Banks v Farmer - [2018] NZHC 604

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-57

[2018] NZHC 604

BETWEEN
A D BANKS

Plaintiff

AND

W R FARMER

First Defendant

S M GAMBLE
Second Defendant

C J MASSAM
Third Defendant

D L FREDERICK

Fourth Defendant

Hearing: 11 December 2017

Appearances:

J W A Johnson and N G Lawrence for the Plaintiff

R J Hooker for the Second, Third and fourth Defendants

Judgment:

5 April 2018

JUDGMENT OF PALMER J

This judgment is delivered by me on 5 April 2018 at 2 pm pursuant to r 11.5 of the High Court Rules.

.....................................................
Registrar / Deputy Registrar

Solicitors:
Vallant Hooker & Partners, Auckland Wynn Williams, Christchurch

BANKS v FARMER & ORS [2018] NZHC 604 [5 April 2018]

Summary

[1] Mr Adam Banks sues directors of a company for alleged breaches of the Securities Act 1978 (the Act) and the Companies Act 1993 in investing his money. One director who lives in the United States, Mr Douglas Frederick, protests the Court’s jurisdiction. Associate Judge Doogue set aside the protest.1 Mr Frederick seeks review by the High Court of that decision on the ground there is not a serious question to be tried here. He says there is evidence Mr Banks was a habitual investor and he was not investing his own money.

[2] To decline to assume jurisdiction for evidential reasons before the parties have completed disclosure and exchange of evidence is likely, as a matter of fact, to be unjustified in most circumstances unless there is no sufficiently plausible evidential foundation. I consider there is a sufficiently plausible evidential foundation that Mr Banks was not a habitual investor for the purposes of the Act, which is not the same as being financially literate. I do not consider the source of Mr Banks’ funding affects his legal claims. The questions raised by Mr Frederick can be explored at trial in the light of all the evidence. They are not a basis for the Court to decline to assume jurisdiction. I uphold Associate Judge Doogue’s decision to set aside the protest to jurisdiction.

What happened?

Mr Banks, Mr Frederick and Mako

[3] Mr Frederick resides in the United States. In December 2011, he became a director of Yellowtuna Holdings Ltd which became Mako Networks Holdings Ltd (Mako) in April 2013. A November 2010 report on Mako capital-raising listed him as Chair of the Board. Mako’s 2012, 2013 and 2014 financial statements listed Mr Frederick as a director.

[4] Mr Banks says he was approached about investing in the company that became Mako by Mr William Farmer, a director, in late 2010. Mr Banks invested in Mako by making loans to it under three agreements in February 2011, June 2013 and March

1 Banks v Farmer [2017] NZHC 1596.

2014. The first two loans totalled around UKP 1,500,000, and the third was NZD 500,000.

[5] In early 2014 Mako restructured existing debt to Telecom Rentals Ltd, a Spark subsidiary, which…

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 Banks v Farmer

Details

AGLC: Banks v Farmer [2018] NZHC 604
Case: [2018] NZHC 604
Decision Date: 5 April 2018

CaseChat Overview and Summary

In the High Court of New Zealand, Mr Adam Banks sued the directors of Mako Networks Holdings Ltd for alleged breaches of the Securities Act 1978 and the Companies Act 1993 in relation to investments made in the company. Mr Douglas Frederick, a director residing in the United States, filed a protest to the court's jurisdiction. Associate Judge Doogue set aside the protest. Mr Frederick sought review of that decision, arguing there was no serious question to be tried as Mr Banks was a habitual investor and the money he invested was not his own. The court was required to decide if there was a sufficiently plausible evidential foundation that Mr Banks was not a habitual investor and if the source of Mr Banks' funding affected his legal claims.

The court found that there was a sufficiently plausible evidential foundation that Mr Banks was not a habitual investor for the purposes of the Securities Act, and this was not the same as being financially literate. The court also found that the source of Mr Banks' funding did not affect his legal claims. The questions raised by Mr Frederick could be explored at trial in light of all the evidence. The court upheld Associate Judge Doogue's decision to set aside the protest to jurisdiction.

Orders