Bannock v Monaco Management Limited

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2013-409-1701 [2016] NZHC 2842

BETWEEN

MICHAEL WILLIAM BANNOCK AND

ANNE MARGARET BANNOCK AND OXFORD STREET TRUSTEES (2010) LIMITED AND THE OTHER PLAINTIFFS LISTED IN SCHEDULE 1

TO THE STATEMENT OF CLAIM Plaintiffs

AND

MONACO MANAGEMENT LIMITED First Defendant

AND

MONACO VILLAGE LIMITED (IN LIQUIDATION AND RECEIVERSHIP) Second Defendant

AND

SCOTT PATRICK SANDERS Third Defendant

Hearing:	29-30 August, 1-2, 5-9, 12-16 and 19 September 2016
Appearances:	P G Skelton QC and S M Thompson for Plaintiffs Q M Hay and A D Marsh for First and Third Defendants
Judgment:	28 November 2016

JUDGMENT OF DUNNINGHAM J

BANNOCK v MONACO MANAGEMENT LIMITED [2016] NZHC 2842 [28 November 2016]

Table of Contents

Summary of findings .................................................................................................. Introduction ............................................................................................................[1] Background ..........................................................................................................[10]

The development commences  [10] The Hotel Lease  [20] A problem with the Securities Act  [23] The Enforceable Undertaking and the Exemption Notice  [24] The Cottage Lease  [30] Scott Sanders becomes involved  [34] Sales under MVL’s ownership  [46] Pooling or separate accounting?  [48] Renewals and registration  [54]

The plaintiffs ........................................................................................................[63] The defendants .....................................................................................................[65] The pleadings .......................................................................................................[69] The Securities Act ................................................................................................[75]

Were the sale and purchase agreements subject to a Cottage Lease participatory securities? .............................................................................................................[83]

Does the exemption in s 5(1)(b) apply? ............................................................. [113] Is s 37 invoked?..................................................................................................[123]

Where the sale and purchase of units was the “allotment” of a security, was it in

every case offered to the public? ........................................................................[126]

Were any of the plaintiffs close business associates?  [136]

Were there any investors who were required to pay a minimum subscription price of at least $500,000 for the securities before the allotment of those securities?            [146]

Were any of the plaintiffs selected otherwise than as members of the public? ..[149] Does s 6(1) mean that s 37(4) does not apply to subsequent purchasers? .........[152] Discussion          [159] Can the plaintiffs get the declaratory relief they seek? ......................................[163] What is invalidated by s 37(4)?..........................................................................[164] Discussion [167]

Is declaratory relief precluded by s 37AL? ........................................................[175] Should declaratory relief be granted in the exercise of the Court’s discretion?.[181] Discussion    [189] Orders under s 37(6)...........................................................................................[196]

Can Mr Sanders be made liable to repay the subscriptions of the relevant MVL

plaintiffs?  [199]

Can MML be made liable to repay the subscriptions of the relevant MVL

plaintiffs?............................................................................................................[209] Conclusion..........................................................................................................[216]

Summary of findings

AThe sale of units in the Monaco Resort which are subject to Cottage Leases is the sale of a participatory security.

BSuch sales are not exempted from the securities law regime by s 5(1)(b) of the Securities Act 1978.

CThe second and third defendants are jointly and severally liable to repay the subscription monies (plus interest under s 37(6)), to those MVL plaintiffs whose claims are not statute-barred.

D        There is no scope to declare the leases invalid and of no effect under s 37(4)

of the Act.

EFor  that  reason,  I  do  not  need  to  consider  the  defences  raised  by  the defendants to such a finding.

FI decline to make a declaration that the agreements for sale and purchase of…