Downes v Jain - [2019] NZHC 1145

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001598

[2019] NZHC 1145

UNDER Sections 274 and 284(1) of the Companies Act 1993 and Parts 12 and 18 of the High Court Rules

IN THE MATTER OF

Pharma Scientific Research Group Limited (in liquidation)

BETWEEN

TIMOTHY WILSON DOWNES and STEPHANIE BETH JEFFREYS as

liquidators of PHARMA SCIENTIFIC RESEARCH GROUP LIMITED (IN LIQUIDATION

Plaintiffs

AND

AKHIL JAIN

First Defendant

KORU LIFESCIENCE LIMITED (FORMERLY KNOWN AS PHARMA SCIENCE AND RESEARCH LIMITED)

Second Defendant

Hearing: 22 May 2019

Appearances:

D L Bennington for Plaintiffs

R B Hucker and R F Selby for Defendants

Judgment:

24 May 2019

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

DOWNES & OR v JAIN & OR [2019] NZHC 1145 [24 May 2019]

Introduction

[1] In my decision of 22 February 2019, I granted summary judgment against the defendants, requiring them to deliver up to the plaintiff liquidators, laboratory equipment and other assets.1 Those assets are defined in a schedule to the judgment and referred to throughout as the Pharma assets.

[2] I concluded that by refusing to deliver up the Pharma assets, the defendants had committed the tort of conversion and that Mr Jain, the first defendant, was acting in breach of s 274 of the Companies Act 1993.

[3] The defendants now seek to recall my judgment or alternatively, seek an order staying my judgment pending a determination of their appeal to the Court of Appeal.

[4] In relation to the recall application it is contended that counsel failed to direct my attention to a plainly relevant decision, namely Working Capital Solutions Holdings Ltd v Pezaro.2 In relation to the stay application, it is claimed that allowing enforcement of the orders for possession will irreparably damage the ongoing business of the defendants, causing loss of employment and delays in the provision of product to third party customers.

[5]The critical issues I must determine are as follows:

(a)Whether counsel’s failure to refer me to Working Capital Solutions (which is relevant to the interpretation of ss 162–167 of the Personal Property Securities Act 1999 (the PPSA)) was a material omission; and

(b)Whether I should grant a stay of execution and, if so, whether on the terms proposed by the defendants (which include payment of a bond of
$149,622 and undertakings guaranteeing access and inspection of the assets) or on modified terms.

1 Downes v Jain [2019] NZHC 199.
2 Working Capital Solutions Holdings Ltd v Pezaro [2014] NZHC 1020, [2014] 3 NZLR 379.

Recalling a judgment

[6]Rule 11.9 of the High Court Rules 2016 reads:

11.9 Recalling judgment

A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.

[7] The leading statement in New Zealand remains that of Wild CJ in Horowhenua County v Nash (No 2):3

Generally speaking, a judgment once delivered must stand for better or worse subject,…

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.

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Details

Case: [2019] NZHC 1145
Decision Date: 24 May 2019

CaseChat Overview and Summary

In Downes v Jain, the High Court of New Zealand addressed an application to recall a prior judgment and an application for a stay of execution of that judgment pending the determination of an appeal. The plaintiffs, Timothy Wilson Downes and Stephanie Beth Jeffreys, as liquidators of Pharma Scientific Research Group Limited, had obtained summary judgment requiring the defendants, Akhil Jain and Koru Lifescience Limited, to deliver up certain laboratory equipment and other assets. The defendants sought to recall the judgment or alternatively, to stay its execution pending appeal to the Court of Appeal.

The court found that counsel's failure to direct attention to the Working Capital Solutions case was not a material omission and dismissed the application to recall the judgment. The court then considered the application for a stay of execution, weighing various factors including the potential irreparable damage to the defendants' business and the risk of rendering the appeal nugatory. The court concluded that the appeal had bona fide prospects of success and that the balance of convenience favoured granting a stay. Consequently, the court granted a stay of execution, subject to several conditions. These included the defendants paying a sum into court, providing an undertaking not to dissipate the assets, and allowing an independent accredited insolvency practitioner to inspect and value the assets. The court also appointed Mr Andrew Bethal of BDO to catalogue and value the assets, with the defendants required to provide access and pay a bond for the practitioner's costs. The court denied costs to either party, suggesting that the parties resolve the issue among themselves.

Orders