Court rules on fallout in Chinese joint venture

The Court of Appeal has dismissed an appeal by a Chinese entrepreneur against his business partner over a joint venture agreement that the pair had a fallout over. 

Appellant Shu Tianxiong, sought to revive an injunction granted ex-parte in the Supreme Court against his business partner, Lan Hongjian. 

But the injunction was later discharged on the grounds that the proceeding should have been heard in China and not Samoa. 

The businessmen got into a joint venture to establish and register a company called Harvest Plus under the Samoa International Companies Act 1987. 

Mr. Shu is the appellant in the case while Mr. Lan, who is now the sole director of Harvest Plus, is the first and second respondent. 

Harvest Plus, which was established in June 2013 by the businessmen, was registered in Apia as the intended vehicle for the acquisition of a Chinese electronics company called Jinjinbi Electronics Co. Ltd. 

They entered into a cooperation agreement, whereby US$15 million (T$39 million) worth of shares in Harvest Plus was agreed for 51 per cent to Mr. Shu and 49 per cent to Mr. Lan. 

In December 2013, as contemplated in the cooperation agreement, Harvest Plus acquired the entire shareholding in the Chinese electronics company with Mr. Shu becoming the legal representative and director.

It was later in 2016 when a share transfer was actioned, in relation to Mr. Shu’s total shareholding, and Mr. Lan assumed a 100 pe rcent interest in Harvest Plus. 

Mr. Shu had sought an appeal seeking to revive an injunction which was discharged against Mr. Lan. 

Mr. Lan was represented by lawyer Tuatagaloa Shane Wulf while Semi Leung Wai is the lawyer for Mr. Lan and Harvest Plus. 

The Court of Appeal dismissed the appeal from Mr. Shu and ordered him to pay Court costs of $5,000. 

Justice Robert Lloyd Fisher, Justice Rhys Harrison, Justice Graham Ken Panckhurst, Justice Vui Clarence Nelson and Justice Mata Keli Tuatagaloa handed down their decision on Monday. 

In delivering the Court's decision, Justice Panckhurst said the appeal concerns a dispute between the two Chinese businessmen, who got into a joint venture which ultimately had a fallout. 

He said as a result there are a number of disputes between the two businessmen

“Mr. Shu and Mr. Lan had incorporated a company here in Samoa called Harvest Plus under the International Company Act,” said Justice Panckhurst.

“This company was nothing more than a vehicle for them to purchase a multimillion electronics company in China which was the main purpose of their joint venture. 

“Despite the fact that Harvest Plus is registered in Samoa, in the events of dispute arising, they will be determined in the Courts in China. 

“Despite the existence of that choice of jurisdiction clause, Mr. Shu – who had a grievance on serving a loan arrangement – issued a proceeding – this proceeding – in Samoa.”

According to Justice Panckhurst, having filed the proceeding in the Supreme Court, Mr. Shu applied for a restraining order to prevent Mr. Lan from dealing with the assets and shares of Harvest Plus. 

Mr. Lan then applied for a stay of proceeding and to discharge the restraining order against him. 

The application was heard in the Supreme Court, where the Judge determined that the choice of jurisdiction was necessarily decisive and was struck out and the restraining order was discharged. 

“However, we found the ruling given in the Supreme Court, we are in complete agreement both in recent and conclusion reached by the Judge in Supreme Court,” said Justice Panckhurst. 

“Accordingly the appeal has been dismissed with costs of $5000 tala…as a result what this means the dispute between the two will be determined in China.” 

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