Banks v Farmer - [2017] NZHC 1596

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-57 [2017] NZHC 1596

BETWEEN
ADAM DAVID BANKS

Plaintiff

AND

WILLIAM ROBERT FARMER First Defendant

SIMON MATHEW GAMBLE Second Defendant

CHRISTOPHER JAMES MASSAM Third Defendant

DOUGLAS LEROY FREDERICK Fourth Defendant

Hearing: 21 June 2017

Appearances:

J W A Johnson for Plaintiff
R J Hooker and S Taylor for Second, Third and Fourth
Defendants

Judgment:

11 July 2017

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on
11.07.17 at 3.30 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

BANKS v FARMER & ORS [2017] NZHC 1596 [11 July 2017]

Background

[1] These proceedings were served by substituted service on the fourth defendant, Mr Douglas Frederick, who resides in Texas, the United States of America (“USA”). They arise out of an investment which the plaintiff, Mr Adam Banks, made in a company called Mako Networks Holdings Limited (“Mako”) in accordance with three different agreements entered into from 2011 to 2014. Mako is now in receivership and liquidation.

[2] Although the fourth defendant now resides in the USA, he was appointed a director of Yellowtuna Holdings Limited (“Yellow”) on 9 December 2011. That company later became Mako on 8 April 2013.

[3] It is not in dispute that the plaintiff made the payments which will be described in more detail subsequently in this judgment.

[4] After the proceedings were served on the fourth defendant in the USA, he filed a protest to the jurisdiction of the New Zealand Courts to hear the matter under r 5.49 of the High Court Rules (“HCR”).

[5] The plaintiff seeks an order setting aside the fourth defendant’s protest to jurisdiction dated 20 January 2017 in relation to the first, third and fourth causes of action, as set out in the plaintiff's amended statement of claim dated 29 June 2016 (“SOC”).

What the plaintiff claims

[6] The plaintiff's claims are set out in full in his SOC. The relevant claims can be summarised as follows:

a) Under s 37 of the Securities Act 1978 (“SA”): the defendants should repay the plaintiff because Mako and the directors failed to comply with their obligations under the SA when raising money from the public;

b)Under s 55G of the SA: the defendants should repay the plaintiff's loans because they were entered into in reliance upon advertisements that included untrue statements made by Mako and the defendants; and

c) Under s 301 of the Companies Act 1993 (“CA”): the plaintiff, as a creditor of Mako, wants the defendants to repay a sum equal to the plaintiff’s advances because they breached their duties as directors of Mako.

[7] I note that a claim was also brought pursuant to the Fair Trading Act 1986. The plaintiff accepts that that claim cannot proceed and agrees that the court ought to make an order setting aside the protest to jurisdiction on condition that the plaintiff re-plead its case to omit the Fair Trading Act claim.

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 [2017] NZHC 1596
Case: [2017] NZHC 1596
Decision Date: 11 July 2017

CaseChat Overview and Summary

Banks v Farmer [2017] NZHC 1596 is a case concerning the jurisdiction of the New Zealand courts to hear a claim against a party residing overseas. The plaintiff, Mr Adam Banks, made an investment in a company called Mako Networks Holdings Limited, which is now in receivership and liquidation. Mr Banks made three separate agreements with Mako between 2011 and 2014. Mr Douglas Frederick, the fourth defendant, was appointed a director of Mako on 9 December 2011, and the company later became Mako on 8 April 2013. Mr Frederick now resides in the United States of America. Mr Banks seeks an order setting aside the fourth defendant’s protest to jurisdiction dated 20 January 2017 in relation to the first, third and fourth causes of action, as set out in the plaintiff's amended statement of claim dated 29 June 2016. The court was required to determine whether it had jurisdiction to hear the case against the fourth defendant. The court applied a two-stage test to determine whether the fourth defendant's protest to jurisdiction should be set aside. Firstly, the court had to establish whether there was a good arguable case that the claim fell within one or more of the circumstances under rule 6.27 of the High Court Rules in which service overseas may be effected without leave. Secondly, the court had to consider whether it should assume jurisdiction by reason of the matters set out in rule 6.28(5)(b) to (d) of the High Court Rules. The court found that there was a good arguable case that the claim fell within rule 6.27(2)(h) of the High Court Rules, which provides that a necessary or proper party to proceedings may be served overseas without leave. The court also found that there was a serious issue to be tried on the merits of the claim that the plaintiff was a member of the public entitled to the recovery of his investment under the Securities Act 1978. The court concluded that the plaintiff had satisfied the requirements under rule 6.29(1)(a) of the High Court Rules, meaning the court was entitled to assume jurisdiction. The court also found that it was in the interests of justice that the failure to apply for leave should be excused, satisfying the requirements under rule 6.29(1)(b) of the High Court Rules. The court granted the application to set aside the fourth defendant's protest to jurisdiction.

Orders