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DHC Assets Ltd v Arnerich

DHC Assets Ltd v Arnerich

Case [2021] NZHC 277 25 February 2021

Breach of Contract

Breach of Director’s Duties

Compensatory Damages

Jurisdiction

Statutory Interpretation

Limitation Periods

Corporate Law & Governance

Civil Litigation & Procedure

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-00975

[2021] NZHC 277

BETWEEN
DHC ASSETS LIMITED

Plaintiff

AND

ANTONY IVO ARNERICH

Defendant

Hearing: 19 October 2020

Appearances:

F Thorp for the Plaintiff

D A Cowan and J McBride for the Defendant

Judgment:

25 February 2021

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 25 February 2021 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Duthie Whyte, Auckland Doug Cowan, Auckland

F Thorp and L Turner, Auckland
J McBride and A J Steel, Auckland

DHC ASSETS LTD v ARNERICH [2021] NZHC 277 [25 February 2021]

Introduction

[1] Mr Arnerich was formerly the sole director of Vaco Investments (Lincoln Road) Limited (Vaco). Vaco engaged DHC Assets Limited (DHC) to design and construct a commercial building at Lincoln Road, Henderson.

[2] After practical completion, DHC submitted a payment claim which included claims for time-related costs arising out of delays in construction. Many of DHC’s claims were rejected, and DHC indicated an intention to proceed to adjudication. Before it could do so, Vaco was placed in voluntary liquidation. By that time, and unbeknownst to DHC, Vaco had sold the Lincoln Road property and Mr Arnerich had distributed all Vaco’s funds either to himself or to interests or persons associated with himself, leaving Vaco without enough funds to satisfy DHC’s claims.

[3] Since then, DHC, Vaco and Mr Arnerich have been involved in a prolonged dispute involving an adjudication under the Construction Contracts Act 2002, arbitration under the construction contract and High Court proceedings. In the most recent of these, DHC sought, pursuant to s 301(1)(c) of the Companies Act 1993, to recover from Mr Arnerich the amount it says it is owed as an unpaid creditor of Vaco.

[4] In a judgment delivered on 27 September 2019 and reissued on 2 October 2019, His Honour Davison J found that by procuring distributions and payments by Vaco shortly prior to it being placed into liquidation, Mr Arnerich had breached his director’s duties to act in good faith, by failing to act in Vaco’s best interests and by distributing Vaco’s assets to the detriment of a creditor, and by preferring his interests and those of other persons associated with him over the interests of Vaco’s creditors.1 His Honour ordered, pursuant to s 301(1)(c) of the Companies Act 1993 that Mr Arnerich pay directly to DHC the amount that had been awarded to DHC in the adjudication proceedings, with interest. However, His Honour concluded that he did not have jurisdiction to order Mr Arnerich to pay any further sums, unless and until such sums are found to be owing by Vaco to DHC through the arbitration which had been activated (but is presently adjourned).

1 DHC Assets Limited v Arnerich [2019] NZHC 1695.

[5] Mr Arnerich appealed that decision. DHC cross-appealed the finding as to absence of jurisdiction and the…

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 DHC Assets Ltd v Arnerich

Details

AGLC: DHC Assets Ltd v Arnerich [2021] NZHC 277
Case: [2021] NZHC 277
Decision Date: 25 February 2021

CaseChat Overview and Summary

The case DHC Assets Ltd v Arnerich involved a dispute between DHC Assets Limited and Mr Arnerich, the former director of Vaco Investments (Lincoln Road) Limited. DHC, which had designed and constructed a commercial building for Vaco, sought to recover from Mr Arnerich the amount it claimed was owed to it as an unpaid creditor of Vaco. The legal issues in this case were whether the proceeding was an abuse of process and whether it was time-barred under the Limitation Act 2010. The Court ruled that the proceeding was not an abuse of process, as the Court had not completed the second part of the s 301 evaluation for the time-related costs (TRC) claims, which meant that it was not res judicata. The Court also found that the proceeding was not time-barred as it was filed within the six-year primary period under s 16(1)(i) of the Limitation Act 2010. Mr Arnerich's application to strike out the statement of claim and dismiss the proceeding was dismissed. The Court ordered DHC to file and serve its submissions by 12 March 2021, and Mr Arnerich to file and serve his submissions by 26 March 2021. Mr Arnerich was also liable for DHC’s costs on a 2B basis, and its disbursements.

Orders