DHC Assets Ltd v Arnerich - [2017] NZHC 1460

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2017-404-307 [2017] NZHC 1460

BETWEEN
DHC ASSETS LIMITED

Applicant

AND

ANTONY IVO ARNERICH Respondent

Hearing: 7 June 2017

Appearances:

L J Turner for Applicant
J A McBride for Respondent

Judgment:

7 July 2017

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on
07.07.17 at 10 a.m., pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

DHC ASSETS LIMITED v ARNERICH [2017] NZHC 1460 [7 July 2017]

Introduction

[1] The plaintiff is the construction company DHC Assets Limited (“DHC”). In October 2011, DHC entered into a construction contract with a company called Vaco Investments (Lincoln Road) Limited (“Vaco”). The defendant, Mr Arnerich, is Vaco’s sole director.

[2] The plaintiff has now brought proceedings against the defendant as the director of Vaco. Three causes of action were pleaded, but one was subsequently abandoned following the plaintiff’s receipt of the defendant’s affidavit. In broad terms, the two remaining causes of action essentially allege that the defendant breached his director’s duties by misapplying either company funds or retention monies in circumstances where (according to the plaintiff) the plaintiff remains an outstanding creditor.

[3] For the reasons that follow, I am not persuaded that summary judgment should be entered for the plaintiff on any of these causes of actions.

Background

[4] The statement of background in the following sub-paragraph taken from the submissions of the plaintiff is not the subject of substantial dispute:

The plaintiff DHC Assets Limited (“DHC”) is a construction company which during 2012 carried out significant building works for the developer of a property at Lincoln Road, namely [Vaco]. A related company of [Vaco] had purchased the property for $1.325 million in October 2011. Following the development works being completed, [Vaco] sold the property on 3 April 2013 for $8.4 million

Six days later, on 9 April 2013, the defendant Mr Arnerich, [Vaco’s] sole director, authorised [Vaco] to pay all of its then remaining assets (being over $2.3 million) to his family trust.

DHC had issued its final account for $553,095 plus GST just three weeks earlier, on 15 March 2013.

[5] It is common ground that the plaintiff received some payments towards the cost of construction, but it maintains that there were additional claims which have

not been met by the defendant. These additional claims relate to extension of time claims made by the plaintiff in August 2012, after delays which were largely caused by changes requested by a prospective tenant, ASB. When these claims were submitted for approval to the engineering firm to the contract, Davis Langdon, substantial amounts were disallowed. There were also disputes during the course of the contract about whether some aspects of the work carried out were authorised.

[6] The plaintiff’s statement of background requires further supplementing. The defendant asserts that on 4 November 2011 he settled a trust, Vaco Investments (Lincoln Road) Trust (“the trust”), of which Vaco was appointed sole trustee. The property on which 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 [2017] NZHC 1460
Case: [2017] NZHC 1460
Decision Date: 7 July 2017

CaseChat Overview and Summary

The High Court of New Zealand, Auckland Registry, was asked to decide a case brought by DHC Assets Limited against Antony Ivo Arnerich, the director of Vaco Investments (Lincoln Road) Limited. DHC alleged that Arnerich breached his director's duties by misapplying company funds or retention monies, to the detriment of DHC, which claims to be an outstanding creditor. The primary issues were whether Arnerich misapplied company funds and whether he misapplied retention monies. The court found that there were arguable defences to both causes of action and declined to grant summary judgment to DHC.

The court examined whether the trust was the beneficial owner of the property or whether Vaco owned it as trustee. It found that there was insufficient evidence to establish that the trust was the beneficial owner. Additionally, even if Vaco had been the trustee of the trust, the court found that there was no evidence that the trust had incurred a liability under the building contract with DHC. The court also considered the circumstances under which the retention monies were paid out and found that there was an arguable defence that the defendant did not breach his obligations by permitting the payment of the retention monies.

Ultimately, the court found that the plaintiff had not demonstrated that there was no real question to be tried and declined to grant summary judgment. The application for summary judgment was therefore declined, and costs were reserved.

Orders