Ballantyne Trustees Limited v HFK Limited

[2019] NZHC 1425

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2015-409-000173

[2019] NZHC 1425

BETWEEN

BALLANTYNE TRUSTEES LIMITED AND OTHERS

First Plaintiffs

AND

SENG BOU KEUNG

Second Plaintiff

AND

HFK LIMITED

First Defendant

AND

KEIRAN ANNE HORNE

Second Defendant

Hearing:

17 June 2019

Appearances:

M J Tingey for First and Second Plaintiffs

J E Eckford for First and Second Defendants

Judgment:

20 June 2019

JUDGMENT OF GENDALL J

Introduction

[1]    This proceeding commenced on 31 March 2015 relates to the liquidation in 2009 of Goose Bay Ranch Holdings Ltd (the company). It involves claims against the company’s liquidators made by the first plaintiffs who are shareholders in the company and the second plaintiff who is the sole director of the company and the trustee of a trust which also owns shares. Together the plaintiffs allege breaches of the Companies Act 1993 and negligence by the second defendant (Ms Horne) who is one of the two liquidators of the company and the first defendant which is the accountancy practice of which she was a member at the time.

BALLANTYNE TRUSTEES LIMITED v HFK LIMITED [2019] NZHC 1425 [20 June 2019]

[2]    The present proceeding had been stayed by consent since 1 September 2016 as a result of the plaintiffs paying a costs award of $10,060.87 two days late. This costs award was due to be paid by 31 August 2016 and was paid in full by the plaintiffs on 2 September 2016.

[3]    The first defendant and Ms Horne sought to have this proceeding struck out for want of prosecution in the absence of any attempt by the plaintiffs to take steps to either proceed with trial, compromise or withdrawal following that 1 September 2016 stay.

[4]    That strike out application was heard in this Court on 2 April 2019 by Associate Judge Johnston. In a judgment he delivered on 29 April 2019 (the decision) Associate Judge Johnston dismissed the strike out application. In doing so, Associate Judge Johnston made a number of findings. First, he found that the plaintiffs’ actions had in fact amounted to inordinate delay, and secondly, that this delay was inexcusable but thirdly, he declined to strike out the proceeding on the basis that the defendants had not demonstrated the requisite prejudice. Associate Judge Johnston formed the view that any additional prejudice caused by delays after the commencement of the proceeding was likely to be minimal and he was not persuaded by the defendants’ contention that the mere passage of time entitled them to say they will be prejudiced here. He was satisfied the proceeding could still be tried fairly and thus he dismissed the strike out application.

[5]    The defendants now seek a review of the decision pursuant to r 2.3 of the High Court Rules. This rule has been repealed but continues to apply to litigation such as the present proceeding which was commenced prior to 1 March 2017.

Application to adduce further evidence

[6]    At the outset of the hearing of this review application, the defendants sought leave to adduce further evidence of Ms Horne contained in an affidavit she had sworn dated 6 May 2019. Leave was opposed by the plaintiffs and, after considering submissions from counsel as to that matter, I dismissed the leave application. I indicated too that my reasons for doing so would follow. I now briefly set out those reasons.

[7]    On this leave application r 2.3(4)(b) of the High Court Rules provides that any such evidence the subject of an appropriate application may be admitted if it is in the interests of justice to do so. Here, the defendants say that Ms Horne’s additional evidence is essentially a response to the decision and it seeks to set out further information concerning the prejudice that the defendants are alleged to have suffered as a result of the delay here.

[8]    In response to Ms Horne’s 6 May 2019 affidavit, the plaintiffs in filing their notice of opposition to the leave application have also filed a further reply affidavit from the second plaintiff, Mr Keung, dated 6 June 2019.

[9]    For this additional evidence to be admitted on the present review application (which in a sense is akin to an appeal), it must be fresh evidence and cogent in the sense that it is relevant to matters at issue. The additional evidence from Ms Horne in my view is not wholly fresh and it would have been available for the original strike out application. Essentially too it repeats earlier evidence from Ms Horne which was before Associate Judge Johnston. I am satisfied that the evidence was available prior to the 2 April 2019 hearing and effectively is largely a repetition of matters which were before the Court at that time.

[10]   For these reasons, I refused leave to have either this new affidavit of Ms Horne, or indeed the reply affidavit from Mr Keung, admitted as evidence in this review hearing.

Substantive review application

[11]   In the defendants’ substantive application for review of the decision (filed in this Court on 6 May 2019) the grounds on which the defendants sought the review were outlined as follows:

(a)The decision erred in finding that “the additional prejudice caused by delays after the commencement of the proceeding is likely to be minimal”; and

(b)The decision erred in its application of the principles in LHL Leasing Solutions Ltd v Pinto Ltd.1

Legal principles

[12]   The approach of this Court on a review pursuant to r 2.3 of the High Court Rules where the decision of the Associate Judge is a recent one following full argument from opposing parties is essentially appellate.2

[13]   Given that the starting point is the decision of the Associate Judge, an applicant has the burden of persuading this Court that the decision was wrong in principle, that it rested on unsupportable findings of fact and/or applied wrong principles of law.3

[14]   The substantive rule applicable in this case for dismissal of a proceeding for want of prosecution is r 15.2 of the High Court Rules. The leading authority on this is Lovie v The Medical Assurance Society of New Zealand Ltd.4 This requires the applicant to show:

(a)the plaintiff is guilty of an inordinate delay;

(b)such delay is inexcusable;

(c)the defendant has suffered prejudice as a result of post-issue delay. If, however, the defendant has also suffered prejudice as a result of pre- issue delay, the defendant will need to show only something more than minimal additional prejudice suffered as a result of the post-issue delay to justify striking out the proceeding.

[15]   The overriding issue here for exercise of the Court’s discretion is whether justice can be done despite the delay.

1      LHL Leasing Solutions Ltd v Pinto Ltd (2016) NZHC 1017

2      Perriam v Wilkes (2014) NZHC 2192 at [4].

3      Opthalmological Society of New Zealand Incorporated v Commerce Commission [2003] 2 NZLR 145.

4      Lovie v The Medical Assurance Society of New Zealand Ltd [1992] 2 NZLR 244 (HC).

[16]   A recent application of these principles occurred in a decision in this court LHL Leasing Solutions Ltd v Pinto Ltd.5 In this case, initially a claim was not struck out by Associate Judge Doogue and this was subsequently confirmed on review by Justice Lang. This was on the basis that the defendants could not point to any prejudice they would suffer referable specifically to the delay. The presumed prejudice, arising out of the fact that as time passes it will be more difficult to locate witnesses and the memories of witnesses, would have dimmed further, was seen as not sufficient.

Analysis

[17]   In the present case the proceeding has originally been stayed by consent since 1 September 2016, as I have noted, because of the late payment of a costs award.

[18]   Neither party sought to lift the stay initially or otherwise to progress the proceeding and the stay was only recently lifted as a result of the present application.

[19]   The plaintiffs explain that the delay in their issuing these proceedings was caused by the fact that the second plaintiff Mr Keung as the driving force here was adjudicated bankrupt on 20 September 2010 and was not discharged from bankruptcy until 9 November 2013. That bankruptcy it is said related to the same matters which resulted in the liquidation of the company here. The plaintiffs’ statement of claim here was filed on 31 March 2015.

[20]   Subsequent to that time, it is claimed that any additional delay in progressing these proceedings was excusable in particular as a result of the Kaikoura earthquake sequence which took place on 14 November 2016. It is said that this had a severe effect on the second plaintiff in particular and compromised his financial and practical ability to progress these proceedings on both his own behalf and on behalf of the first plaintiffs.

[21]   The plaintiffs contend there has been no actual prejudice in this case shown by the defendants nor is any real prejudice likely. They maintain that it will be entirely a document heavy case with matters largely determined on the documentation which the

5      LHL Leasing Solutions Ltd v Pinto Ltd (2016) NZHC 1777.

liquidator defendants were obliged to maintain throughout the liquidation – memories can be refreshed once the documents are referred to, and I am of the view that this will enhance the reliability of the evidence presented. The plaintiffs say this case is on all fours with the LHL decision which generally applies Lovie and that no real prejudice will be suffered by the defendants as a result of the passage of time here.

[22]   Ms Horne takes issue with this. She maintains that to reinvigorate these proceedings after what is claimed to be two years of inaction would cause her and the first defendant significant prejudice. Ms Horne states she has not been employed by the first defendant since 1 April 2018 and the liquidation events in question took place some nine years ago. This liquidation Ms Horne says involved multiple companies and this proceeding will require consideration of a huge amount of information involving something over 6,000 documents at least. Ms Horne confirms in her evidence that she no longer undertakes liquidation work but rather focuses on board memberships and compliance. She says too that her co-liquidator of the company at the time has long since retired. In addition, Ms Horne indicates in her evidence that the first defendant is no longer trading having been incorporated into a new company, Nexia New Zealand Ltd.

[23]   Against all of these matters, the plaintiffs contend that if their claim were to be struck out, they would themselves be very seriously prejudiced particularly because their claim could not be brought again as it is outside the limitation period. This would leave them without any possible remedy.

[24]    On all of these issues, I am satisfied that no error occurred in Associate Judge Johnston’s decision here. Like the Associate Judge, I take the view that little real prejudice even of a minimal kind arises in this case because of the delays to date even after 31 March 2015 when the proceeding was commenced. I reach this conclusion again mindful that this will be a case largely involving documentary evidence from the liquidators and others.

[25]   And, as the decision in Lovie emphasised, the overarching consideration in the end is whether justice can be done despite delays which occur. I agree with Associate Judge Johnston’s concession on overall fair trial questions that this proceeding is still

able to be tried fairly and strike out here is not appropriate. This is not a case which as I see it will be heavily dependent on oral testimony. I conclude that the defendants have been unable to satisfy the burden on them of persuading this Court that Associate Judge Johnston’s decision was wrong in principle, that it rested on unsupportable findings of fact and/or that it applied wrong principles of law.

Result

[26]   The application by the first and second defendants to review the decision of Associate Judge Johnston dated 29 April 2019 is dismissed.

[27]   As to costs, they are reserved. In the event that counsel for the parties are unable to agree the question of costs between themselves, then they may file memoranda (sequentially) which are to be referred to me and in the absence of either party indicating they wish to be heard on the matter, I will give my decision on costs based on the memoranda filed and all material then before the court.

Gendall J

Solicitors:

Ronald Angland & Son, Christchurch Counsel: M J Tingey, Barrister, Christchurch Parker Cowan, Queenstown