646 Victoria (Hamilton) (in liq) v Hunt HC Hamilton CIV 2009-419-1640
[2010] NZHC 1437
•18 August 2010
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV 2009-419-001640
BETWEEN 646 VICTORIA (HAMILTON) (IN LIQUIDATION)
Plaintiff
ANDGEOFFREY GERARD HUNT Defendant
Hearing: 17 August 2010
Counsel: DP Shore for plaintiff
GE Minchin for defendant
Judgment: 18 August 2010 at 10:00am
INTERIM JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]
This judgment was delivered by me on 18 August 2010 at 10:00am pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: McCaw Lewis Chapman, PO Box 9348, Hamilton 3420
Ellis Law, PO Box 4516, Auckland 1140
646 VICTORIA (HAMILTON) (IN LIQUIDATION) V HUNT HC HAM CIV 2009-419-001640 18 August
2010
Background
[1] 646 Victoria (Hamilton) Ltd was placed into liquidation on 18 May 2009. Mr DM Blanchett and Ms V Fatupatio were appointed the liquidators.
[2] 646 Victoria (Hamilton) Ltd was incorporated on 30 August 2002. The
Companies Office records disclose that the defendant was appointed its director on
24 December 2002. Counsel advised me from the bar that other directors were appointed from time to time in respect of this company. That is a matter which only came to the notice of the liquidators a day or so before the hearing.
[3] The liquidators have made numerous requests of Mr Hunt for the company’s records. He has not provided them. He has been examined by the liquidators.
[4] The liquidators obtained copies of the company’s bank statements from the company’s banker, Westpac Bank. Those statements provided details of the incoming and outgoing funds from the company bank account.
[5] The liquidators prepared a schedule from the matters recorded in the bank statements. Mr Blanchett says that the schedule “identifies the personal and unidentifiable withdrawals from the account”.
[6] On 23 September 2009 the liquidators wrote to Mr Hunt enclosing the schedule. They sought his response by 7 October 2009. No response was immediately forthcoming. The liquidators instructed their solicitors to write to Mr Hunt. The solicitors wrote on behalf of the liquidators on 15 October 2009. That letter made demand for the total sum set out in the schedule, namely $729,765.69.
[7] The defendant responded by email which bears the date 15 October 2009. The email provides:
Regarding 646 Victoria Street (Hamilton) Ltd, in liquidation.
Your letter dated 23 September in regards to the captioned subject was not received by me until Monday 12 October.
The claim therein is disputed in its entirety and any action will be rigorously defended.
[8] I have assumed throughout that the liquidators have worked on the assumption that Mr Hunt was the only person who had authority to operate the bank account. I have mentioned earlier in this judgment that the existence of other directors was not apparent to the liquidators until only a day or so ago, despite the fact that reference to other directors is contained in Mr Hunt’s affidavits. The problem apparently has arisen from the fact that a detailed Companies Office search was not undertaken, which might have revealed the position.
[9] The investigations on both sides to date have not uncovered any annual accounts. Importantly no profit and loss statements or balance sheets for the 2003 and subsequent years up until the time the liquidators were appointed have been discovered.
[10] The liquidators’ case, put simply, is that the schedule lists payments which were made to, or on behalf of, Mr Hunt and must therefore be debited to his current account with the company. The current account can be recovered by making demand. A demand has been made. The payment has not been made to the liquidators.
The opposition
[11] The matters advanced in opposition, in summary, are as follows:
a) The liquidators have not undertaken a sufficient search of the company’s records themselves which establishes a liability for the payments made out of the company’s bank account resting with Mr Hunt;
b)Mr Hunt claims that he should have been paid a salary and that would be off set against any drawings that have been made by him;
c) He claims that he has advanced a substantial sum of money to the company. That should be off set against any liability he has in respect of the funds withdrawn from the company’s bank account; and
d)That the matters listed in the schedule contain a large number of business expenses which are not personal and are therefore not appropriately debited to Mr Hunt’s current account.
The court’s approach to a plaintiff’s summary judgment application
[12] Rule 12.2 of the High Court Rules requires that a plaintiff satisfy the court that a defendant has no defence. In Krukziener v Hanover Finance Ltd[1] guidance was given as to how that position should be approached by the court when determining a summary judgment application. The court said:
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11
PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[1] Krukziener v Hanover Finance Ltd [2008] NZCA 187 at 26.
[13] In Pemberton v Chappell[2] the court said as follows:
If a defence is not evident on the plaintiff’s pleading I am of the opinion that if the defendant wishes to resist summary judgment he must file an affidavit raising an issue of fact or law and give reasonable particulars of the matters which he claims ought to be put in issue. In this way a fair and just balance will be struck between a plaintiff’s right to have his case proceed to judgment without tendentious delay and a defendant’s right to put forward a real defence.
[2] Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
[14] That position was further reinforced in Australian Guarantee Corporation (NZ) Ltd v McBeth[3] where the court said:
[3] Australian Guarantee Corporation (New Zealand) Ltd v McBeth [1992] 3 NZLR 54 at 59.
Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidential foundation for the defences which are raised. If not,
the plaintiff’s verification stands unchallenged and ought to be accepted unless it is patently wrong.
“No defence means ‘no bona fide defence, no reasonable ground for defence and no fairly arguable defence’.”
[15] Hypothetical possibilities in vague terms, unsupported by any positive assertion or corroborative documents advanced by defendants will not frustrate the obligation on a plaintiff to discharge the onus of proof: SH Lock (NZ) Ltd v Oremland.[4]
[4] SH Lock (NZ) Ltd v Oremland HC Auckland CP641/86, 19 August 1986.
[16] A caution was raised in Tilialo v Contractors Bonding Limited[5] where the court said.
The Courts must of course be alert to the possibility of injustice in cases in which some material facts to establish a defence are not capable of proof without interlocutory procedures such as discovery and interrogatories. That does not mean that defendants are to be allowed to speculate on possible defences which might emerge but for which no realistic evidential basis is put forward.
[5] Tilialo v Contractors Bonding Limited CA 50/93, 15 April 1994 (CA) at 7.
[17] The court also observed:[6]
[6] Ibid, at 8.
Drawing the line between mere assertions of possible defences and material which sufficiently raises an arguable defence so that the defendant should not be denied the opportunity to employ interlocutory procedures and have a trial is a matter of judgment. Views may well differ.
The current position
[18] I have not received from the defendant an adequate explanation for the entries in the schedule prepared by the liquidators. In re Samarang Developments Ltd (in liquidation)[7] the court, explaining the approach which should be adopted where drawings have been made from a company, said:
in the absence of explanation for drawings they must be treated as advances from the company to the shareholders; i.e., debts owed by the shareholders to the company repayable on demand.
[7] re Samarang Developments Ltd (in liquidation) HC Christchurch CIV 2003-409-2094,
30 September 2004, at [55] per John Hansen J
[19] Mr Hunt, as a director of this company, has a number of obligations which are imposed by the Companies Act 1993. One such obligation which is important for this case is the obligation imposed by s 194(1). Section 194 provides:
194 Accounting records to be kept
(1)The board of a company must cause accounting records to be kept that—
(a)Correctly record and explain the transactions of the company; and
(b) Will at any time enable the financial position of the company to be determined with reasonable accuracy; and
(c)Will enable the directors to ensure that the financial statements of the company comply with section 10 of the Financial Reporting Act 1993 and any group financial statements comply with section 13 of that Act; and
(d) Will enable the financial statements of the company to be readily and properly audited.
(2)Without limiting subsection (1) of this section, the accounting records must contain—
(a)Entries of money received and spent each day and the matters to which it relates:
(b) A record of the assets and liabilities of the company: (c) If the company's business involves dealing in goods—
(i)A record of goods bought and sold, except goods sold for cash in the ordinary course of carrying on a retail business, that identifies both the goods and buyers and sellers and relevant invoices:
(ii) A record of stock held at the end of the financial year together with records of any stocktakings during the year:
(d)If the company's business involves providing services, a record of services provided and relevant invoices.
[20] The affidavits show that since the filing of this proceeding some attempt has been made by Mr Hunt to gather in information. He has apparently been to Westpac and has asked for access to cheques which might throw some light on the reason for debits against the company’s account. He has apparently approach the firm of solicitors which, he says, were involved in the advance he made to the company and
has asked them to provide evidence in relation to that matter. He has also been a tax accountant and has asked for statements of account to be prepared, although that matter does not seem to have been progressed at all expeditiously.
[21] I have considerable reservations as to whether there is any foundation available to Mr Hunt for his claim for a salary. A director’s remuneration was examined in Wellington Audio Visual Ltd v Euro Boston Group Ltd (No 2).[8]I draw that examination of principle to counsel’s attention.
[8] Wellington Audio Visual Ltd v Euro Boston Group Ltd (No 2) CIV HC Auckland 2007-404-1089,
31 March 2010 at [16] and following per Heath J.
[22] Had it not been for the fact that counsel acknowledged that others were also directors of this company, I would not have granted further time in this case because I believe the defendant has had ample opportunity to advance some foundation for the defence which he wishes to proceed with. The fact that others may have had authority to withdraw from the company’s bank account calls for further inquiry as to the basis for those payments being made.
[23] Although it is unusual to adjourn a summary judgment application, this is one case where I consider it appropriate. I adjourn the case purely to see if the defendant can provide any foundation for a defence based on the areas that I have mentioned. It is important, however, that the defendant realises that he is particularly fortunate to be given this opportunity.
[24] Accordingly I order as follows:
a) The defendant may file further affidavits in opposition which provide some evidential foundation for the defences that are referred to in this judgment. Such affidavits shall be filed and served no later than
5 October 2010.
b) The plaintiff may file and serve reply affidavits by 15 October 2010;
c) This proceeding shall be listed in the summary judgment list at
12 noon on 18 October 2010 at which time directions will be given for the conclusion of the hearing; and
d) Costs are reserved.
JA Faire
Associate Judge
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