What constitutes a partnership? The nexus between law and culture

K3 Legal's Edwin Morrison and Ruby George breaks down the relevance of culture in a Supreme Court case

What constitutes a partnership? The nexus between law and culture

The law is meant to represent society, and the Supreme Court is meant to enable the law to evolve as society evolves or changes (no mention in this note on the recent USA Supreme Court decision to overturn Roe v Wade – that discussion is for another day). The Supreme Court’s decision in Zheng v Deng is representative of the developing awareness of New Zealand’s increasingly cultural and linguistic diversity. The case acts as a timely reminder that an understanding of the nexus between law and culture is becoming essential for judges and practitioners alike.

An important feature of the case was that all the primary records were in Mandarin and several witnesses gave their evidence in Mandarin. Therefore, issues were raised about the interpretation of documents translated from Mandarin as well as the cultural setting in an arrangement between two Chinese parties whose business relationship was conducted almost entirely in Mandarin.[1] On this basis, the Court seem to adopt an “actions speak louder than words” approach and exercise a high degree of caution before attributing significance to the precise terms of the various translations.

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We analyse the decision below.

Context

Mr Zheng and Mr Deng entered the Orient Partnership in 2004, although without formal documentation. The two men used the Orient Partnership as the basis for several joint property development and construction projects over a ten-year period. In 2008, an agreement was drawn up to fund a construction project: the Bella Vista Agreement. Its title was subsequently translated from Mandarin as a “partnership agreement,” or a “cooperation” agreement. The Bella Vista Agreement was signed only by Mr Zheng. Despite this, Mr Zheng claimed that he and Mr Deng were partners with each other in the venture. Mr Deng denied this and argued that their relationship was instead based on various separate structures. The reason for this argument is that without a partnership being established, the pair would not owe each other a fiduciary duty, which would clearly benefit Mr Deng.

By 2015, the business relationship had become strained, partly due to financial strain bought on by the Global Financial Crisis. Subsequently, a “Principles in Separation” document was made up to separate the business interests of the two men. After unsuccessful attempts at a complete and amicable separation, litigation commenced concerning whether the relationship between the two men was a partnership.

Lower Courts

Mr Deng was successful in the lower courts, with Downs J concluding that there was no partnership. The Court of Appeal overturned the High Court, holding there had been a partnership. In reaching this conclusion, significant weight was placed on the internal accounts and the Principles in the Separation Document.

Supreme Court Decision

The approved question was whether the Court of Appeal was correct to make a declaration that there was a partnership between Zheng and Deng in which they were equal partners. The NZLS was invited to intervene on the appeal and did so after consultation with NZ Asian Lawyers; this consultation was material in the following cultural findings. The appeal was dismissed – the Supreme Court decided there was a partnership.

The Supreme Court heeded to the “note of caution” laid out by the Court of Appeal in their judgement which highlighted the necessity to bear in mind the risk of nuances in expression being lost in translation between two languages.[2] The significance of the Chinese concept of guānxi was at issue in the case. The word has multifaceted meanings, but it can be understood as “interpersonal connections”, “social capital”, or the “set of personal connections which an individual may draw upon to secure resource or advantage.”[3]

Whilst guānxi (as a cultural framework) was not critical to this decision, the Court proposed that cases in which one or more of the parties have a different cultural background to the judge are likely to become more common in the future.[4] They subsequently laid out some principles to aid future courts in assessing cases within a cultural context. They also purported the need for judges to proceed with caution in such cases.

The Court highlighted that some of the “usual rules of thumb” they use for assessing credibility may have no or limited utility. However, they stressed that in many cases, the usual rules will indeed be sufficient. It seems as if the Court is saying that expecting and obliging that cultural framework evidence must be used in all cases with a cultural dimension would not be practicable.

In cases where it is appropriate that the judge receive social and cultural framework information, the following requirements should be upheld:[5]

  • It is open to witnesses to explain their own conduct by reference to their own social and cultural background.
  • Where parties have been in a relationship, they must explain the course of the relationship by referencing the above framework.

By way of example, in the present case Zheng and Deng could have referred to guānxi by way of explanation for their actions and the way the relationship operated.

Importantly, care is required to not stereotype in similar circumstances. The Court outlines that whilst guānxi is important for some people of Chinese ethnicity, it is not for all.[6]

Thoughts

The law applies equally to all, despite their cultural or ethnic background. This is of course central to upholding the rule of law in New Zealand. However, it is encouraging to see the Supreme Court’s recognition and understanding of the relevance of cultural differences. It will be interesting to see if this framework can “flex” and aid acknowledgement of different cultural complexities in future judgments. Having lawyers who can understand the nuances of conduct will become ever more critical in applying different cultural business norms into the common law.

This article was provided by K3 Legal.

Edwin Morrison has practiced as a Lawyer in various firms for the last 20 years, currently as a Director of K3 Legal. Edwin is considered a leader in his field and has been a finalist for the NZ Law Awards Managing Partner of the Year for the past three (3) consecutive years.

Edwin deals with complex commercial transactions for both private and public clients, capital market transactions including takeovers, shareholder disputes, property law, resource management and civil litigation.


[1] Zheng v Deng [2022] NZSC 76 at 4.
[2] Zheng v Deng, above n 1, at 38.

[3] Zheng v Deng, above n 1, at 76.
[4] Zheng v Deng, above n 1, at 78.
[5] Zheng v Deng, above n 1, at 79.
[6] Zheng v Deng, above n 1, at 81.

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