Zeng v Shao [2025] QDC 162

Partnership Act 1891 s 8, s 9, s 29, s 32, s 33, s 35, s 42

Zeng v Shao [2025] QDC 162 | Case summary | Zoe

[24]

[1] Between March 2016 and March 2022, the plaintiff (Mr Zeng) and the first defendant (Mr Shao) operated a restaurant in Raby Bay called "Sushi Lovers", under an oral partnership agreement. On 25 March 2022, Mr Zeng closed the restaurant and removed some tablets, the telephone, some cash and electronic point of sale devices. The next day, he removed much (if not all) of the stock and two rice cookers. The landlord terminated the lease on 31 March 2022.
[2] The landlord subsequently offered each of Mr Zeng and Mr Shao the opportunity to make an offer to re-lease the premises. Each of them made an offer and Mr Shao eventually reopened the restaurant toward the end of April 2022. The second defendant (Zesty Food) was a pre-existing company of which Mr Shao was and remains the sole director and was also the sole shareholder until 28 April 2022.[1] That company entered a lease of the premises in June 2022, effective from 1 April 2022. Zesty Food, at least partly under the direction and management of Mr Shao, has been operating the restaurant under the name "Sushi Lovers" since then. As Mr Zeng's counsel summarised in his written opening, the business operated by Mr Shao and later by Zesty Food has the same name, sells the same food, has the same landlord, employs some of the same staff, uses the same fitout, at least initially used the same ABN and food licence and continues to use the same telephone number as the business operated by the partnership.
[3] In this proceeding, Mr Zeng seeks declarations that the business being conducted by Mr Shao and Zesty Food and all its assets and profits are assets of the partnership held as to 50% on constructive trust for Mr Zeng and orders that a referee be appointed to take an account of the partnership and the same person be appointed as receiver of the partnership in order to wind it up, with consequential judgment for Mr Zeng against both defendants.
[4] Mr Shao, by counterclaim, seeks damages and consequential orders for Mr Zeng's alleged breach of the partnership agreement and breaches of fiduciary duties. The damages he claims are limited to half the value of the items taken by Mr Zeng from the restaurant and of amounts taken by Mr Zeng from the partnership bank account or paid by Mr Shao on behalf of the partnership. He also seeks an account of profits of another sushi restaurant that Mr Zeng acquired and operated during the term of the partnership.
[5] For the following reasons, I find that Mr Shao did not breach any duties to Mr Zeng, Mr Zeng did not operate his other restaurant in breach of any duties to Mr Shao, and Mr Zeng is liable to Mr Shao for some of the amounts sought by the counterclaim.

[25]

[6] In 2012, Mr Zeng, Mr Shao and another person incorporated (and became equal shareholders in) a company, Triple Pan Pty Ltd, to acquire and operate a restaurant in Rosalie Village, Paddington, which they called "Sushi Lovers Japanese Restaurant". At that time, Mr Zeng had been working in the restaurant (for the previous owner) for about six months. Mr Shao was the sole director of Triple Pan and each of the shareholders held two shares. Mr Zeng transferred his shares in 2017: he said he sold them to Mr Shao's wife (apparently Cui Chen). In July 2023, Ms Chen became the sole director and shareholder of the company, which I understand still carries on the business in Paddington.
[7] In his defence, Mr Shao alleged that, before the establishment of the Raby Bay restaurant, Mr Zeng was an employee at the Paddington restaurant. In his reply, Mr Zeng denied that allegation, on the basis that he and Mr Shao had shared the purchase price of that restaurant, which was owned and operated by them both through Triple Pan.
[8] In fact, Mr Zeng said that he wanted an employment contract from the company, rather than to become a director, because he wanted the company's sponsorship to obtain permanent residency. The company formally employed him as a cook under an offer of employment made in October 2012, for the period up to 1 November 2016. That employment contract was superseded on 26 March 2015 by a more formal agreement, which itself was for a period of two years plus any extension.[2]
[9] The effect of these agreements is that Mr Shao's pleading that Mr Zeng was an employee at the Paddington restaurant until the establishment of the Raby Bay restaurant is correct.
[10] Mr Zeng said that, after they bought the Paddington business, he changed the menu, changed the recipes for existing menu items that continued on the menu and created recipes for new products, which led to the business improving. He accepted, though, that other staff and Mr Shao contributed to the development of the new menu and recipes and it was all undertaken while he was an employee of Triple Pan. He also accepted that it is possible to find many sushi menus and recipes online, but he insisted that changes to the ingredients or proportions of ingredients could change and improve the taste, resulting in a different recipe.[3]
[11] Mr Shao agreed that the recipes for the food at the Paddington restaurant were changed over the period that Mr Zeng was working there. He said that the modifications were made in discussions between himself, Mr Zeng and two other employed cooks.[4]
[12] In early 2016, Mr Zeng and Mr Shao decided to buy an existing sushi restaurant business in Raby Bay, then called Sushi 79. They bought the business in equal partnership with each other, although they had no formal partnership agreement. They paid a purchase price of $75,000 plus stock in trade.[5] They agreed that they would use the same menu, recipes and marketing material (including photographs of the food) as Triple Pan was using in Paddington and they would both work in that restaurant in the same roles as they had in Paddington: Mr Zeng as cook and Mr Shao as "front of house". They also agreed to use the same name as the Paddington restaurant: Sushi Lovers.
[13] As will become clear, the business run by the partnership was profitable. Both Mr Zeng and Mr Shao said that they each drew on the profits by way of equal distributions from time to time each year, to the extent that all the profits each year were distributed.
[14] They operated the Raby Bay restaurant together until March 2022. In the meantime, in 2019 they found out about a sushi restaurant in Manly West called Sushi Lab that was for sale and they considered buying it together. However, Mr Zeng thought the kitchen was too small and he did not want to buy it. Unbeknown to him, Mr Shao did buy it. He renamed it Sushi Joo and used the same menu as the Raby Bay restaurant. He said that sometimes he took stock from the Raby Bay restaurant to use at the Manly West restaurant, but he recorded it and would return the same amount of stock later to Raby Bay. Mr Zeng only found out about Mr Shao's purchase some time later.
[15] Similarly, in 2021 Mr Zeng opened a sushi restaurant in Wellington Point, which he called Sushi Tatsu. He did not tell Mr Shao that he had opened it. Mr Shao said he only found out about it in about January 2022. Mr Zeng also used the same menus and marketing material for that restaurant as the partnership used in Raby Bay. Mr Shao contends that that restaurant competed with the Raby Bay restaurant.

[26]

[16] In March 2022, one of the sushi cooks employed at the Raby Bay restaurant was a man referred to by the parties as Dama. Mr Zeng said that, on Tuesday 22 March 2022, he had a discussion with Dama in which Dama argued with him about a pay rise and about whether there needed to be more staff working in the kitchen. Mr Zeng said Dama acted aggressively toward him. Mr Zeng told the restaurant manager, Erica, and asked her to prepare a report for the "HR group". By that term, I understood him to mean a WeChat group messaging service used by him, Mr Shao and Erica to discuss matters concerning the restaurant.[6]
[17] A series of WeChat messages is at TB22. They start with an undated message from Erica apparently sent on 22 March and stating that, in the morning shift, Mr Zeng and Dama had a dispute over wages and staff allocation. She ended the message saying, "Please be informed, Boss." (I understand the term "boss" to be referring to Mr Shao, as her "boss" at the front of house.) Mr Zeng responded that evening, giving more information about the dispute.
[18] Mr Zeng said, in his evidence, that a couple of days later he found Dama vaping in the kitchen. He decided to dismiss him and he told Dama that he had to leave because he was vaping in the kitchen, he had an aggressive attitude and he often came late and left early from his shifts. His recollection of the timing of dismissing Dama was not clear, but it appears that he dismissed him (he said, by sending him a WeChat message) on 23 March. He did not discuss his desire to do so with Mr Shao before implementing it. I find that it was on that day, not a couple of days after 22 March, that these events occurred, as they clearly occurred before the next set of WeChat messages to which I shall now refer.
[19] In the evening of 23 March, Mr Zeng and Mr Shao exchanged a lot of messages, beginning with Mr Zeng setting out more details about Dama's behaviour the previous day and on earlier occasions, including repeatedly vaping inside the store. Mr Zeng said that, from 24 March, Dama need no longer go to work and he would be paid up to 22 March. Staffing arrangements had been made for the rest of the week. Mr Shao did not agree with the decision, asked a number of questions and suggested they discuss the issue, but Mr Zeng said the decision had been made and he did not need Mr Shao's approval. Mr Shao told Mr Zeng that he had told Dama to go to work the next day. Early the next day, in response to further messages from Mr Shao in which he contended that they should have discussed and agreed on a course of action before taking any action against Dama and expressed concerns about his liability if Dama were to sue for unfair dismissal or similar actions, Mr Zeng simply repeated the same message six times, saying:

[28]

[20] On 24 March 2022, Mr Zeng went into the restaurant with two of his friends. Later, Dama arrived, apparently to work on the day shift. Mr Zeng refused to allow him to work and, when he refused to leave, Mr Zeng accepted in his evidence that, on that day, he prevented the restaurant from opening while Dama was there. He did so by standing or sitting at the door, refusing customers entry and telling them that the restaurant was temporarily closed. He also attempted to prevent Mr Shao from giving takeaway orders to customers or delivery drivers. He also turned off the cookers to prevent food being prepared, including for takeaway orders submitted through services such as Deliveroo. Mr Zeng's explanation for taking these steps was that he did not want the restaurant to open until he and Mr Shao had sorted out their differences, or until Dama had left. He agreed in cross-examination that he would not allow the restaurant to reopen until Mr Shao agreed with his decision to dismiss Dama. However, once Dama had left the premises at about 4.00pm, Mr Zeng said, he allowed the restaurant to open for the dinner shift on 24 March.
[21] Mr Shao was present, according to him, from about noon until about 4 or 5.00pm. He observed Mr Zeng and attempted to serve at least one takeaway order. Mr Zeng prevented customers entering the restaurant and prevented takeaway orders being taken or served, including by turning off the cooking equipment.
[22] Mr Shao said that Mr Zeng did not allow the restaurant to reopen in the evening of 24 March. Counsel for Mr Shao, Mr Sams, put to Mr Zeng that videos and some photos showing Mr Zeng stopping customers going into the restaurant in the evening were taken on 24 March, demonstrating that he had not allowed it to reopen that evening, but Mr Zeng insisted that what they portrayed occurred on 25 March.[7] Mr Shao did not say who took those videos or when. Mr Zeng said that the person who took the photos and videos was someone he did not know. The file name of each video appears to show the date and time at which it was made,[8] which supports the proposition that these videos were taken on 24 March, but a camera or telephone may show the wrong date if deliberately or inadvertently set in that manner and a file name can, of course, be changed (although I do not suggest that they were changed in this case). Given Mr Zeng's evidence that they must have been taken on 25 March, Mr Shao's evidence that he left the restaurant at about 5.00pm on 24 March, but stayed there until about 7 or 8.00pm on 25 March, in the absence of express evidence from Mr Shao or any other person who took them about when they were taken, and given the evidence referred to below about an EFTPOS payment received from the bank the next day, I am not prepared to find that they were taken on 24 March.
[23] The bank account statements for the partnership for the period from 5 January to 5 April 2022[9] shows a "merchant settlement" deposit of $545.10 on 25 March. Mr Zeng contended that that deposit would have been from EFTPOS payments made by customers on 24 March, consistently with his evidence that the restaurant opened for business that evening. He said that that deposit would not have been for earlier days' trading, as funds were always received into the bank account the day after each day's trade. I consider that that deposit does support Mr Zeng's evidence that the restaurant opened in the evening of 24 March, as previous deposits appear to have been made daily (including, on Mondays, three separate deposits that, I infer, represent the trade on the immediately preceding Friday, Saturday and Sunday).
[24] Although Mr Shao said that Mr Zeng refused to allow the restaurant to open in the evening of 24 March, he said that he left at about 4 or 5.00pm. Accepting that evidence, Mr Shao was not there that evening, so he is not in a position to give direct evidence of the alleged closure. His evidence is inconsistent with that of Mr Zeng and of the earnings deposited to the partnership bank account.
[25] Therefore, I find that the restaurant did open for trade in the evening of 24 March.
[26] On 25 March 2022, Mr Zeng arrived at the restaurant and placed a chain around the door's external handles, preventing the door from being opened. Later that morning, a representative of the landlord told him that was not permitted (in Mr Zeng's words, he was told that it was illegal), so he removed the chain, but again he refused to allow any customers into the restaurant. He also put a sign on the door that said that the restaurant was temporarily closed.
[27] Mr Shao also attended on that day, from shortly after midday until 7 or 8.00pm. According to Mr Zeng, Mr Shao instructed the staff to open the front door, so Mr Zeng again stopped customers from entering. The restaurant was not able to trade at all on that day. It did not open for trade again under the ownership of the partnership.
[28] Mr Zeng removed a number of items from the restaurant. On 25 March, he said, he removed the EFTPOS machine and the telephone, to stop customers paying for orders and to stop telephone orders being made. It is clear that he did that before Mr Shao arrived. He took four tablet computers through which orders were placed by takeaway service providers such as Deliveroo. He originally said that he took the tablets on 26 March, but he later conceded that he removed them on 25 March. This is supported by a photograph taken by the manager, Erica, and sent to Mr Shao by WeChat at 12.01pm on 25 March, which showed a table with cords but no equipment. Mr Zeng also took about $900 cash from the cash drawer. He said that he took all those items in order to prevent the restaurant trading until his dispute with Mr Shao was resolved. On 25 March he also told the staff not to come back the following day, as the restaurant would not be open.
[29] On Saturday 26 March 2022, Mr Zeng went into the closed restaurant. He removed a large amount of stock and took it away. Those actions were caught on CCTV in the storeroom. A couple of hours later, he returned the stock, disconnected the CCTV and then removed the stock again, together with two rice cookers.
[30] Mr Zeng said that he kept in his garage all the items that he had taken and they are still there, apart from the stock, as his wife threw it out some months or years later. He said that he took all those items because he was angry, having seen from the partnership's bank records that Mr Shao had dismissed the employees and paid all the suppliers, leaving very little in the bank account.
[31] That evening, he sent a WeChat message to the landlord's representative, in which he said:

[35]

[41] On 1 April 2022 at 11.58am, Mr Zeng's solicitors wrote to the landlord's solicitors, saying that Mr Zeng would be prepared to accept that the partnership's lease had been validly terminated on condition that the landlord agree to enter into a new lease with a company controlled by Mr Zeng. A condition of the offer was that the present plant and equipment remain in the premises for use in the business. Mr Zeng said he did not receive any response to that letter.
[42] At 5.28pm that day, Mr Shao's solicitors wrote to the landlord's solicitors offering, on behalf of Mr Shao, a lease to Zesty Food. The offer included payment of a lump sum for Zesty Food to acquire all existing equipment in the premises. It appears that the landlord and Mr Shao then negotiated the terms of a new lease to be granted to Zesty Food. Mr Shao said that the landlord did not accept his offer to buy the plant and equipment, but instead asked for a higher rent than he had offered.
[43] Ultimately, Zesty Food and the landlord entered into a lease for five years with effect from 1 April 2022. Mr Shao executed the lease on behalf of Zesty Food on 16 May 2022 and the lessor executed it on 19 June 2023. Mr Shao is guarantor of Zesty Food's obligations under the lease.
[44] Mr Shao said that Zesty Food started operating the restaurant in late April 2022. It bought and paid about $2,500 for equipment that it needed. (I infer that was principally rice cookers and electronic devices to replace those taken by Mr Zeng.) It is using the same fixed plant and initially it used the same tables and chairs as the partnership had used, although it has since replaced the latter. It employed some of the same staff. It also used the partnership's food licence and Australian Business Number until its own licence and ABN were issued a few weeks after the reopening. It used (and is still using) the same telephone number for the restaurant as the partnership had used. Mr Shao said that phone number was in his name, which he allowed the partnership (and then Zesty Food) to use. Zesty Food used the same menu and recipes as the partnership had (which Mr Shao noted were derived from those used at the Paddington restaurant, together with some menu items from the restaurant that they bought and converted into Sushi Lovers Raby Bay), but it modified "the flavour and taste" within about two months of reopening.

[37]

[48] Mr Shao denies that he has breached any duties to Mr Zeng. He contends that, once the partnership was dissolved at Mr Zeng's behest and as a result of Mr Zeng's conduct, Mr Shao's fiduciary obligations as a partner changed so that he was thereafter only required to cooperate with Mr Zeng in realising, applying and distributing the remaining partnership property. By the time he took steps to obtain a lease for Zesty Food, the former partnership business had ceased and was worthless, the partnership had lost its right to occupy the premises as its lease had been terminated, the partnership had no (or minimal) assets (and, in particular, no goodwill of any value) and no winding up is needed, nor is any accounting as between the partners necessary.
[49] Mr Shao also contends that the partnership business came to an end and its substantive assets were lost due to Mr Zeng's conduct in refusing to allow it to continue trading. In taking those steps (and in removing partnership assets necessary to trade) Mr Zeng himself breached his fiduciary duties as partner, causing the loss of its valuable assets, in particular the lease and consequently the ability to carry on the business. He was also in continuous breach of those duties by buying and operating the Wellington Point restaurant, which was at least partly in competition with the Raby Bay restaurant. Furthermore, by himself making an offer to the landlord to enter into a new lease without the involvement of Mr Shao, Mr Zeng impliedly acquiesced in Mr Shao taking advantage of the same opportunity, or he is estopped from complaining that Mr Shao realised that opportunity. Mr Zeng now seeks to take a share in profits from a business to which he has made no contribution and that only became possible as a result of his own wrongdoing in destroying the business formerly conducted by the partnership. He has unclean hands and his conduct should disentitle him to any relief.
[50] Mr Shao counterclaims for 50% of the value of the cash and items taken by Mr Zeng and of debts of the partnership that Mr Shao paid. The total of that part of the counterclaim is $15,942.75. He also seeks an account of the profits of the Wellington Point restaurant.

[45]

[56] Since then, the proposition espoused by the Lord Chancellor has been extended to the conduct of anyone owing a fiduciary duty, including in cases of partners and former partners and where the partnership had rights under a lease. Most relevant, in this respect, is the High Court's decision in Chan v Zacharia.[20] It is worth spending some time discussing the principles and outcome of this case, as Mr Zeng relies heavily on it and Mr Shao seeks to distinguish it from the instant circumstances.
[57] In Chan v Zacharia, the partnership had a lease of the premises from which it operated a general medical practice. The lease included an option in the partnership to renew it for a further two years. The partnership ended in May 1981, but the lease period was until January 1982. The option to extend the lease had to be exercised by 30 September 1981. The benefit of the lease and the right to exercise the option were potentially valuable rights that could be sold to other general practitioners. Dr Chan refused to join with Dr Zacharia to exercise the option. The landlord then offered to enter a new lease with either or both of the former partners. The receiver of the partnership assets invited tenders from each party for the right to purchase from the partnership the right to the existing lease and to obtain a new lease from the landlord. Dr Zacharia made an offer. Dr Chan did not but, in November 1981, he reached agreement with the landlord to secure a fresh lease to himself.
[58] The High Court affirmed the decisions of the courts below that Dr Chan held the new lease on trust for the partnership. Gibbs CJ recorded that the new lease was obtained after the partnership had been dissolved but before its affairs had been wound up. His Honour said that, after the dissolution of a partnership where the property of the partnership includes a leasehold interest, while the partnership has not been completely wound up each of the former partners owes the same obligations to the other and is under the same restrictions with regard to the renewal of the lease as if they were still partners. His Honour also held that the option for renewal of the lease was an asset of the partnership and, to enable it to be realized, each partner had a duty to join in the exercise of that option if it was of value and the other party required it.[21]
[59] Brennan J considered that Dr Chan was not bound to join in the exercise of the option, but he could not take advantage of his refusal to obtain the benefit of a new lease for himself.[22]
[60] Deane J (with whom Dawson J agreed) agreed that the rights under the lease (both the benefit of the lease and the right of renewal) were an asset of the partnership. Neither partner was entitled to claim for himself the benefit of either the residue of the current lease or the option for a further lease. Those rights were partnership property which was, if possible, to be disposed of by sale in the winding up of the partnership.[23] The partners' relationship was curtailed and altered by the dissolution, but each former partner remained under fiduciary obligations in respect of the partnership property that was to be realised and applied in discharging partnership liabilities and distributing any surplus to the partners. The partners' roles as trustee and former partner were fiduciary and involved the obligation to act, in relation to the rights under the lease, in the interests of the dissolved partnership and the beneficial realisation of its assets.[24] His Honour went on to record that the rule in Keech v Sandford has since been extended to partners in respect of the renewal of a lease which was held on behalf of the partnership, whether or not the partnership had been dissolved.[25]
[61] Applying all these principles, his Honour noted that Dr Chan was introduced to the premises through the partnership and he obtained any rights in respect of the new lease through the misuse of his position as a trustee of the former tenancy and as a former partner. Therefore he held his rights under the new lease as constructive trustee for both partners.[26]
[62] At this point, it is convenient to refer to Blythe v Northwood,[27] in which Mason P (with whom Giles JA agreed) made the important observation that the principle in Keech v Sandford does not extend beyond fiduciary relationships where there is abuse of the duty to avoid a conflict of interest.
[63] More recently, French CJ and Keane J noted the limitations on the extent of fiduciary duties, saying:[28]

[59]

[80] Mr Hogg submitted that, once the partnership ended, both former partners owed fiduciary duties to the other to allow for the orderly winding up of the partnership and the realisation of its assets for the benefit of both parties. Those duties encompassed a duty on each of them not to take advantage of opportunities that came to them from the partnership without accounting for them to the other. He relied in particular on the passage from Warman v Dwyer that I have set out at [65] above.
[81] Mr Shao breached those duties in the manners pleaded in paragraph 12C of the statement of claim: he has taken the partnership business and assets for his own benefit, transferred that business to Zesty Food and caused Zesty Food to continue to operate it, and failed to account to the partnership for the benefits he has derived and continues to derive from that business.
[82] As to the first of these, Mr Shao took (and transferred to Zesty Food) effectively all of the assets of the former partnership - the recipes, the name, the fit-out, the stock, the new lease of the premises. As for the lease and the fit-out, even though the lease to the partnership had been validly terminated by the landlord and the fit-out may have been forfeited to the landlord, the opportunity to secure the new lease and the benefit of using the fit-out came from Mr Shao's knowledge of and relationship with the landlord derived as a former partner. He also contacted the partnership's former employees and offered them employment, which some of them took up. Effectively, he took over (or arranged for Zesty Food to take over) the entire business formerly conducted by the partnership.
[83] The business formerly operated by the partnership and now operated by Zesty Food is the same: a Japanese restaurant called Sushi Lovers operating from the Raby Bay premises under a lease on substantially the same terms, selling the same food (even if the recipes were slightly modified by Mr Shao), using the same telephone number, the same fit-out, some of the same employees and, for a while, the partnership's ABN and food licence.
[84] The goodwill of the partnership's business and Zesty Food's business is the same: it is location goodwill. That is, the custom is derived principally from walk-in trade and people local to the location of the restaurant. It did not and does not matter who in fact operated the business, either in the kitchen or front of house. A part of the goodwill established by the partnership was and is the name, which customers would associate with a restaurant whose food and service they enjoyed. So when Zesty Food started to operate the restaurant there was already brand familiarity that derived from the use of the name by the partnership. The dissolution of the partnership and the temporary closure of the restaurant did not mean that this business ceased to be a going concern or that the goodwill in it had no value.
[85] Having regard to the principle established by Keech v Sandford and the later cases expanding that principle, the court should find that Mr Shao obtained the lease for Zesty Food utilising his knowledge of its availability and his relationship with the landlord, both of which he only acquired as a partner operating the former business. To negotiate for the new lease for his own (or Zesty Food's) benefit was in conflict with his duty to seek a new lease for the former partners, which could then be assigned to somebody else for valuable consideration as part of winding up the partnership and realising its assets.
[86] Zesty Food is fixed with Mr Shao's knowledge of all the facts and therefore of his breach of duties. At the time Mr Shao negotiated the new lease and recommenced the business, he was the sole shareholder of Zesty Food, having divested his shares only on 28 April 2022. Mr Shao was also and remains its sole director, in which capacity he caused it to be incorporated and he runs its business. Even if Mr Shao himself has not derived any benefit from taking those steps (which Mr Zeng does not accept), his conduct and position must result in Zesty Food having the requisite knowledge that it has obtained its lease and business as a result of Mr Shao's breaches of duty.
[87] Consequently, Zesty Food holds the lease (and the business) on trust for the partnership, which should be made available as part of an orderly winding up and distribution of the partnership assets. For the purpose of such a winding up, a receiver of the partnership should be appointed to take over its assets (including the business) and to sell them. Zesty Food must also account to Mr Zeng in the same manner as Mr Shao.
[88] The defences raised by Mr Shao should be dismissed. Despite a contention by Mr Shao that neither defendant had received any benefit from the new business, the evidence shows that, after a period of loss making, the business is now profitable, resulting in benefits for the defendants. Given the profitability of the partnership business, one might expect this business to increase in profitability and value in the near to medium term.
[89] Mr Zeng does not come to the court with unclean hands. His actions in dismissing the cook and insisting that Mr Shao agree with that decision were reasonable given the health and safety concerns arising from the cook repeatedly vaping in the kitchen, especially having been told before not to do so. I understood Mr Hogg to infer that it was Mr Shao's conduct in refusing to agree to the cook's dismissal that led Mr Zeng, quite reasonably, to refuse to allow the restaurant to operate with that cook in the kitchen, which in turn led to the partnership terminating. Nothing in that conduct justifies the "unclean hands" defence.
[90] Nor does Mr Zeng have "unclean hands" because he acquired and operated Sushi Tatsu without Mr Shao's consent and in competition with Sushi Lovers. When Mr Shao became aware of it, he was not really concerned and, more relevantly, there is no evidence that the restaurant competed with the partnership business. Mr Zeng did not breach any duties to the partnership in acquiring and operating Sushi Tatsu and therefore he is under no obligation to account to the partnership for any profits of that business.
[91] Furthermore, there is no basis for the defences that, because Mr Zeng offered to take on a new lease, he impliedly consented to, or acquiesced in, Mr Shao taking on such a lease, separate from the partnership, should Mr Shao's offer be accepted by the landlord. Mr Zeng first proposed that either party buy out the other's interest in the partnership and, when that offer was not accepted, he then proceeded to take up the landlord's offer to make a separate offer for a new lease. His first proposition was in accordance with the parties' fiduciary duties and it was only after it was clear that the partnership business was at an end that he took up the landlord's offer and himself made an offer. However, that did not constitute acquiescence to Mr Shao making an offer and taking a new lease if offered one. Nor does it give rise to any estoppel preventing his claim.

[60]

[92] Mr Sams submitted that none of the pleaded breaches of fiduciary duty by Mr Shao - namely, that he took the partnership business for his own benefit, he derived some personal benefit from it, and then he later transferred the business to the second defendant - was made out on the evidence as constituting a breach. In particular, Mr Shao breached no fiduciary duties to Mr Zeng in causing Zesty Food to acquire the new lease and to operate the business.
[93] On the contrary, the partnership was terminated solely as a consequence of Mr Zeng's conduct in dismissing the chef without first consulting with Mr Shao and then refusing to allow the business to operate unless Mr Shao agreed with Mr Zeng's decision. Mr Zeng was intransigent in refusing to consider Mr Shao's points of view and in refusing to allow the business to operate. Mr Zeng then proposed that the partnership be dissolved, but as a consequence of his conduct the principal asset of the business - the leasehold interest - and its physical assets - the fit-out and furniture forfeited to the landlord and the other assets taken by Mr Zeng - were all lost to the partnership, resulting in it having no assets of any value and no way to continue on for the purpose of winding it up and realising its assets.
[94] In dismissing the chef without first consulting with Mr Shao, refusing to discuss the matter with Mr Shao and then preventing the restaurant from opening while Mr Shao disagreed with him, Mr Zeng was willing to sacrifice the entire partnership business unless and until he got his way, and he took active and escalating steps to force that outcome. Everything that followed, including the loss of the partnership assets, the termination of the lease, the forfeiture of the fixtures and furniture to the landlord, the landlord calling for individual offers for a new lease and the subsequent commencement of Zesty Food's business, were all direct and immediate consequences of Mr Zeng's actions. Yet Mr Zeng brings this proceeding to complain about the result because the landlord accepted Mr Shao's offer rather than his own.
[95] Mr Zeng's complaint that Zesty Food is using the same business name and the same menus and recipes as the partnership did, and therefore wrongly benefitting from a substantial partnership asset (effectively the intellectual property in those items), has no substance. Those items derived from the pre-existing and ongoing business of Triple Pan, which allowed the partnership to use them and now allows Zesty Food to do so. Neither the partnership nor Mr Zeng had any personal ownership or interest in them. The menus and recipes were created in the course of his employment by Triple Pan and therefore were (and remain) the property of Triple Pan.[41] This was an implied term of Mr Zeng's first employment contract and an express term of his second (clause 6.3). Any minor changes to the recipes made during the partnership business did not affect Triple Pan's property rights in them.
[96] The court should find that Mr Zeng destroyed the relationship of trust and confidence essential to an ongoing partnership. He acted unreasonably in doing so without first consulting with Mr Shao and in refusing to consider Mr Shao's point of view and his suggested compromise that he accept the dismissal provided that Mr Zeng indemnify him for any adverse consequence.
[97] Further, Mr Zeng then deliberately damaged the partnership business by obstructing its trade on 24 March and by causing the closure of the business on 25 March. On the latter date, he first locked the door, then he prevented customers from entering, he turned off the cookers and he took the eftpos machine, the tablets, the telephone and the $900 cash float, thus preventing even online or takeaway business. His clear intention was to shut down the business. Then, the next day, he took the stock and the rice cookers. Mr Sams submitted that I should reject Mr Zeng's evidence that he did that after seeing that Mr Shao had paid creditors and paid employees a dismissal amount, but even if I do not reject that, he had already forced the restaurant to close and had told the staff that it would not be reopening unless his dispute with Mr Shao was resolved.
[98] From no later than 26 March, Mr Zeng was determined that the partnership could not continue, but contended that he could take over and run the business himself. On that day, having removed the stock, he told the landlord that it was impossible to continue to operate with Mr Shao, but he was willing and confident to run the store alone[42] and three days later he told Mr Shao that they could not continue their cooperation and there was no point in going on.[43] In the meantime, having received the landlord's notice of breach, he took no steps to enable the partnership to reopen the restaurant in order to maintain the lease.
[99] Following the termination of the lease, there were no surplus assets that might be available for sale and distribution of the proceeds to the partners. The partnership had no physical assets to operate the restaurant. It had no lease, nor any property interest in the premises. It had no right to assign the business name and the recipes to any potential buyer, as they belonged to Triple Pan, and it owned no other intellectual property. While the report and oral evidence given by the business valuer called by Mr Shao could be criticised, his key conclusion - that there was no valuable goodwill in the business once the restaurant had closed down and particularly after the lease was terminated - was not tested in cross-examination and should be accepted by the court. When operating successfully, the business included goodwill based on its location and its right to occupy the premises but, once that right was lost, the value of its goodwill was also lost.
[100] The consequence of these matters was that, by the time Mr Shao (and Mr Zeng separately) offered to take a new lease of the premises, there were no substantial assets of the partnership that could be realised and therefore the former partners had no ongoing fiduciary duties to the partnership or to each other. In the circumstances, there was no conflict between Mr Shao's interest (or that of Zesty Food) and any duty to Mr Zeng. Nor was Mr Shao under any duty to act in Mr Zeng's interests once Mr Zeng had terminated the partnership and caused the loss of its assets.
[101] The court should find that Zesty Food's business has not resulted in substantial, if any, benefits to itself or to Mr Shao. Mr Shao has not been paid any wages for his involvement in the business, nor was he paid anything for his efforts in negotiating the lease for Zesty Food. Zesty Food made no profits from the business for at least 15 months and since then its profits have been lower than those of the partnership, but earned from its own efforts and not from any breach of duty by Mr Shao (even if there were such a breach). Allowance must be made for the costs and efforts of operating the business, to which Mr Zeng made no contribution. For those reasons and because of Mr Zeng's conduct, it would be inequitable to order an account of profits and there would be no utility in ordering the appointment of a receiver to whatever minimal assets remain in the partnership.
[102] Mr Hogg's submission that Zesty Food's business was the same or substantially the same as the partnership ought not be accepted. The defendants accepted that Zesty Food commenced running its business in a way similar to the partnership, however, that does not mean it was the same. Zesty Food has different shareholders, signed a new lease and took on all the liabilities of setting up the business and operating it. It hired its own staff, including people previously employed by the partnership but under new contracts. Most importantly, Zesty Food did not have the involvement of either Mr Zeng or Mr Shao in the same way they were involved in the partnership.
[103] It was Mr Zeng's conduct that caused the loss of the partnership assets. Mr Shao reasonably assumed from that conduct that Mr Zeng did not require that the partnership maintain or acquire a leasehold interest in the premises. Similarly, Mr Shao reasonably assumed that Mr Zeng was content for each former partner to compete with the other in seeking a new lease. Mr Shao relied on that assumption in making the offer and negotiating the lease. Mr Zeng should be found to have acquiesced in that process and should be estopped from asserting that Mr Shao had any ongoing duty to him that was in conflict with him participating in the offer process and then negotiating a fresh lease.
[104] This case is distinguishable from the facts in Chan v Zacharia, because the partnership in that matter was solvent and the lease, including the option to renew it, constituted a partnership asset held by the partners on behalf of the partnership and it continued to be held by them after the partnership was dissolved. Dr Chan's conduct in refusing to take up the option that was available and instead taking a lease for himself deprived the partnership of a valuable opportunity to assign the lease, including the option, for valuable consideration. The lease remained on foot when the partnership ceased and each former partner had an obligation to cooperate in and act consistently with the realisation, application and distribution of the partnership property, including to realise the value of the ongoing lease and the option.
[105] In contrast, as a consequence of Mr Zeng's actions, the partnership in this case had already been dissolved and, more importantly, the lease had been terminated before Mr Shao took any steps to acquire a separate lease: there was no extant partnership asset available which Mr Shao's actions might have prevented the partnership from realising. He did not obtain the opportunity to negotiate a new lease, nor cause Zesty Food to obtain the new lease, as a consequence of any misuse by him of knowledge acquired as a partner.
[106] Similarly, this case is different to the situation in Keech v Sandford, in which the trustee negotiated a new lease for his own benefit while the lease held by him in trust for the infant remained on foot.
[107] By reference, in particular, to the decision of Wanstall J in Brown v Potter, Mr Sams submitted that, if Mr Zeng's case is that Mr Shao had a duty to cooperate to sell the goodwill of the partnership, then the onus was on Mr Zeng to have led evidence that any such goodwill was a valuable asset that was realisable, and only in that circumstance could it be found that Mr Shao might have breached his duty to cooperate in the realisation of that asset. But Mr Zeng has called no evidence to prove that there was any realisable goodwill, nor that Mr Shao refused to cooperate with him to realise any goodwill, or any other valuable assets of the partnership (if there remained any). Indeed, Mr Zeng prevented any such realisation of assets by removing physical assets necessary for the conduct of the business and causing the business to shut down.
[108] In any event, any goodwill that may have existed when the business was operating and the partnership occupied the premises under the lease, evaporated when Mr Zeng caused the business to shut down and the partners then lost the right of occupation. Mr Sams succinctly put the position of the partnership, after the lease was terminated, in this way:

[62]

[109] The partnership was insolvent, at least at 31 March 2022, as it had no physical assets other than those taken by Mr Zeng and it had liabilities that eventually Mr Shao paid, as well as a potential liability to the landlord for breach of the lease.
[110] Finally, Mr Zeng's conduct was such that, even if the court were to find that Mr Shao breached a duty to the partnership in acquiring a new lease and assisting Zesty Food in its operation of the business, an account of profits and the appointment of a receiver are equitable remedies that are within the court's discretion but ought not be ordered if the circumstances do not merit them. In particular, if a plaintiff has "unclean hands" equity will often refuse relief. That should be applied in this case, where it was solely Mr Zeng's improper and unreasonable conduct that caused the loss of the partnership assets and he was not prepared to try to salvage the business by attempting to reach an agreement on its future operations. Furthermore, once the lease was terminated as a consequence of his conduct, Mr Zeng applied for a lease in his own name, as did Mr Shao, thereby demonstrating that he considered it appropriate for each former partner to seek the opportunity to take on a new lease and to carry on a similar business at the same location. It would be unconscientious to make any order in his favour in the circumstances.
[111] Mr Shao counterclaims for an account by Mr Zeng of the profits he has made from the business Sushi Tatsu. Mr Sams initially contended that Sushi Tatsu, when taken over by Mr Zeng, competed with the Raby Bay restaurant and therefore Mr Zeng breached his fiduciary duty not to have a conflict of interest with the partnership. In his final address, however, while not conceding that this was not the case, Mr Sams said that part of Mr Shao's case relies on the court drawing an inference on limited evidence. He submitted that I should draw that inference on the basis that the two restaurants were only five kilometres apart, both operated using online delivery platforms and both used the same menu and marketing material.

[77]

[132] There are, of course, several similarities, but also several differences, between the cases to which I have referred above and this. Applying the principles derived from those and other cases, for the following reasons I have concluded that Mr Shao did not breach any duty he owed to Mr Zeng in arranging for Zesty Food to enter into its lease and to carry on the business at the premises formerly occupied by the partnership and using the name Sushi Lovers.
[133] Nor did Mr Zeng breach any of his duties to the partnership by acquiring and operating the restaurant, Sushi Tatsu. I am not satisfied that the business competed with the Raby Bay business. His use, in that business, of the menu and marketing material used by the partnership in its business, also was not in competition with the Raby Bay business, although it may legitimately have been of concern to Triple Pan given that it all derived from its business.
[134] The lease to the partnership was due to expire on 2 September 2022. While the partnership was on foot, both partners had a fiduciary obligation not to take any step that would threaten their right to continue to occupy the premises under the lease.
[135] Furthermore, the lease contained an option to renew it for a further term of three years (and thereafter two further options for equivalent periods). As in Chan v Zacharia, that option was a valuable asset of the partnership and, although neither party could be forced to exercise it, if either partner did not wish to do so but the other did, then the partners together should attempt to assign the lease, with its option, for valuable consideration as part of a smooth winding up of the partnership.
[136] It was Mr Zeng's conduct that caused the business to cease operating. He dismissed the chef without first consulting Mr Shao. In the absence of any specific agreement between them, any partner is generally authorised to engage and dismiss employees. In the absence of any specific agreement, this power derives from the fact that each partner can bind the partnership in its relations with other people.[57] There is no evidence that Mr Zeng and Mr Shao had ever discussed any limits on such a power. Mr Zeng therefore did have the power to dismiss an employee without first consulting Mr Shao.
[137] Mr Zeng summarily dismissed Dama, he said, because he had previously warned the chef about his disruptive, inconsiderate and disrespectful behaviour and that he must not vape in the kitchen. But, that being the case, if he felt that there were, or might be, grounds to dismiss the chef, even though he had the power to dismiss him unilaterally, one might ordinarily expect that he would first consult with his partner, Mr Shao, and at least attempt to agree the circumstances in which the chef may be dismissed. It is understandable that Mr Shao was concerned about the potential adverse effects on the partnership of dismissing Dama without notice. But Mr Zeng, having himself made the decision without consultation, then refused to discuss it with Mr Shao and insisted that the chef not be permitted to return to the kitchen.
[138] Despite knowing Mr Shao's concerns, Mr Zeng took no steps to try to resolve matters with Mr Shao, but instead disrupted the business by refusing to allow customers to enter, preventing online orders being fulfilled, preventing anyone from cooking and eventually taking away equipment that was necessary for the business to operate. His actions forced the business to close. That led the landlord to terminate the lease after due warning and notice of default.
[139] I find that Mr Zeng destroyed the relationship of trust and confidence essential to an ongoing partnership. Although his action in dismissing the chef was within his powers as a partner and binding on the partnership, he acted unreasonably in doing so without first consulting with Mr Shao and more so in refusing to consider Mr Shao's point of view and his suggested compromise that he accept the dismissal provided that Mr Zeng indemnify him for any adverse consequence. He acted even more unreasonably in refusing to allow the restaurant to operate until Mr Shao agreed with his decision and without genuinely attempting to resolve their differences. This was especially so when he maintained in evidence that he could have taken over as chef until they found a new chef. He could have maintained his dismissal of Dama and insisted that he not be involved, while enabling the ongoing operation of the restaurant. Mr Zeng's conduct was the antithesis of the "mutual co-operation and a level of trust" required in a partnership.
[140] Between the date that the business closed and the date of termination of the lease, the partnership ended. If it were not already clear, that end became effective once Mr Zeng sent to Mr Shao his message of 29 March.[58] While Mr Shao did not respond to it, I consider that message to be a unilateral termination of the partnership by Mr Zeng. He was making clear to Mr Shao that he did not want to continue in partnership with him (if he had not made that clear in any event by forcing the closure of the restaurant). A partnership at will is terminated by any partner giving notice to the other of the partner's intention to dissolve the partnership and, where the date of dissolution is not stated, the termination is effective on the date of that notice.[59] That is what Mr Zeng did by that message. If I were wrong about that, then the partnership clearly came to an end when the lease was terminated: it was a partnership for a single undertaking, which was terminated by the termination of its ability to carry on the business.
[141] I find that Mr Shao did not cause or contribute to the closure of the business and the loss of the lease. Those consequences were attributable solely to Mr Zeng's actions. I do not consider that Mr Zeng's actions in taking those steps were undertaken in good faith and in the interests of the partnership. They were capricious and obviously contrary to those interests.
[142] Although the evidence of the value of the business given by Mr Khoury was, as I have said, in many respects unsatisfactory, I consider that he was correct in saying that the business's substantial goodwill was location goodwill (which Mr Zeng appears to accept), although I do not accept that there was no "business goodwill" while it was operating.
[143] I do not accept Mr Khoury's conclusion that, as at 24 March, the value of the business was nil. Until the business was closed, it clearly had substantial clientele, turnover and profits. If it had continued in operation with its existing lease (and the options available to the lessee) and been sold by the partnership as a going concern, I have no doubt that it would have had substantial value. Even as at 24 March 2022, although it did not undertake much business on that day, it could have been reopened and operated in the ordinary way until sale. So, as at 24 March, it would have been marketable and had valuable goodwill and other assets. Indeed, at any time until the landlord terminated the lease, the restaurant could have been reopened and its business resumed if Mr Zeng had enabled that course.
[144] If Mr Khoury had expressed his opinion, as he had been asked, as at 31 March 2022, I would have agreed with him. The location goodwill was lost to the partnership as soon as the landlord terminated the partners' right to occupy the premises. Without that right of occupation the business could not continue.[60] The landlord made it clear that it would not grant a fresh lease to the partnership, although it was prepared to grant a lease to one or other of the partners (and it ultimately chose Mr Shao). Mr Zeng had also made it clear that he was not prepared to continue to be a part of operating the business on behalf of the partnership. A fresh lease for the partnership was not available.[61]
[145] In the circumstances, the goodwill that had been an intangible asset (and indeed the most valuable asset) of the partnership was, as I have said, lost to the partnership upon the termination of the lease. That termination was a consequence of Mr Zeng's actions, which rendered the sale of the partnership's goodwill impracticable,[62] indeed impossible because it was destroyed. Upon that event, the partnership lost its right and ability to continue to carry on the previously successful business. It had no ongoing business and no right of occupation that it might realise by sale. I am satisfied that it no longer had any valuable and realisable goodwill in the business.
[146] The circumstances in this case differ from those in Chan v Zacharia most obviously because the lease in that case remained on foot after the dissolution of the partnership and during its winding up and Dr Chan negotiated a new lease for himself while that lease was on foot, whereas here the lease came to an end, through termination by the landlord, within a week after the partnership ended and before Mr Shao made an offer to secure a fresh lease. In making that offer, Mr Shao did not have a conflict between his interest and his fiduciary duties to the former partnership. Nor did he take advantage of an opportunity or knowledge derived from his fiduciary position.
[147] That being the case, I find that Mr Shao did not breach any duty to the partnership in negotiating a fresh lease and enabling Zesty Food to open a sushi business at the premises. In doing so, he did not utilise any remaining asset or right of the partnership. Nor did he secure that opportunity in the course of the previous fiduciary relationship between him and Mr Zeng. The opportunity to secure a new lease arose only after the partnership (and its business) had ended and there was no substantial asset remaining that could be sold for the benefit of the partners. By offering to enter into a new lease, both he and Mr Zeng recognised and acted on the basis that the partnership was at an end and had no further right to occupy the premises. Neither of them had a conflict of interest in doing so, given that the partnership had no subsisting interest in the former lease and the landlord had made it clear that it would not grant a new lease to the partnership. It ill behoves Mr Zeng now to assert that for Mr Shao to offer to take a new lease was a breach of any duty either of them owed to the other. The situation was similar to that described by Bowen CJ in Eq in Alcock v Robb, in the second part of the passage that I have set out at [74] above.
[148] The result of the loss of the right to occupy the premises was that the only remaining assets of the partnership were its physical assets. However, those assets did not include the fitout of the restaurant, nor the chattels remaining in it, as those assets were forfeited to the landlord upon termination of the lease. That left its only assets, after payment of most of its creditors (including its employees) out of the funds in the bank account at the time of its closure on 25 March, as comprising a small amount of money remaining in its bank account and the cash and other equipment and stock taken by Mr Zeng from the premises.
[149] The result was that the partnership had no substantial valuable and realisable assets that might be realised for the benefit of the partners in a winding up of the partnership. Mr Zeng kept possession of the only remaining assets. Those assets have now, no doubt, deteriorated in value simply through the effluxion of time. I am not satisfied, as there was no evidence to prove, that even the equipment taken by Mr Zeng has any real value. In any event, he misappropriated it and cannot complain that any value in it has not been realised for the benefit of the partners.
[150] The name, Sushi Lovers, was not an asset controlled by the partnership. That name was a pre-existing business name (even though it was not registered until later) that "belonged" to Triple Pan. Once the partnership came to an end, that name either could only be used by, or with the consent of, Triple Pan, or it could perhaps be used by anyone provided that, in using it, the user was not misleadingly implying that it was, or passing itself off as being, associated with Triple Pan's pre-existing business.
[151] The recipes derived from those created and modified by Triple Pan. While Mr Zeng altered them a little during the operation of the partnership business, I accept Mr Shao's evidence that they have since been altered again by Zesty Food. In any event, to the extent that they are small modifications of Triple Pan's recipes, any intellectual property rights in them belonged to Triple Pan.
[152] Zesty Food used the partnership's food licence and ABN for a while, without which it would not have been able to operate the restaurant for that period. To that extent, Mr Shao may have breached his duties by utilising rights of the partnership to enable trade by Zesty Food. He enabled Zesty Food to open its own business earlier than would otherwise have been the case. However, Zesty Food did not apparently make any profits during that period. I find that neither it nor Mr Shao need account to Mr Zeng for the use of those authorisations.
[153] Mr Shao gave evidence, which was not challenged, that he has not personally benefitted from Zesty Food's business (although, as I have recorded above, he has received loans from the company). Zesty Food did not make any profits until the 2024 financial year, having made losses in the previous two years. I agree with Mr Sams' submission that, given the effluxion of time since Zesty Food opened the business, those profits cannot be seen as attributable to the prior business.[63] If I were wrong in finding that Mr Shao did not breach his duties in obtaining the lease for Zesty Food, I would limit any benefits for which he should account, at most, to a small percentage of the loans he has received to reflect the value to him of receiving those sums without having to pay interest. I would not require him to account for the amounts of the loans themselves because, being loans (the terms of which neither counsel explored in the evidence), I infer that they are repayable by him on demand. I would also limit any liability of Zesty Food to half of the difference between the profit it made in the 2024 financial year and the losses that it had incurred in the previous two financial years, with interest from no earlier than 1 July 2024. I would not order an account, nor the appointment of a receiver, as either step would result in excessive costs and delay, but I would simply give judgment for those sums.
[154] It is strictly unnecessary for me to consider the other bases of Mr Shao's defence. However, I do not consider that Mr Zeng's conduct in himself making an offer to take a new lease constituted any form of consent to Mr Shao acting similarly. Nor do I consider that it forms the basis for any estoppel preventing Mr Zeng from complaining of any breach of duty by Mr Shao. So far as I am aware on the evidence, Mr Shao was not aware, at the time he made his offer, that Mr Zeng had made an offer, so Mr Shao did not change his position in reliance on Mr Zeng having done so.
[155] However, I do consider that Mr Zeng has "unclean hands," given that it was substantially his actions that led to the closure of the partnership's business and the loss of almost all its assets. It ill behoves him to complain about Mr Shao and Zesty Food taking advantage of the opportunity that that closure presented them. Even if Mr Shao had, in some way, breached his duties to Mr Zeng in taking that advantage, equity ought not compensate Mr Zeng in the circumstances, but especially not where Mr Zeng has made no contribution to the success or otherwise of that business, and where it was Mr Zeng's actions that destroyed the value of the partnership business and led to that opportunity becoming available.

[78]

[156] Mr Zeng contends that his acquisition and operation of the Wellington Point restaurant were not in breach of his obligations to the partnership and Mr Shao has not proved that that restaurant was in competition with the Raby Bay restaurant. As for the claim for half of the partnership expenses allegedly paid by Mr Shao, his counsel submitted that Mr Shao has not proved most of them, but conceded that Mr Zeng is liable for half of the proved amounts, totalling $1,007.84.
[157] Mr Zeng did not breach his fiduciary duties to the partnership in acquiring and operating the Sushi Tatsu restaurant. Mr Zeng has no liability to account to Mr Shao for any profits derived from that venture.
[158] Mr Zeng, though, removed from the premises and deprived the partnership of the assets that he took from the premises on 25 and 26 March 2022. As Mr Hogg submitted, Mr Shao has not proved the value of the items taken. Mr Hogg conceded that Mr Zeng had appropriated and ought account to Mr Shao for $900 in cash and $494 taken from the partnership bank account. He also conceded that Mr Shao had personally paid an expense of the partnership, namely a waste processing fee of $310.27, and had deposited into the partnership account amounts of $289.80 and $311.41. However, he noted that the former deposit, while demonstrated on the evidence, was not pleaded in the counterclaim. Thus, he submitted, Mr Zeng should be held liable only for half of the pleaded and proved amounts: a liability of $1,007.84.
[159] Mr Sams accepted Mr Hogg's submission as to what was proved by the evidence, but submitted that the court should order that the equipment removed by Mr Zeng be sold and the proceeds divided.
[160] Although one deposit was not pleaded, it has nevertheless been proved on the evidence and in my view Mr Zeng ought repay Mr Shao half of that amount, as well as half of the other items referred to. The total of all those items is $2,305.48. Mr Zeng ought therefore pay Mr Shao half of that sum, namely $1,152.74.
[161] While, strictly speaking, Mr Zeng ought sell and account to Mr Shao for the proceeds of the equipment that he retains, it is likely that there would be minimal return on any sale. The costs of supervising such a sale and accounting for the proceeds would no doubt be out of all proportion to any returns. I do not consider it appropriate or equitable to make the order that Mr Sams sought.

At a glance

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Judgment (123 paragraphs)

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Cases Cited (11)