Carlsen v Ching
[2024] NZHC 606
•21 March 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2101
[2024] NZHC 606
BETWEEN BJARNE STOKBRO CARLSEN and CARLSEN BUSINESS TRUSTEES
LIMITED as trustees of the CARLSEN BUSINESS TRUSTPlaintiffs
AND
MARK LAWRENCE CHING
First Defendant
GRANT WATSON McCURRACH
Second DefendantMARK LAWRENCE CHING and GRANT
WATSON McCURRACH as trustees of the RAFFLES FOUNDATION TRUST
Third Defendants
GRANT WATSON McCURRACH, KRISTINE MARIE McCURRACH and JZE TRUSTEE COMPANY LIMITED as
trustees of the OXFORD TRUST Fourth Defendants
Hearing: 27 February 2024 Appearances:
S Jeffs for the Plaintiffs
LCA Farmer and E J Moreton for the Defendants
Judgment:
21 March 2024
JUDGMENT OF GAULT J
(Permission to proceed by originating application)
This judgment was delivered by me on 21 March 2024 at 10:30 am pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
CARLSEN v CHING [2024] NZHC 606 [21 March 2024]
[1] The plaintiffs (the trustees of the Carlsen Business Trust (CBT)) seek permission for this proceeding to be commenced by originating application.1 In the proceeding, they seek a declaration under the Declaratory Judgments Act 1908 (the Act) that the CBT will be entitled to payment under a “Deed recording payments on the sale of shares in Armacup Maritime Services Ltd and Agencie Maritime Holdings Ltd” (Payment Deed) when the third and fourth defendants sell their remaining shares in Armacup Ltd and Armacup Maritime Services Ltd (the Armacup Companies). That transaction is anticipated to occur on 31 December 2024 and the plaintiffs seek a substantive declaration before that date.
Factual background
[2] The Armacup Companies, based in New Zealand, provide freight and liner services in the Asia-Pacific region.
[3] Mr Ching, the first defendant, is the managing director of the Armacup Companies.
[4] Mr McCurrach, the second defendant, is a director of Armacup Ltd and has acted as the financial controller of the Armacup Companies.
[5] The third defendants are the trustees of the Raffles Foundation Trust and the fourth defendants are the trustees of the Oxford Trust, trusts associated with the first and second defendants (respectively) and shareholders in the Armacup Companies.
[6] In October 2001, Mr Ching employed Mr Carlsen (the first named plaintiff), a trustee and beneficiary of the CBT, as the CEO of Armacup Maritime Services Ltd. In effect, he was the CEO of both the Armacup Companies.
[7] In 2006, Wallenius Wilhelmsen, a large Scandinavian shipping conglomerate, began negotiating with the defendants to acquire shares in the Armacup Companies.
1 High Court Rules 2016, r 19.5(1).
[8] In January 2007, Wallenius Wilhelmsen Logistics AS (WWL) and Eukor Car Carriers Inc (Eukor), as buyers, and the third and fourth defendants, as sellers, entered into an agreement for the sale and purchase of 50 per cent of the shares in the Armacup Companies (Sale Agreement). They also entered a shareholders’ agreement on the same day (2007 SHA).
[9] Mr Carlsen was concerned about how the sale would impact upon his role. He discussed those concerns with Messrs Ching and McCurrach and they negotiated an agreement to address Mr Carlsen’s concerns.
[10] On 17 October 2007, the CBT and the defendants entered into the Payment Deed. The Payment Deed had been delayed by the sale of the shares in the Armacup Companies, but the defendants had made the first payment under the Payment Deed to the CBT on 13 June 2007.
[11] In April 2010, WWL consolidated its shareholding by acquiring Eukor’s shares.
[12] In June 2010, WWL and the third and fourth defendants entered into a new shareholders’ agreement (2010 SHA).
[13]On 31 August 2010, Mr Carlsen resigned his role as CEO.
[14] In September 2013, WWL and the third and fourth defendants entered into a deed terminating the 2010 SHA (Termination Deed). Mr Carlsen did not learn of this until March 2022. The defendants say that no further shareholders’ agreement was entered into because the Armacup Companies had encountered significant trading difficulties and were essentially valueless, and that the underlying 2007 transaction was at an end and with it, as a consequence, so were any further obligations under the Payment Deed.
[15] In 2014, WWL acquired 15 per cent of the shares in the Armacup Companies from the third and fourth defendants.
[16] In 2021, WWL transferred its shares in the Armacup Companies to Wallenius Wilhelmsen Ocean AS (WWO) as part of a restructuring.
[17] In its 2020 annual report, Wallenius Wilhelmsen announced it intended to acquire the remaining shares in the Armacup Companies. The sale was to occur on 31 December 2022 but was subsequently deferred to 31 December 2024.
Applicable legal principles
[18] The applicable legal principles for permission to proceed by way of originating application under pt 19 of the High Court Rules 2016 (the Rules) are well established, and counsel differed only in emphasis.
[19] Part 18 of the Rules applies to proceedings in which relief is claimed solely under the Act.2 However, Part 18 does not prevent commencement by originating application if the proceeding is eligible to be so commenced under pt 19.3 Part 19 applies automatically to certain specified proceedings, not including claims under the Act. However, under r 19.5(1) the Court may, in the interests of justice, permit proceedings to which pt 19 does not automatically apply to be commenced by originating application. So the test, when considering an application for permission to proceed by way of originating application, is whether it is in the interests of justice. This should be assessed in a manner consistent with the objective of the Rules stated in r 1.2 – to secure the just, speedy and inexpensive determination of any proceeding or interlocutory application.4
[20] The originating application procedure under pt 19 is normally limited to cases where particularised pleadings and interlocutory steps such as discovery are not necessary for the proper determination of issues. It is not appropriate where factual issues are in dispute.5 It is not a shortcut for urgent cases. But references to pt 19 being “an exceptional procedure” rather than the norm should not be understood to go further.6
2 High Court Rules 2016, r 18.1(b)(v).
3 Rule 18.4(2).
4 See also Siemer v Attorney-General [2022] NZCA 200, (2022) 26 PRNZ 113 at [2].
5 Jones v O’Keeffe [2019] NZCA 222, [2019] NZAR 1448 at [52].
6 See for example Lung v Liu [2021] NZHC 1810 at [9].
Discussion
[21] The Court’s permission to proceed by way of originating application under pt 19 of the Rules may be sought without notice,7 and is often dealt with on the papers by way of minute.8 Here, however, the plaintiffs applied on notice – perhaps anticipating the matter was not routine. Indeed, permission was sought (on 28 August 2023) by way of an “originating application for leave to commence proceedings by way of an originating application”, which unduly complicated the process. Permission should be sought – whether without notice or on notice – by interlocutory application.
[22] The defendants opposed the application for permission and, following an adjournment, it was timetabled to a two-hour hearing. As in Clarkson v Clarkson,9 I observe that the proceedings have not started well, with the parties even disagreeing on which part of the Rules should apply. As a result, the objective of the Rules is not being met.10
[23] The starting point here in assessing whether to give permission to proceed by originating application under pt 19 is that, if permission is not granted, pt 18 applies to this proceeding given the only relief sought is under the Act. Part 19 is a speedier and less expensive mechanism than under pt 18, and is, broadly speaking, analogous to the interlocutory application procedure,11 but pt 18 also involves streamlined procedures without the elaborate procedures appropriate for the ordinary civil jurisdiction of the High Court (under pt 5). Under pt 18, pleadings are required, but evidence is generally given by way of agreed statement of facts or affidavit.12 One of the relevant factors in applying the interests of justice test in this case is that there is now less difference between pt 18 and pt 19, as both contemplate the Court adapting the procedures as appropriate for the particular case.13
7 Rule 19.5(2).
8 If sought without notice and the Court is not persuaded that the originating application procedure under pt 19 is appropriate, permission may simply be declined rather than stalling the proceeding entirely by requiring the application for permission itself to be the subject of an on notice hearing.
9 Clarkson v Clarkson [2020] NZHC 2211, (2020) 5 NZTR 30-016 at [19].
10 Other commitments also meant that I was unable to give a speedier judgment.
11 Public Trust v Kain [2018] NZHC 1547, (2018) 4 NZTR 28-012 at [15] and [35].12 Rule 18.15(1).
13 Smith v New Zealand Parole Board [2024] NZHC 57 at [10].
[24] Mr Jeffs, for the plaintiffs, submitted the dispute is a narrow one of contractual interpretation, since the defendants say the Payment Deed is no longer of any effect and so they do not owe any obligations to the plaintiffs. He submitted the relevant material is confined and uncontroversial; most of it is already before the Court. He submitted the only document not before the Court is the shareholders’ agreement containing the option that Wallenius Wilhelmsen used to trigger the purchase of the remaining shares in the Armacup Companies, which is within the defendants’ control, and they have indicated it will be disclosed subject to protections for confidentiality.
[25] Mr Jeffs submitted there are no material disputes of fact. He submitted there is no need for pleadings, discovery or interlocutory applications. He also submitted that proceedings under pt 18 are subject to full case management, as Cooke J noted in Clarkson,14 and that this is not required here. Finally, Mr Jeffs submitted that it is important this case be resolved prior to the sale of the remaining shares on 31 December 2024, whereas proceeding under pt 18 would delay the proceeding for 12 to 18 months.
[26] Mr Farmer, for the defendants, submitted that, in addition to the interpretation issue, the dispute will require the Court to resolve the extent to which any remaining obligations under the Payment Deed are capable of enforcement, because the “Option” obligations are predicated on the existence of an underlying commercial transaction which has since been terminated. He submitted that particularised pleadings are required, there are material factual disputes, interlocutory steps such as discovery will be necessary and security for costs may be sought.
[27] Mr Farmer relied on Catherwood v Asteron Life Ltd, where permission to proceed under pt 19 was declined in a case concerning contractual interpretation.15 Catherwood also involved a choice between pt 18 and pt 19. The Judge saw merit in the submission that the proceeding should be pursued under pt 5 and did not accept that a declaratory order would be determinative of the dispute. The proposed originating application and notice of opposition did not define the issue; pleadings would assist, discovery would be required, and case management was desirable.
14 Clarkson v Clarkson [2020] NZHC 2211, (2020) 5 NZTR 30-016 at [14] and [16].
15 Catherwood v Asteron Life Ltd [2021] NZHC 2612.
[28] While Mr Farmer made similar submissions here, I consider they carry less weight than in Catherwood. Here, I accept that to determine the interpretation issue in the Payment Deed it will be necessary to understand the underlying commercial transaction with Wallenius Wilhelmsen. But the key related issues are whether the Termination Deed brought the Payment Deed obligation to an end and whether the defendants’ sale of shares to Wallenius Wilhelmsen will be a sale of shares “triggered by exercise of the Option” in terms of the Payment Deed. The wider issue identified by the defendants – whether the obligation under the Payment Deed continues in circumstances where the triggering event arises under a different contractual framework disconnected in time from the earlier contractual framework – is also an aspect of the proper interpretation of the contract, recognising that this must reflect the commercial context or factual matrix. The factual matrix should not be materially in dispute. In particular, insofar as the defendants rely on the termination of the underlying contractual arrangements for commercial reasons (the Armacup Companies had encountered significant trading difficulties), that should not involve material dispute. Nor should the defendants’ reliance on the nature of the new arrangements. Mr Farmer submitted that the declaration sought may not resolve the dispute, but that is much less clear than in Catherwood. As he acknowledged, the plaintiffs are entitled to seek a declaration under pt 18. Even so, much of the defendants’ opposition seemed to reflect their preference for a general proceeding.
[29] For these reasons, I consider the reference to material factual disputes is overstated. So too is the defendants’ reference to the need for the application of common law principles in relation to the interpretation of contracts. The application of common law doctrines may render a dispute unsuited to pt 19.16 However, I do not consider that the application of established principles of contractual interpretation precludes proceeding under pt 19.
[30] Further, in relation to the need for particularised pleadings, Mr Farmer submitted that the question in the originating application raised a question of fact by referring to the payment obligation being triggered “when the Defendants sell their shares”. He submitted it is necessary to identify the scope claimed – otherwise the
16 Hong Kong and Shanghai Banking Corp Ltd v Erceg (2010) 20 PRNZ 652 (HC) at [25].
parties may need to adduce wider evidence. Mr Jeffs acknowledged that the form of the declaration should be amended to say “if”, rather than “when”, the defendants sell their shares, and to make clear that the declaration sought applies only to the transaction triggered by Wallenius Wilhelmsen under the current agreement, that is expected to occur on 31 December 2024. As he submitted, wider evidence should not be a concern. The matters raised by the defendants do not lead me to consider that it is necessary for the plaintiffs’ contentions to be set out in a statement of claim. The parties have ventilated their dispute in correspondence and the issues can be adequately articulated by way of an (amended) originating application and notice of opposition.
[31] Mr Farmer suggested that standard discovery should precede affidavits. I doubt the need for discovery since the context for contractual interpretation comprises the communications between the parties and the context known to the parties, not their respective private thoughts. Even so, without suggesting pt 19 would be appropriate where interlocutory steps such as discovery are plainly necessary, if targeted discovery were to become necessary at a later stage, it could be ordered in a pt 19 proceeding. Also, the commercial sensitivity of documents can be readily addressed – it is not a reason to favour pt 18 over pt 19. Indeed, counsel agreed that the shareholders’ agreement (referred to at [24] above) would be disclosed on a counsel-only basis, at least in the first instance.
[32] A potential application for security for costs has been signalled. Mr Farmer submitted it is hardly surprising that it has not yet been sought, given how the proceeding is to be commenced has yet to be determined. He submitted there is a good prospect the Court’s assistance will be required and the discipline of case management will ensure that such issues are resolved in a timely way. That may be so, but the defendants’ position on these matters does not appear aimed at ensuring that issues are resolved in a timely way.
[33] Further, case management takes various forms. While the need for interlocutory steps such as discovery means a proceeding will benefit from case management, the applicable form of case management is a consequence of deciding which part of the Rules to apply, rather than a proxy for deciding which part to apply.
[34] As an example of more proactive case management, I asked counsel whether an assigned Judge might be appropriate. They indicated that would not be opposed. Such a course in this commercial case may be more likely to achieve the objective of the Rules.
[35] The defendants dispute the need for urgency, noting that Wallenius Wilhelmsen has deferred its exercise on numerous occasions and that any sale would not mature until March 2025 at the earliest. In any event, Mr Farmer submitted it is very unlikely the pt 19 procedure would result in a declaration being issued before March 2025. Whether or not hearing time is available sooner, as indicated, pt 19 is not a shortcut for urgent cases.
[36] Even so, stepping back and considering the interests of justice in relation to this commercial dispute, I consider that particularised pleadings and interlocutory steps such as discovery are unlikely to be necessary for the proper determination of the declaratory relief sought. As indicated, I consider the factual dispute is overstated. I consider that, in the particular circumstances of this case, permission to proceed by way of originating application should be granted.
[37] As to timing, Mr Jeffs estimated that a one-day hearing would be required. Mr Farmer thought one day would be tight given the need to examine the subsequent transaction. I consider that a two-day hearing would be prudent.
Result
[38]The plaintiffs are permitted to proceed by way of originating application.
[39]I make the following timetable directions:
(a)The plaintiffs are to file and serve their (amended) originating application within five working days;
(b)The defendants are to file and serve their notice of opposition and affidavit(s) in support of their opposition within a further 20 working
days, with leave reserved to apply to extend time if issues arise with informal disclosure;
(c)Any application for security for costs is also to be filed and served within 25 working days;
(d)If an application for security for costs is filed, the parties are to confer and file a joint memorandum regarding next steps (even if it records areas of disagreement) within a further five working days; and
(e)The registry is to allocate a two-day substantive hearing.
[40] The plaintiffs are entitled to 2B costs (for an interlocutory application only). I expect they can be agreed. If not, brief memoranda (not exceeding three pages) are to be filed within 20 working days and I will determine costs on the papers.
Gault J
Solicitors / Counsel:
Mr S Jeffs, Barrister, Auckland
Mr T Refoy-Butler (plaintiffs’ instructing solicitor), Holland Beckett Law, Tauranga Mr LCA Farmer, Barrister, Auckland
Mr G D Simms and Ms E J Moreton (defendants’ instructing solicitor), Wynn Williams, Auckland
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