Delegat v Norman - [2012] NZHC 2358

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2010-404-004444 [2012] NZHC 2358

UNDER Section 301 Companies Act 1993

BETWEEN JAKOV NIKOLA DELEGAT (AS TRUSTEE OF THE JIM DELEGAT BUSINESS TRUST)
First Plaintiff

ANDBOAT 93 HOLDINGS LIMITED (IN LIQUIDATION)
Second Plaintiff

ANDCHRISTOPHER JOHN NORMAN Defendant

ANDJULIE ANNE SALTHOUSE Third Party

Hearing: 16, 17, 18, 19, 20, 23, 24, 25 and 27 July 2012

Counsel: C T Patterson and E J Grove for the Plaintiffs
G P Blanchard and J P Nolen for the Defendant
D G Collecutt for the Third Party

Judgment: 4 December 2012

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Tuesday, 4 December at 3:00 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel: Jones Young, Auckland.
Lowndes Associates (J P Nolen) Auckland.
Simpson Dowsett Mackie (W A Meggitt) Auckland. C T Patterson, Auckland.
G P Blanchard, Auckland
Grant Collecutt, Auckland.

DELEGAT V NORMAN HC AK CIV 2010-404-004444 [4 December 2012]

TABLE OF CONTENTS

Introduction ............................................................................................................[1] Factual background ..............................................................................................[11] Issues for determination .......................................................................................[22] Shadow or de facto director .................................................................................[24] Use of funds received by boat building subsidiaries............................................[36] Use of proceeds of sale of Boat 89 trade-in .........................................................[48] The Luana.............................................................................................................[66] Financial position of SML ...................................................................................[77] December 2008 .................................................................................................[79] April 2009..........................................................................................................[84] August 2009.......................................................................................................[87] November 2009 .................................................................................................[90] Analysis .............................................................................................................[96] Overall assessment of duties under Companies Act 1993 .................................[102] Fair Trading Act claim .......................................................................................[122] Result..................................................................................................................[128]

Introduction

[1] This case arises out of the failure of a luxury yacht builder, Salthouse Marine Limited (SML), which was placed into receivership on 4 February 2010 and then into liquidation on 19 May 2010. At the time of its receivership, SML had a Salthouse 68 yacht in the early stages of construction for the first plaintiff, the Jim Delegat Business Trust (the Trust). In accordance with its normal practice, SML had incorporated a wholly owned subsidiary, Boat 93 Holdings Limited (Boat 93), for the specific purpose of contracting with the Trust to build the yacht for it.

[2] The Trust signed a contract to build the yacht with Boat 93 on 12 November

2009. In terms of the contract, the Trust paid Boat 93 $615,000 on 13 November

2009 and a further $615,000 on 8 January 2010, a total of $1.23 million. Boat 93 ceased trading on 4 February 2010 when a receiver was appointed to SML. It was unable to complete construction of the yacht and was therefore in breach of its contract with the Trust. SML had guaranteed the contract. SML was in breach of its guarantee as it too was unable to complete construction of the yacht.

[3] The Trust was left with an incomplete hull and a claim against the insolvent

Boat 93 and SML. The plaintiffs say the incomplete hull was worth approximately

$150,000 (if that) but a marine surveyor’s report obtained by the Trust found the costs to build the hull to 4 February 2010 were $455,461 excluding GST. Whatever figure is used, the Trust suffered a substantial…

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.

Continue reading Delegat v Norman

Details

AGLC: Delegat v Norman [2012] NZHC 2358
Case: [2012] NZHC 2358
Decision Date: 4 December 2012

CaseChat Overview and Summary

In Delegat v Norman, the Jim Delegat Business Trust (the Trust) and Boat 93 Holdings Limited (Boat 93) sought to recover losses resulting from the failure of Salthouse Marine Limited (SML), a luxury yacht builder. SML had contracted with the Trust to build a yacht, but the project was incomplete when SML went into receivership and then liquidation. The plaintiffs alleged that Mr Norman, a director of SML, breached his duties under the Companies Act 1993 and engaged in misleading and deceptive conduct under the Fair Trading Act 1986. The court determined that Mr Norman was not a shadow or de facto director of Boat 93 or any other boat-building subsidiary of SML. Although the plaintiffs argued that Mr Norman was involved in the governance decisions of these subsidiaries, the court found that he did not direct or instruct the actions of the appointed directors or the board of directors. Furthermore, the court concluded that Mr Norman's funding of SML did not constitute reckless trading or breach any of his duties under the Companies Act. The court held that Mr Norman acted in good faith and in what he believed to be the best interests of SML. Finally, the court rejected the claim that Mr Norman made a misleading and deceptive representation to the Trust, finding that the statement in question did not imply that SML or a subsidiary would be able to complete the construction of the yacht. Consequently, the plaintiffs' claims were not proven, and judgment was given in favour of the defendant, Mr Norman, with costs to follow the event.

Orders