Clark v Libra Developments Ltd - [2007] NZSC 16

For a Court ready (fee required) version please follow this link

IN THE SUPREME COURT OF NEW ZEALAND
SC 87/2006
[2007] NZSC 16
BETWEENLINDSAY ALLAN CLARK

Applicant

ANDLIBRA DEVELOPMENTS LIMITED

First Respondent

ANDRUSSELL EARNEST HYSLOP AS TRUSTEE OF HYSLOP FAMILY TRUST

Second Respondent

Court:Blanchard, McGrath and Anderson JJ
Counsel:L A Andersen and H T Alloo for Applicant

P B Churchman and A C Skelton for Respondents

Judgment:15 March 2007

JUDGMENT OF THE COURT

A The application for leave to appeal is dismissed.
BThe applicant is to pay the respondents jointly costs in the sum of $2,500 plus disbursements to be fixed if necessary by the Registrar.

REASONS
[1]       This application for leave to appeal against a judgment of the Court of Appeal concerns an arrangement for sharing the profits of real estate developments.
[2]       Essential issues in both the High Court and the Court of Appeal were whether there was such an arrangement and if so whether the parties to it were Mr Clark and Mr Hyslop, or Mr Clark and Mr Hyslop’s company, Libra Developments Limited.
[3]       The lower Courts each held that a partnership existed between Mr Clark and the company. Mr Clark accepts that finding but submits that certain assets held to be partnership property are Mr Clark’s personal property. His argument is founded on the status of Mr Hyslop and Libra at the time those assets were acquired.
[4]       Mr Hyslop was the sole director of Libra. He was adjudicated bankrupt on 13 July 1997 and no replacement director was appointed. He was discharged from bankruptcy on 30 July 2000. Pursuant to s 151(2)(b) s 157(1)(c) of the Companies Act 1993 he was disqualified from holding office as a director during the period of his bankruptcy. In terms of s 157(1)(c) he vacated that office upon becoming bankrupt.
[5]       On 16 March 1999 Libra was struck off the Register of Companies pursuant to Part 17 of the Act and was not restored to the Register until 13 November 2000. The property in issue was acquired during that period.
[6]       Mr Clark argues that in light of the bankruptcy and the absence from the Register the company could not have been his partner when the disputed property was acquired.
[7]       The lower Courts held that notwithstanding Mr Hyslop’s disqualification as a director, his acts as a director were valid in terms of s 158 of the Act which provides:
158     Validity of director’s acts
The acts of a person as a director are valid even though—
(a)     The person’s appointment was defective; or
(b)     The person is not qualified for appointment.

[8] In addition, the Court of Appeal held Mr Hyslop remained a de facto director because, in terms of the definition of the expression in s 126(1) he was a person “occupying the position of director of the company by whatever name called”. It cited Harlow Finance & Leasing Ltd v Sterling Nominees Ltd[1] which dealt with the implications for a company of the disqualification…

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 Clark v Libra Developments Ltd

Details

AGLC: Clark v Libra Developments Ltd [2007] NZSC 16
Case: [2007] NZSC 16
Decision Date: 15 March 2007

CaseChat Overview and Summary

Lindsay Allan Clark applied for leave to appeal against a judgment of the Court of Appeal that determined the existence and terms of an arrangement for sharing the profits of real estate developments. The case involved whether such an arrangement existed between Mr Clark and either Mr Hyslop or Libra Developments Limited, a company of which Mr Hyslop was the sole director. The High Court and the Court of Appeal both found that a partnership existed between Mr Clark and Libra Developments Limited. Mr Clark accepts this finding but contests the characterisation of certain assets as partnership property, arguing that they are his personal property due to the status of Mr Hyslop and Libra at the time the assets were acquired.

The key legal issues the Court had to decide were whether Mr Hyslop’s disqualification as a director during his bankruptcy invalidated the company’s acts and if Libra Developments Limited could be considered a partner when it was removed from the Register of Companies. The Court of Appeal upheld that Mr Hyslop’s acts as a director remained valid under s 158 of the Companies Act 1993, which states that the acts of a director are valid despite any defects in their appointment or qualifications. The Court also held that Mr Hyslop remained a de facto director under s 126(1) of the Act, which defines a director by their position rather than title. Furthermore, the Court of Appeal concluded that Libra Developments Limited, despite being removed from the Register, was deemed to have continued in existence as if it had not been removed, under s 330(2) of the Act.

The Supreme Court agreed with the reasoning of the lower Courts, finding that the acts of a disqualified director could still be valid if performed after disqualification. The Court also held that the company’s removal from the Register did not affect its status as a partner. Consequently, the application for leave to appeal was dismissed, and Mr Clark was ordered to pay the respondents’ costs.

Orders