ANDHERALD VICTOR DE ALWIS

First Respondent
ANDMARGARET ELIZABETH & HERALD VICTOR DE ALWIS

Second Respondents
ANDJOHN WAH KUM

Third Respondent
ANDCONNIE FAY LING KUM

Fourth Respondent
ANDMARSHA ADRIENNE TAI PING TAN

Fifth Respondent
ANDPETER WEE

Sixth Respondent
ANDPAUL SENG POH KHOR

Seventh Respondent

Hearing:10 November 2009

Court:Chambers, O'Regan and Ellen France JJ
Counsel:E Orlov and D Lee for Appellant

G A D Neil and K M Wakelin for Respondents

Judgment:24 February 2010 at 3 pm

JUDGMENT OF THE COURT

A The application to adduce evidence in support of the appeal is dismissed.
BThe appeal is allowed in part. The summary judgment in favour of the respondents other than the sixth respondent is set aside and the matter is to proceed to trial in the High Court. The summary judgment in favour of the sixth respondent is upheld.
CWe make no award of costs.

____________________________________________________________________
REASONS OF THE COURT
(Given by O’Regan J)
Table of Contents
Para No

Introduction  [1]
Brief background  [2]
Issues  [9]
Factual background  [13]
Courtney J’s decision  [17]
Issue estoppel  [20]
Section 37(6): was Ms Chean a director at the relevant time?  [39]
Section 37: proviso  [49]
Admission of new evidence  [53]
Knowing receipt: is it arguable that Ms Chean did not know
of the breach of trust?  [60]
Result  [86]
Costs  [87]
Introduction
[1]        This is an appeal against two decisions of Associate Judge Faire, under which he entered summary judgment against the appellant, Ms Chean, for $150,000 in favour of the sixth respondent and a total of $573,195.49 in favour of the respondents.[1]
Brief background
[1]De Alwis v Chean HC Auckland CIV-2007-404-5357, 4 July 2008 and De Alwis v Chean HC Auckland CIV-2007-404-5357, 15 October 2008.
[2]        The respondents invested in a company called Luvit Foods International Limited (Luvit). In total, they invested $1.68 million. The appellant’s husband, James Chean, who was the driving force behind Luvit, had solicited these investments and the respondents had received an information memorandum. There was no registered prospectus. When the respondent discovered their money had been lost, they sued Luvit, Mr Chean and another company associated with Mr Chean, Tennet International Limited (Tennet), seeking a refund of their investments. Their claim was due to be heard in the High Court in April 2007, but Mr Chean declared himself bankrupt just before that hearing.
[3]        The matter then proceeded to a formal proof hearing in May 2007 before Courtney J. Her decision was delivered on 23 May 2007.[2] She found that the respondents’ claims against Luvit and Mr Chean based on the Fair Trading Act 1986 were made out. She found that the loss they had suffered was equal to the amount they had invested. She also found that they were entitled to reimbursement of their investments under s 37(6) of the Securities Act 1978. Again, both Luvit and Mr Chean were found to be liable under that section for an amount equal…

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 Chean v De Alwis

Details

AGLC: Chean v De Alwis [2010] NZCA 30
Case: [2010] NZCA 30
Decision Date: 24 February 2010

CaseChat Overview and Summary

This is an appeal against two decisions of Associate Judge Faire, under which he entered summary judgment against the appellant, Ms Chean, for $150,000 in favour of the sixth respondent and a total of $573,195.49 in favour of the other respondents. The respondents had invested in a company called Luvit Foods International Limited (Luvit). They invested $1.68 million and had received an information memorandum. There was no registered prospectus. When the respondents discovered their money had been lost, they sued Luvit, Mr Chean and another company associated with Mr Chean, Tennet International Limited (Tennet), seeking a refund of their investments. Their claim was due to be heard in the High Court in April 2007, but Mr Chean declared himself bankrupt just before that hearing. The matter then proceeded to a formal proof hearing in May 2007 before Courtney J. She found that the respondents’ claims against Luvit and Mr Chean based on the Fair Trading Act 1986 were made out. She found that the loss they had suffered was equal to the amount they had invested. She also found that they were entitled to reimbursement of their investments under s 37(6) of the Securities Act 1978. Again, both Luvit and Mr Chean were found to be liable under that section for an amount equal to the investment made by each of the respondents. The respondents then decided to sue Ms Chean. Their statement of claim was filed in August 2007, and a further amended statement of claim was filed in October 2007. They advanced six causes of action against Ms Chean:(a) A claim under s 37(6) of the Securities Act;(b)Breach of trust and breach of the Securities Act (failure to abide by the statutory trust created by s 37(5) of the Securities Act);(c)Knowing receipt of trust funds (because $723,195.49 of the money invested with Luvit was paid into the personal bank account of Mr and Ms Chean);(d)Dishonest assistance (based on the allegation that Ms Chean dishonestly assisted in the breach of the statutory trust referred to above);(e)A claim under s 60 of the Property Law Act 1952 (which relates to alienations of property made with intent to defraud creditors);(f)Breach of her duty as a director under ss 131, 133, 135 and 137 of the Companies Act 1993.The sixth respondent, Mr Wee, sought summary judgment in respect of the first cause of action (s 37(6) of the Securities Act), but the other respondents did not do so because there was a limitation issue which, they accepted, made their claims unsuited for summary judgment. All respondents sought summary judgment under the second cause of action (breach of trust/breach of the Securities Act) and the third cause of action (knowing receipt). They sought an amount equal to the sum paid into the personal bank account of Mr and Ms Chean, $723,195.49. However, the second cause of action was not pursued in the High Court or this Court. We say no more about it. In the High Court, Associate Judge Faire found that the respondents had made out their case for summary judgment against Ms Chean. He awarded $150,000 to Mr Wee and $573,195.49 to all of the respondents. (The figure of $573,195.49 was the amount deposited in the Cheans’ joint account ($723,195.49) less the $150,000 awarded to Mr Wee.) In his second judgment, the Associate Judge ruled that summary judgment should be entered in favour of the respondents for specified amounts totalling $573,195.49. The Associate Judge entered summary judgment in relation to the first cause of action (s 37(6)) in favour of Mr Wee and in relation to the third cause of action (knowing receipt) in favour of all respondents. Ms Chean appeals to this Court against both judgments of the Associate Judge. The issues to be resolved are whether issue estoppel applied in relation to Courtney J’s findings that the offer of securities in Luvit had been made to the public without a registered prospectus as required by the Securities Act, that the proceeds of the offer ought therefore to have been held in trust under s 37(5) of the Securities Act, and that Luvit and its directors were personally responsible for the refund of those investments under s 37(6). The next issue is whether there is an arguable case that Ms Chean was not liable under s 37(6) either because she was not a director at the time of the allotment of shares in breach of s 37 or because the proviso to s 37(6) applies to her. The final issue is whether summary judgment ought to have been entered in relation to the knowing receipt cause of action. The appeal is allowed in part. The summary judgment in favour of the respondents other than the sixth respondent is set aside and the matter is to proceed to trial in the High Court. The summary judgment in favour of the sixth respondent is upheld. We make no award of costs.

Orders