Andrews v Lomax - [2022] NZHC 2244

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2021-425-72

[2022] NZHC 2244

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 Plaintiffs

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 HOSPITALITY LIMITED

Fourth Defendant

Hearing: 23 August 2022

Appearances:

S D Williams and B B Gresson for Andrews parties P Murray for Lomax parties

Judgment:

5 September 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

ANDREWS v LOMAX [2022] NZHC 2244 [5 September 2022]

[1] The Andrews parties and the Lomax parties are involved in what can be fairly be described as acrimonious litigation. There is a complete lack of trust between them.

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

[3] The Andrews parties seek orders enforcing orders for tailored discovery made by consent on 4 November 2021 and varied by consent on 15 December 2021.

[4] By the time the application was heard, the application related to the following categories of documents:

(3)All documents relevant to Paul Lomax’s 4 February 2021 proposal for a cash bonus payment form Arrow, including but not limited to:

(a)correspondence between Paul and Vanessa Lomax, Paul or Vanessa Lomax and Mike McNab, Paul or Vanessa Lomax and employees of Chester Hospitality Ltd, and Paul or Vanessa Lomax and trustees of the NH Trustees No. 9 Ltd and the February 2021 proposals to increase the management fee charged by Chester Hospitality Limited (Chester); and

(b)documents relevant to Robert Andrews’ refusal on or about 24 February 2021 to agree to Paul Lomax’s request for a cash distribution and his recommendation that Arrow prioritise paying down company debt and making provisional tax payments.

…

(8)All documents relevant to Arrow’s tax compliance (income tax, provisional tax, PAYE, GST), quantification of tax liability and payment for the period 1 January 2021 to date, including but not limited to correspondence between Paul and Vanessa Lomax, Paul or Vanessa Lomax and Mike McNab, employees of Chester, the trustees of the NH Trustees No. 9 Limited, or any tax deferral scheme providers.

(9)All documents relevant to Arrow’s Wage Subsidy claims as pleaded in paragraph [13] of the statement of claim dated 16 July 2021,

including but not limited to documents identifying the employees in respect of whom the wage subsidy was…

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 2244
Case: [2022] NZHC 2244
Decision Date: 5 September 2022

CaseChat Overview and Summary

The case of Andrews v Lomax involved the Andrews parties and the Lomax parties in a contentious dispute, marked by mutual distrust. The Lomax parties, comprising Paul Lomax, Chester Hospitality Limited, NH Trustees No. 9 Limited, and Arrow Hospitality Limited, faced proceedings under Section 174 of the Companies Act 1993, initiated by the Andrews parties. In turn, the Andrews parties, including Robert Anthony Andrews, Kerry Andrews, and the Ruby Trust, filed separate proceedings against the Lomax parties. The crux of the matter was the enforcement of tailored discovery orders that had been consented to by both parties on 4 November 2021 and subsequently varied on 15 December 2021.

The legal issues centred on whether the Lomax parties had fulfilled their obligations under the tailored discovery orders. Specifically, the court needed to determine if there was sufficient reason to believe the Lomax parties had failed to produce certain categories of documents, particularly those related to Paul Lomax's proposal for a cash bonus payment from Arrow, Arrow's tax compliance, wage subsidy claims, and employment records. The court also had to address whether the Lomax parties had provided all relevant documents within their control, including those held by Arrow’s former accountants.

The court found that the Lomax parties had indeed breached the tailored discovery orders. Evidence showed that the Lomax parties had not discovered certain documents, such as signed employment agreements, and had potentially deleted or edited discoverable documents. The court held that the Lomax parties were in default, triggering the broad jurisdiction under Rule 7.48 of the High Court Rules 2016. The court ordered an independent IT specialist to investigate the Dropbox files held by Chester, focusing on the allegations of document deletion and editing. Additionally, the Lomax parties were directed to provide further discovery of specific documents and to obtain an affidavit from an employee involved in the discovery process. The costs of this investigation were initially to be borne by Arrow, with reimbursement contingent on the findings of the IT specialist.

Furthermore, the court addressed the issue of documents held by Arrow’s former accountants, ruling that the Lomax parties should have discovered all relevant documents they held, despite the existence of an outstanding invoice. The court mandated that both parties jointly request the accountants to release all Arrow-related documents to them. The court also directed Mr Lomax to confirm whether he had reviewed all his devices and email accounts for relevant correspondence with Lara Miller. Finally, the court reserved the issue of costs, allowing any party seeking costs to file a memorandum within a specified timeframe after the IT specialist’s report.

Orders