Coffey v Walker - [2020] NZCA 621

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA206/2020
[2020] NZCA 621

BETWEEN	PAUL CORNEL COFFEY AND WILLIS STREET TRUSTEE SERVICES LIMITED AS TRUSTEES OF THE PC COFFEY TRUST Appellants
AND	MARK ALAN WALKER AS TRUSTEE OF THE WYNSFIELD FAMILY TRUST Respondent

Hearing:	10 November 2020
Court:	Courtney, Woolford and Mander JJ
Counsel:	G E Slevin for Appellants D J Clark and E Z Caro for Respondent
Judgment:	4 December 2020 at 2 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe respondent is entitled to costs for a standard appeal on a band A basis, plus usual disbursements.

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REASONS OF THE COURT

(Given by Courtney J)

This appeal concerns the sale of shares in two companies, Alligator Ltd (Alligator) and Independent Monitoring Services Ltd (IMS), which provided security and alarm monitoring services. The shares in both companies were owned by the trustees of the PC Coffey Trust of which Paul Coffey was a trustee. In May 2008 Mr Coffey negotiated the sale of 30 per cent of the shares in each company to the trustees of the Wynsfield Family Trust, Mr Walker and Mr Bertelsen.[1] Mr Walker was a long-time acquaintance of Mr Coffey. He held a senior position with the ASB Bank (ASB), which was a client of both companies.
[1]Mr Bertelsen is no longer a trustee.
The purchase price for the shares was $700,000, to be paid by one instalment of $200,000 due immediately with the balance left in as a loan that fell due in June 2013. The parties also entered into a shareholders’ agreement.[2] The parties agreed that Mr Walker would leave his employment and work fulltime in the business. He paid the $200,000, left the ASB and began work for Alligator and IMS.
[2]The signed shareholders’ agreement was no longer available but a draft was produced, which both parties accepted reflected the agreement entered into.

Within a short time Mr Walker could see there were financial problems. In particular, substantial sums were owing to the Inland Revenue Department (IRD) for PAYE and GST. By June 2009 Mr Walker had resigned as a director of both companies. He secured another job with the ASB, which would require him to sever his association with the companies. There were communications between Mr Walker and Mr Coffey about this, though no formal agreement was entered into.
Following Mr Walker’s resignation, Mr Coffey tried, unsuccessfully, to resolve matters with the IRD. In 2011 both companies were placed in liquidation. Mr Coffey was prosecuted by the IRD for failing to ensure that the companies paid the GST and PAYE owing. He was convicted and sentenced to a term of home detention.
The date for repayment of the $500,000 balance provided for under the share sale agreement came and went. Mr Walker did not pay the $500,000. Mr Coffey did not demand payment. In 2015, however, Mr Coffey (through debt collectors) made demand for the $500,000 together with contractual interest. Mr Walker did…

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 Coffey v Walker

Details

AGLC: Coffey v Walker [2020] NZCA 621
Case: [2020] NZCA 621
Decision Date: 4 December 2020 at 2 pm

CaseChat Overview and Summary

This appeal concerns the sale of shares in Alligator Ltd and Independent Monitoring Services Ltd, which provided security and alarm monitoring services. The shares were owned by the trustees of the PC Coffey Trust, of which Paul Coffey was a trustee. In 2008, Mr Coffey negotiated the sale of 30% of the shares in each company to the trustees of the Wynsfield Family Trust, Mr Walker and Mr Bertelsen. The purchase price for the shares was $700,000, to be paid by one instalment of $200,000 due immediately with the balance left as a loan that fell due in June 2013. The parties also entered into a shareholders’ agreement. The agreement was not available but a draft was produced which both parties accepted reflected the agreement entered into. The shareholders’ agreement stipulated that Mr Walker would leave his employment and work fulltime in the business. Mr Walker paid the $200,000, left the ASB and began work for Alligator and IMS. However, within a short time Mr Walker could see there were financial problems. In particular, substantial sums were owing to the Inland Revenue Department (IRD) for PAYE and GST. By June 2009, Mr Walker had resigned as a director of both companies. Mr Coffey tried, unsuccessfully, to resolve matters with the IRD. In 2011 both companies were placed in liquidation. Mr Coffey was prosecuted by the IRD for failing to ensure that the companies paid the GST and PAYE owing. He was convicted and sentenced to a term of home detention. The date for repayment of the $500,000 balance provided for under the share sale agreement came and went. Mr Walker did not pay the $500,000. Mr Coffey did not demand payment. In 2015, however, Mr Coffey (through debt collectors) made demand for the $500,000 together with contractual interest. Mr Walker did not accept that he was under any obligation to pay. Nothing further happened until 2019 when Mr Coffey issued proceedings against Mr Walker, seeking summary judgment. Associate Judge Smith refused the summary judgment application on the ground that it was reasonably arguable that Mr Coffey had misrepresented the extent of the companies’ liabilities and that Mr Walker had cancelled the share sale agreement for that reason, thus relieving him of any further obligations under the agreement. Mr Coffey appeals the decision. The 11 grounds of appeal, as argued, can fairly be summarised as being that the judgment was wrong because: (a) the issue of cancellation was not properly raised as a defence in either the notice of opposition or Mr Walker’s evidence and therefore should not have been considered; (b) the evidence did not support the finding that there was a reasonable possibility that Mr Walker had cancelled the agreement; and (c) Mr Walker had affirmed the agreement in June 2009 and August 2011 with full knowledge of the alleged misrepresentations (which were denied). The appeal was dismissed. The court found that the issue of cancellation as a defence was adequately raised and the Associate Judge was right to deal with it. The notice of opposition was not as clear as it could have been, but the foundation for cancellation as a defence was nevertheless laid in the reference to s 37 of the CCLA, which entitles a party to cancel for misrepresentation. The court also found that there were a number of important factual issues in dispute regarding what was said between the parties in 2009 and 2011 and that there was evidence on which it could reasonably be argued that Mr Walker had taken steps that conveyed cancellation of the agreement.

Orders