Clyma v Kaminski - [2024] NZHC 1576

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2019-463-000035

[2024] NZHC 1576

UNDER the Companies Act 1993 and the Fair Trading Act 1986

IN THE MATTER

of prejudiced shareholders and misleading and deceptive conduct

BETWEEN

THOMAS JAMES CLYMA, QIAN WANG, JU LI, CHRISTINA KALESITA CLYMA, JIA ZHAO, XIANMEI MENG, MARCO DUMAS and STEPHEN MICHAEL

REILLY as shareholders of KIWI RIDER LIMITED

Plaintiffs

AND

THOMAS KAMINSKI

Defendant

Hearing: On the papers

Appearances:

E St John and S Maloney for the Plaintiffs T Kaminski in Person

Judgment:

14 June 2024

JUDGMENT OF WALKER J [QUANTUM]

This judgment was delivered by me on 14 June 2024 at 4 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

CLYMA & ORS v KAMINSKI [2024] NZHC 1576 [14 June 2024]

[1] This judgment concerns the question of the quantum of damages payable by the defendant following an earlier interim judgment as to liability under the Fair Trading Act 1986 (FTA) (the liability judgment).1

[2] The liability judgment found that the defendant had engaged in misleading and deceptive conduct which had induced some of the plaintiffs to invest in a start-up tourism adventure business operated by Kiwi Rider Limited (Kiwi Rider).

[3] The full background is set out in the liability judgment and will not be repeated here. The ailing venture failed after the fixed helium balloon taking passengers for panoramic views over Rotorua was destroyed in a storm. Prior to the accident, Kiwi Rider was operating at a significant loss. It ceased to trade. The shareholders, other than the defendant, resolved to wind up the business rather than use any insurance payout to replace the balloon. Their intention is to liquidate Kiwi Rider. The investor shareholders will recover some of their investment once any remaining assets of the company are distributed after liquidation in accordance with the shareholding of all investors.

[4] The defendant is also a shareholder, although did not provide any initial start- up capital. He is therefore entitled to a pro-rated distribution by the company on liquidation.

How did the parties get here?

[5] The liability judgment held that only the plaintiffs Thomas Clyma, Christina Clyma, Marco Dumas, Ju Li and Qian Wang are entitled to damages, calculated by reference to their initial investment less any sum they recover on liquidation of the company.2 A damages figure could not be determined due to the lack of evidence of the projected recovery on liquidation.

[6] It is trite that the less the successful plaintiffs receive on liquidation, the greater their loss and therefore quantum.

1 Clyma & Ors v Kaminski [2023] NZHC 3026.
2 At [148]. These plaintiffs are a subset of the joint plaintiffs.

[7] The plaintiffs were directed to file further evidence to support their calculation of damages quantum. The defendant had an opportunity to respond. The Court directed a telephone conference once that material was filed to determine how to proceed. In the light of the knowledge…

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 Clyma v Kaminski

Details

AGLC: Clyma v Kaminski [2024] NZHC 1576
Case: [2024] NZHC 1576
Decision Date: 14 June 2024

CaseChat Overview and Summary

This case concerns the determination of damages payable by the defendant, Thomas Kaminski, following an interim judgment on liability under the Fair Trading Act 1986. The plaintiffs, shareholders of Kiwi Rider Limited, alleged that Kaminski had engaged in misleading and deceptive conduct, inducing them to invest in the company. The liability judgment found in favour of the plaintiffs and established that they were entitled to damages, calculated by reference to their initial investment less any sum they recover on liquidation of the company. The central issue in this case is the quantum of damages to be awarded to the plaintiffs. The plaintiffs submitted that their damages should be based on the financial accounts prepared by Kiwi Rider's accountants, while the defendant argued that damages should be calculated by reference to sums received from insurance monies and the legitimate business expenses required to wind down the business.

The court determined that the plaintiffs were entitled to have the question of quantum determined without further delay. The court recognised the need to arrive at a figure even where the evidence was thin, acknowledging that the onus lay with the plaintiffs to establish their quantum claim on the balance of probabilities. The court examined the evidence provided by the plaintiffs, including the affidavits of Marco Dumas, and the defendant's arguments. The court found that while it was reasonable for the directors and shareholders of Kiwi Rider to take time to decide whether to use the insurance funds to replace the destroyed balloon and to negotiate insurance payouts, there came a point in time when it was no longer reasonable to continue to deplete the insurance proceeds, particularly to pay salaries to any of the plaintiffs in respect of a non-trading business.

The court made several adjustments to the damages claimed by the plaintiffs. These adjustments included reducing the period for ongoing salary payments to Marco Dumas, excluding certain unexplained payments from the Kiwi Rider bank account, and making an adjustment in respect of compensation to Xianmei Meng. The court awarded damages to the successful plaintiffs of $357,530.87, pro-rated amongst the successful plaintiffs based on their initial investment. The court also declined to make a further order for costs in respect of this quantum judgment, determining that costs on this aspect should lie where they fall in view of the mixed success of the parties.

Orders