Banks v Farmer

[2021] NZHC 1922

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-000057

[2021] NZHC 1922

BETWEEN

ADAM DAVID BANKS

Plaintiff

AND

WILLIAM ROBERT FARMER

First Defendant

AND

SIMON MATHEW GAMBLE

Second Defendant

AND

CHRISTOPHER JAMES MASSAM

Third Defendant

AND

DOUGLAS LEROY FREDERICK

Fourth Defendant

Hearing:

1 to 24 July 2019, 11 December 2019 and 5 and 6 October 2020

Appearances:

Jeremy Johnson, Gregory Simms and William Porter for the Plaintiff

Robert Hollyman QC, Alec Steel, Lance Green and Ana Lenard for the First Defendant

Second Defendant in Person Third Defendant in Person

No appearance for the Fourth Defendant

Judgment:

28 July 2021

JUDGMENT OF MOORE J

This judgment was delivered me on 28 July 2021 at 2:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

BANKS v FARMER & ORS [2021] NZHC 1922 [28 July 2021]

Contents

Paragraph Number

INTRODUCTION

THE CLAIM............................................................................................................ [9]

BACKGROUND................................................................................................... [12]

The beginnings of YellowTuna and Mako...................................................... [14]

Corporate structure.......................................................................................... [19]

Growth and development of Mako.................................................................. [22]

Mako in 2007 to 2009 and PCI-DSS certification.......................................... [27]

Telecom funding................................................................................................ [29]

The Private Placement Memorandum (2010)................................................ [31]

Mr Banks meets Mr Farmer............................................................................ [38]

Agreement 1....................................................................................................... [50]

Mako in 2011 and 2012

Customers and marketing............................................................................ [54]

Mr Frederick and Mr Frawley join the Board and Mr Gamble moves to

the United States.......................................................................................... [66]

Finances and cashflow................................................................................ [71]

Mako in 2013

Telecom Rentals........................................................................................... [79]

Agreement 2....................................................................................................... [85]

Initial Public Offering (“IPO”)........................................................................ [90]

The Norcal Reports

Norcal Marketing Report (15 March 2013)................................................. [92]

The Norcal Pipeline Report (1 July 2013)................................................... [98]

Solvency test paper......................................................................................... [102]

Deloitte Planning Report................................................................................ [105]

Restated accounts for year ended 30 June 2012........................................... [107]

Bell Gully instructions.................................................................................... [108]

The Weldon Report......................................................................................... [109]

Telecom Rentals raises concerns.................................................................... [114]

Customers and marketing.............................................................................. [117]

Mr Frawley raises concerns........................................................................... [121]

Mr Frawley resigns......................................................................................... [127]

Telecom Rentals restructures debt................................................................ [130]

Agreement 3..................................................................................................... [137]

Mako in 2014.................................................................................................... [153]

Sprint.......................................................................................................... [155]

D&S Communications............................................................................... [156]

Goldman Sachs.......................................................................................... [157]

BP North America...................................................................................... [158]

Mako in 2015................................................................................................... [160]

Post-receivership events................................................................................. [164]

DEFENCE APPLICATIONS FOR POST-TRIAL PRODUCTION ORDERS AND TO RECALL MR BANKS

Introduction..................................................................................................... [166]

Background..................................................................................................... [168]

The evidence.................................................................................................... [177]

Discussion and findings.................................................................................. [180]

Credibility findings......................................................................................... [191]

FIRST CAUSE OF ACTION – S 37 OF THE SECURITIES ACT................ [210]

The parties’ positions...................................................................................... [211]

What is the correct approach for this cause of action?............................... [213]

Can the Agreements be considered security allotments?............................. [219]

Agreement 1..................................................................................................... [224]

Agreements 2 and 3......................................................................................... [225]

Were there offers of securities made to the public?

Legal principles.......................................................................................... [228]

What is the effect of the chosen approach?.................................................. [248]

Was there an offer to the public?

Agreement 1

(a)Factual circumstances................................................................ [249]

(b)Analysis on Agreement 1.......................................................... [289]

(c)Conclusion................................................................................. [300]

(d)Was Mr Banks a habitual investor?........................................... [301]

Agreement 2

(a)Factual…