Social and cultural framework relevant to interpretation of business relationships

19 July 2022

A recent decision of the Supreme Court signals a welcome shift to ensuring that the courts better meet the needs of an increasingly diverse New Zealand.  In Deng v Zheng [2022] NZSC 76, the Court has held that the courts can, in appropriate cases, consider evidence about the social and cultural framework of the parties involved.

The proceeding raised two issues related to the background of Messrs Zheng and Deng.  The first arose out of the use of Mandarin in their interactions and business documents.  In particular, whether the meaning to be ascribed to 公司 went beyond 'company' and could extend to 'firm' or 'enterprise'.  The second was the significance of 关系 (guānxi), a term understood as a set of personal connections which an individual may draw upon to secure resources or advantage when doing business (among other definitions).

Mr Deng and Mr Zheng had a working relationship between the late 1990s and 2015.  The proceeding concerned the nature of their business relationship.  Mr Zheng asserted that the relationship was a partnership.  Mr Deng contended that there was no overarching partnership and that projects between them were carried out through companies which the men had interests in.

In the High Court, Mr Deng was successful, with Downs J concluding that there was no partnership.1  The Court of Appeal disagreed and concluded that the relationship had been a partnership and granted relief to Mr Zheng.

The Supreme Court held that the relationship between the parties was consistent with guānxi concepts: in particular, the apparent significance to them of the family relationships and pre-existing friendships in terms of whom they did business with and the relative dearth of formal agreements.

While the Court held that the relationship between the parties as a partnership was clear from the contemporaneous documents, it noted that in other cases the social and cultural framework of the parties may be of greater significance.  In such cases:

  • It will be open to witnesses to explain their own conduct by reference to their own social and cultural background
  • Where parties have been in a relationship (business or otherwise), they may explain the way in which the relationship played out by reference to the social and cultural framework in which they operated
  • In the circumstances just mentioned, there can be no objection to such evidence being supported by expert evidence or by resort to ss128 and 129 of the Evidence Act 2006 (which permit the admission of uncontroverted facts and reliable published documents)
  • More difficulty may arise where a litigant wishes to introduce social and cultural framework information to explain not their own or joint conduct but rather that of another party.

The Court considered that it was well-known that guānxi often governs the way Chinese people do business and that there is an associated tendency for Chinese people to rely on personal relationships, mutual trust and honour more than on written contracts.  However, it should not be assumed that this is so with all Chinese people and judges are required to take care when employing general evidence about social and cultural frameworks.

The Supreme Court also observed that cases which involve parties of different cultural backgrounds are common to New Zealand courts and are likely to become more common.  Judges should approach such cases with caution and actively consider what should be done if a cultural dimension to a case presents itself.

Read the full decision here.

This article was co-written by Chantal Ottow (solicitor), Luke Sizer (senior associate), David Broadmore (partner) and Terence Ng (partner).


1 Zheng v Deng [2019] NZHC 3236.