Dalton v Mackley

[2021] NZHC 2697

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-000760

[2021] NZHC 2697

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of Carbon Group Limited (in liquidation)

BETWEEN

SIMON DALTON and MATTHEW PETER KEMP

Applicants

AND

NEIL MACKLEY

Respondent

Hearing:

8 October 2021 (by VMR)

Appearances:

K Kommu for Applicants

B J Norling and C T Zhang for Respondent

Judgment:

8 October 2021

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 8 October 2021 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

DALTON v MACKLEY [2021] NZHC 2697 [8 October 2021]

[1]    The applicants as liquidators of Carbon Group Ltd (in liq) (Carbon Group) applied for directions under s 284(1)(a) of the Companies Act 1993. In substance they asked the Court to rule that Carbon Group owned certain assets in the possession of the respondent (Mr Mackley) and to order him to deliver up those assets to them.

[2]    In an interim judgment of 7 September 2021, I held that the orders sought by the applicants were not ones the Court could properly make under s 284(1)(a) in the circumstances of this case but that steps should be taken to regularise the proceeding rather than dismiss it.1 I directed that a conference was to be convened with counsel to consider three issues arising namely:

(a)the orders that should be made to regularise the proceeding;

(b)to timetable the proceeding to a hearing; and

(c)determine the issue of costs.

[3]    Counsel have conferred on these matters but have filed memoranda indicating that they cannot reach agreement on any of them.

1. In this judgment I make orders for the future conduct of the proceeding.

The applicants’ submissions

[5]    There has been a marked change in the applicants’ position since the hearing. Previously the applicants’ stance was that if they had incorrectly sought to utilise the s 284 procedure the case could proceed justly, speedily and most inexpensively as a summary judgment application. The applicants apparently no longer consider the case suitable for summary judgment. They now seek orders which can be summarised as:

(a)that the case proceed as an ordinary proceeding under pt 5 of the High Court Rules 2016;

(b)substituting Carbon Group as plaintiff in place of the applicants;

1      Dalton v Mackley [2021] NZHC 2329.

(c)directing the filing of pleadings;

(d)directing that the affidavits filed to date be treated as the briefs of evidence and the common bundle for trial;

(e)the case be set down for trial as soon as pleadings are filed; and

(f)that interim orders be made to prevent the disposal of the disputed assets pending resolution of the proceeding.

[6]    As far as costs in respect of the interim judgment are concerned, the applicants submit they should be reserved pending final determination of the proceeding.

The respondent’s submissions

[7]    The respondent argues the directions the applicants now seek are substantially different from what had previously been advised to the Court. In addition, he submits the directions are so inappropriate and offer so little benefit that the proceeding should simply be dismissed and the applicants required to commence a fresh proceeding in the District Court. In this regard, the respondent notes the applicants’ claim is for a very modest sum within the District Court jurisdiction and no reason has been advanced why it should be dealt with in the High Court. He says the applicants seek to impose an unusually expedited process depriving him of discovery and other disclosure processes available in ordinary actions. The directions also fail to recognise that until pleadings are exchanged the issues between the parties will not be clear nor has any provision been made in them for the payment of security for costs which will inevitably be sought against Carbon Group. It is submitted that even if the Court were of the view the proceeding ought not to be dismissed, it is premature to make any timetabling directions beyond the filing of pleadings.

[8]    In relation to costs in respect of the interim judgment, the respondent submits that issue should be determined now in his favour and if this is not agreed a timetable made for the filing of memoranda.

Discussion

[9]    There is much force in the respondent’s submissions. The applicants previously took the position that if they could not proceed under s 284 they would do so by way of summary judgment and even suggested a date in October 2021 to hear the application. This was a factor in my assessment that the interests of justice could be best served by regularising the proceeding rather than dismissing it.

[10]   I am faced with the options of directing that the case continue as an ordinary proceeding or dismissing it and requiring the applicants to begin afresh. On balance, I still believe that the appropriate course is to regularise rather than dismiss the proceeding. The case will soon become, if it is not already, uneconomic. The process going forward should reflect that reality and attempt to minimise costs. I consider that dismissing the proceeding will be wasteful. By making orders to regularise the proceeding further delay will be avoided by close case management and there remains a prospect that the substantial evidence that has been filed may be utilised with consequent cost savings.

[11]   However, the directions the applicants seek are not all appropriate. It is premature to make directions for the conduct of the proceeding to trial before pleadings have even been filed. Furthermore, the respondent is entitled to seek discovery and apply for security for costs and the applicants’ timetable makes no specific provision for that. There is no basis either upon which the Court would make interim orders in relation to the disputed assets at this stage when no such application and evidence to support it has been filed. Finally, appropriate consideration needs to be given to whether the case is heard in this Court or the District Court.

[12]In those circumstances, the directions I will make are as follows:

(a)this proceeding shall henceforth continue as an ordinary proceeding under pt 5 of the High Court Rules:2

2      I identified the Court’s jurisdiction to make such an order in the interim judgment at [47] and [48].

(b)Carbon Group is substituted for the applicants as the plaintiff for the purposes of the proceeding;3

(c)Carbon Group is to file and serve a statement of claim and notice of proceeding within 15 working days;

(d)the respondent is  to file and serve his  statement of defence within   15 working days thereafter;

(e)the case is then to be set down for case management review before an Associate Judge; and

(f)Counsel are to confer prior to the case management review to attempt to reach agreement as to the payment of security for costs and whether the proceeding should be transferred to the District Court under s 94 of the District Court Act 2016. They shall file memoranda at least three working days prior to the case management conference addressing these issues and all other matters required by r 7.3 of the High Court Rules.

[13]   As far as costs in relation to the interim judgment are concerned, I consider that they should be determined now. In relation to those costs the following timetable shall apply:

(a)the respondent shall file and serve a memorandum as to costs within five working days;

(b)the applicants will file and serve a memorandum five working days thereafter;

(c)I will then determine the issue of costs on the papers unless I consider there is good reason to conduct a hearing; and

3      High Court Rules 2016, r 4.56.

(d)the memoranda should be no longer than five pages.

Result

[14]There shall be directions in accordance with paras [12] and [13] above.

[15] Costs on today’s hearing are reserved to be dealt with in accordance with para [13].

[16]   For the avoidance of doubt, the hearing scheduled for 13 October 2021 is vacated.

O G Paulsen Associate Judge

Solicitors:

Glaister Ennor, Auckland, [email protected] / [email protected] Norling Law Limited, Auckland, [email protected] / [email protected]