Bigyard Holdings Limited (in receivership) v Tasmandairy Limited
[2017] NZHC 1918
•11 August 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-002958 [2017] NZHC 1918
BETWEEN BIGYARD HOLDINGS LIMITED (IN
RECEIVERSHIP) First Plaintiff
ASSET FINANCE LIMITED Second Plaintiff
AND
TASMANDAIRY LIMITED First Defendant
YI WU (ALSO KNOWN AS EASTER WU)
Second Defendant
Hearing: 11 April 2017 Appearances:
Stephen Clews for the Second Plaintiff
Chen Jiang for the DefendantsJudgment:
11 August 2017
JUDGMENT OF MOORE J
This judgment was delivered by me on 11 August 2017 at 3:30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
BIGYARD HOLDINGS LIMITED (IN RECEIVERSHIP) & ANOR v TASMANDAIRY LIMITED & ANOR [2017] NZHC 1918 [11 August 2017]
Contents
Paragraph
Number
Introduction ..............................................................................................................[1] Factual background .................................................................................................[5] The history of the premises and Doxcon’s demise.................................................[9] How Bigyard came to be involved ........................................................................[18] Ownership disputes between Bigyard and Tasmandairy ...................................[24] Dispute over computer equipment .......................................................................[27] Dispute over machinery .......................................................................................[36] How Asset Finance came to be involved...............................................................[41] Summary judgment principles .............................................................................[45] The causes of action ...............................................................................................[50] Conversion ...........................................................................................................[51] Detinue .................................................................................................................[56] Has the plaintiff made out its claim? ....................................................................[58] Breach of the lease agreement between Doxcon and Tasmandairy ...................[62] Abandonment .........................................................................................................[69] Estoppel ...................................................................................................................[80] Failure to identify and prove Doxcon’s assets .....................................................[85] Draft TSE evaluation............................................................................................[87] Mr McConnon’s “asset list” ................................................................................[91] Evidence of Hu Lu ................................................................................................[95] Asset Finance amends its claims for summary judgment...................................[105] Discussion ..........................................................................................................[107] Appropriate relief................................................................................................. [119] The defendants’ counterclaim for trespass ........................................................[125] Should Mr Wu have been named as a defendant? ............................................[130] Result .....................................................................................................................[131] Costs ......................................................................................................................[132]
Introduction
[1] Bigyard Holdings Limited (in receivership) (“Bigyard”) defaulted on its loan to Asset Finance Limited (“Asset Finance”). Asset Finance seeks to enforce its general security. It claims it has possessory rights in respect of various plant and equipment it says is owned by Bigyard. However, the plant and equipment is located at premises owned and occupied by another business, Tasmandairy Limited (“Tasmandairy”) which is refusing to hand over the assets.
[2] Asset Finance sues Tasmandairy and its director (Easter Wu (“Mr Wu”)) in conversion and detinue. It seeks summary judgment and an order for the delivery up of specified plant and equipment. Tasmandairy and Mr Wu resist the application for summary judgment. They allege no fewer than four available defences, although some of these are advanced as alternatives.1 The defences are:
(a) Asset Finance has failed to identify and prove which assets it has rights in;
(b)the security interest never attached to the claimed assets because these assets passed to Tasmandairy under a lease agreement with a third party and were never owned by Bigyard;
(c) there are no rights of possession because the claimed assets have been abandoned; and
(d)Bigyard is estopped from pursuing its claim because it failed to make adequate arrangements to remove the plant and equipment.
[3] Tasmandairy and Mr Wu counterclaim in trespass. They say that leaving the goods on land without permission constitutes a trespass on the land.
1 The defendants initially pleaded the defence of “unconscious bailee” but withdrew this at the
hearing. I do not discuss it in this Judgment.
[4] However, that summary, brief as it is, belies the factual and legal complexities which sit behind this dispute. For that reason, they require some explanation.
Factual background
[5] On my calculation there are at least a dozen entities connected, in one way or another, with the intricate web of interrelationships which have evolved from events which commenced as early 2002 when the premises situated at 26 Waipareira Avenue, Henderson (“the premises”) were leased to a company which produced health and medical products.
[6] The first plaintiff, Bigyard, is now in receivership. Its sole director is an Auckland solicitor, Brian Ellis (“Mr Ellis”). Bigyard represents the business interests of another person, Geoffrey Mathis (“Mr Mathis”). Mr Ellis and Mr Mathis formed a joint business venture incarnated in various trusts and companies. Bigyard was one of these. The second plaintiff, Asset Finance, as its name suggests, is a finance company. Its human agent involved in these proceedings is Clive George (“Mr George”), a business relations manager. Mr George approved a loan transaction and a concomitant general security agreement with Bigyard giving rise to the interest the company claims in the plant and machinery.
[7] The first defendant, Tasmandairy, owns and occupies the premises. These are the premises on which the claimed assets are stored. Tasmandairy’s sole director is the second defendant, Mr Wu.
[8] Beyond these parties the other participant of primary significance is a company called Doxcon Pharmaceuticals Limited (“Doxcon”). Doxcon, which is now in liquidation, used to produce dairy products, particularly dairy infant formula for export to China and other Asian markets. Asset Finance claims Doxcon once owned the plant in which they claim possessory rights.
The history of the premises and Doxcon’s demise
[9] The relevant chronology begins in 2009 when a company, Naturies Laboratories Limited (“Naturies”) purchased the premises. The premises is a large factory building situated on a 1.2 hectare site.
[10] From 2010 a number of businesses moved into the premises. They operated under the auspices of Naturies. One of those companies was Doxcon.
[11] Also operating out of the premises was a company called Supermega Market Limited (“Supermega”). Supermega operated independently of the Naturies companies but distributed their products including those of Doxcon.
[12] Right from the outset, Doxcon obtained significant funding for its business operations. On 3 October 2011 Doxcon granted the BNZ bank (“the bank”) a general security over its present and after acquired property in return for credit facilities.
[13] Despite this, and not long into its trading existence, Doxcon encountered financial difficulties which required a large injection of capital if the business was to survive. In or around July 2013 Doxcon managed to obtain investment from a Chinese company which, in return, became a 24.9 per cent shareholder. As a consequence, one of the Chinese company’s representatives, Mr Feng, became a director of Doxcon and the other Naturies companies. Despite the investment, Doxcon’s financial position remained precarious and according to Mr Wu it ceased production by December 2013. However, the Naturies companies devised a solution. Naturies would sell the premises in order to provide much-needed capital for Doxcon which, in turn, would enter into a lease agreement with the purchaser.
[14] After efforts to locate an external purchaser proved fruitless, the directors of Doxcon approached Mr Wu and raised the possibility of him or one of his companies purchasing the premises. In view of Supermega’s business relationship with the Naturies companies, Mr Wu agreed to the proposal and incorporated Tasmandairy for the express purpose of purchasing the premises. In March 2014 Tasmandairy and Naturies entered into a sale and purchase agreement. Naturies then entered into a
deed of lease with Doxcon dated 16 May 2014. The term of the lease was five years. The balance of the Naturies companies continued to operate from the premises, as did Supermega.
[15] These new arrangements proved ineffective. Again, Doxcon was unable to trade profitably. It began to default on its rent obligations soon after its lease with Tasmandairy commenced. Mr Wu deposes that the lease was cancelled on 7 January
2015. Indeed, on 9 January 2015, Ms Lu, one of Doxcon’s directors, signed an agreement confirming the lease had been cancelled two days earlier. However, Doxcon then issued proceedings against Tasmandairy disputing the validity of the cancellation. It obtained interim orders on 26 February 2015 permitting it to return in possession until the next case management conference.2
[16] However, the substantive dispute between Doxcon and Tasmandairy never took place. This was because Doxcon was placed in liquidation on 7 August 2015 and the proceedings against Tasmandairy were discontinued. The circumstances of Doxcon’s liquidation are discussed in more detail below.
[17] On 11 August 2015 Tasmandairy’s solicitors sent an email to the liquidators, PricewaterhouseCoopers (“PwC”). The email explained that Doxcon’s liquidation put it in breach of the lease and gave Tasmandairy a right to cancellation. Tasmandairy’s solicitors advised that the company would be cancelling the lease and re-entering the premises on 27 August 2015 if the breach was not remedied. Tasmandairy’s solicitors also advised that the liquidators would have a right to claim Doxcon’s chattels but would need to arrange a convenient time to remove them. Tasmandairy gave formal notice of its intention to cancel the next day. It recovered possession of the premises on 27 August 2015.
How Bigyard came to be involved
[18] In 2014 Mr Ellis and Mr Mathis sensed an opportunity to invest in the struggling Doxcon. Mr Ellis deposes that pursuant to an agreement dated
15 September 2014 the company under his directorship, T K (Hong Kong) Limited
2 See Doxcon Pharmaceuticals Limited v Tasmandairy Limited [2015] NZHC 295 and Doxcon
Pharmaceuticals Limited v Tasmandairy Limited [2015] NZHC 350.
(“TKL”), bought 10 per cent of Doxcon’s shares and agreed to advance working capital through a shareholder. That shareholder was Mr Mathis in his capacity as trustee of two family trusts.
[19] Mr Ellis deposes that following negotiations with the bank, the bank transferred the general security it held over Doxcon’s assets to the family trusts associated with Mr Mathis and a company called Truby King Limited (“Truby King”) of which Mr Ellis was a director. The deed of assignment dated 27 August
2014 shows that as at 30 July 2014 Doxcon was indebted to the bank in the sum of
$198.01. The Mathis trusts and Truby King paid the bank this figure in
consideration for the transfer of the bank’s general security over Doxcon’s assets.
[20] Over the next few months the Mathis trusts and Truby King advanced funds to Doxcon totalling $1,090,110. However, Doxcon’s chronic inability to perform led to the Mathis trusts and Truby King making demand on 3 July 2015 for the total repayment of the funds advanced. Three days later they served Doxcon with a notice of intention to sell collateral under s 144 of the Personal Properties Securities Act
1999 (“the PPSA”). The notice referred to:
“… all plant and equipment (fixed and stored), storage-racks, loading bay equipment, inventory, spare parts, office, equipment, desks, chairs and furniture, computer systems including trademarks, NIPs, formulations, recipes, designs, office manuals and everything else used by and belonging to Doxcon …”
[21] On 24 July 2015 the collateral was sold to TKL for $822,422.
[22] TKL then transferred its assets to Bigyard. This is evidenced by a resolution passed by the directors of Bigyard on 25 July 2015 to issue shares to TKL in consideration for Bigyard taking ownership of TKL’s assets.
[23] On 5 August 2015 Bigyard entered into a loan agreement to borrow $376,903 from Asset Finance. On the same day, Bigyard and Asset Finance entered into a general security agreement in relation to all of Bigyard’s present and after acquired property. The circumstances of this loan are discussed in greater detail below. Two days later, on 7 August 2015, Messrs Mathis and Ellis placed Doxcon into liquidation.
Ownership disputes between Bigyard and Tasmandairy
[24] Mr Wu deposes that immediately after Doxcon was placed into liquidation, Mr Mathis and Mr Ellis erected “Bigyard Holdings” signs throughout the premises. He says Mr Mathis and Mr Ellis told him that they were sorting out Doxcon’s business and assets.
[25] According to Mr Wu, Mr Ellis and Mr Mathis did not leave the premises until around 10 September 2015 despite Tasmandairy recovering possession on 27 August
2015. Mr Wu says that Mr Ellis and Mr Mathis did not tell him that Bigyard would be leaving any assets on the premises. He says he assumed they had taken any assets Bigyard claimed ownership of when they vacated the premises.
[26] In the months that followed Bigyard laid claim to plant, machinery and computer equipment situated at the premises. Bigyard attempted to gain access to the premises to claim the assets but was refused entry. The sequel to these events in respect of the computer equipment and the machinery is described below.
Dispute over computer equipment
[27] After Bigyard was refused entry Mr Ellis contacted Mr Wu saying he wished to remove all the computer equipment at the premises. Mr Ellis told Mr Wu that all of the computer equipment had been owned by Doxcon and had been sold to Bigyard. Mr Wu says that he asked for proof of ownership but none was provided.
[28] On 21 September 2015 Mr Wu asked Tasmandairy’s solicitors to contact Doxcon’s liquidators, PwC, to obtain a list of the assets which had been taken over by Bigyard. PwC responded to Mr Wu advising him that Doxcon’s assets had been taken over by the general security holders (the Mathis trusts and Truby King) and then on-sold to TKL. PwC told Mr Wu to contact Mr Ellis to obtain a list of assets.
[29] Mr Wu says that he approached Mr Ellis again and asked for a list of assets and proof of ownership. He says Mr Ellis failed to provide either.
[30] On 16 October 2015 Mr Ellis contacted Tasmandairy’s solicitors asking to remove computer equipment from the premises. Mr Wu’s solicitors responded requesting proof of ownership, a personal undertaking or PwC’s confirmation. Mr Ellis responded that a copy of all supporting documentation had been sent to PwC but, according to Mr Wu, refused to provide these when asked by Mr Wu’s solicitors. No asset list was provided and, according to Mr Wu, Mr Ellis also refused to provide a personal undertaking but offered an undertaking on behalf of Bigyard.
[31] At around the same time Tasmandairy was contacted by Mr Feng in his capacity as director of one of the Naturies companies, Home Care Health Management Limited (“Home Care”). Mr Wu says Mr Feng advised him the computer equipment left at the premises belonged to Home Care and provided him with documentation to support that claim.
[32] On 16 October 2015, two men engaged by Mr Mathis visited the premises to uplift the computer equipment. Mr Wu described them as attempting to “forcibly enter … and acting very aggressively”. He says they advised him that they were hired by Bigyard to remove the computer equipment and attempted to physically remove the items. Mr Wu called the Police.
[33] One of the men engaged by Mr Mathis, Mr McConnon gives a very different account. He says that he and another entered the premises and waited in reception for Mr Wu. According to Mr McConnon they sat on a couch and were served water by the staff as they waited. They were unaware that in the meantime Mr Wu had called the Police who arrived shortly afterwards. Mr McConnon described Mr Wu as becoming “very animated and … screaming ‘blue murder’”. He says the Police had to take Mr Wu outside to sit in a Police car until he calmed down. Mr McConnon says he showed the Police certain documents to prove that the computer equipment formed part of Bigyard’s assets. However, because the documents did not contain serial numbers the Police were not prepared to assist him in removing the computer equipment and Mr McConnon had no option but to leave empty handed. Later that evening he sent an email describing his version of events. That account is consistent with the narrative contained in his affidavit.
[34] On 18 October 2015 Tasmandairy received an email from Mr Feng advising that Home Care claims ownership in “lots of machineries, computers, SAP servers, SAP software, furnitures and documents and files”. Mr Feng urged Mr Wu not to “release them to anyone and/or any parties nor auction them nor abandon them during this time.” Mr McConnon continued to correspond with Mr Wu in an attempt to access the premises to take possession of the computer equipment. However, Mr Wu was intransigent and the correspondence between the two became increasingly hostile.
[35] Home Care then engaged solicitors who entered into correspondence with Mr McConnon regarding the computer equipment. Home Care’s solicitors repeated Mr Feng’s assertion that Home Care owned the computer equipment. In an email to Mr McConnon, Home Care’s solicitors referred to a document dated 31 March 2014 by which Doxcon’s directors resolved to take a transfer of Home Care’s computer equipment in consideration for assuming certain of Home Care’s liabilities. However, Home Care’s lawyers stated that the proposed transaction never took place and thus Home Care retains ownership of the computer equipment. Mr Wu says Bigyard never responded to this correspondence. The computer equipment remains at the premises.
Dispute over machinery
[36] After Bigyard left the premises sometime around September 2015, Mr Ellis contacted Mr Wu advising that Bigyard owned machinery at the premises. Mr Wu says he asked Mr Ellis for proof of ownership or an assets list. Again, he says Mr Ellis failed to do this.
[37] On 17 September 2015 Tasmandairy’s solicitors wrote to Bigyard and PwC demanding not only the removal of Bigyard’s machinery from the premises but also payment for leaving it on the premises after the termination of the lease and a bond of $600,000 to cover any damage which might be caused to the premises in the course of the removal process. Bigyard did not reply. Tasmandairy’s solicitors wrote to Bigyard again on 22 October 2015 putting Bigyard on notice that the failure to remove the machinery constituted a trespass to land. Tasmandairy’s solicitors
advised that if Bigyard failed to remove the machinery within 21 days it would be treated as abandoned and Tasmandairy would take steps to dispose of it.
[38] There does not appear to have been any further correspondence between the parties until 11 December 2015 when Bigyard’s solicitors wrote to Tasmandairy’s solicitors to advise that Bigyard had an agent coming to Auckland to inspect the plant and machinery. Bigyard’s solicitors sought confirmation that Tasmandairy would give the agent access to the premises for this purpose. A similar request was repeated on 15 December 2015.
[39] On 16 December 2015 Tasmandairy’s solicitors replied stating that, as they had received no response by 30 November 2015, Bigyard must be taken to have abandoned the machinery. However, and without prejudice to this position, Tasmandairy’s solicitors advised that Tasmandairy would allow Bigyard’s dairy engineers and professional removal contractors to inspect the machinery for a period of two hours on 18 December 2015 provided:
(a) Bigyard paid compensation totalling $164,450 for failing to remove
the machinery after termination of Doxcon’s lease;
(b) Tasmandairy retained the right to claim other damages or losses
suffered as a result of Bigyard’s conduct; and
(c) Bigyard provided copies of the alleged sale and purchase agreement for the machinery, the alleged security agreement and the relevant Personal Property Security Register registration by 17 December
2015.
[40] Tasmandairy’s solicitors sought a response by the end of the day. A reply sent on behalf of Bigyard on 17 December 2015 advised that Bigyard did not have the funds to comply with Tasmandairy’s conditions. Access for inspection was again requested but refused.
How Asset Finance came to be involved
[41] Asset Finance entered into a loan with Bigyard on or about 5 August 2015. The loan was secured by a general security agreement charging all the present and after acquired assets of Bigyard. A financing statement was registered on 31 July
2015.3
[42] Bigyard defaulted and on 12 July 2016 Asset Finance appointed Mr Gilbert as the receiver of Bigyard. Asset Finance made attempts to have Mr Gilbert obtain possession of the plant and equipment secured by its general security.
[43] Mr Gilbert met with Mr Wu on 14 July 2016. He showed Mr Wu a valuation report prepared for Doxcon dated 8 December 2014 which listed Doxcon’s various plant and equipment situated at the premises. Mr Gilbert explained he would be making arrangements to uplift the plant and equipment. Mr Wu told Mr Gilbert that whatever Bigyard may have owned, if anything, it had been abandoned. He refused to permit access to the premises to uplift any of the plant or machinery.
[44] Asset Finance continued to make requests and demands to uplift the plant and machinery. Mr Wu continued to deny access to the premises. On 10 November
2016 Asset Finance’s solicitors sent an email to Mr Wu making final demand that he and/or Tasmandairy deliver up possession of the plant and equipment which was the subject of Asset Finance’s security. No response was received.
Summary judgment principles
[45] The principles pertaining to summary judgment are well settled. They can be summarised as follows:4
(a) The question on a summary judgment application is whether the
3 It does not matter that the security interest was registered before the loan agreement was entered into: Personal Property Securities Act 1999, s 41(2).
4 See for example Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at
[26].
defendant has no defence to the claim; that is, that there is no real question to be tried.5
(b)The Court must be left without any real doubt or uncertainty. The applicant must show that there is no real counter-argument requiring trial evidence to be taken.6
(c) The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.7
(d)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. However, it does not need to accept uncritically evidence that is inherently lacking in credibility or inconsistent with undisputed contemporary documentation or is inherently improbable.8
(e) The Court may take a robust and realistic approach where the facts warrant it.9
[46] Summary judgment will not be granted where there is a credible dispute since questions of credibility can be determined only when a witness is in the witness-box on oath and cross examined.10 As Greig J observed in Attorney-General v Rakiura
Holdings:11
“In matters such as this it would not be normal for a judge to attempt to resolve any conflicts in evidence contained in affidavits or to assess the credibility or plausibility of averments in them.”
5 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
6 Body Corporate 90315 v Redican Allwood Ltd [2014] NZHC 1212 at [24].
7 MacLean v Stewart (1997) 11 PRNZ 66 (CA).
8 Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC).
9 Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
10 Andrew Beck (ed) McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [12.2.03].
11 Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14.
[47] But these observations are, of course, subject to the proviso that a Judge is not bound:12
“to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit, however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbably in itself it may be.”
[48] Importantly, for present purposes, the Court is able to give summary judgment on part of a plaintiff’s claim. In Raptorial Holdings Ltd (in receivership) v Elders Pastoral Holdings Ltd the Court of Appeal observed:13
“[4] We of course accept that it is competent to enter summary judgment for part of a claim. Rules 136 and 137 recognise as much. The utility of these two rules was discussed in AGC (NZ) Ltd v McBeth [1992] 3 NZLR 54, 61 (CA) where the Court said:
We see no reason to prevent judgment being given for an amount which is indisputably due and owing but which is only part of the claim and therefore not the whole of the relief sought under the particular cause of action. This is not to say that courts are to strive to find some indisputable amount and then to give judgment for it.
The Court then noted there will be cases where it would be unjust to give summary judgment, even in part, on account of the existence of a cross- claim, set-off or counterclaim. Later still it noted:
On the other hand it is equally unjust that by raising some dispute as to part of a claim the defendant should be entitled to prevent the entry of judgment at all. That would seem to defeat the purpose of the summary judgment procedure.
[5] In our view the discussion in AGC v McBeth demonstrates that whether it is appropriate to enter summary judgment in relation to part of a claim involves the exercise of a discretion. There can be no fixed rules. The circumstances of the particular case must be closely considered. In the end the interests of justice will be determinative.”
[49] The relevant procedural rules pertaining to summary judgments are now contained in Part 12 of the High Court Rules 2016. The cited observations continue
to apply.
12 Eng Mee Yong v Letchumanan [1980] AC 331 at 341.
13 Raptorial Holdings Ltd (in receivership) v Elders Pastoral Holdings Ltd (2000) 14 PRNZ 663.
The causes of action
[50] Asset Finance sues in conversion and detinue. The principles relevant to these causes of action, when distilled to their essence, are not particularly complicated and share some common features.
Conversion
[51] While the circumstances in which conversion of goods can occur are widely variegated, the basic features of the tort reduce to three. In Kuwait Airways Corp v Iraqi Airways Co (Nos 4 & 5) Lord Nicholls expressed them in the following way:14
“Conversion of goods can occur in so many different circumstances that framing a precise definition of universal application is well nigh impossible. In general, the basic features of the tort are threefold. First, the defendant’s conduct was inconsistent with the rights of the owner (or other person entitled to possession). Second, the conduct was deliberate, not accidental. Third, the conduct was so extensive an encroachment on the rights of the owner as to exclude him from use and possession of the goods. The contrast is with lesser acts of interference. If these cause damage they may give rise to claims for trespass or in negligence, but they do not constitute conversion.”
[52] Lord Nicholls emphasised in particular the requirement that the conduct goes beyond mere retention of goods. Later in his judgment he explained:15
“Mere unauthorised retention of another’s goods is not conversion of them. Mere possession of another’s goods without title is not necessarily inconsistent with the rights of the owner. To constitute conversion detention must be adverse to the owner, excluding him from the goods. It must be accompanied by an intention to keep the goods.”
[53] Importantly, the right to sue in conversion is a consequence of the right of possession, rather than that of ownership.16 In the context of conversion, possession
is not just evidence in support of ownership; rather, a possessory title is as good as
14 Kuwait Airways Corp v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883 at [39]. These principles were adopted in New Zealand by the Court of Appeal in JS Brooksbank and Co (Australasia) Ltd v EXFTX Ltd [2009] NZCA 122, (2009) 10 NZCLC 264,520 at [21]- [22].
15 At [42].
16 Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington,
2016) at [12.3.03] citing Harris v Lombard New Zealand [1974] 2 NZLR 161 (SC).
ownership against all the world except for one who can demonstrate a superior right.17
[54] There is authority to suggest an action in conversion is a purely personal action and can only result in an order for monetary damages.18 However in Nash v Barnes, Salmond J said it could not be disputed that the Court has the power to give judgment for the specific restitution of chattels, and that a dispossessed owner of goods may sue either for possession of the chattel or for damages.19
[55] The authors of Todd on Torts in New Zealand suggest the equitable jurisdiction to order specific restitution of goods should not be displaced by the common law remedy of damages but note the equitable power to order specific restitution is discretionary and sparingly exercised. The power will normally only be ordered where a miscarriage of justice would result or where damages would not be an adequate remedy.20
Detinue
[56] Detinue is effectively a species of conversion. That is because the essence of detinue is the detention of property with the intention of keeping it in defiance of the rights of the person entitled to possession of it.21 In E E McCurdy Ltd v PMG
McGregor J said:22
“It is the essence of detinue that the detention should be adverse. This is ordinarily established by proof of a demand for the return of the goods followed by proof of a demand for the return of the goods followed by the defendant’s refusal.”
[57] As the authors of the Law of Torts in New Zealand explain, the crucial difference between conversion and detinue is that conversion is a single wrongful act and the cause of action arises at the date of the conversion. Detinue, on the other
hand, is a continuing cause of action which accrues at the date of the wrongful
17 The Law of Torts in New Zealand at [12.3.03] citing Flack v Chairperson, National Crime
Authority (1997) 80 FCR 137 (FCA) at 141.
18 General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644.
19 Nash v Barnes [1992] NZLR 303.
20 The Law of Torts in New Zealand at [12.3.04(2)].
21 The Law of Torts in New Zealand at [12.4.01].
22 E E McCurdy Ltd v PMG [1959] NZLR 553 at 556.
refusal to deliver up the goods and continues until the goods are delivered up or judgment is obtained.23 Accordingly, in an action in detinue, the plaintiff may seek:
(a) judgment for the value of the goods as assessed and damages for their detention; or
(b)judgment for the return of the goods or recovery of their value as assessed and damages for their detention; or
(c) judgment for return of the goods and damages for their detention.
Has the plaintiff made out its claim?24
[58] The essence of Asset Finance’s claims in conversion and detinue arise out of its assertion that the defendants have deliberately interfered with the ownership rights of the plaintiff to such an extent they have excluded the plaintiffs from their legitimate use and possession of the goods by refusing to deliver them up.
[59] Against those principles I turn to the facts. I am satisfied of the following:
(a) Bigyard obtained whatever assets Doxcon owned as at 24 July 2014 pursuant to sale of collateral under s 109 of the PPSA;
(b)Asset Finance obtained a general security over all of Bigyard’s present and after acquired property on 5 August 2015;
(c) Asset Finance became entitled to take possession of the collateral from at least 12 July 2016 when Mr Gilbert was appointed receiver;
(d)Asset Finance has made genuine attempts to take possession of the collateral; and
23 The Law of Torts in New Zealand at [12.04.03].
24 Bigyard as first plaintiff withdrew its application for summary judgment. This explains the reference to the plaintiff in the singular throughout this judgment.
(e) Mr Wu has obstructed these attempts and refused to allow Asset Finance access to the premises for the purpose of removing the property.
[60] Whether Asset Finance’s application for summary judgment should be granted thus depends on Asset Finance proving beyond dispute that Bigyard did take ownership of the claimed assets and that none of the other pleaded defences raise serious questions to be tried.
[61] For the purpose of this judgment I shall first discuss the availability of the defences which, if proved, would amount to a complete defence to Asset Finance’s claim before considering whether Asset Finance has proved it has a right to possess the assets for which it seeks summary judgment.
Breach of the lease agreement between Doxcon and Tasmandairy
[62] Mr Jiang, for the defendants, refers to clauses 20.1 and 20.3 of the lease agreement entered into by Tasmandairy and Doxcon. Clause 20.1 concerns additions and alterations made by the tenant and provides, relevantly, as follows:
“… Ownership of the alterations or additions that are not removed by the end or earlier termination of the lease may at the Landlord’s election pass to the Landlord without compensation payable to the Tenant …”
[63] Clause 20.3 concerns removal of chattels and provides as follows:
“The Tenant may at any time before and will if required by the Landlord no later than the end or earlier termination of the term remove all the Tenant’s chattels. In addition to the Tenant’s obligations to reinstate the premises pursuant to subclause 20.1 the Tenant will make good at the Tenant’s own expense all resulting damage and if the chattels are not removed by the end or earlier termination of the term ownership of the chattels may at the Landlord’s election pass to the Landlord or the Landlord may remove them from the premises and forward them to a refuse recollection centre.”
[64] Mr Jiang submits the lease between Doxcon and Tasmandairy was cancelled in law on 7 January 2015. He says Ms Lu, despite taking a contradictory position when Doxcon brought proceedings to challenge the cancellation, now accepts that this was the date on which the lease was cancelled. Mr Jiang refers to Ms Lu’s
affidavit in which she deposes that the lease was indeed cancelled on 7 January
2015.
[65] In his written submissions, Mr Jiang claimed that pursuant to the lease, any assets of Doxcon passed to Tasmandairy upon cancellation of the lease on 7 January
2015 and well before the assignment to Bigyard or Asset Finance. However, there are insuperable difficulties with that submission. Even if the date of cancellation is accepted to be 7 January 2015, Tasmandairy confronts the difficulty on the evidence that it never made any election, as required by the lease, to take ownership of the assets. Tasmandairy could not have made any such election because Doxcon re- entered the premises and remained in possession until after Asset Finance obtained its general security. Moreover, the email sent by Tasmandairy’s solicitors on
11 August 2015 advised Doxcon’s liquidators of a right to claim Doxcon’s chattels. This is entirely inconsistent with any suggestion Tasmandairy had taken ownership of Doxcon’s chattels by election.
[66] In oral argument Mr Jiang modified this submission. He accepted Tasmandairy was unable to make an election while Doxcon remained in possession. However, he submitted that Doxcon improperly obtained a Court order to remain in possession which meant Tasmandairy could not cancel the lease until after Asset Finance had acquired its security interests. In other words, Tasmandairy was prevented by Doxcon’s conduct from making an election to take ownership of the assets before Asset Finance obtained its general security.
[67] Even if it is accepted that Doxcon did improperly obtain an order of the Court entitling it to remain in possession after a valid cancellation, I cannot see how this affects Asset Finance’s possessory right to the collateral secured under its general security. It is simply a question of fact whether title to Doxcon’s assets were transferred to Bigyard by way of the sale of collateral or to Tasmandairy by election under the lease. In the absence of any evidence suggesting an election, and in the face of evidence to the contrary, I am satisfied title passed to Bigyard by virtue of the sale conducted under s 109 of the PPSA. Asset Finance is entitled to rely on its general security. Any conduct on behalf of Doxcon or the directors of Bigyard
which may have prevented Tasmandairy from making an election to take ownership
of Doxcon’s asset cannot affect this.
[68] I am satisfied there is no real question to be tried in respect of this defence.
Abandonment
[69] The defendants claim that no rights of possession can subsist in the claimed assets because they have been abandoned.
[70] Abandonment occurs:25
“when there is “a giving up, a total desertion, and absolute relinquishment” of private goods by the former owner. It may arise when the owner with a specific intent of desertion and relinquishment casts away or leaves behind his property …”
[71] After citing this definition, Asher J in Hongkong and Shanghai Banking
Corporation v Erceg went on to state that:26
“for there to be abandonment, the owner of the chattel must effectively divest itself of ownership by its unequivocal actions and the title thereto may be acquired effectively by someone else who thereafter has title”.
[72] On this point, Mr Jiang submits that Bigyard’s assets, if any, were abandoned
because:
(a) prior to Doxcon’s liquidation on 7 August 2015 Mr Mathis and Mr Ellis had been at the premises for some months assessing the possibility of removing the plant and equipment;
(b) following Doxcon’s liquidation Tasmandairy made several attempts to
contact the interested parties in an effort to have the assets removed but did not received a meaningful response; and
25 R A Brown The Law of Personal Property (1955) 2nd ed at p 9, quoted in Simpson v Gowers 32
OR (2d) 385 at 387.
26 Hongkong and Shanghai Banking Corporation Ltd v Erceg HC Auckland CIV-2010-404-2835,
1 November 2010 at [23].
(c) Bigyard did not identify or provide evidence of the assets it owned and did not take any steps to remove the assets or offer a sensible proposal as to what should happen to them.
[73] On the evidence I am far from satisfied that any of these aspects of Mr Jiang’s argument, whether taken individually or collectively, establish an “absolute relinquishment of private goods” by Bigyard. In my view, the strongest evidence suggesting abandonment was Bigyard’s failure to respond to the email of
16 March 2015 when Tasmandairy’s solicitors gave notice that unless they received details of satisfactory arrangements to remove the machinery by 30 November 2015
Tasmandairy would treat the machinery as being abandoned and would take steps to dispose or remove it. In the context of an ongoing and lengthy dispute between parties, the failure of Bigyard’s solicitors to reply to this email, bearing in mind it was one of a number, within the stipulated deadline falls well short of the required level of establishing, unequivocally, an intention on the part of Bigyard to divest itself of ownership.
[74] But even if abandonment is arguable in respect of Bigyard, the position must be considered in relation to Asset Finance. In his written submissions, Mr Jiang advanced two arguments. First, he submits that full discovery is required to ascertain whether Asset Finance knew of the lawful presence of any of Bigyard’s assets remaining at the premises. Secondly, he submits that after Bigyard was placed in receivership Asset Finance did not make any sensible proposal to remove the claimed assets. Rather than providing any evidence of the assets it had a right to possess, Mr Jiang submits Asset Finance’s lawyers demanded delivery of the assets knowing that some of them could not be removed without damaging the premises.
[75] In oral argument, Mr Jiang expressly argued against the proposition that Asset Finance could never abandon its possessory right to the secured assets. He posed the following hypothetical question:
“What if Asset Finance sat on its hands for years knowing all the relevant
facts and then attempted to enforce its security?”
[76] In that case Mr Jiang submitted it would be entirely unfair and unreasonable for a landlord to be prevented from disposing of goods which are trespassing on its land simply because a secured creditor has a security interest in respect of those goods. He even went so far as to suggest that this could a novel point of law.
[77] I am not persuaded there is any merit in this argument. The landlord in Mr Jiang’s hypothetical example would be at liberty to take title to the goods subject to the security interest or sell them or dispose of them. However, whatever the landlord may decide to do, the secured party would have an immediate right to possession from the moment the debtor was in default or the collateral was at risk.27 “At risk” is defined in s 109 of the Act to mean that when the secured party has “reasonable grounds to believe that the collateral has been or will be destroyed, damaged, endangered, disassembled, removed, concealed, sold or otherwise
disposed of contrary to the provisions of the security agreement”. Those provisions would be enforceable against the landlord under s 36(1)(b) of the Act because the security interest had been perfected. What the landlord may not do is take title to the property, use it and then later complain when the secured party decides to enforce its security agreement. There is nothing in the Act to suggest a security interest is extinguished merely because the secured party fails to enforce it after the debtor has been in default for a particular period.
[78] In any event, the issue does not need to be determined. Mr Jiang’s hypothetical example is far removed from the facts of the present case. Asset Finance moved to enforce its security as soon as Mr Gilbert was appointed as Bigyard’s receiver and has been attempting to take possession of the collateral ever since. It cannot be said that Asset Finance has, in any sense, “sat on its hands”.
[79] I am thus satisfied that this defence does not give rise to any real question to be tried.
Estoppel
[80] Mr Jiang submits that Asset Finance is estopped from pursuing its claim because it has failed to make adequate arrangements to remove the plant and equipment. In many ways this argument duplicates the previous one but, nonetheless, I propose to deal with it briefly.
[81] The defendants refer to the Canadian case of Stewart v Gustafson in which
the Queen’s Bench of Saskactchewan observed:28
“[24] Failure by the owner to remove his or her chattels in circumstances where the proprietor of the premises in which the chattels are located has expressed an intention to treat the chattels as abandoned will often be sufficient to give rise to a valid defence of estoppels to an action for conversion.”
[82] Mr Jiang submits the actions of Bigyard and Asset Finance in failing to remove any machinery and equipment, or to make arrangements to do so, gives rise to a defence in estoppels.
[83] At best, the defence may be arguable against Bigyard but is unsustainable against Asset Finance for the same reasons as previously discussed. Asset Finance has a perfected security interest and has consistently, albeit unsuccessfully, attempted to obtain possession of the assets.
[84] The defendants cannot resist summary judgment on this basis.
Failure to identify and prove Doxcon’s assets
[85] I turn now to what I regard as the real issue in this dispute.
[86] Asset Finance’s claim depends on it establishing what assets were formerly owned by Doxcon and subsequently sold as collateral to the trusts and entities controlled by Messrs Ellis and Mathis. To consider this issue it is necessary to summarise the evidence adduced by the plaintiff to prove Doxcon’s ownership of these assets.
Draft TSE evaluation
[87] Asset Finance relies primarily on the draft valuation report of assets said to belong to Bigyard as the evidential basis for the former’s claim to possessory rights in the plant and machinery situated at the premises. The defendants criticise this document. They say it is unreliable, at least for the purpose Asset Finance asks that it be used.
[88] The report was prepared by Mike Aitkins, a registered plant and machinery valuer of TSE Value Limited, a firm of valuers and property consultants. As noted earlier, the document is dated 8 December 2014 but, as the valuation report explains, this was the date the valuer visited the premises rather than the date on which the report was prepared.
[89] The valuation report contains an itemised list of 316 assets with a total value said to be $2,104,000. In preparing the report, Mr Aitkins says that he received a list of company-owned assets from Mr Ellis’ law firm by email on 1 and 12 December
2014. He says he amended and added to the list after he had undertaken an onsite inspection.
[90] The criticisms which the defendants level in respect of this document are as follows:
(a) The document states it was Mr Ellis who told Mr Atkins what Doxcon’s assets were. For this reason the valuation is not proof of ownership of the assets valued.
(b)As the document discloses, items numbers 1 to 26 are assets situated at a different address, 6 Tony Street. Nevertheless, Asset Finance has included these in its claim for summary judgment.
(c) According to Mr Wu, items numbers 48 to 123 (assets found in the laboratory) belonged to Naturies who purchased the laboratory equipment from the previous landlord when it bought the premises.
He says Doxcon had nothing to do with the laboratory as it operated from a different part of the property.
(d)Item 294 relates to the computer equipment forming the subject of the dispute I have summarised above. Mr Wu repeats his evidence and says Homecare owns this item.
(e) Items 297 to 310 (office equipment) appear to match the description of assets ordered or purchased by Naturies.
(f) Items 312 to 313 (assets relating to an air vacuum system) appear to match the description of assets ordered by Naturies via fax in 2009.
(g)Item 316 (a large container) appears to be a container purchased by Homecare in 2008. Despite this it is listed as a Doxcon asset under Mr Ellis’ instruction with an estimated year of manufacture of 2010.
(h)Mr Wu has been unable to locate a number of the listed items at the premises.
Mr McConnon’s “asset list”
[91] Another document forming part of the evidential pool is the “asset list”
prepared by Mr McConnon. This was the document he took to the premises on
16 October 2015 and showed the Police after Mr Wu had called them. The document purports to establish the assets formerly owned by Doxcon.
[92] Mr McConnon deposes that he spent approximately two to three months at the premises and became very familiar with the plant and equipment. He says the plant and equipment was all identified and a schedule prepared. He annexes this “schedule” to his affidavit. This annexure is comprised of two documents containing asset lists. The first is an undated document entitled, “Doxcon Pharmaceuticals Limited Plant and Machinery”. The second document is a 25 page document entitled, “Fixed Assets Listing Financial Year (01/04/2010-31/03/2011)”. There is no
perfect symmetry between the documents themselves and between these documents and the TSE valuation report.
[93] In relation to the first document Mr Wu makes the following comments:
(a) It is undated and its origins are unclear. It contains significant errors, misspellings and is poorly presented. There is no description of where the items were located. Mr Wu suggests the document could be a forgery.
(b)A number of items are described as “ex Naturies Machine Mtlk [sic] Power” or “ex Natunes [sic] Machinery Tablets & Capsules”. Mr McConnon has not provided any evidential basis as to why these items are “ex-Naturies” or how they came to be assets of Doxcon. Mr Wu says this description indicates these items belonged to Naturies.
(c) Mr McConnon says he was engaged by Mr Mathis to undertake due diligence of Doxcon in March 2015. The document would have been prepared not long after. He has not explained why this document was not provided to Tasmandairy and PwC in 2015 when Tasmandairy requested evidence of proof of ownership and an asset list from Bigyard.
[94] In relation to the second document, as with the first, I refer to Mr Wu’s comments which, in my view, have some cogency or at least the potential for cogency. These are:
(a) It is unclear which company or entity this document belongs to because it contains no company name nor is it attributed to any individual.
(b)As noted, Mr McConnon must have produced this document some time in 2015 but the document relates to the financial year ending
31 March 2011.
(c) It appears to be a separate and distinct document despite the fact
Mr McConnon says he prepared “a schedule”.
(d) This document was not produced to PwC or Tasmandairy.
(e) Mr Feng deposes he has never seen any asset list in relation to
Doxcon.
Evidence of Hu Lu
[95] At all material times Ms Lu was a director of Doxcon and other Naturies companies. She deposes that the plant, machinery and other assets owned by Doxcon was set out in two depreciation schedules to the annual accounts for Doxcon. She annexes to her affidavit depreciation schedules for the financial year ending 31 March 2015 for “laboratory equipment” and “plant machinery” respectively. Ms Lu’s affidavit was filed by Asset Finance in response to Mr Wu’s claim that the TSE valuation and Mr McConnon’s “asset list” are fictitious.
[96] Ms Lu also deposes to receiving, in her capacity as a director of Doxcon, the valuation report of 8 December 2014 referred to above. She says the valuer did not value all of the plant and machinery in the basement of the premises because it was stored on pallets and covered in heavy shrink wrap.
[97] Mr Jiang objects to the admission of Ms Lu’s evidence. He says the affidavit introduces new material which should have been contained in the original filing. He says this is not reply evidence and there is no explanation as to why Ms Lu did not produce this material at the outset.
[98] In support of this complaint he cites Westpac v Cooper where Duffy J observed what is envisaged by the summary judgment procedure as a quick remedy without the need for successive filing of evidence. Her Honour remarked:29
“[61] The purpose of an application for summary judgment is to provide a robust and efficient means of obtaining judgment in cases where the defendant has no available defence. This should be done in a clear and cogent manner by way of the original documents the applicant files in the Court. Applicants whose cases get off to a poor start through material failures to plead the claim properly, and to provide all the necessary and relevant evidence in the original affidavits should not be able to keep such cases going through filing reply evidence, which result in defendants then needing leave to respond. What is intended to be a quick and efficacious remedy becomes instead something that is long and drawn out. As a matter of policy, I consider that it is wrong in principle for applicants for summary judgment to bring poorly prepared applications and then to attempt to repair them once the defendant has identified the deficiencies. [The plaintiff’s] application comes within this category.”
[99] As Mr Jiang notes, after being served with the defendants’ evidence, Asset Finance did not file any reply evidence from those witnesses who had already made affidavits. Mr Jiang characterises the present evidence as an attempt by Asset Finance to repair the deficiencies identified in the plaintiff’s evidence by Messrs Wu and Feng filing evidence which is not actually in reply. They have done this by filing completely new evidence and amending their summary judgment application. He submits Ms Lu’s evidence is simply a bald attempt to repair deficiencies in the original affidavit evidence with no explanation as to why it was not provided earlier.
[100] When asked by me to identify any prejudice arising from the reply evidence, Mr Jiang advised that Mr Wu has not been able to respond to the exhibits which comprise a lengthy list of assets claimed to have been owned by Doxcon. He submits that Mr Wu could not be expected to receive such extensive evidence and reply within a week. He would need to consult with Mr Feng who was in China.
[101] While I entirely agree with Duffy J’s comments on the proper use and purpose of the summary judgment procedure, I am not satisfied these principles are engaged in the present case. I accept Asset Finance’s submission that the evidence is genuinely evidence in reply because it responds to the defendants’ suggestion that
the documents evincing ownership are forgeries.
29 Westpac v Cooper (2010) 20 PRNZ 568 at [61].
[102] To this, Mr Jiang has a fallback submission. He claims Ms Lu:
(a) has dishonestly held herself out in the past as a director of Supermega in an attempt to steal Supermega’s clients; and
(b)obtained an interim order from the High Court allowing Doxcon to return to the premises by alleging that Tasmandairy wrongfully cancelled their lease but, contrary to her evidence in previous proceedings, now admits the lease was cancelled on 7 January 2015.
[103] Mr Jiang says full disclosure is required to resolve the question of Ms Lu’s credibility and it would be inappropriate to make credibility findings in the context of an application for summary judgment. Mr Clews, for the second defendant, on the other hand, urges the Court to take a robust and realistic approach to the facts.
[104] I am not satisfied there is a sufficient evidential platform to order discovery to ascertain whether Ms Lu has forged documents. This is an extremely grave allegation and one which should not have been made lightly. For my own part, I cannot see what might have motivated Ms Lu to have perjured herself on behalf of a finance company as is alleged. In my view Ms Lu’s affidavit should be admitted for the reasons I have already discussed. I am satisfied that this evidence is genuinely evidence in reply and not some thinly disguised device designed to place before the Court evidence which, on reflection, ought to have been filed at the onset.
Asset Finance amends its claims for summary judgment
[105] As a result of the evidence and arguments advanced on behalf of the defendants, Asset Finance amended its claim. It now no longer seeks summary judgment in relation to certain specified items. These are:
(a) Items 1 to 26 (the assets situated at 6 Tony Street); (b) Item 294 (the computer equipment);
(c) Items 312 and 313 (the assets relating to an air vacuum system); and
(d) Item 316 (the large container).
[106] The issue is whether Asset Finance has proved beyond dispute that its security interest attaches to the remaining assets in respect of which summary judgment is still sought.
Discussion
[107] Mr Jiang essentially repeats the concerns of Mr Wu. He submits that in relation to the draft valuation:
(a) the concessions made by Asset Finance in amending its statement of claim casts doubt on the accuracy of the draft valuation. This list was supposed to be evidence of what Doxcon owned but the list has been shown to be in error;
(b)the document was not disclosed at any stage when Bigyard left the premises only to suddenly surface in July 2016; and
(c) the document is unreliable.
[108] Mr Jiang submits the reliability of Mr McConnon’s “asset list” is impugned
by the following:
(a) Bigyard and Asset Finance’s failure to produce this document to Tasmandairy in the face of multiple requests for supporting documentation; and
(b) the documents were purportedly prepared in 2015 but one of them is
headed up “Fixed Assets Listing: Financial Year (01/04/2010-
31/03/2011)”.
[109] Mr Jiang further submits:
(a) the depreciation schedules do not match with the TSE draft valuation; (b) it is concerning that Mr Feng says he has never seen any asset lists in
respect of Doxcon given that the company he was representing undertook due diligence on Doxcon before investing in it and the fact that Mr Feng later became a director; and
(c) Asset Finance now only seeks to rely on the draft valuation which is tantamount to an admission the other documents are not reliable.
[110] Mr Clews, on the other hand, submits Asset Finance is only seeking relief in respect of the assets where there can be no genuine or serious dispute. In other words, Asset Finance seeks delivery only of the assets which the Court can be completely satisfied were once the property of Doxcon and were subsequently transferred to Bigyard.
[111] In particular, Mr Clews submits that relief should be given in respect of a canning plant claimed to be worth about $600,000. Mr Clews refers to Mr Wu’s affidavit in which he deposes that the canning plant was there when he purchased the premises and that Doxcon was using it to produce milk powder.
[112] Mr Clews submits there is nothing in the sale and purchase agreement to suggest Tasmandairy bought the canning plant or the laboratory equipment. Under that agreement the only chattels included in the sale were a stove, fixed floor coverings, blinds, curtains, drapes and light fittings.
[113] Mr Wu’s evidence is that he understood Naturies acquired it when it bought the premises from the previous landlord in 2009. Mr Clews submits this statement of understanding is to be contrasted with the evidence adduced by Asset Finance that the plant and equipment were owned by Doxcon.
[114] In my view, whether Asset Finance makes out it claim depends on whether or not the Court accepts, to the required standard, the evidence of Ms Lu.
[115] I have already determined that her evidence should be admitted. The depreciation schedules are the evidence of assets owned by Doxcon. Ms Lu, as director of Doxcon and the Naturies companies, is in the best position to give evidence as to what Doxcon owned. The difficulty with the TSE valuation is that it is reliant on what Mr Ellis told the valuer what assets to value.
[116] However, even taking into account Ms Lu’s evidence, I am not satisfied to the point I am left without any real doubt or uncertainty. This is not a case where there is no real counter-argument requiring trial evidence to be taken. As discussed, there remain material conflicts of evidence and the assessment of credibility is likely to be central.
[117] Furthermore, the premises were occupied by a number of different companies and there is a patent lack of documentation to show who owned what and when to the level of clarity which would permit me to take the robust and realistic approach the plaintiff presses for.
[118] In my view, this is a case where the Court would benefit from full discovery and the examination of witnesses at trial.
Appropriate relief
[119] Even if I am wrong and summary judgment should be entered in respect of Asset Finance’s amended claim I am not satisfied that the appropriate relief would be an equitable order for restitution.
[120] Mr Clews explains that Asset Finance does not seek a monetary order because of Mr Wu’s conduct. His obstructive tactics have prevented Asset Finance from valuing the assets. However, there are a number of cogent factors militating against an order for restitution.
[121] As noted earlier, an order for the return of possession is not available as of right. It is a discretionary remedy to be exercised in accordance with equitable principles applied to the circumstances of the case. An authority often cited in this
context is Nash v Barnes, a 1922 New Zealand case.30 There a car was fraudulently sold to a bona fide purchaser of a value who had no notice of the fraud. After learning of the sale, the true owner claimed the return of the car. The innocent buyer had spent considerable funds improving the car while it was in his possession. Salmon J held it would be unjust to order the car’s return and instead the true owner was compensated in damages being the value of the car at the time the unlawful sale took place.
[122] Of relevance to the present case is a line of authority which provides that where the goods in question are ordinary articles of commerce and have no special value or interest, the Court is unlikely to order that they be delivered to the plaintiffs. In Tanks and Vessels Industries Ltd v Devon Cider Co Ltd31 the High Court of England and Wales applied the observations of Swinfen Eady MR in Whitely Limited v Hilt32 that:
“the power vested in the Court to order the delivery up on a particular chattel is discretionary, and ought not to be exercised when the chattel is an ordinary article of commerce and of no special value or interest, and is not alleged to be of any special value to the plaintiff, and where damages would fully compensate.”
[123] In my view, the following factors weigh against ordering the defendants to deliver up possession of the assets:
(a) As Mr Clews concedes, Tasmandairy has arguable defences and claims against Bigyard in respect of abandonment, estoppel and trespass to land. And under its lease with Doxcon, it was entitled to elect to take possession of any chattels left on the premises after termination of the lease. It has, therefore, at least an arguable claim it is the owner of the assets. The competing equities must be
approached with this dynamic in mind.
30 Nash v Barnes, above n 19.
31 Tanks and Vessels Industries Ltd v Devon Cider Co Ltd [2009] EWHC 1360 (Ch) at [55].
32 Whitely Limited v Hilt [1918] 2 K.B. 809 at 809.
(b)The claimed assets are articles of commerce. As the observations cited above illustrate, this factor weighs against ordering delivery of the goods to Asset Finance.
(c) The previous point applies with even stronger force in this case because Asset Finance is a finance company. There is no conceivable use to which Asset Finance could put the assets to other than selling them to satisfy a debt.
(d)There is evidence to suggest removal of the property will be difficult and costly. If damages are available after a valuation, it seems eminently more sensible to order monetary damages than delivery of the specific chattels.
[124] Standing back and weighing up these respective considerations I am not satisfied that the appropriate course is to order delivery up of the assets. There are far more cogent reasons to decline to exercise the equitable jurisdiction to order delivery. It would only be if Mr Wu could not be compelled to permit valuers access to the premises following liability findings made against him that an order for restitution would be appropriate.
The defendants’ counterclaim for trespass
[125] The defendants’ counterclaim for trespass is a logical extension of their arguments advanced in support of abandonment and estoppel. Mr Jiang refers to the following remarks of Asher J in Hongkong and Shanghai Banking Corporation v Erceg:
“[21] A party lawfully in possession of land is entitled to enjoy that land free from trespassing chattels. Any form of possession if it is clear and exclusive, and exercised with the intention to possess, is sufficient to support a claim. Chattels or goods which remain on land after the party lawfully in possession has revoked any permission for them to be there, can constitute a trespass to the land: see Konskier v B Goodmam Ltd and Jones v Gospel. This can be the case even when the chattel has been the subject of a bailment and the bailment has ceased. Of course, goods lawfully on the property do not trespass overnight. Reasonable notice for their removal must be given. I am satisfied that such reasonable notice was given.”
[126] Mr Clews accepts there is an argument to be made in respect of Bigyard but submits the argument is unsustainable as against Asset Finance. In his submission, there can be no claim of trespass against Asset Finance because the plant and machinery were already situated at the premises before arrangements were entered into between Bigyard and Asset Finance. Accordingly, the trespass to land, even if there is one, has not been caused by an act of Asset Finance.
[127] Mr Jiang submits the position taken by Asset Finance cannot be correct. He submits that Asset Finance cannot have all the benefits of ownership but none of the detriments. He submits a security holder’s position cannot be better than the owner’s.
[128] I am satisfied the defendants counterclaim cannot succeed against Asset Finance. The short point is that Asset Finance has made genuine attempts to recover the assets ever since it appointed its receiver in July 2016. It now sues to do so. Tasmandairy cannot prevent Asset Finance from taking steps to possess the claimed assets and then simultaneously make a claim in trespass against Asset Finance for failing to remove the assets.
[129] Putting the instant facts aside for a moment, I do not consider a claim in trespass could lie against a secured party whose only interest in the assets is a right to possession. A secured party has no obligation to exercise its rights of possession once a debtor is in default. Inaction on the part of the secured party should not render it liable for an action in trespass.
Should Mr Wu have been named as a defendant?
[130] Mr Wu does not consider that he should have been named as a defendant. He says he has acted at all material times as a director and therefore as an agent of Tasmandairy. I am not prepared at this stage to remove Mr Wu as a party to the proceedings. The nature of the relief sought could conceivably require orders enforceable against Mr Wu in his personal capacity. This is a matter that can be addressed at a substantive hearing.
Result
[131] The application for summary judgment is declined.
Costs
[132] I invite the parties to consult with a view to agreeing on the question of costs. In the event that agreement is not reached the parties are directed to file memoranda as to costs within 20 working days of the date of this judgment. No memorandum
may exceed five pages in length.
Moore J
Solicitors:
Mr Hucker, Auckland Mr Clews, Auckland Mr Jiang, Auckland
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