Youfeng Zhang left for China with his family after duping fellow investor Weihong Huang out of his share of their Hamilton liquor store. He was ordered to pay $219,600 damages.
The High Court was told the two agreed in 2016 to set up a 50/50 company to buy an existing liquor outlet on Peachgrove Road in Hamilton East. Mr Zhang had previous experience in the industry. He was to become sole director. Each were to put in $400,000 cash to buy the business.
Mr Huang paid across his $400,000.
Mr Zhang was left in control of the business. Without Mr Huang’s knowledge, Mr Zhang sold the business two years later. He was told of the sale just before Mr Zhang left the country.
With their company in liquidation, Insolvency Service had a forensic accountant investigate company records.
It transpired that Mr Zhang had put no money at all into the company, despite their earlier agreement that he would contribute a $400,000 half share. Instead, he had arranged a Westpac loan in the company’s name in place of his half share.
Mr Zhang pocketed an unknown amount following sale of the business after repayment of secured debts, including the Westpac loan. Other company debts were left unpaid.
Justice Moore ruled Mr Zhang was in breach of contract by failing to front up with his promised $400,000 equity contribution. Damages were assessed at $219,600; primarily a return of Mr Huang’s $400,000 plus interest paid on loans taken out in the company’s name by Mr Zhang for his unpaid equity contribution less Mr Huang’s share of loss on Mr Zhang’s resale of their business.
Huang v. Zhang – High Court (24.05.24)
24.136