Corbans Viticulture Limited v Waihopai Valley Management Limited
[2012] NZHC 3567
•18 December 2012
IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY
CIV-2010-406-000046 [2012] NZHC 3567
BETWEEN CORBANS VITICULTURE LIMITED Plaintiff
ANDWAIHOPAI VALLEY MANAGEMENT LIMITED
First Named First Defendant
ANDACHILLIES VENTURES LIMITED, ATREIDES HOLDINGS LIMITED, BLICKS ROAD INVESTMENTS LIMITED, FARRAH INVESTMENTS LIMITED AND ORS TRADING AS PATRIARCH JOINT VENTURE Second Named First Defendant
ANDANTHONY LEWIS MOORE Second Defendant
ANDDEAN ALFRED STEELE Third Defendant
ANDBEN DOUGLAS Fourth Defendant
ANDDENNIS LUNKEN Counterclaim Defendant
Hearing: 12 December 2012
Appearances: L Ponniah for Plaintiff and Counterclaim Defendant
T Jeffcott for the Third and Fourth Defendants
Judgment: 18 December 2012
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[Second Defendant’s Application to Strike Out]
CORBANS VITICULTURE LIMITED V WAIHOPAI VALLEY MANAGEMENT LIMITED HC BLE CIV-
2010-406-000046 [18 December 2012]
The applications
[1] The plaintiff (Corbans) filed a second amended statement of claim on
6 September 2012. The fifth, sixth and seventh causes of action are expressed to be in the alternative, presumably to all four of the earlier causes of action and each other. The fifth alternative cause of action is against the second, third and fourth defendants and is described as based on dishonest assistance. The sixth alternative cause of action is against the first-named first defendant (Waihopai) and the second, third and fourth defendants. It is said to be based on breach of trust.
[2] The seventh alternative cause of action is against the second and third defendants, and is said to be based on knowing receipt.
[3] The third and fourth defendants have applied to strike out the fifth and sixth causes of action, and the third defendant has applied to strike out the seventh cause of action.
[4] All applications are opposed by the plaintiff.
Preliminary issues
[5] Prior to the filing of the second amended statement of claim, the third and fourth defendants had filed an application to strike out the first amended statement of claim. After considering the second amended statement of claim they filed an amended application to strike out. It was not served on the plaintiff. It was included in a casebook prepared for argument of the third and fourth defendants’ application for leave to file a summary judgment application. Mr Jeffcott says that the amended application must have come to Mr Ponniah’s attention as long ago as October when that casebook was used in the course of argument on that application.
[6] That may be so but it is no substitute for service as required by the High Court Rules. Plainly there was an oversight, and Mr Ponniah’s objection to this application proceeding was soundly based. He noted that he had filed submissions
on the basis of the first application, not having seen the amended application in the casebook.
[7] However, this case is set down for a trial, to commence early in March 2013. If this application were adjourned it could not be argued until February. Almost inevitably, a decision on this application would only be available a matter of days before commencement of the trial, far too late for orderly preparation for a two week civil fixture. Reluctantly Mr Ponniah agreed that the amended application could be dealt with.
[8] A second preliminary issue arose in relation to an affidavit filed by Mr Ponniah, sworn by a Mr Livingstone. Mr Jeffcott submitted that normally a strike-out would not be accompanied by affidavit evidence, overlooking (perhaps) the fact that he had filed affidavits in support of his original application. Mr Jeffcott said that Mr Livingstone’s affidavit contains opinion evidence, hearsay evidence and submissions on the law. He asked that it not be read. Alternatively, he asked for leave to file two affidavits in reply.
[9] Mr Ponniah says the affidavit was filed to bring to the attention of the Court the evidence Mr Livingstone intends to give at the trial, because this strike-out application has been brought after exchange of evidence and the Court should be informed, on this application, of the evidence that is to be given which is relevant to the issues to be decided on this application. He did not oppose leave for affidavits to be filed in reply.
[10] After considering the respective submissions of counsel I admitted the affidavit of Mr Livingstone and also affidavits from Mr Douglas and Mr Leonard in reply. Nonetheless, the extent to which evidence can be taken into account on an
application to strike out is limited.1
1 See [14] below
Legal principles
[11] Rule 15.1 of the High Court Rules provides:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
(2) If the court strikes out a statement of claim or a counterclaim under subclause(1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court's inherent jurisdiction.
[12] On a strike-out application, pleaded facts, whether or not admitted, are assumed to be true. It is inappropriate to strike out a claim summarily unless the Court can be certain that it cannot succeed. Accordingly the jurisdiction to be exercised sparingly, and only in clear cases. However, the jurisdiction is not excluded by the need to decide difficult questions of law requiring extensive
argument.2
[13] Given the arguments presented in this case, by the applicants, it is important to record that a proceeding will not be struck out as an abuse of process if it appears to lack merit, nor if a defendant considers that he has a complete defence.3
[14] Evidence by way of affidavit may be received, notwithstanding the assumption that pleaded facts are true, in appropriate cases. In Attorney-General v
McVeagh,4 the Court of Appeal said:
2 Attorney-General v Prince [1998] 1 NZLR 262; Couch v Attorney-General [2008] NZSC 45.
3 Geotherm Energy Ltd v Electricity Corporation of New Zealand (1991) 4 PRNZ 231 (CA)
4 Attorney-General v McVeagh [1995] 1 NZLR 558 at 566
The Court is entitled to receive affidavit evidence on a striking out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it would not consider evidence inconsistent with the pleading, for a striking out application is dealt with on the footing that the pleaded facts can be proved: see Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641, 645-646, Southern Ocean Trawlers Ltd v Director General of Agriculture and Fisheries [1993] 2
NZLR 53, 62-63, per Cooke P. But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the
matter ought not to be allowed to proceed further.
Background facts, as context for the three causes of action in issue
[15] In 2008 and 2009 Waihopai, then called Ants Nest Limited, purchased from Corbans a substantial number of grapevines on behalf of the remaining first defendants, who were intending to develop a vineyard, and are known as the Patriarch Joint Venture. Payment in full was not made. Corbans sues for the balance of the purchase price. Waihopai says that the vines were not of first grade quality, as they should have been, or of the highest health standards, and were not of an acceptable commercial standard. It seeks judgment, in its counterclaim, for the cost of replacement vines and replanting, and loss of profits from lost production.
[16] It is common ground that the Patriarch Joint Venture partners paid the cost of the vines to Waihopai. Waihopai did not pay Corbans; rather, it used the funds for other expenditure in the course of its vineyard development business. There is a clause in Corbans’ terms and conditions of trade which Corbans says applies to the supply of these vines. It is in the following terms:
If the goods or any part are onsold by the customer prior to payment to [Corbans] the customer shall receive the proceeds of sale in trust and on account for [Corbans] and shall pay the said proceeds in reduction of the customer’s indebtedness to [Corbans].
[17] Corbans says that this clause provides that the monies paid to Waihopai by the Patriarch Joint Venture were therefore to be held by Waihopai on trust for Corbans.
[18] It is this allegation which forms the foundation for the three causes of action in issue in this application.
Fifth cause of action
[19] As noted this cause of action is headed “Dishonest Assistance”. Corbans says that the third defendant, Mr Steele, was at all material times the chief executive officer of Waihopai and was, or should have been, aware of Corbans’ terms of trade to Waihopai, which included the above provision. It says that the fourth defendant, Mr Douglas, was at all material times the financial controller of Waihopai and, similarly, should have been aware of this provision.
[20] Corbans says that Waihopai, Mr Moore (the second defendant) and Mr Steele and Mr Douglas committed a breach of trust by using monies held by Waihopai for purposes other than payment to Corbans, and the funds should instead have been held in a separate account, or in any event on trust, until paid to Corbans. Corbans says that Mr Steele and Mr Douglas in their respective executive positions with Waihopai have dishonestly assisted Waihopai in its breach of trust. Corbans says this was conduct below an objective standard of an honest person, and/or was conduct undertaken in reckless disregard of the rights of Corbans and the obligations of Waihopai as trustee. Various particulars of payments said to have been made from the funds are given.
[21] As a result, Corbans claims a declaration that Mr Moore, Mr Steele and Mr Douglas are liable to account to Corbans for monies paid to Waihopai and not paid by Waihopai to Corbans.
Sixth cause of action
[22] This cause of action is against all defendants and is said to be based on breach of trust.
[23] After pleading the trust, and the alleged breach of it by Waihopai as I have described, Corbans again pleads that the actions of Waihopai were under the control and direction of Mr Moore as a director, Mr Steele as CEO of Waihopai and Mr Douglas as financial controller of Waihopai.
[24] Corbans then alleges:
64. That, in their respective capacities as officers and/or employees and/or agents or controllers of ANL, the second, third and fourth defendants owed ANL, as trustees, a duty to exercise reasonable care and skill in the conduct of ANL’s finances and its trustee obligations. That the rights flowing from this duty duly form part of the trust property.
65. That the second, third and fourth defendants are in breach of the duty to exercise reasonable care and skill owed to [Waihopai], as trustee, in that they caused, permitted or assisted the breach of trust as pleaded in paragraph 62 above.
66. Therefore, [Waihopai], as trustee, has a cause of action against the second, third and fourth defendants for breach of their duty to exercise reasonable skill and care. [Waihopai] is unable to or is unwilling to take such action, given that [Waihopai] is controlled and directed by the second, third and/or fourth defendants.
67. That, in the circumstances, such duty to exercise reasonable care and skill is owed to the beneficiary of the trust, being [Corbans], and is enforceable by [Corbans]. [Corbans] has suffered loss as a result of the breach of trust and for breach of duty by the second, third and fourth defendants are therefore liable to make good any loss.
Seventh cause of action
[25] This cause of action is described as knowing receipt.
[26] Corbans first alleges that knowing of its terms of trade, relating to the obligation of Waihopai to hold funds received from the Patriarch Joint Venture in trust and on account of Corbans, Mr Moore, Mr Steele and Mr Douglas “participated, caused, directed and/or assisted the breach of trust” by various pleaded means including dissipating and/or paying out the monies, causing them to be intermingled with Waihopai’s funds, and participating in what is described as commercially unacceptable conduct in the financial accounts of Waihopai. Particulars are given.
[27] Of the funds said to have been paid out to other entities by Waihopai, only one relates to either Mr Steele or Mr Douglas, and then only indirectly - $126,477 is said to have been transferred to the general ledger account of Achillies Ventures Limited, a company said to be owned and controlled by Mr Steele. It is not alleged
that any sums were received by Mr Steele personally, nor by Mr Douglas personally or put into the name of any other entity owned or controlled by either of them.
[28] Corbans then says:
69. In all of the circumstances, the second, third and fourth defendants had actual knowledge and/or wilfully shut their eyes to the obvious and/or wilfully and recklessly failed to make such enquiry as a(sic) honest and reasonable person would make and/or had knowledge of circumstances which would indicate the facts to an honest and reasonable person and/or had knowledge of circumstances which would put an honest and reasonable person on enquiry, to ensure that the said funds that [Waihopai] was obliged to hold in trust for [Corbans] was first held in trust and/or paid out to [Corbans] prior to ... .
[29] The lengthy pleading proceeds to summarise alleged actions by the second, third and fourth defendants in causing, directing or permitting or assisting with transfers of money, as previously pleaded.
The case for Mr Steele and Mr Douglas
[30] Mr Jeffcott says that as all three causes of action involve allegations of dishonesty the law requires a high standard of proof, and places on Corbans and its solicitors an obligation to have evidence that will support a prima facie case of dishonesty.
[31] Mr Jeffcott refers first to X v Y,5 in which Penlington J discussed in detail the latter of these obligations, by reference to a number of authorities. This case was cited with approval by the Court of Appeal in Commerce Commission v Carter Holt Harvey.6 Mr Jeffcott cited relevant passages from these judgments.
[32] Both Mr Steele and Mr Douglas deny that they held any senior management roles with Waihopai as alleged, and in their affidavits give evidence about the extent of their involvement in the affairs of Waihopai. In particular, both say that they did
not know of the clause in the supply contract requiring Waihopai to hold the funds
5 X v Y [2000] 2 NZLR 748
6 Commerce Commission v Carter Holt Harvey [2009] 3 NZLR 573 (CA)
received from Patriarch Joint Venture on trust. Thus Mr Jeffcott says they cannot be found to have acted dishonestly in relation to trust monies, and for that reason all three of the causes of action against them are destined to fail.
[33] Mr Ponniah does not suggest that the principle relied on by Mr Jeffcott is inapplicable or inaccurately stated but says that there is evidence available which will be led at trial showing that Mr Steele and Mr Douglas were closely involved in the day to day management of the financial affairs of Waihopai and that they did, in fact, hold the respective senior management roles which are alleged.
[34] Mr Jeffcott develops his argument on this point by saying that given the principle which requires solicitors and counsel as well as parties to have strong evidence supporting allegations of dishonesty before they are pleaded, it is appropriate for the Court to scrutinise the case in advance of trial to ensure that has occurred, otherwise his clients will be forced to defend those allegations at a lengthy trial when it can be shown beforehand that they are without substance.
[35] Mr Jeffcott concedes that he could not advance any authority for this proposition, which amounts to suggesting that in cases involving allegations of dishonesty, there should be an assessment of the evidence before it is presented at trial, to ensure that it meets the standards required of solicitors and counsel, which he set out. The reason for this is that no such principle has been recognised. In civil law there is no assessment of the adequacy of evidence prior to trial, other than, in some circumstances, by way of summary judgment. Even then, the Court will not enter summary judgment for a defendant if there is a dispute on the facts, or the evidence should be tested at trial before findings can be safely made. The principles need not be further elaborated upon here, but are clear and well-established and balance the rights of a plaintiff to take a case to trial against the rights of a defendant to have it summarily disposed of where it cannot succeed.
[36] To a limited extent an application to strike out can, in some circumstances, perform a pre-trial screening to prevent cases which are within the terms of r 15.1 being taken to trial. However, as can be seen from the summary I have set out above, the principles do not go as far as to favour a pre-trial assessment of the
quality or weight of the evidence. This is manifest in the principle that the pleadings are taken as correct statements which can be proved, and affidavit evidence, though admissible, is of limited application: genuine disputes of fact will not be resolved so only undisputed evidence will be taken into account.
[37] It is clear from these principles that neither procedure involves a preliminary assessment of the weight of evidence for a plaintiff’s case, but rather a very limited review of evidence only, though of course there is scope in both procedures for an examination of whether a cause of action can succeed as a matter of law.
[38] There are disputes of evidence in this case in relation to the degree of involvement of Mr Steele and Mr Douglas in the affairs of Waihopai. However strongly held their belief may be that they were not integrally involved, or at least involved to the extent that the plaintiff says, that is a matter for trial. Similarly, their evidence that they did not know of the term within the supply agreement relating to the proceeds of onsale being held on trust is challenged by the plaintiff. I am unable to make a finding on a summary basis on this point. The plaintiff has a right to bring its case to trial on this issue.
[39] Mr Jeffcott then made detailed submissions in relation to each of the causes of action. In relation to the fifth cause of action, dishonest assistance of Waihopai in its breach of trust, Mr Jeffcott cited Westpac New Zealand Ltd v MAP Associates Ltd,7 where in the Supreme Court Tipping J said:
[27] The key ingredient in the cause of action for dishonest assistance is the need for a dishonest state of mind on the part of the person who assists in the breach of trust. We agree with the statement in Barlow Clowes that such a state of mind may consist in actual knowledge that the transaction is one in which the assistor cannot honestly participate. But it may also consist in what we would describe as a sufficiently strong suspicion of a breach of trust, coupled with a deliberate decision not to make inquiry lest the inquiry result in actual knowledge. For the purpose of this alternative, it is necessary that the strength of the suspicion that a breach of trust is intended makes it dishonest to decide not to make inquiry. That state of mind, which equity equates with actual knowledge, is usually referred to as wilful blindness. It involves shutting one’s eyes to the obvious and can thus fairly be equated with the dishonesty involved when there is actual knowledge.
7 Westpac New Zealand Ltd v MAP Associates Ltd [2011] 3 NZLR 751 (SC)
[40] Against that background, Mr Jeffcott discussed the principles from X v Y and Commerce Commission v Carter Holt Harvey, and related authorities which I have referred to above.
[41] Again, there can be no argument with the principle. At trial the Court would review the evidence against the statement I have cited, and determine whether it can properly be found that either Mr Steele or Mr Douglas had the requisite state of mind for the cause of action to be proved. However, that finding cannot be made on this application on the conflicting evidence that I have. It is an assessment which will be made after a thorough examination, including by way of cross-examination, of all the evidence which may bear on the finding that has to be made. It is not an issue for summary disposal.
[42] I decline to strike out the fifth cause of action.
[43] The sixth cause of action is against all defendants and is said to be based on breach of trust. Corbans says the defendants owed Waihopai a duty to exercise reasonable care and skill in the conduct of its finances, and its trustee obligations in relation to the funds it received from the Patriarch Joint Venture. It says that Waihopai has a right to enforce these duties and this right is also held by Waihopai on trust, for Corbans.
[44] Mr Ponniah relies on the judgment in Royal Brunei Airlines v Tan.8 At p 391 their Lordships said:
This question ... is directed at whether an honest third party who receives no trust property should be liable if he procures or assists in a breach of trust of which he would have become aware had he exercised reasonable diligence. Should he be liable to the beneficiaries for the loss they suffer from the breach of trust?
The majority of persons falling into this category will be the hosts of people who act for trustees in various ways: as advisers, consultants, bankers and agents of many kinds. This category also includes officers and employees of companies in respect of the application of company funds. All these people will be accountable to the trustees for their conduct. For the most part they will owe to the trustees a duty to exercise reasonable skill and care. When
8 Royal Brunei Airlines v Tan [1995] 2 AC 378
that is so, the rights flowing from that duty form part of the trust property. As such they can be enforced by the beneficiaries in a suitable case if the trustees are unable or unwilling to do so. That being so, it is difficult to identify a compelling reason why, in addition to the duty of skill and care vis-a-vis the trustees which the third parties have accepted, or which the law has imposed upon them, third parties should also owe a duty of care directly to the beneficiaries. They have undertaken work for the trustees. They must carry out that work properly. If they fail to do so, they will be liable to make good the loss suffered by the trustees in consequence. This will include, where appropriate, the loss suffered by the trustees, being exposed to claims for breach of trust.
[45] Plainly this cause of action is dependent on Corbans being able to prove the requisite degree of participation by Mr Steele and Mr Douglas in the affairs of Waihopai for them to have owed Waihopai a duty of care as they went about execution of those duties. That is an issue of fact. Although Mr Steele and Mr Douglas deny participating in the affairs of Waihopai in the way alleged, Corbans maintains that their participation was significantly more extensive than they say. Inevitably, this is an issue for trial.
[46] Submissions on this cause of action centred on the extent to which it would be necessary to show dishonesty by Mr Steele and Mr Douglas for the cause of action to be established. This is an issue of law which must be decided, but it is not an issue which arises on this application, because it cannot determine the application to strike out. Even if I were to find, on this application, the standard which should apply, the question of whether or not that standard has been met cannot be determined on affidavit evidence, so the cause of action could not be struck out. As I have noted, above, an application to strike out is not a process for a pre-trial
assessment of the quality or weight of the evidence.9 Whilst I acknowledge that both
Mr Steele and Mr Douglas are aggrieved at the allegations against them, an application to strike out this cause of action cannot succeed on the basis that their evidence should be accepted over that of the plaintiff’s. It is trite to observe that in the end, they may prove to be right. But an application to strike out the pleading is
not a means to resolve a case on this basis.10
9 See [35]-[38] above
10 See [13] above
[47] Mr Jeffcott submits that even if Mr Steele and Mr Douglas were officers of
Waihopai, they did not owe a duty of care in law to Corbans as one of its creditors.11
[48] The cases he relies on discuss and determine the extent of statutory liability of directors, imposed by the Companies Act 1993. The claim of Corbans in this case is differently formulated, and relies on the duty of care recognised in Royal Brunei v Tan, which I have described. Establishment of that duty of care is a matter for trial, particularly when it is necessary, as here, to first establish on disputed evidence the degree of involvement of Mr Steele and Mr Douglas in the events which are called
into account.12
[49] Finally, in relation to the sixth cause of action, Mr Jeffcott submits that for there to be liability for pure economic loss there must have been an assumption of responsibility by a defendant, and Corbans has not pleaded an assumption of responsibility in this case. He relies on Minister of Education v Econicorp Holdings
Ltd.13 Accepting that to be the case, without deciding, the assumption of
responsibility concerned would be by Mr Steele and Mr Douglas to Waihopai, as it is the cause of action thus derived by Waihopai that Corbans is said to be able to take advantage of under the principle enunciated in Royal Brunei v Tan. In my opinion the duty of care relied upon is adequately pleaded in the second amended statement of claim. Whether it can be established is a matter for trial. It follows that the application to strike out the sixth cause of action fails.
[50] For the sake of completeness I record that Mr Ponniah accepted that the words “as trustees” in the third line of paragraph 64 of the second amended statement of claim should not be in the pleading; the duty pleaded in paragraph 64 is said to be owed to Waihopai, and the capacity of Waihopai as a trustee or otherwise
is not relevant. Accordingly these words should be struck from paragraph 64.
11 Nippon Express( New Zealand) Ltd v Woodward & Hutt (1998) 8 NZCLC 261,765 at 261,777;
Fatupaito v Bates [2001] 3 NZLR 386
12 Couch v Attorney-General [2008] NZSC 45, per Elias CJ and Anderson J
13 Minister of Education v Econicorp Holdings Ltd [2012] 1 NZLR 36 (CA)
[51] Turning to the seventh cause of action, Mr Jeffcott bases his application on the lack of any pleading that either Mr Steele or Mr Douglas actually received any part of the monies which Corbans claims in this case.
[52] He also says the pleading replicates the fifth cause of action. There is a degree of strength in this submission. The second and third defendants are said to have participated, caused, directed and/or assisted in breach of trust, by one or more of various means. To that extent, this pleading has the appearance of replicating in different words the fifth cause of action, dishonest assistance with a breach of trust. The particulars given in paragraphs 68.1 to 68.4 mirror in part the particulars given in paragraph 59.
[53] Further, the only actual receipt of funds pleaded is by persons or companies other than Mr Steele or Mr Douglas apart, as I have already noted, from an alleged transfer to Achillies Ventures Limited, a company owned and controlled by Mr Steele.
[54] After noting this difficulty Mr Jeffcott then submits that a knowing receipt claim requires proof of knowledge on the part of the defendant, and submits that “Corbans has failed to adduce evidence that would support a prima facie case that such knowledge existed”. It is no part of the duty of Corbans on an application of this kind to produce any evidence at all, for the reasons already enunciated. Mr Jeffcott also submits that because of the extent of intermingling of funds which has occurred, the alleged trust property is uncapable of being traced to Achillies, with the result that it is impossible for Corbans to show that trust property was in fact received by either Mr Steele or by Achillies.
[55] This submission cannot succeed on an application to strike out. At trial it will be for the plaintiff to show where the money went and to establish claims by one or other of the pleaded causes of actions against those who handled the monies and who received the monies. The plaintiff may be able to show that the monies can be traced into the hands of Achillies Ventures Limited as presently pleaded and on this application I must assume it can.
[56] Mr Jeffcott is on stronger ground, however, with his submission that the pleading does not suggest that any part of the monies has been received either by Mr Steele or Mr Douglas personally. Although both counsel referred to the fact that the pleading alleges money reached Achillies Ventures Limited, neither presented argument on whether this is sufficient receipt to found liability on the part of Mr Steele. This claim is based on receipt, so this point is fundamental to this aspect of the application to strike out. Mr Jeffcott appears to assume that as Achillies Ventures Limited is a separate entity from Mr Steele, this element of the claim cannot be established. Conversely Mr Ponniah seems to assume that Achillies Ventures Limited can be treated as one and the same as Mr Steele. Neither elaborated on these positions.
[57] In the event, therefore, I have reached the view that:
(a) The reference to Mr Douglas in the fourth line of paragraph 68 is struck out.
(b)The seventh cause of action against Mr Steele can only succeed if it can be shown that as a matter of law receipt of funds by Achillies Ventures Limited is to be treated as receipt of those funds by Mr Steele.
(c) The cause of action needs to be substantially repleaded to set out with precision, and with sufficient particulars, each of the elements of a cause of action in knowing receipt, as distinct from a cause of action in dishonest assistance, which are presently liberally intermingled with it.
(d)Given the latter shortcoming, and the lack of argument on point (b), I am unable to make a final decision on whether this cause of action can remain.
[58] Accordingly the application to strike out the seventh cause of action is adjourned. Mr Ponniah is to review whether in his view a cause of action in knowing receipt can succeed, as a matter of law, where the recipient is a company in the ownership and under the control of Mr Steele, as distinct from the recipient being Mr Steele himself. If he forms the view that, arguably, this is sufficient, then he is to
file an amended statement of claim repleading the seventh cause of action against
Mr Steele, with sufficient particulars of each element of a claim in knowing receipt.
[59] If Mr Ponniah forms the view that receipt by Achillies Ventures Limited, and not Mr Steele personally, is not sufficient for this claim, he is to advise that the seventh cause of action is discontinued.
[60] In the event an amended statement of claim is filed with a repleaded seventh cause of action based on knowing receipt by Mr Steele, the recipient in fact being Achillies Ventures Limited, I will reconvene a hearing at the earliest practicable opportunity to hear argument on whether the receipt by Achillies Ventures Limited as distinct from Mr Steele personally is sufficient for this cause of action (unless Mr Jeffcott accepts this proposition as a matter of law).
[61] The deadline for these steps to be taken is 5.00 pm on Tuesday, 22 January
2013. Provisionally I set aside time for argument at 2.15 pm on Tuesday,
12 February 2013 at Nelson. If Mr Ponniah notifies the Court that the seventh cause of action is discontinued against Mr Steele, that fixture will not, of course, be required. However, if it is required written submissions are to be filed by Mr Jeffcott no later than 4 February 2013 and by Mr Ponniah no later than 7 February 2013, in both cases restricted to five pages as a maximum, and confined entirely to the legal issue of whether receipt by a company owned and directed by a person is sufficient, as a matter of law, to constitute receipt by that person, under a cause of action based on knowing receipt.
Costs
[62] Costs are reserved and will be assessed when the outcome of the final aspect of this application has been decided.
J G Matthews
Associate Judge
Solicitors:
Corban Revell, PO Box 21-180, Waitakere City. [email protected] / [email protected]
Hamish Fletcher, PO Box 1672, Nelson 7040. [email protected]
McFadden McKeeken Phillips, PO Box 656, Nelson. [email protected]Fletcher Vautier Moore, PO Box 90, Nelson 7040. [email protected]
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