Crane v Aquamarine Operations and Management Limited
[2014] NZHC 1960
•19 August 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-000625 [2014] NZHC 1960
IN THE MATTER OF the Companies Act 1993 BETWEEN
PHILLIP CRANE Plaintiff/Respondent
AND
AQUAMARINE OPERATIONS AND MANAGEMENT LIMITED Defendant/Applicant
Hearing: 11 August 2014 Appearances:
C F Foote for Applicant/Defendant
N S Tabb for Plaintiff/RespondentJudgment:
19 August 2014
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to stay of liquidation proceeding
This judgment was delivered by me at 4.30 pm on 19 August 2014 pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
CRANE v AQUAMARINE OPERATIONS AND MANAGEMENT LIMITED [2014] NZHC 1960 [19 August
2014]
Background
[1] The plaintiff (Mr Crane) and the defendant (Aquamarine) entered into a contractual relationship which fell apart within two months. The parties do not agree on who caused the problem between them. They each accuse the other of failing in their contractual obligations.
[2] In January 2014, Mr Crane had a statutory demand for NZD 122,670.54 served on Aquamarine. When Aquamarine did not meet the demand or apply to have it set aside, Mr Crane commenced a proceeding to put Aquamarine into liquidation.
This application
[3] Aquamarine applies for orders restraining publication of an advertisement of this proceeding and staying any further proceedings. Mr Crane opposes the application.
Name of the plaintiff
[4] The proceeding was incorrectly commenced by naming the plaintiff as “Phil Crane”. I order that the plaintiff’s name be amended to read “Phillip Crane” as now shown in the heading to this judgment.
Procedural issue as to the evidence
[5] A preliminary issue arose as to an additional (copy) affidavit on which Mr Crane sought to rely. Mr Crane is based in the United Kingdom and I take that into account in the immediately following paragraphs.
[6] When this application was filed, the intention was that it would be dealt with in the normal way. Aquamarine, as applicant, filed its supporting evidence with its application. Mr Crane filed his notice of opposition on 7 April 2014 stating that he relied also on grounds to be contained in his affidavit to be filed. Directions were made for Mr Crane’s affidavits to be filed by 9 May 2014, along with other directions to work towards a fixture on 16 July 2014.
[7] Mr Crane failed to meet the timetable which led to an order on 24 June 2014 whereby the July fixture was vacated, the application adjourned to the hearing which has now taken place, time extended for Mr Crane’s opposition evidence (to 31 June
2014) and the costs of the adjournment ordered against Mr Crane. Mr Crane’s affidavit in opposition was initially sworn within the timetable on 28 July 2104. Ms Tabb’s submissions were filed a little after the timetable date, an email version being sent on 5 August 2014 and filed three days later.
[8] To Ms Tabbs’ submissions there was appended a photocopy of a document purporting to be Mr Crane’s second affidavit sworn 1 August 2014 before a notary in Edinburgh. The affidavit provides in four paragraphs some additional narrative evidence largely reflective of what Mr Crane had previously stated. It then attaches two forms of invoice addressed from Mr Crane to Aquamarine dated 5 October 2013 and 7 November 2013 by which more detail of Mr Crane’s claims of those dates are provided. Other attachments include hotel bills, credit card statements and some additional emails not previously produced.
[9] Ms Tabb made an oral application for leave to have Mr Crane’s additional affidavit read at this hearing. In support of that application, she noted that the information being provided by Mr Crane is largely by way of clarification, going so far as to state there was “nothing new”. She identified as the main purpose of the additional affidavit the attaching of the documents to which I have referred.
[10] Mr Foote, for Aquamarine, opposed the additional affidavit being read. He referred to Mr Crane’s previous timetable failures and the vacating of the earlier fixture to accommodate Mr Crane’s delays. He noted that in the time since receipt of Ms Tabb’s submissions and the copy affidavit he had not had time to have Aquamarine’s witnesses digest and provide any reply to the proposed additional affidavit.
[11] For the reasons that follow I refuse leave to have Mr Crane’s additional
affidavit filed and read.
[12] First, the photocopy of the affidavit was received at a time when not only had Aquamarine’s evidence in reply been filed but also Aquamarine’s submissions for this hearing had been filed. There is substantial force in Mr Foote’s observation that a major purpose of the second affidavit would have been to provide clarification and to bolster Mr Crane’s evidence in the light of criticisms of that evidence made in Mr Foote’s submissions.
[13] Secondly, even an affidavit in reply has to be limited to new matters raised in the other party’s notice of opposition or affidavit evidence.1 Ms Tabbs’ realistic concession as to the purpose of “clarification” indicates that Mr Crane’s second affidavit would not even have qualified as a reply affidavit if he had been the applicant. It is even less acceptable given that he is the respondent who has already filed his opposition evidence.
[14] Finally, it would have been unjust to Aquamarine to have Mr Crane’s supplementary affidavit read at a time when, to accommodate Aquamarine’s legitimate interest in making any evidential response, a second hearing date would have to be vacated. An adjournment for the purposes of considering Mr Crane’s second affidavit would be unjust.
The central issue
[15] The parties have diametrically opposed views as to responsibility for breakdown of the contract and as to financial entitlements and responsibilities which flow.
[16] The central issues on this application are whether:
(a) there is a genuine and substantial dispute between the parties as to the existence of the debt claimed by Mr Crane either at all or to its full extent;
(b)Aquamarine has a set-off claim which arguably extinguishes any debt claimed by Mr Crane.
1 High Court Rules, r 7.26.
[17] The evidence filed leads me to the conclusion that there cannot be a substantial dispute as to a significant part of the debt claimed by Mr Crane. Consequently, the relief sought by Aquamarine will be refused.
[18] Aquamarine’s evidence has been provided by Ian Mellsop and Nicholas
Traviss, directors of Aquamarine. Mr Crane has given the evidence in opposition.
[19] There are a number of issues on which the parties have provided conflicting evidence, the truth of which cannot be resolved in this context.
The undisputed background
[20] There is no dispute as to the matters which I now set out (at [21] to [44]):
[21] In 2013 Aquamarine (with Mr Crane’s involvement) presented a proposal (on
31 July 2013) and then won a contract (the Emaar contract) to manage an aquarium in Dubai owned by Emaar Retail (LLC) (Emaar). Aquamarine was formed as a company for that single purpose.
[22] The Emaar contract required Aquamarine to appoint Mr Crane as General Manager. By the Emaar contract, Emaar reserved the right to assess the General Manager’s performance. In the event Emaar deemed the performance of the General Manager to be unsatisfactory, Emaar could request Aquamarine to replace the General Manager, which Aquamarine was required to do within one month of such request, without affecting the aquarium’s operation.
[23] Around August 2013, Aquamarine and Mr Crane entered into a written agreement (the agreement) whereby Mr Crane was the subcontractor for the General
Manager position with Emaar. The terms of the agreement included:
remuneration of USD 20,000 gross per month, payable in advance;
a per diem allowance of EUR 50;
provision of a serviced apartment;
provision of a vehicle on a three year lease and a mobile phone; and
certain airfares.
The agreement provided for termination by either party’s giving three months’ notice of termination to the other. The agreement (by clause 11.4) also had provision for termination without notice in a number of situations, including if Emaar deemed the performance of the General Manager to be unsatisfactory. By the agreement the parties agreed to submit to arbitration any dispute arising over the interpretation or implementation of the agreement.
[24] Mr Crane commenced his contractual duties in Dubai on 1 September 2013.
[25] On 13 September 2013 Emaar’s chief operating officer (the Emaar COO) wrote to Messrs Mellsop and Traviss to arrange a meeting without Mr Crane to discuss a number of observations as to negative impressions she had over Mr Crane’s performance to date.
[26] On 14 September 2013, Messrs Mellsop and Traviss met the Emaar COO. They also met separately Mr Crane.
[27] From 16 September 2013, Mr Crane chased Aquamarine for payments owing to him under the agreement, and sent further chasing emails over the following month.
[28] Aquamarine made only two payments to Mr Crane in all, being USD 10,000 on 17 September 2013 and USD 10,000 on 18 October 2013.
[29] On 3 October 2013, the Emaar COO sent to Messrs Mellsop and Traviss an email in which:
she stated that she was not satisfied with Mr Crane’s performance;
she asked Aquamarine to replace Mr Crane at the earliest in two months’
time; and
she requested Aquamarine’s immediate plan and time lines on Mr Crane’s
replacement.
[30] On 4 October 2013, Messrs Mellsop and Traviss met with the Emaar COO
and separately with Mr Crane.
[31] On 5 October 2013, Mr Crane requested payment of GBP 32,263.13, which I infer to relate substantially to the balance due for remuneration and to cover additional sums including per diem allowances, travel and hotel costs (Mr Crane for convenience had converted all sums into Pounds Sterling).
[32] On 15 October 2013, Mr Crane emailed Mr Traviss to ascertain what had been agreed with the Emaar COO concerning Mr Crane’s departure and to chase payment of money as he could not afford to live in his hotel any longer. He concluded:
Let me know what’s happening or I will have to be on a plane this weekend.
The irresistible inference is that Mr Crane was prepared to stay on to cover the period to arrival of his replacement provided he was paid.
[33] From 15 October 2013 further email exchanges occurred as to Mr Crane’s
need for payment.
[34] On 18 October 2013, Mr Crane by email suggested there needed to be an agreement on how much notice he was to get. He noted he did not know how long he was still in his job for.
[35] On 24 October 2013, Mr Crane had a meeting with the Emaar COO which “did not go well”. Mr Crane concluded that it was not appropriate to work on – he decided to leave Dubai and to return home.
[36] On the same date, 24 October 2013, Mr Mellsop and Mr Crane had a telephone discussion in which money owing to Mr Crane was discussed. Mr Mellsop promised Mr Crane he would personally make payment to Mr Crane if Aquamarine did not pay.
[37] Mr Crane left Dubai on 25 October 2013. He has not since worked for
Aquamarine. Aquamarine has not paid him any further sum.
[38] On 26 October 2013, Mr Crane and Mr Mellsop had further discussions. Mr Mellsop sent an email in which he referred to funds held in Russia which might be available for payment to Mr Crane. Mr Mellsop concluded:
Let’s put this behind us and think about the next project.
[39] In the meantime, Aquamarine took urgent steps to bring in a temporary General Manager, recruited from Canada. Emaar deducted from its payments to Aquamarine the equivalent to five days fees (a sum of USD 7,361) on, the basis of the absence of a General Manager for that period.
[40] On 7 November 2013, Mr Crane emailed Aquamarine a claim for GBP 4,577.46, which I infer relates to some per diem allowances and other expenses such as hotel accommodation and travel.
[41] Further email exchanges occurred between Mr Crane and Mr Mellsop, with
Mr Mellsop stating on 23 November 2013:
Hi Phil.
Almost got some funds sorted.
And further on 4 December 2013:
Yes you are definitely getting paid …
[42] On 4 December 2013, Mr Crane emailed a claim for a further GBP 36,498, a figure which Mr Mellsop states he regarded as “outlandish”. Ms Tabb conceded in her submission that the GBP 36,498 figure which stems from Mr Crane’s view that he should have received payment in lieu of notice is at most arguable. She accepted that that claim cannot be asserted as definitely owed in this liquidation proceeding.
[43] The parties have exhibited no correspondence from then (4 December 2013)
until the statutory demand for NZD 122,670.54 was issued on 13 January 2014.
The documentary evidence
[44] For reasons which are unclear, neither party exhibited a complete chronological set of the email correspondence. The Court has been given bits. One inference is that the full correspondence would do neither party nor its case credit. There is a strong indication in what has been produced that Aquamarine fulfilled neither its contractual obligations nor the promises given by Mr Mellsop and that part of the reason was Aquamarine’s limited cash flow. There is a strong indication that Mr Crane’s expectations increased with the passage of time after the break-up and made any negotiated resolution unlikely.
[45] The lack of a full, chronological documentary record leaves gaps in the
Court’s understanding and renders conclusive findings the more difficult.
The sum demanded
[46] Mr Crane demanded payment of NZD 122,670.54. The three demands (above at [31], [40] and [42]) which made up that total had been earlier provided. But in his notice of opposition Mr Crane did not particularise the break-down of his demands or the total demand. Nor did he exhibit any invoices. What Mr Crane provided in the last paragraph of his affidavit was a summary (not copies) of three sums being for GBP 32,263.13, GBP 4,577.46 and GBP 36,498.00. Mr Crane says that after deducting the two payments of GBP 6,088 (converted from USD 10,000), a balance of GBP 61,172.59 remained). From Mr Crane’s evidence, one can infer that
there may be components of the demand along the following lines:
October 2013 remuneration USD 20,000
Accommodation and associated expenses ?
Per diem allowance @ EUR 50 @ 54 days EUR 2,700
Payment in lieu of notice GBP 36,498
[47] The Court has not been provided with particularised evidence to reach accurate conclusions as to the accurate total sums owed to Mr Crane beyond USD 20,000 for October 2013 and the per diem allowance.
[48] In his evidence, Mr Mellsop noted the lack of detail and substantiation of Mr Crane’s demand and made his assessment of what emerged from Mr Crane’s emails as to possible components of the demand. He notes a claim for USD 30,000 (USD 20,000 of which might relate to the September/October remuneration period). In addition to per diem and accommodation allowances, he notes possible elements
of:
telephone calls;
credit card charges;
flight expenses;
medical cover; and
pay in lieu of notice of USD 60,000 (being three months at USD 20,000 per month).
Staying a liquidation proceeding
[49] Against this background, I come to the rules and the principles applicable on an application to restrain publication of the advertisement of a liquidation proceeding and an order staying any further proceedings.
Rule 31.11 High Court Rules
[50] Rules 31.11 High Court Rules provides the legislative authority for orders of this nature. It provides:
31.11 Power to stay liquidation proceedings
(1) If an application for putting a company into liquidation is made under rule 31.3, the defendant company, or, with the leave of the court, any creditor or shareholder of that company or the Registrar of Companies, may, within 5 working days after the date of the service of the statement of claim on the defendant company, apply to the court—
(a) for an order restraining publication of an advertisement required by rule 31.9 or any other information relating to that statement of claim; and
(b) for an order staying any further proceedings in relation to the liquidation.
(2) The court must treat an application under subclause (1) as if it were an application for an interim injunction and, if it makes the order sought, it may do so on whatever terms the court thinks just.
(3) The inherent jurisdiction of the court is not limited by this rule.
The principles
[51] I adopt as a accurate statement of applicable principles the passage in McGechan on Procedure2 where the authors bring together the classic summary of principles in the judgment of Wallace J in Nemisis Holdings Ltd v North Harbour Industrial Holdings Ltd in the following terms:3
(a) The Court has an inherent jurisdiction to stay winding-up proceedings where the debt upon which such proceedings are founded is the subject of genuine dispute. In those circumstances the plaintiff cannot show it has the status of a creditor or that there has been neglect by the company to pay.
(b) The jurisdiction is an inherent one to prevent abuse of process. There is no inflexible rule.
(c) The governing consideration is whether the proceedings suggest unfairness or undue pressure.
2 McGechan on Procedure (online looseleaf ed, Brookers) at HR31.11.02.
3 Nemisis Holdings Ltd v North Harbour Industrial Holdings Ltd (1989) 1 PRNZ 379 (HC) at 385 per Wallace J.
(d) It is a serious matter to stay winding-up proceedings, so the decision to do so is never made lightly. The onus is on the applicant and it is normally necessary to demonstrate “something more” than the balance of convenience considerations which are usually considered on an application for interim injunction. If the defendant company has had an opportunity to file appropriate affidavits, such defendant is required to establish a strong prima facie case of the existence of a genuine dispute on substantial grounds, or show that there are clear and persuasive grounds for a stay.
[52] To this summary may be added two further principles:
(e) A dispute to only part of the plaintiff’s claimed debt is insufficient to
justify a stay;4 and
(f) A defendant’s set-off claim will be recognised if the defendant established a strong prima facie case of set-off on substantial grounds.5
What is in substantial dispute in this case?
Mr Crane’s contractual entitlements
[53] Mr Crane’s and Aquamarine’s deponents give conflicting evidence on the
causes of the break-down of the relationship.
[54] Messrs Traviss and Mellsop’s evidence is that Emaar required Aquamarine to replace Mr Crane because the Emaar COO found Mr Crane’s performance unsatisfactory. Their evidence is that while they were still working through the needs of replacement, Mr Crane left the job and Dubai. The thrust of their evidence (and Mr Foote’s submissions) is that by abandoning his employment on 25 October
2013, Mr Crane became unentitled to further remuneration. Had Mr Crane been
actually dismissed because of Emaar’s requirements the agreement did not require a
period of notice.
4 At 385, applying Anglian Sales Ltd v South Pacific Manufacturing Co Ltd [1984] 2 NZLR 249 (CA) at 255.
5 Nemisis Holdings Ltd, above n 3, at 386 per Wallace J.
[55] Mr Crane’s position is that Aquamarine’s conduct forced him to leave Dubai. First, he says that he was performing his job satisfactorily and that it was the attitude and conduct of Emaar’s COO which was unsatisfactory. This is factually arguable, but Aquamarine’s evidence is to the contrary. As a matter of contractual law, Mr Crane’s standard of performance is arguably not decisive given Aquamarine’s rights in the event Emaar required Mr Crane’s replacement. Secondly, Mr Crane says that he simply could not afford to stay in his job when Aquamarine was in breach of the agreement by not properly paying Mr Crane, with the consequence that Mr Crane had to leave Dubai. These arguments as to Aquamarine’s breaches of contract are strong. Aquamarine in its evidence provided limited explanation of its failure to pay Mr Crane his USD 20,000 in advance on 1 September and 1 October. Aquamarine’s contemporary email explanations, through Mr Mellsop, were in terms of having to access money for the payments. In the Aquamarine evidence filed on this application, there is now reliance on the absence of a written tax invoice from Mr Crane, although Mr Mellsop at the time appeared content to promise payment without calling for any tax invoices. It is arguable that Aquamarine’s failure to fully pay Mr Crane’s remuneration was in breach of contract and that Mr Crane was financially forced to leave Dubai when he did as a result of Aquamarine’s breaches. But those events alone would not automatically entitle Mr Crane to claim remuneration and other payment for the extent of periods and sums demanded. His employment was about to come to an end in any event.
[56] There are two scenarios, based on who lawfully brought the contract to an end. If it came to an end on 25 October 2013 because Mr Crane accepted Aquamarine’s breach of contract as a repudiation which entitled him to cancel the contract, his entitlements under the contract may be much more limited than he claims with any additional arguable rights being in the nature of unliquidated damages. If, on the other hand, Mr Crane’s employment came to an end around 25
October 2013 because his leaving Dubai was a repudiation which Aquamarine accepted, then Mr Crane’s entitlements will be limited to the sums to which he was entitled at termination (subject to any set-off for Aquamarine’s damages).
[57] Both scenarios are arguable on the evidence and Aquamarine is entitled to have the Court accept for the purpose of this application the second scenario, being the argument most favourable to Aquamarine.
[58] On the limited evidence which Mr Crane provided in his affidavit in opposition, this second scenario would leave Mr Crane entitled to claim:
unpaid remuneration of USD 20,000 (albeit with arguable a five day
pro rata deduction by way of set-off for the unworked October days);
a per diem entitlement – 54 days at EUR 50 per day, totalling EUR
2,700.00;
compensation for the apartment, and associated expenses, not provided by Aquamarine while Mr Crane remained at his own cost in
a hotel (1 September 2013 to 25 October 2013); and
compensation for medical cover not provided by Aquamarine (1
September 2013 to 25 October 2013).
[59] Mr Crane sought to provide additional evidence by the copy affidavit dated 1
August 2014 which I have discussed above at [5] to [14]. I refused leave to have that affidavit filed and read.
Aquamarine’s set-off claim
The quantum of the set-off claim
[60] Aquamarine asserts a set-off. It says that Mr Crane’s unlawful abandonment
of his contractual duties caused Aquamarine losses.
[61] Messrs Mellsop and Traviss gave evidence of Aquamarine’s costs during and
after the period of Mr Crane’s agreement, as follows:
Costsof flights to and from and accommodation in Dubai to deal with Emaar’s concerns over Mr Crane’s performance and to bring Mr Crane’s
replacement to Dubai USD 12,983.39
Emaar’s deduction of five days’ fees USD 7,361.00
Total USD 20,344.39
The two categories of set-off claimed
[62] Aquamarine’s set-off claims fall into two categories. The first relate to Mr
Crane’s alleged breaches of contract between 1 September 2013 and 25 October
2013. The second relate to the consequences of Mr Crane’s alleged repudiation.
The “1 September to 25 October breaches”
[63] Aquamarine says that Mr Crane was in breach of his contract by performing so poorly that the Emaar COO intervened with complaints and ultimately her request for Mr Crane’s removal.
[64] There is sufficient evidence both in what Messrs Mellsop and Traviss say, and in Mr Crane’s email comments at the time, to indicate that Mr Crane may have been a substantial cause of problems in the very first weeks of the Emaar contract. Mr Crane’s emails indicate at least a lack of sympathy for the perspectives and values of Emaar as a client.
[65] Aquamarine says that because of Mr Crane’s breaches it incurred in trying to remedy the breaches to Emaar’s satisfaction:
(a) travel and accommodation expenses of Messrs Mellsop and Traviss for the 14 September 2013 meeting; and
(b)travel and accommodation expenses of Messrs Mellsop and Traviss for the 4 October 2013 meeting.
[66] The evidence of Messrs Mellsop and Traviss is that they had to travel urgently to Dubai especially for the two meetings to discuss Mr Crane’s performance. Ms Tabb challenges that evidence, saying it is not credible. I accept that, at the least, it is very likely on the evidence filed that Aquamarine would fail to satisfy the Court that the two meetings involved specially arranged travel. In an email from Mr Traviss to the Emaar COO dated 7 September 2013 (six days before the COO raised her concerns about Mr Crane) Mr Traviss recorded:
I will definitely be in Dubai on the 13th, 14th, and 15th.
[67] Mr Mellsop’s evidence of “scrambling resources and making immediate emergency trips to Dubai” is completely inconsistent with the record of earlier arrangements for at least the September trip. Aquamarine, in the event compensable breaches on the part of Mr Crane were found, is very unlikely to recover any part of its expenses for the September meeting.
[68] Ms Tabb accepted that she could not refer to any equally undermining evidence in relation to the 4 October meeting. She submitted that the apparent misstatement in Mr Mellsop’s evidence as to the emergency nature of both meetings must, of itself, undermine the reliability of the Aquamarine evidence as to the October meeting. I agree. Ms Tabb submitted that some weight may also be placed on the requirement in the Emaar contract that Aquamarine make its senior management of its international operations available for regular consultation with Emaar. This might suggest, as the early arranging of the September meeting indicates, that regular arranged meetings would flow through the year. Until Aquamarine’s full email correspondence with Emaar is disclosed, it is not possible to conclude reliably that Aquamarine’s evidence as to “scrambling to arrange meetings” is reliable for the October meeting when it is plainly unreliable for the September meeting.
The “repudiation” breaches
[69] Aquamarine says that Mr Crane abandoned the agreement by leaving Dubai on 25 October 2013. This argument suggests, as Mr Foote accepted, a contractual
analysis of repudiation, in which Mr Crane clearly evinces an intention to no longer be bound by the agreement and Aquamarine accepts that repudiation.
[70] Aquamarine’s suggestion that Mr Crane’s leaving Dubai on 25 October 2013 amounted to repudiation is, on the evidence in this application, weak. Rather, Mr Crane has a strong case for saying that Aquamarine had from 1 September committed egregious, repeated breaches of the agreement which left Mr Crane so short of his entitlement to remuneration and other benefits that he had no choice but to leave for a place where he would be able to afford to live. There is also compelling documentary evidence that Mr Crane’s inability to trust Aquamarine to meet its contractual obligations was rammed home when repeated assurances of Mr Mellsop as to imminent payment were apparently cut across by Mr Traviss. This problem over non-payment was culminating in the period immediately before Mr Crane’s departure. On 24 October 2013, Mr Mellsop had made his promise to Mr Crane that he would be paid and that Mr Mellsop would make the payment personally if necessary. But Mr Traviss on the previous day had responded rather differently to an enquiry from one of the Emaar personnel. Mr Traviss stated in an email on 23 October 2013 that:
One of the specific reasons that we have not paid Mr Crane is that I have not had the reports that I was to have each week and each month.
In other words, Mr Traviss was saying to Emaar (although not to Mr Crane directly) that Mr Crane’s remuneration was being deliberately withheld partly because Mr Crane had not been filing reports (a supposed requirement not of itself the subject of any documentary evidence produced by Aquamarine in this application).
[71] Mr Crane has a strong case for asserting that it was Aquamarine which had by 25 October 2013 repudiated the contract and that his leaving Dubai was the acceptance of that repudiation.
[72] Any claim which Aquamarine might have for damages from Mr Crane’s alleged repudiation (being both the travel expenses of Mr Crane’s replacement and the five days’ fees withheld by Emaar) is, on the evidence filed, weak at best. There is also a serious issue as to Aquamarine’s failure to mitigate any such losses – Mr
Crane had repeatedly offered to stay on to assure a smooth transaction. He was at the same time wanting Aquamarine to catch up with his overdue payments. There is a real prospect that Aquamarine will be found to have caused its own losses or failed to mitigate those which it sustained.
[73] The Court can have little sympathy for the position in which Aquamarine finds itself in this application. Aquamarine chose not to apply to set aside the statutory demand and has offered no explanation for that failure. Through its directors, and now through Mr Foote’s submissions, it has strongly suggested that there has been but one person responsible for all the problems which occurred in September and October 2013. Yet, through its own failure to properly remunerate Mr Crane from Day 1, Aquamarine laid the foundations for a breakdown in its contractual relationship with Mr Crane.
What remains of Aquamarine’s set-off claims?
[74] Once the Court recognises, first, the difficulties with Aquamarine’s evidence as to the urgency of the September and October meetings and, secondly, the weakness of Aquamarine’s repudiation argument, Aquamarine is left without the strong prima facie set-off claim which is required to justify the Court’s intervention on an application of this kind.6 Mr Crane had accrued monetary entitlements under the agreement. Aquamarine, at best, has some modest chance of succeeding on some part of its set-off claims.
A startling development – no payment at all by Aquamarine
[75] In his evidence in opposition, Mr Mellsop’s careful statement in relation to
Aquamarine’s payment of a sum as a form of security was this:
I have arranged for the Defendant to deposit in the trust account of the Defendant’s solicitors a sum of at least USD17,055.75, which covers the amount of the Plaintiff’s disputed pay for 2 months and the per diems, accommodation and medical cover claims, but not flights, with a further deduction for the Defendant’s claimed set-offs of USD20,344.39.
6 Nemisis Holdings Ltd, above n 3.
[76] When Mr Mellsop swore his additional (reply) affidavit some three months later, he made no further reference to the payment arrangement deposed to in his first affidavit.
[77] In the course of the hearing, I noted that Aquamarine’s payment to the solicitor’s trust account would have to be taken into account in any judgment. I was surprised to be told at that point by Mr Foote that Aquamarine had never made the payment which Mr Mellsop said that he had “arranged”.
[78] The failure to carry through on the payment or to file correcting or explanatory evidence is a further, unsatisfactory aspect of Aquamarine’s payment record. As it happens, it does not impact directly on my conclusions which are reached for other reasons.
Mr Crane’s substantially indisputable claims
[79] Once it is established (as I have found) that Aquamarine’s set-off claims do not fall for further consideration on this application, the Court is left with a portion of Mr Crane’s financial entitlements on which he must be permitted to rely in his liquidation proceeding.
[80] Mr Crane’s financial entitlements were:
October 2013 remuneration USD 20,000
Per diem allowance EUR 50 @ 54 days EUR 2,700
[81] Had Mr Crane submitted (in time) acceptable evidence as to his accommodation expenses and his medical expenses I would have found those expenses also recoverable entitlements.
[82] Thus, although Mr Crane’s demand was substantially overstated by reason of the portion representing a claim for pay in lieu for three months’ notice, the demand was justifiable to a substantial degree (and not challenged by Aquamarine at that point). Mr Crane is entitled to be regarded as a creditor for a substantial sum and is entitled to proceed on that basis.
Aquamarine’s solvency
[83] Aquamarine, in its application, relied on the additional ground that it is a solvent, going concern, and will be irreparably harmed if the application is not granted.
[84] Although Mr Crane’s notice of opposition did not challenge this particular ground of Aquamarine’s application, Mr Crane asserted that the evidence of Aquamarine’s dealings with him from September 2013 indicated that it was continuing to trade and to incur debts on which it will default. Mr Crane asserts:
This company is insolvent and should be in administration.
[85] Mr Mellsop provided such evidence as Aquamarine produced in relation to its financial position. The documentation exhibited by Mr Mellsop – being three pages of financial statements from 31 March 2014 – show the Dubai operation as the only source of income, with modest net income. Equity is positive only because of two “assets” which appear to be advances made to related entities. No independent assessment has been provided to support a conclusion of solvency.
[86] The evidence provided is scant justification for a positive finding that Aquamarine is solvent, particularly when the directors chose not to explain Aquamarine’s failure in September and October 2013 to honour its contractual payment commitments to a key employee.
[87] Aquamarine has not sufficiently proved its solvency to justify staying the proceeding on that ground alone and refusing to allow the issue of solvency to go to trial. Mr Crane is entitled on the evidence of Aquamarine’s performance in September and October 2013 to say that Aquamarine was then performing as a cash- strapped company which either could not or would not meet all its current debts.
Standing back
[88] While Mr Crane’s asserted claim includes a portion which is at best arguable, there is nothing in his liquidation proceeding (following upon a statutory demand to which Aquamarine did not respond) to render this proceeding an abuse of process.
He has entitlements, recognised at the time at least by Mr Mellsop, which Aquamarine failed to meet. If there has been undue pressure in relation to Mr Crane’s entitlements, it derives historically from Aquamarine’s unfulfilled promises rather than Mr Crane’s current proceeding.
Outcome
[89] It is not appropriate that this proceeding be stayed or advertising restrained.
Costs
[90] Costs must follow the event. The appropriate categorisation is 2 and the appropriate band B.
Order
[91] I order:
(a) The defendant’s application is dismissed;
(b)The defendant is to pay costs to the plaintiff on a 2B basis together with disbursements to be fixed by the Registrar;
(c) The time for the filing and service of the Defence is extended to 10 working days from the date of this judgment;
(d) The proceeding is to be called in Associate Judge Sargisson’s
Companies List at 10.45 am on 19 September 2014.
Associate Judge Osborne
Solicitors:
Kendall Sturm & Foote, Auckland
N S Tabb, Auckland
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