An Auckland winemaker has launched legal action against her former business partner and best friend in a costly court battle over who has legal title to a multimillion-dollar boutique vineyard.
Chinese nationals Jieyu ‘Chrissy’ Lu and her husband Hongzhao Huang purchased the luxury Matakana Estate vineyard, winery and lodge for more than $7 million.
They were later fined $20,000 by the overseas investment watchdog for failing to get consent.
They claim their former joint venture partner Chris Chen advised them to put his name on the vineyard’s ownership documents to skirt Overseas Investment Office (OIO) restrictions, but is now refusing to relinquish the title.
They also claim he is refusing to repay a $2.3m loan they gave him when his former Waihopai Valley Vineyard in Marlborough needed money.
Chen denies suggestions he tried to dodge OIO rules or that the money was a loan, and says he has filed “significant counter claims” against Lu and Huang in the High Court.
He labelled their claims a “rather one-sided, simplistic version of events”, and says he is confident the court will “support my position”.
Lu told the Herald she and her husband did not seek legal advice before purchasing Matakana Estate and no loan agreement was drawn up before they gave millions of dollars to Chen.
Just days before the civil claim against Chen was due to be heard in March this year, he and a fellow director sold their Marlborough vineyard for about $14m, with nearly half the remaining sale proceeds going offshore to Chen’s brother.
Lu and Huang claimed this was an attempt to hide assets ahead of their civil case, a claim Chen disputes.
They have now slapped Chen and his business associates with freezing orders they claim are necessary to prevent the Marlborough company’s assets being stripped, and temporarily forced Chen to surrender his passport to prevent him travelling overseas.
In an interim judgment earlier this year, Justice Duffy said the actions of Chen and his fellow director “were consistent with intentional conduct” designed to ensure any financial damages awarded against Chen or the Marlborough vineyard “would not be recoverable”.
“It is not in a company’s interests to strip it of all assets so that creditors cannot be paid,” Duffy ruled. “Breaches of equitable duty are a form of equitable fraud.”
Lu, 39, said she and her husband have already spent more than $1m on legal fees in the protracted dispute which is now set to go to trial next year.
“It’s a disaster and a very big mess.
“I learn from this expensive lesson.”
Documents released to the Herald under the Official Information Act reveal the couple were fined $20,000 by the OIO after using Chen as an “associate” to purchase the Matakana vineyard.
They have since been granted retrospective consent by the regulator, which ruled their investment would create jobs, increased export receipts and tourism opportunities.
And though they paid millions of dollars for the Matakana vineyard, and own and operate the winery business, the land’s legal title remains under Chen’s name.
Under their joint venture arrangement, Chen ran the vineyard until the relationship soured. He ceased his directorship in 2018 and Lu took over the operation.
Lu gained New Zealand residency in 2013 and is now based mostly in New Zealand while her husband attends to business in China.
She admitted she had been naive due to “cultural differences”, telling the Herald she trusted Chen but wound up “getting burnt”.
She had “big dreams” for Matakana Estate, but could not develop it while Chen – who had not contributed financially to the purchase – held the title.
“It’s very ridiculous. That’s why we’re fighting for ownership.
“I want fairness through the courts.”
Matakana Estate is the largest winery in the region, producing award-winning boutique-style wines and offering luxury vineyard accommodation.
The OIA documents show Lu and Huang initially paid $2.5m to purchase 12ha of Matakana Estate land between October 2011 and February 2012 after being advised by Chen – whose name was redacted – that the previous owner Vegar Estate Wines Ltd had gone into receivership.
The documents say Lu and Huang believed Chen would obtain necessary OIO consents after settlement occurred, and also transfer the title to the joint venture.
They later admitted failing to seek legal advice, saying they were “unfamiliar with New Zealand’s overseas investment regime”.
Five years later, in 2017, Lu purchased the 12ha Matakana Estate Lodge for $4.64m.
The sprawling mansion accommodates up to eight guests, boasts a private dining room, media room and heated indoor swimming pool. It costs upwards of $1680 a night.
Lu did not think she needed OIO consent due to her residency, but it later emerged she had not spent the required number of days in New Zealand the preceding year.
In October 2017, the couple received legal advice that their acquisition had likely breached foreign investment rules – voluntarily disclosing this to the watchdog.
Investigators determined the pair had inadvertently breached the Overseas Investment Act but granted retrospective consent in September last year.
Enforcement manager Simon Pope said the $20,000 penalty handed down was “not unduly harsh or oppressive” given the value of the land and the advantage gained by Lu and Huang.
Lu told the Herald they now wanted the courts to rule the vineyard land belonged to them, not Chen, and for the $2.3m to be repaid.
“The main factor is he didn’t take responsibility for our OIO consent so the land is still under his name.”
Chen told the Herald he never agreed to obtain OIO consent for the couple.
“This was absolutely their own responsibility and there is no basis for any belief that I would assist.”
He denied trying to skirt OIO rules or suggestions the $2.3m was a loan.
That money was an investment in both the Matakana vineyard and pre-existing Marlborough venture, “into which Ms Lu and her husband, effectively, bought”.
“Unfortunately, the joint venture failed, causing losses to all parties. It is only following this failure that the suggestion that the investment provided by Ms Lu and her husband was a ‘loan’ arose.”
The sale of the Waihopai vineyard was “necessitated by the bank funder”, with a large chunk of the sale proceeds used to repay the mortgage, Chen said.
“The remainder was paid to other investors in the Marlborough joint venture, on the basis of legal advice.”
Chen said Lu was an “aggrieved investor” trying to recover money she was not entitled to.
“I am confident that the court will support my position in this regard.”
Chen said it was agreed the Matakana land would be under his name, and that he became entitled to part of that land following Lu and Huang’s “buy-in” to the Waihopai vineyard.
“Ms Lu and her husband have not complied with what was agreed between us in relation to the joint venture. As such … they are not entitled to a transfer of the land to them.”
Source: Read Full Article