Andrews v Lomax - [2022] NZHC 3480

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2021-425-72

[2022] NZHC 3480

UNDER Section 174 of the Companies Act 1993

BETWEEN

ROBERT ANTHONY ANDREWS

First Plaintiff

KERRY ANDREWS
Second Plaintiff

ROBERT ANTHONY ANDREWS, KERRY ANDREWS and BERYL ANDREWS as

trustees of the Ruby Trust Third Plaintiff

AND

PAUL JOHN LOMAX

First Defendant

CHESTER HOSPITALITY LIMITED
Second Defendant

NH TRUSTEES NO. 9 LIMITED, as trustee

of the Lomax Family Trust Third Defendant

ARROW HOSPITILITY LIMITED

Fourth Defendant

Hearing: 7 December 2022

Appearances:

S D Williams and B B Gresson for Plaintiffs (by VMR)

P C Murray and K M Patterson for Defendants (by VMR)

Judgment:

16 December 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

(in relation to second application for discovery)

ANDREWS v LOMAX [2022] NZHC 3480 [16 December 2022]

[1] The acrimony between the Andrews Parties and the Lomax Parties, together with the complete absence of trust between them, has resulted in a second discovery application within a little over three months.

[2] The Lomax Parties are Paul Lomax (Mr Lomax), Chester Hospitality Limited (Chester) of which Mr Lomax is a director, NH Trustees No. 9 Limited, as trustee of the Lomax Family Trust, and Arrow Hospitality Limited (Arrow). The Lomax Parties issued proceedings under s 174 of the Companies Act 1993 (the Act) against the Andrews Parties. Shortly thereafter the Andrews Parties issued separate proceedings against the Lomax Parties. The Andrews Parties are Robert Andrews (Mr Andrews), Kerry Andrews, Robert, Kerry and Beryl Andrews (as trustees of the Ruby Trust), and Arrow. The two proceedings have now been consolidated.

[3] The Andrews Parties and Lomax Parties, or their interests, are equal shareholders in Arrow which runs a hotel in Arrowtown. Mr Andrews and Mr Lomax are directors of Arrow. The issue is who should buy who out of Arrow.

[4] Mr Lomax’s company, Chester, provided management services to Arrow and in doing so maintained a Dropbox containing records in relation to Arrow’s business. Ms Miller is Chester’s administration manager and is also involved in maintaining the Dropbox. Arrow uses Xero accounting software.

[5] The last discovery hearing was in August 2022 in which the Andrews Parties sought orders enforcing existing orders for tailored discovery. The current application is the other side of the coin. The Lomax Parties say the Andrews Parties failed to meet their obligations under the discovery orders. The Lomax Parties also seek discovery of new categories of documents.

What the Lomax Parties must show to establish breach of the existing orders for discovery

[6] As the parties agreed to orders for tailored discovery, I do not need to consider whether documents within those categories are relevant. The discovery orders were made by consent. This aspect of the Lomax Parties’ application does not need to meet all the criteria set out in the Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd test as it

is not an application…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Andrews v Lomax

Details

AGLC: Andrews v Lomax [2022] NZHC 3480
Case: [2022] NZHC 3480
Decision Date: 16 December 2022

CaseChat Overview and Summary

The case of Andrews v Lomax involved a dispute between the Andrews Parties and the Lomax Parties, who were equal shareholders in Arrow, a hotel company. The Lomax Parties, including Paul Lomax and his associated companies, filed proceedings against the Andrews Parties under section 174 of the Companies Act 1993. The primary issue was the determination of who should buy out the other party in Arrow. The Lomax Parties alleged that the Andrews Parties had failed to meet their obligations under the discovery orders, and they sought discovery of new categories of documents.

In deciding the case, the court first addressed the criteria for establishing a breach of the existing orders for discovery. The court noted that since the parties had agreed to tailored discovery, the relevance of documents was not in question. The Lomax Parties needed to demonstrate there was reason to believe the Andrews Parties had not met their obligations regarding the existing categories of tailored discovery. Regarding the discovery of new categories of documents, the Lomax Parties had to satisfy the Assa Abloy test, which involved demonstrating the relevance of documents, the existence of the documents, proportionality, and the appropriateness of an order in the court's discretion.

The court found that ordering the Andrews Parties to provide the discovery sought by the Lomax Parties would be pointless since the Andrews Parties had already sworn they had no further documents. The court suggested non-party discovery from Mr. Townsend, the accountant, to address the distrust between the parties. The court invited Mr. Murray, counsel for the Lomax Parties, to make an oral application for non-party discovery, which Ms. Williams, counsel for the Andrews Parties, did not oppose.

The court also addressed the relevance of certain categories of documents, such as those relating to the employment of Natalia Seabra, the closure of the venue, unbanked cash, and payments of life insurance made by Arrow on behalf of Mr. and Mrs. Andrews. The court declined some categories of discovery as irrelevant or not necessary due to the existing material in the parties' control.

Regarding the joint expert conferral, the court directed the experts to confer no later than the end of February 2023 and prepare a joint expert report. The court also directed the parties to confer and agree on an appropriate valuation date.

In conclusion, the court made several orders, including a conditional order for Mr. Townsend to provide non-party discovery, orders for the Andrews Parties to provide further affidavits, and directives for the joint expert conferral and valuation date. The court also reserved the right for the Lomax Parties to apply for costs to shift to the Andrews Parties if they considered the circumstances justified that.

Orders