Curtis Investments Limited v John Curtis Limited

[2022] NZHC 770

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-588

[2022] NZHC 770

IN THE MATTER

of a breach of contract

BETWEEN

CURTIS INVESTMENTS LIMITED

Plaintiff

AND

JOHN CURTIS LIMITED

Defendant

KATHRYN CORSTON

Proposed Intervener

Hearing:

4 April 2022

(Telephone Hearing)

Appearances:

O D Peers for Intervener

J R Pullar and A E Kennerley for Plaintiff No appearance for Defendant

Judgment:

13 April 2022

Reissued:

13 April 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment has been re-issued under the slip rule to make minor changes to paras [9] and [18].

CURTIS INVESTMENTS LIMITED v JOHN CURTIS LIMITED [2022] NZHC 770 [13 April 2022]

[1]                 Kathryn Corston (Kathryn) seeks leave to intervene in this summary judgment application.

[2]Kathryn is the daughter of the late John Robert Curtis (John Robert).

[3]                 John Robert died in 1989. John Robert and his wife, Pamela Curtis, were the holders of 79,995 shares in John Curtis Limited, the defendant in this proceeding. Five further shares were in the names of John Robert and Pamela’s children who are relevantly, John Stanley Curtis (John Stanley), Christine O’Connor, the present applicant to intervene Kathryn, and two others.

[4]                 40,997 of the 79,995 shares were owned by John Robert and 38,998 were owned by Pamela. The shares owned by John Robert and Pamela did not entitle them to share in the profits of John Curtis Ltd but did confer voting rights and a fixed dividend. When John Robert died in 1989 he left Pamela a life interest in his shares.

[5]                 The evidence is that Pamela was close to her son, John Stanley, and in October 2016, transferred all of the shares she held, including those subject to the life interest, to John Stanley’s Trust (the JS Curtis Trust). Pamela and John Stanley were the trustees of the JS Curtis Trust.

[6]Pamela died in October 2019 and John Stanley died in January 2020.

[7]                 Accordingly, as at the date of John Stanley’s death, the JS Curtis Trust held shares that, on the face of it, should not have been transferred to the JS Curtis Trust as Pamela only had a life interest in the 40,997 shares. It was not suggested before me that Pamela intended to only transfer her life interest in the shares (assuming that was possible). On Pamela’s death the shares in which she had a life interest have not been returned to John Robert’s Estate.

[8]                 John Stanley’s wife, Joanna Curtis (Joanna) became trustee of the JS Curtis Trust, along with another. Kathryn’s position is that the JS Curtis Trust is under the control of Joanna.  Kathryn  alleges  that  Joanna,  in  May 2020,  used  the  shares (as majority shareholder) that she now controls, to appoint herself as director of

John Curtis Ltd.   At the same time, Joanna also appointed as director Christine O’Connor, one of John Robert and Pamela’s children.

[9]                 At issue in this proceeding is a contract dated 3 June 2021 entered into by Curtis Investments Limited  (the  plaintiff),  of  which  Joanna  is  sole  director.  John Curtis Ltd contracted to sell one of the properties it holds. That purchase has not settled. The contract under which John Curtis Ltd sells the property is signed by Christine O’Connor, on behalf of the vendor, with Joanna signing on behalf of the purchaser.

[10]              The sale by John Curtis Ltd to Curtis Investments Ltd has not settled as Christine has declined to authorise John Curtis Ltd’s solicitors to complete the sale until the issue of the shares transferred to the JS Curtis Trust, apparently in breach of the life interest, is resolved.

[11]              Kathryn has issued separate proceedings in this Court under CIV-2022-409-103 seeking an order rectifying the Share Register of John Curtis Ltd. If that order is granted, then the 40,997 shares transferred apparently in breach of the life interest, will be recorded as owned by the Estate of John Robert of which Kathryn is now sole executor.

[12]              With the 3 June 2021 contract not settling, Curtis Investments Ltd has issued these specific performance proceedings against John Curtis Ltd. John Curtis Ltd is not defending those proceedings. Joanna’s position is she would not stand in the way of Christine instructing counsel to appear on behalf of John Curtis Ltd to defend the summary judgment application if that is what she wanted to do. Indeed, counsel for John Curtis Ltd did file an appearance reserving rights on behalf of John Curtis Ltd, but I was told at the telephone conference hearing on 4 April 2022, that counsel’s instructions have been withdrawn. In an affidavit of Joanna, filed just before the hearing, she says  she  abstained  from  the  process  of  instructing  counsel  for  John Curtis Ltd. The tenor of Joanna’s evidence is that she would abstain from that process and leave whether a defence was to be filed to Christine.

[13]              In the meantime, Kathryn, as I have said, commenced proceedings seeking to rectify the Share Register. Those proceedings were filed on 18 March 2022 (CIV-2022-409-103). That proceeding was accompanied by an application for two orders; the first being an interim injunction against Joanna and Christine, in essence seeking to restrain them from selling any further assets of John Curtis Ltd; and the second seeking an order staying the summary judgment application in this proceeding pending determination of the application for rectification.

[14]              The application for summary judgment (the present proceeding) and the application for an injunction restraining the directors of John Curtis Ltd from disposing of assets and for stay (both in the share rectification proceeding), are to be heard at the same time. Kathryn’s application to intervene is to enable her to be heard in opposition to the application for summary  judgment  and in support  of the stay. If Kathryn is granted leave to intervene, she will file a notice of opposition (provided in draft) as to why Curtis Investments Ltd should not be granted summary judgment and in particular pursue the stay application.

[15]              Paraphrasing, the proposed defence is equity should not assist the plaintiff in obtaining specific performance when Joanna has acted in breach of constructive trust principles in utilising shares she knew, or ought to have known, belonged to the Estate of John Robert when she appointed herself and Christine directors of John Curtis Ltd.

[16]              Accordingly, the grounds that would be advanced in support of the notice of opposition overlap with the issues in the rectification proceeding.

[17]              Mr Pullar, counsel for Curtis Investments Ltd, notes that under the Estate of John Robert, his five children (with Joanna taking John Stanley’s place), share equally in the Estate. Mr Pullar submitted that with the 38,998 shares that Pamela was able to transfer to John Stanley and with one-fifth of the 40,997 shares, Joanna would control a majority. On that basis, Mr Pullar says, even if the share transfer had not taken place, Joanna would have been able to control John Curtis Ltd once the shares in the company were distributed by John Robert’s Estate.

[18]              Mr Peers, counsel for Kathryn, notes that the terms of John Robert’s Will do not require the shares to be distributed immediately, indeed the Will expressly empowers the executors to hold the shares. Accordingly, Mr Peers said it cannot be assumed that Joanna would have control over John Curtis Ltd in any event.

[19]              As at the hearing of the application to intervene, papers in opposition had not been filed on the share rectification proceeding.

Principles governing intervention

[20]              The power to allow a party to intervene is described in McGechan as being broad in nature. It should be exercised with restraint to avoid the risk of expanding issues, elongation of hearings and increasing costs. It is also relevant whether the intervener’s rights will be directly affected by the proceeding along with the extent to which the intervener can rely on a joined party to protect its rights.1

Decision

[21]              I consider it is in the interests of justice to allow Kathryn to intervene. I hold that view for the following reasons:

(1)The hearing of the injunction and stay applications will raise issues similar to those that will come up in the proposed defence to the summary judgment application.

(2)Should the material filed in opposition by Joanna in the rectification  proceeding  support  an  arguable  defence   to the summary judgment application, it is appropriate that the Court hear submissions on those matters given  the onus on    a plaintiff in a summary judgment.

(3)The rectification claim, albeit with no papers in opposition filed, appears to have merit. If the shares are returned to the

1      Andrew Beck and others McGechan on Procedure: High Court Rules 2016 (online ed, Brookers) at [HR7.43A.01].

Estate of John Robert Curtis then Kathryn will be able to use those shares to remove Joanna as a director of John Curtis Ltd and appoint herself or another person to make appropriate enquiries into the circumstances in which John Curtis Ltd sold the property subject to the summary judgment proceedings.

(4)Given the overlap in the issues, I do not consider granting leave is going to significantly increase the hearing time for the applications – all matters will be dealt with on the affidavit evidence and can be, given the overlap in issues, dealt with in the allocated hearing time.

(5)If Kathryn fails in her application to oppose then, having become a party, she will be liable for costs in respect of her opposition.

(6)Joanna was relaxed about the prospect of Christine mounting  a defence. Joanna’s position is that she brought Christine into John Curtis Ltd as a director so that there would be some family representation on the Board. I see giving Kathryn the opportunity to oppose the summary judgment as akin to giving the children of John Robert and Pamela a chance to be heard. While Christine supports the rectification of the Share Register, there is some suggestion she did not follow through on defending the summary judgment proceeding out of a concern that she may attract some personal liability in doing so. Kathryn has no such reservation – if Kathryn is not permitted to intervene, there will be no contradictor to the summary judgment.

(7)While Mr Pullar was correct that Kathryn, as a disgruntled shareholder of John Curtis Ltd (or at least someone who will inherit shares), will have remedies available to her, for example, under s 174 of the Companies Act 1993, that is to open the

prospect of further litigation which may well be avoided by granting the application to intervene which, given the matters are to be heard together, shall not significantly increase the cost of the hearing.

[22]              At the end of the day, I consider it is in the interests of justice that there be an opportunity for all with concerns to be heard in what is ultimately a family company dispute. Granting the application will allow a different perspective to be put to the Court. I accept on the evidence filed to date that it appears the property subject to the specific  performance  claim  was  sold  at  value  and  so  Kathryn’s  interests  as     a shareholder in John Curtis Ltd may not be directly affected, but further evidence on that point may be available.

[23]Accordingly, the application to intervene is granted.

Costs

[24]Costs were not sought in the application and so none are awarded.

Associate Judge Lester

Solicitors:

Buddle Findlay, Christchurch Taylor Shaw, Christchurch