabilities is reflected in the proposal made by Mr Zhengthat OHL (100 per cent of the shares in which were held in Mr Deng'sname) would close immediately, with all of its taxes and responsibilities(including repairs to properties) jointly covered by both parties.This confirms a "common business" overlay on top of the corporatestructure.(e) Item 9 contemplates a "last reconciliation of accounts" with moneyowed to each other by the two parties being cleared by the end of 2015.Mr Zheng made reference to clearance in cash as soon as possible"[no] matter who owes whom as a result of the division".(f) One exception to equal sharing is reflected in item 10, which providesfor independent calculation of the RAL investment and sale ofMr Deng's shares as soon as possible. That is consistent with thisentity sitting outside the partnership, but the parties needing to dealwith that unequally owned joint investment in order to separate all theirinterests. Other references to the Rosedale Apartments Project in thisdocument (at item 4) relate to construction work carried on at that siteby OCL, not the underlying property investment. The parties did havean equal interest in the construction work.[103] The practice of agreeing on underlying equity shares in the business regardlessof where title to particular assets may sit is consistent with the approach contemplatedin relation to the Bella Vista Project in the Bella Vista Agreement. The Project asa whole was owned as to 60 per cent by the parties and as to 40 per cent by Mr Jiang.They agreed to share profits and losses in those proportions. The individual sections52 See Appendix B, item 6, referring to three properties described as "LG, 54, 103 and 50"were to be held by nominees designated by each interest, but regardless of where titlemight sit, those proportions would apply. This was also in our view a partnership,with Mr Jiang as one partner and the Orient Partnership as the other partner.(We note that signature of the Bella Vista Agreement by Mr Zheng alone on behalf ofthe Orient Partnership is consistent with our analysis of the parties' relationship.One partner can bind the firm.53 ) The way in which this model was deployed inrelation to the Bella Vista Project sheds light on the parties' approach to the structureand operation of the Orient Partnership.Our response to the Judge's reasons for not accepting Mr Zheng's evidence[104] The Judge gave five reasons for rejecting the evidence of Mr Zheng. We havereached a conclusion that differs from that reached in the High Court judgment fora number of reasons.Terminology used and omitted[105] First, it seems to us that the Judge gave too much weight to the use of particularlanguage — or the absence of particular language — in the dealings between theparties. As noted above, the pervasive references to "公司" can be read as referencesto a firm/partnership rather than to a company with separate legal personalityestablished under the Companies Act. Likewise, the Bella Vista Agreement useslanguage and concepts that appear to be equally consistent with the existence ofa partnership. Even putting to one side the linguistic and cultural issues discussedabove, it is well established that the labels used by participants in a business ventureare not determinative as to the nature of that venture.54 Rather, it is necessary toexamine what the parties said and did in order to ascertain the true nature of theirrelationship.[106] Against that backdrop, we consider that the Judge erred in putting some weighton the email from Mei Zheng to Mr Deng in which she complained about Mr Deng'suse of "company property". Her original email was written in Mandarin. The term53 Partnership Act, ss 8 and 9.54 Banks, above n 49, at [2-01]. See also Horne v Pollard and Anderson [1935] NZLR 125 (SC).used in the email was "公司". As we explained above, this can be translated as"company", "firm" or "enterprise". It is not possible to attribute any legalsignificance to the term used by the interpreter in these circumstances, at least in theabsence of detailed contextual evidence confirming that the term used had a particularconnotation in that context. There was no such evidence.[107] For essentially the same reasons, the absence of particular terminology carrieslittle weight where the parties are dealing with each other in another language.The absence of the familiar (English) language of partnership in the translations of theparties' documents and communications tells us little or nothing about the nature oftheir dealings.[108] Likewise, the absence of a formal written partnership agreement, which maywell have been seen as unnecessary or inappropriate as between these two men whowere friends and close business associates, having regard to the cultural contextdescribed at [88] above, sheds no light on the nature of their relationship in thesecircumstances.[109] The absence of a separate partnership bank account is also a neutral factor.So too is the absence of separate GST registration for the partnership. If thepartnership was an investment partnership that did not itself engage in the supply ofgoods or services, it may not have needed to register for GST. And even if it wasrequired to register for GST, but failed to do so, that would be a compliance issue forthe Inland Revenue Department, not evidence that there was no partnership.The relevance of the various companies[110] Second, as explained above, it seems to us that the Judge misunderstood theeffect of s 4(2) of the Partnership Act. The two men's common shareholding ina number of companies, in particular OCL, does not require the projects carried outby those companies to be "removed from the calculus", or leave "a sizable hole in thealleged five-year partnership".55 This error appears to have significantly influencedthe Judge's analysis.55 High Court judgment, above n 1, at [85].[111] The Judge was also wrong to proceed on the basis that there is an inconsistency,or any element of impropriety, in a partnership owning one or more companies thatdeal with the outside world. For example, it is very common for a legal partnershipto hold certain assets used in connection with the partnership's practice (such asa lease, office equipment, furniture) through a company the shareholders of which areall or some of the partners. The company deals with third parties — for example,a lessor or suppliers of office equipment — as a company, and those third parties haverights and obligations vis-à-vis the company rather than vis-à-vis the individualpartners. But the shares in the company are, in many if not most cases, held asa partnership asset. We respectfully disagree with the Judge that there is anythingunattractive about the world being told one thing in relation to particular companiesby the way in which dealings are conducted, and by the external accounts of thosecompanies, merely because there is a partnership sitting behind those companies.An arrangement of this kind is not especially unusual. Nor is it unattractive,provided that the external accounts for each company provide a true reflection of thefinancial position of that particular company.[112] Similarly, once one appreciates that the internal accounts were intended to keeptrack of the underlying joint interests of the two participants in the various projects,regardless of shareholding in particular companies, the fact that the two sets ofaccounts cannot readily be reconciled loses the significance attached to that factor bythe Judge.[113] We also respectfully disagree with the Judge's suggestion that in contendingfor a partnership, Mr Zheng "now wants to have it every which way".56 As explainedabove, there is no inconsistency between dealing with third parties through corporatevehicles — which so far as the third parties are concerned is the "true position" — andthere being a partnership between the two men sitting behind those vehicles. Thirdparties dealing with the companies were indeed entitled to rely on the existence of thecompanies, and financial statements or other information about those companies thatwas available to them. If any of the companies had failed to meet its obligations, theinformal way in which the Group was managed could have exposed the participants56 At [80].to liability in their capacity as directors (actual or shadow). But there is nosuggestion of default by any of the companies. This aspect of the Judge's analysisalso appears to be affected by the false dichotomy the Judge drew between theexistence of corporate vehicles for carrying out projects, and an overarchingpartnership. There is no such dichotomy, as explained above."Likely impropriety"[114] Nor do we consider that the evidence Mr Zheng gave about the way in whichthe companies operated, which the Judge described as involving "likely impropriety",was a reason not to accept the evidence of Mr Zheng. The account given byMr Zheng of the way in which funds were transferred and used by the variouscompanies was consistent with the evidence of Mr McKay about the manner in whichthe finances of the projects operated. We accept Mr Zhang's submission that frankacknowledgement of the informal manner in which the Group operated does not affectthe credibility of Mr Zheng's evidence. Nor was it suggested that any possibleillegality rose to a level where Mr Zheng's claim should not be entertained by theCourts. This is in our view something of a red herring, in the context of theseproceedings. It seems likely that there were breaches of the two men's duties asdirectors of the various companies. Some of the dealings disclosed by the evidencemay have had tax consequences: but that is a matter for the Inland RevenueDepartment to address. This does not mean that Mr Zheng is disentitled fromseeking relief in respect of the partnership. Still less does it cast doubt on hiscredibility.Excluding RAL from the partnership[115] The Judge's fourth reason for not accepting Mr Zheng's evidence — what hesaw as the "capricious" distinction drawn between RAL and other companies that wereincluded in the partnership's business — also falls away in light of the rationale fortreating RAL differently described at [98] above.Discovery of the Principles in Separation document[116] The Judge's fifth reason for not accepting Mr Zheng's evidence was based onthe incorrect finding addressed at [68] above that Mr Zheng had not discovered thePrinciples in Separation document. And in circumstances where that documentprovides strong support for Mr Zheng's case, we do not consider that any adverseinference could be drawn from the fact that he did not refer to it in his brief.Conclusion[117] We do not consider that the five reasons given by the Judge, whether takenseparately or together, cast material doubt on the credibility or reliability ofMr Zheng's evidence. We accept Mr Zhang's submission that the Judge erred inrejecting the evidence of Mr Zheng, the central elements of which are in our viewsupported by contemporaneous documents.[118] Mr Zhang was anxious that the credibility finding in relation to his client beaddressed by this Court, because it affects Mr Zheng's reputation. There wererespects in which the evidence of each of Mr Zheng and Mr Deng sought to paint therelevant events in the light most favourable to them, with some element ofreconstruction with the benefit of hindsight. But we expressly record that we haveaccepted the central elements of Mr Zheng's evidence about the existence of thepartnership, and the manner in which it operated.[119] We add that there is nothing unusual about the absence of express evidencefrom one or other party about matters such as mutual loyalty, reliance and trust, or theabsence of references to these concepts in contemporaneous documents.These matters are often tacitly assumed in the context of a relationship between twoor more partners. They follow from the existence of that relationship and areincidents of it. It is an error to treat express references to these concepts asprerequisites for the existence of a partnership.[120] And in any event, we accept Mr Zhang's submission that there was evidencein this case of mutual reliance and trust. Mr Deng relied on Mr Zheng to managetheir business affairs and prepare their internal accounts and trusted him to do so.He said so repeatedly. Similarly, it is clear that Mr Zheng trusted Mr Deng to managesite operations. It was when that trust broke down that the parties decided to separatetheir interests.[121] Nor, as explained above, is Mr Zheng's primary (or perhaps, sole)responsibility for business matters an indication that there was no partnership.Mr Zheng may well have been "in charge" so far as business matters were concerned,with Mr Deng taking lead responsibility for operational matters. The Judge waswrong to say that his finding that Mr Zheng was in charge told against the existenceof partnerships.57[122] The conclusion reached by the Judge about the existence of a partnership wasfounded on a number of errors of law in relation to the indicia of partnership, and theperceived incompatibility of corporate and partnership relationships between thesemen. It was also founded on inferences drawn from the language used by the partiesand their business practices, which lacked a robust foundation. If thosemisconceptions are put to one side, the evidence that there was a partnership is in ourview compelling.The Bella Vista sections[123] It is in our view clear from the Bella Vista Agreement, the Principles ofSeparation document, and other evidence before the Court, that the transfers of BellaVista sections to family members were not arm's length absolute sales of thosesections. In particular, the Principles of Separation document proceeds on the basisthat eight sections are still owned by the Bella Vista Partnership, with Mr Zheng andMr Deng each having an equal share in their 60 per cent interest in that venture.Hence item 2 of the Principles in Separation document referring to "eight pieces ofland left" and Mr Deng's observation that the Project has a loss of over $90,000 on thebooks, "of which Zheng should cover nearly 30,000". Thirty per cent of $90,000 is$27,000 — that is, "nearly $30,000". The discussions about sharing of losses on thesections, and sharing any appreciation on the land, only make sense on the basis ofa common understanding that beneficial ownership of the eight sections remained with57 High Court judgment, above n 1, at [86].the Bella Vista Partnership, subject to the need to pay off the borrowings by theindividuals holding title to those sections. Mr Deng's evidence that these wereoutright sales is impossible to reconcile with his contributions to the Principles inSeparation document. In light of his evidence that he did not understand the businessside of the parties' dealings, we refrain from making any credibility finding in respectof Mr Deng. But we are firmly of the view that his evidence on this issue was wrongand was not consistent either with the pattern of dealings involving the families of thetwo participants or the specific evidence in relation to these transactions.The dispute about the $290,000 transferred to Mr Deng[124] It was ultimately common ground between the parties' experts that a netamount of $290,000 was transferred from the Group companies' bank accounts toMr Deng in May/June 2015. It seems to us that the separate claim in relation to thesetransfers is misconceived. If this was a "loan", it took the form of drawings out ofassets beneficially owned by the partnership, for which Mr Deng would ultimately berequired to account to Mr Zheng. (It is irrelevant for this purpose whether thesedrawings were authorised or unauthorised.) If it was a payment on account of sumsowed to Mr Zheng, that will become apparent when an account is taken and thebalances owing between the parties at the relevant time are ascertained. Plainly thesesums were not a gift: so they must be factored into the accounting process.[125] We will allow the appeal on this issue to the extent of setting aside the dismissalof the claim for this sum. We do so in order to ensure that the High Court judgmentdoes not preclude the relevant payments being taken into account in the course oftaking an account as between the partners. They will either increase the amountpayable to Mr Zheng, or reduce the amount payable by him, depending on where theultimate balance lies.Mr Deng's set-off defences[126] The same applies to the three matters relied on by Mr Deng by way of set-off.These can be addressed in the context of the taking of an account. They go to theamount payable as between the two men, not to whether or not a partnership existed.The implications of our findings[127] It follows from these findings that a declaration should be granted that therewas a partnership between Mr Zheng and Mr Deng from no later than March 2010until 31 May 2015, which encompassed all the joint business ventures between thesetwo men other than RAL. They had equal shares in that partnership.[128] Although the two men made some progress towards reaching agreement on theseparation of their interests, Mr Zheng says no final agreement was reached.Mr Turner accepted in the course of oral argument, as indeed he had to having regardto the contemporaneous correspondence, that if there was a partnership then no finalcontractual agreement had been arrived at in relation to the necessary accountingbetween the partners following its termination. It is therefore necessary for anaccount to be taken, with any balance due to one or other partner being paid to theother partner. We will direct that an account be taken under the supervision of theHigh Court.[129] We consider that the appropriate machinery for the taking of that account isbest left to the High Court to determine. Some of the issues are accounting issuesbest determined by an expert accountant. We consider that fluency in Mandarinwould be a significant advantage for that person. Some issues may need to bedetermined by a Judge, after hearing evidence: for example, it appears there isa dispute about the value of the half share in OCL transferred to Mr Zheng byMr Deng. The Judge will need to decide how best to determine any disputes of thatkind, to inform the taking of the account.[130] To avoid any confusion, we note that:(a) No argument was advanced before us in relation to the miscellaneouspayments (totalling $57,423.29 from OCL to Mr Deng), cars and othermatters referred to at [58] above. The High Court judgmentdismissing the claims in respect of those matters stands, and it followsthat those matters should be disregarded in taking the account.(b) There was no appeal to this Court in relation to the constructive trustclaims against the defendants other than Mr Deng and OHL. Thosedefendants were not named as respondents to this appeal. The claimsagainst those defendants were dismissed in the High Court, and thisjudgment cannot and does not revive the claims for relief against them.But for the reasons given above, as between Mr Zheng and Mr Deng anaccount should be taken on the basis that as at 31 May 2015 thetwo men beneficially owned 60 per cent of the remaining eightBella Vista sections in equal shares.[131] The appropriate treatment of the alleged loan and/or unauthorised drawing ofa total of $290,000 by Mr Deng can most appropriately be resolved in the context ofthat taking of accounts. We add that against the backdrop of a partnership betweenthe two men, and a practice of one or other of them drawing on the funds of thepartnership for their own personal benefit with a subsequent adjustment in the internalaccounting between them, there would be nothing unorthodox in an advance byMr Zheng to Mr Deng being provided through a similar mechanism. We do not seethe fact that the funds were drawn from the account of OCL as either confirming ordisproving the allegation that these sums were in effect drawings for which Mr Dengwould be subsequently liable to account, rather than consideration for transfer of otherassets. If that issue continues to be disputed between the parties, it may need to beresolved by the High Court in order to enable the mutual accounting to take place.[132] Similarly, the three claims that Mr Deng relies on by way of set-off are in ourview matters that should be determined in the context of the taking of an account, andif established, reflected in the balance struck between the two men or (in relation tothe RAL shares, which were not a partnership asset) set-off against any balance owingby Mr Deng to Mr Zheng.[133] We add that in light of the declaration we have granted, and the substantialprogress towards an agreed resolution made by the parties in 2015, it would be sensiblefor Mr Zheng and Mr Deng to seek to reach an agreed resolution rather than incur thefurther expense of a formal taking of accounts, in light of the time and cost that sucha process will inevitably involve. We strongly encourage the parties to attempt this,either through direct discussions or with the assistance of a mediator.The costs appeal[134] The conclusions we have reached in relation to the substantive appeal meanthat the costs appeal is superseded. We will set aside the costs order made in theHigh Court, with costs issues to be determined by that Court in light of the outcomebefore this Court.Result[135] The appeal is allowed.[136] The judgment of the High Court is set aside insofar as it relates to Mr Zheng'sclaims for a declaration that there was a partnership and the consequential taking ofan account (Mr Zheng's second cause of action against Mr Deng) and in relation tothe payments to Mr Deng of $290,000 (Mr Zheng's first cause of action againstMr Deng).[137] We make an order that an account be taken of the dealings of the partnership.The proceeding is remitted to the High Court for the taking of that account.[138] We make an order that such amount as may be due by one party to the other onthat account be paid accordingly. Any question of interest on the net amount due isto be dealt with in the High Court, having regard to the findings made in the course oftaking the account between the parties.[139] Mr Zheng is entitled to costs in this Court. Mr Deng must pay costs toMr Zheng for a standard appeal on a band B basis. Counsel agreed that this was notan appropriate case in which to certify for second counsel.[140] We set aside the order for costs made in the High Court. Costs in that Courtshould be determined by the Judge in light of the outcome of this appeal.Solicitors:Advent Ark Lawyers, Auckland for AppellantsMcVeagh Fleming Lawyers, Auckland for RespondentsAppendix AINFORMATION ON RELEVANT COMPANIESORIENT CONSTRUCTION LIMITED – currentIncorporation date 23/07/2013Current director Lu Zheng Since 2/04/2016Former director Donglin Deng Between 23/07/2013 and27/11/2013Current shareholder Lu Zheng (100%) Since 2/04/2016Former shareholders Donglin Deng (50%) Between 23/07/2013 and2/04/2016Lu Zheng (50% Between 23/07/2013 and2/04/2016ORIENT HOMES LIMITED – removedIncorporation date 11/06/2004Removed 15/12/2017Director historyLu Zheng 11/06/2004appointed30/09/2008removedDonglin Deng 11/06/2004appointed20/09/2008removed1/04/2009appointed15/12/2017removedJingli Zhu 11/06/2004appointed30/09/2008removedZuoqi Li 30/09/2004appointed1/04/2009removedShareholder history11/06/2004 24/10/2007 1/10/2008 10/10/2008 12/08/2009Donglin Deng 40% 23% 30.6% 0% 100%Lu Zheng 40% 26% 34.6% 0% -Jingli Zhu 20% 21% 28% 0% -Hong Lin - 12% 0% - -Yaping Yao - 10% 0% - -Zuoqi Li - 5% 6.6% 100% 0%Lei Yu - 3% 0% - -EVERSOLID CONSTRUCTION LIMITED – removedIncorporation date 21/03/2011Removed 15/12/2017Former director Tong Zhu Between 21/03/2011 and15/12/2017Former shareholder(s) Tong Zhu (100%) Between 21/03/2011 and15/12/2017ORIENT CONSTRUCTION GROUP LIMITED (OCGL) – removedIncorporation date 29/06/2006Removed 18/08/2014Former director Donglin Deng Between 29/06/2006 and18/08/2014Former director Jingli Zhu Between 29/06/2006 and10/10/2008Shareholder history29/06/06 10/04/07 13/06/07 25/06/07 1/10/08 10/10/08Meng Zhao &Feng Lu9%jointly0% - - - -Donglin Deng 20.6% 23% 23% 23% 30.6% 74%Ying Zheng 18.4% 21% 0% - - -Shouju Zheng 23% 26% 26% 26% 26% 26%Lei Yu 3% 3% 3% 3% 0% -Zuoqi Li 4% 5% 5% 5% 6.7% 0%Hong Lin &Xinchun Lin &Xincheng Lin12%jointly12%jointly12%jointly12%jointly0% -Yaping Yao &Yang Wang &Xiaomei Liu10%jointly10%jointly10%YangWang10% YangWang &YapingYao0% -Jingli Zhu - - 21% 21% 28% 0%Lu Zheng - - - 8.7% 0%ALBANY APARTMENTS LIMITED (AAL) – removedIncorporation date 22/09/2006Removed 8/07/2016Former director Lu Zheng Between 22/09/2006 and8/07/2016Shareholder history22/09/06 10/04/07 13/06/07 18/07/07 1/10/08 10/10/08Wen Lu & LuZheng & YangWang23%jointly26%jointly26%jointly26%jointly0% -Lu Zheng - - - - 34.6% 100%Yaping Yao &Xiaomei Liu &Yang Wang10%jointly10%jointly10%YangWangalone10%YapingYao alone0% 0%Donglin Deng 20.6% 23% 23% 23% 30.7% 0%Ying Zheng 18.4% 21% 0% - - 0%Jingli Zhu - - 21% 21% 28% 0%Xincheng Lin& Xinchun Lin& Hong Lin12%jointly12%jointly12%Hong Linalone12%Hong Linalone0% 0%Lei Yu 3% 3% 3% 3% 0% 0%Zuoqi Li 4% 5% 5% 5% 6.7% 0%Meng Zhao &Feng Lu9% 0% - - - 0%ROSEDALE APARTMENTS LIMITED – currentIncorporation date 10/03/2010Current directors Lu Zheng Since 19/12/2013Chenggang Zhang Since 12/04/2010Former director(s)Donglin Deng 6/07/2011appointed8/09/2015removedLu Zheng 10/03/2010appointed11/07/2011removed19/12/2013appointedChenggangZhang12/04/2010appointedShareholder history10/03/10 10/04/10 11/07/11 14/01/14 8/09/15Lu Zheng 100% 60% 0% 35% 35%Chenggang Zhang - 40% 70% 60% 65%Donglin Deng - - 30% 5% 0%D & R HOMES LIMITED (DRH) - currentIncorporation date 13/05/2008Current director Bin Jiang Since 13/05/2008Current shareholder Bin Jiang (100%) Since 13/05/2008Appendix BPrinciples in Separation郑邓分家原则1) 双方决定自 2015 年 5 月 31 日正式分家。2)郑将 BELLA VISTA 八块地的 30%股份按实际投资值交给邓，朱桐的借款 50 万及今后产生的利息由邓个人负责。BV 项目目前账面还亏 9 万多，郑应承担近3 万，以今后 OCL 向 D&R 开票 20 万+GST 形式补偿。但是剩下的八块地还有增值，暂且忽略不计。只算现在我们三个人的投入加银行贷款，除以八块地，折合每块地 33 万左右，这个数字相当于把前 3 栋的亏损计入后的结果，而且以前 3 栋的东方的管理费也就不要了，相当于郑应得的部分给了邓和蒋。截止 31/5/2015，8 快地均价是 35 万 6（见附表 2），不含本金的利息，现在市场价也只在 35 万左右，何谈增值？并且 Lot20 卖给朱彤还得先垫付 50 万给 D&R。3)借郑梅的 14 万（加截至 5 月 31 日的利息）徐嘉辰 3 万，马斌 3 万仍然双方承担，可以用双方共同项目的应收款优先偿还，若现在不用全部偿还的，他们跟谁干，钱就放在谁的公司（需经他们本人同意）。因徐，马今后还是为OCL 工作，3 万就作为之前公司收入，按原先已定的规定办，与邓无关。徐，马的钱与聂的不同，不能算公司收入，因为早晚还要还给他们，现在不可以拿出来分掉。徐，马的 3 万可以理解为工作 3 年的押金，先作为公司收入，每工作满一年，郑 .邓各还 5000 给每人。4)40 Rosedale Rd 的项目归郑。5 月 31 日之前郑邓共同为该项目投入的材料及人工费，若多于同期的 NCCL 的付款，算郑欠公司（郑邓），反之亦然。该项目 5 月 31 日之后归郑，之前双方共有。建议算到六月底，届时 BASEMENT部分可以基本做完，挡土墙也能修好，那我们可以把前六项的利润全分掉（多做的梁和 rib 与没做的内外楼梯调整一下细账）。只是 P&G 到目前的亏损能否计算出来（P&G 是按月平均开发票的，收款额与真实支出无关）。同意算到 6 月底，P&G 如何结算到时分析结算表大家达成共识即可。分家之后邓在该项目工作报酬由郑按每小时 60+GST（公司对公司）支付，邓的交通费用，通讯费用自理，只计算为 OCL 工作的时间，不计算为 RAL 和NCCL 工作的时间（例如，修 COMMON DRIVEWAY 等土地分割工作及股东会议等）。邓暂定为 OCL 服务半年，按在 40Rosedale 实际工作时间计时，每小时税后 60，每两周支付（邓，林每两周转账工资税后各 2000，多还少补），PAYE，交通及通讯费由 OCL 支付。2016 年若 Rosedale 项目需要到 2015 年底再商量。税后（现金）60 可以，但 paye 太高，折合近 20 万年薪 39%的税率交给税局意义不大。郑邓之间不是雇用关系，而是分包（管理工作）关系，相当于 21ALPERS AVE 旅馆 ANDY 和小苏的关系。如果邓到年底大部分时间在ROSEDALE 干，交通费通信费郑可以出。邓.林每两周转帐工资是为了今后盖房做贷款，一般最多需要 3 个月的收入证明，PAYE 不多，等贷到款后工资可以用不同方式灵活支付，邓只认到手每小时 60 的工资。5) 以前的公司：ORH 马上关闭，其全部税务及责任（修理以前的房子）双方共同承担。ECL 归邓，2014-2015 财务年度的税务双方共同承担，2015-2016 财务年度及以后的邓个人承担。因 103，50 项目未结束应共同承担直到项目结束再关闭ECL。同意OCL 归郑，2014-2015 财务年度的税务双方共同承担，2015-2016 财务年度及以后的郑个人承担。6) 以前的未完成的项目：LG,54,103,50 双方共有。及 40Rosedale5 月 31 日之前。6 月 30 日才能告一段落。额外工作 LOT1 的挡土墙的利润，两个临时办公室的利润，只要是在 6月 30 日之前的都可以分掉。同意高佬 MIKE,小徐亲戚的项目归邓。归双方共有（这两项目是为解决现金流及充票）同意,望尽快做完，我们实在是没有这个能力。帮 Mike 家干活是为了Rosedale 项目而做好和他的关系，小徐亲戚家两个月之前已结束。106 项目分家之前归双方，之后归郑。51 归郑（给公司管理费已付清）。7) 车辆，工具，设备及有意义的库存。由邓去统计（实际还有多少）做价，按需分配，原则上与水泥施工相关的归郑。8)工人，原则上留在 ROSEDALE 工地。邓可以带走 2 名以内的工人，现在先讲好，以便下一步人员安排。不然 BV 一开工马上把人员带走，造成混乱。分家后邓不使用 OCL 现有雇员。BV 项目及 46LG 开工后若因 Rosedale 项目需要而走不开，只使用 Sam Cheng 帮忙，Sam 人工按 30 每小时由邓支付。同意，希望小钟到时能回到 ROSEDALE.小钟何时回 Rosedale 取决于 Omahu 何时完工。9)最后一次对账双方相互欠款 2015 年底之前结清。希望尽快分期结清（46LG材料工程款可以抵扣，但 GST 需返还邓）同意尽快结清（三个月内）。无论分完后的结果谁欠谁，都用现金结算，不可以开票抵账，与税务无关，这样比较容易算清楚。邓若不用 ECL 最好成立新公司并去开户并转走相关车辆（FBT 年年要算，太麻烦了），抵账会有税务风险，而且注明地址的发票不能冲票。同意10) 分家之后郑邓对 RAL 的投资各自独立计算，尽快将邓的股份卖掉。2015 年 5月 31 日之后邓就不再作为股东参与。林也尽快从 NCCL 撤出。补充说明1)RAL 之前投资款，郑不应算替邓垫付资金并算利息，因之前向朱彤无息筹款50 万投入 OCL 使用近 4 年，于情于理都不应在 RAL 投资款中算邓利息。1)我们这几年为 ECL 交的税也有十六万多（不含 OCL 和 ORH 的税，ECL 的 PAYE），朱桐钱 2012 年 6-7 月到公司账（不到 3 年），算下来不比其他借款利息便宜。2)郑为邓垫是在五年以前，经济最困难的时候，郑这些年一直向别人借款，也要付给别人利息。3)邓对 RAL 的实际投资是从一年多以前开始的，郑邓利息相抵后邓欠郑不到九万。郑尽量帮邓把所持股份卖个好价钱，若净利不足十万，可以从欠郑的利息中扣除。ECL 这几年交的税才 4 万出头，见附件 2.何来 16 万一说？朱彤和白伟借的钱从 2010 年就注入公司，邓当初就是想用这种方式偿还郑替邓垫付的 RAL 的资金。郑邓利息差为 8 万多与朱彤这50 万 4 年的利息差不多。2） 林 7 月 1 日后离开公司，6 月份做好交接工作及算清分家帐目。Principles in Separation of Zheng and Deng1) Both parties have decided to formally separate on 31 May 2015.2) Zheng shall give the 30% shares of the eight pieces of land of Bella Vista to Dengaccording to the actual amount of investment. Tong Zhu's loan of 500,000 and theinterests occurred in future shall be the responsibility of Deng personally. The BVproject still has a loss of over 90,000 on the book now, of which Zheng should covernearly 30,000, and shall be compensated for in the form of OCL invoicing 200,000+ GST to D&R in future. However, the eight pieces of land left still has appreciationand should be left uncounted for the moment. Only our three people's investmentplus the bank loan should be counted, which, divided by eight pieces of land, isconverted into around 330,000 per piece of land. This figure is equivalent to theresult of counting the losses of the previous 3 properties. Furthermore, themanagement fees of the 3 properties of Orient are also waived, equivalent to givingto Deng and Jiang the part that is due to Zheng. Up until 31/5/2015, the averageprice of the 3 pieces of land is 356,000 (refer to Schedule 2). Without the interest ofthe principal, the market price now is only around 350,000. So where doesappreciation come from? Furthermore, when Lot 20 was sold to Tong Zhu, 500,000needed to be paid to D&R temporarily on behalf.3) The 140,000 borrowed from Mei Zheng (plus interest up until 31 May), the 30,000from Jiachen Xu and the 30,000 from Bin Ma are still covered by both parties andcan be repaid as first priority with the receivables of the joint projects of both parties.If full repayment is not needed now, the money will be put in the company ofwhoever they work with (their personal consent is needed). As Xu and Ma will stillwork for OCL in future, 30,000 will be considered as the income of the companybefore and be dealt with according to the rules set originally and have nothing to dowith Deng. The money of Xu and Ma is different from that of Nie and cannot becounted as company income and, as it will still be repaid to them sooner or later,cannot be brought out and split up now. The 30,000 of Xu and Ma can be understoodas the deposit for 3 years' work and first considered as company income. At the endof each full year of work, Zheng and Deng shall each repay 5000 to each person.4) The project of 40 Rosedale Road shall belong to Zheng. Before 31 May, if thematerial and labour costs that Zheng and Deng have jointly invested are more thanthe NCCL payment during the same period, they should be counted as what Zhengowes to the company (Zheng and Deng) and vice versa. The project shall belong toZheng after 31 May and shall be jointly owned by both parties before then. It issuggested that they are counted till the end of June, by which time the basement partcan be basically completed and the repair of the retaining wall can also be finished.Then we can fully split up the profits of the previous six projects (specific accountscan be adjusted regarding the beams and rib that have been built in excess and theinterior and exterior staircases that have not been built). The issue is whether theexpenditure). Counting till the end of June is agreed to. As to how P&G makessettlement, all sides have only to reach consensus by analysing the settlement whenthe time comes.After separation, Deng's remuneration for work on the project shall be paid byZheng at 60+GST per hour (company to company). Deng's transport costs andtelecommunication costs shall be dealt with by himself. Only the time spent workingfor OCL is counted. The time spent working for RAL and NCCL is not counted(e.g. land division work such as the building of the common driveway, shareholdersmeetings, etc.). It is temporarily decided that Deng will work for OCL for half ayear, with time calculated according to the actual work time at 40 Rosedale, 60 aftertax each hour, paid fortnightly (Deng and Lin each have wages of 2000 after tax byaccount transfer fortnightly, with excess amount refunded and deficit made up), andPAYE, transport and telecommunication costs paid by OCL. If the Rosedale projectis needed in 2016, it will not be discussed until the end of 2015. 60 (cash) after taxis okay but the PAYE is too high. It is not very meaningful to pay tax to IRD at therate of 39% of the equivalence of the almost 200,000 annual wage. Zheng and Dengare not in a relationship of employment but one of contract (management work),equivalent to the relationship between Andy and Su of the motel at 21 Alpers Ave.If Deng works most of the time at Rosedale by the end of the year, Zheng can coverthe transport costs and the telecommunication costs.Deng and Lin being paid wages fortnightly by account transfer is for loanapplication in property construction in future. Normally proof of income is neededfor 3 months at most. The PAYE is not much. The wages can be paid flexibly invarious ways after the loan is obtained. Deng only acknowledges the wage of 60 perhour in hands.5) The company before:ORH shall close immediately, with all of its taxes and responsibilities (repairingproperties before) jointly covered by both parties.ECL shall belong to Deng. The taxes in the 2014-2015 financial year shall be jointlycovered by both parties. Those in the 2015-2016 financial year and afterwards shallbe covered by Deng personally. As the 103 and 50 projects are not finished, theyshould be jointly covered. ECL shall not be closed until the projects are finished.AgreeOCL shall belong to Zheng. The taxes in the 2014-2015 financial year shall bejointly covered by both parties. Those in the 2015-2016 financial year andafterwards shall be covered by Zheng personally.6) Unfinished projects before:LG, 54, 103 and 50 shall be jointly owned by both parties. And 40 Rosedale by 31May. It will not come to an end until 30 June. As to the extra work, the profit fromthe Lot 1 retaining wall and the profit from the two temporary offices, so long asbefore 30 June, can both be split up. AgreeThe projects of Tall Man Mike and Xu's relative shall belong to Deng. Jointlyowned by both parties (the two projects are in order to resolve cash flow andmisappropriate dockets). Agree. Hopefully to be completed as soon as possible. Wereally do not have the ability. Working for the Mike family is in order to maintain agood relationship with him for the Rosedale project. The home of Xu's relative wasfinished two months ago.The 106 project shall belong to both parties before the separation and belong toZheng after the separation. 51 shall belong to Zheng (the management fee to thecompany has been paid off).7) Vehicles, tools, equipment and meaningful inventory.Deng will do calculation (as to how many are actually left) and pricing. Distributeaccording to needs. In principle, those relevant to concrete construction shall belongto Zheng.8) The workers shall, in principle, remain on the Rosedale construction site. Deng maytake away no more than 2 workers. Agreement shall be made now in order tofacilitate further personnel arrangement. Otherwise, if BV takes away personnelimmediately at the start of work, chaos will be created. After separation, Deng willnot use the current employees of OCL. After the work of the BV project and 46LGhas started, if the people are unable to walk away due to the needs of the Rosedaleproject, only Sam Cheng will be used to help out and Sam's salary will be paid byDeng at 30 per hour. Agree. Hopefully Zhong can come back to Rosedale when thetime comes. When Zhong comes back to Rosedale depends on when the work atOmahu is completed.9) The money owed to each other by the two parties upon the last reconciliation ofaccounts shall be cleared by the end of 2015. Hopefully it will be cleared byinstalments (the money for the materials in the 46LG project can be used indeduction but the GST needs to be refunded to Deng). Agree to clear it as soon aspossible (within three months). No matter who owes whom as a result of thedivision, it shall be settled with cash. Invoices must not be issued to offset theaccounts. Nothing to do with taxes. In this way, it is easier to be calculated clearly.If not using ECL, Deng had better establish a new company and open an accountand transfer relevant vehicles (FBT needs to be calculated every year, tootroublesome). Offsetting accounts may have tax risks. Furthermore, invoices withaddresses noted cannot be used in misappropriation of dockets. Agree10) After separation, Zheng and Deng shall each carry out independent calculation ofthe RAL investment and sell out Deng's shares as soon as possible. After 31 May2015, Deng shall not participate as a shareholder, and Lin shall also withdraw fromNCCL as soon as possible.Supplementary Remarks1) Regarding the investment fund of RAL before, Zheng should not be regarded ashaving paid temporarily on behalf of Deng with interests counted, because the fundof 500,000 was raised from Tong Zhu interest free and invested in OCL and usedfor nearly 4 years. Either emotionally or logically, interests of Deng in the RALinvestment fund should not be counted. 1) We have paid over 160,000 in tax forECL over these few years (excluding the taxes of OCL and ORH and the PAYE ofECL). Tong Zhu's money arrived in the account of the company in June - July 2012(less than 3 years) and, through calculation, is no cheaper than the interests of otherloans. 2) It was five years ago, the most financially difficult period, that Zheng paidtemporarily on behalf of Deng. Zheng has been borrowing money from others overthe years and also needs to pay interests to others. 3) Deng's actual investment toRAL started over a year ago. After Zheng and Deng have each other's interestsoffset, Deng owes Zheng less than 90,000. Zheng shall make utmost effort to sell agood price for the shares held by Deng. If the net profit is less than 100,000, it canbe deducted from the interest owed to Zheng. The taxes paid by ECL over these fewyears were just a little over 40,000. Refer to Schedule 2. Where does the 160,000come from? The money lent by Tong Zhu and Wei Bai was invested in the companyfrom as early as 2010. At the time, Deng exactly wanted to use this method to repaythe fund of RAL that Zheng paid temporarily on behalf of Deng. The difference ininterests between Zheng and Deng is over 80,000, similar to the 500,000 interest ofTong Zhu for 4 years.2) Lin shall leave the company after 1 July and shall accomplish the handover workand calculate the separation accounts clearly in June.