Commercial Factors Ltd v Meltzer - [2017] NZHC 30

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2016-404-1398 [2017] NZHC 30

BETWEEN
COMMERCIAL FACTORS LIMITED

Plaintiff

AND

JEFFREY PHILIP MELTZER LLOYD JAMES HAYWARD AND ARRON LESLIE HEATH Defendants

Hearing: 30 November 2016

Appearances:

E Telle for Plaintiff
A Challis for Defendants

Judgment:

27 January 2017

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 27 January 2017 at 12:00pm
pursuant to Rule 11.5 of the High Court Rules

…………………………………………………….
Registrar/Deputy Registrar

Solicitors:
Neilsons Lawyers (E Telle), Onehunga, Auckland, for Plaintiff
McElroys (A Challis), Auckland, for Defendants

COMMERCIAL FACTORS LIMITED v MELTZER HAYWARD AND HEATH [2017] NZHC 30 [27 January
2017]

[1] Commercial Factors Ltd is a litigation funder. Under an agreement of

24 August 2009 it paid Blue Chip New Zealand Ltd (in liquidation) $67,750 for the liquidators to obtain a legal opinion as to potential proceedings against Blue Chip’s directors and others. It sues to recover that payment plus a further sum called “additional funding”. The liquidators have applied for strike-out and summary judgment. They say that under the agreement the terms for repayment have not been triggered.

Facts

[2] Blue Chip New Zealand Ltd went into voluntary liquidation in early 2008. The defendants were the liquidators not only of Blue Chip New Zealand Ltd but also
20 other Blue Chip companies. They were interested in taking proceedings against the directors and others. While they had received some assistance from a grant from the Liquidation Surplus Account, that did not provide them with enough to obtain a full opinion or to fund proceedings. A Queen’s Counsel was retained to provide an opinion. That would cost $50,000. The liquidators approached Commercial Factors Ltd for initial funding for the opinion. Commercial Factors Ltd carries on business in debt factoring and finance, including providing funds for litigation.

[3] The parties to the “Agreement Relating to Funding of Legal Opinion” of

24 August 2009 are Commercial Factors Ltd, Blue Chip New Zealand Ltd (in liquidation) and the liquidators. The agreement provided that Commercial Factors Ltd would provide funding up to a sum of $60,000 plus GST for advice as to possible claims against directors and professional advisors. That payment was to cover the liquidators’ costs of obtaining the opinion and the costs of preparing the agreement.

[4] These are the relevant parts of the agreement:

3.0 Additional Sum and Repayment

3.1The Company (through the Liquidators) must pay CFL an additional amount of $18,000 or 24% per annum (calculated daily and compounding annually), whichever is greater, at the time of repayment of the Funding.

3.2If the Liquidators decide that as a result of the Advice they will endeavour to obtain funding for proceedings against the parties identified in the Advice as having liability to the Company, the Company and the Liquidators will give CFL the first option to provide that funding on terms determined by the Liquidators. If CFL within 10 days of receiving notice of the funding requirements chooses not to fund the proceeding or…

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.

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Details

Case: [2017] NZHC 30
Decision Date: 27 January 2017

CaseChat Overview and Summary

The plaintiff, Commercial Factors Ltd, a litigation funder, sued the liquidators of Blue Chip New Zealand Ltd and its subsidiaries for payment under an agreement relating to funding of a legal opinion on potential proceedings against the directors and others. The liquidators applied for summary judgment. They argued that they had no obligation to repay the plaintiff because they had not obtained funding for the proposed proceedings. The court rejected the liquidators' argument. It held that the agreement provided for repayment if funds were available to the company and that the liquidators had not established that the whole of the plaintiff's cause of action was bound to fail. The court also held that the liquidators were required to repay the plaintiff from the funds received in the liquidation. The liquidators' application for summary judgment was dismissed and they were ordered to pay the plaintiff's costs on the application.

Orders