EBR Holdings Ltd (in liquidation) v Van Duyn

[2016] NZHC 1112

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-1560 [2016] NZHC 1112

BETWEEN

EBR HOLDINGS LTD (IN

LIQUIDATION) First Plaintiff

VIVIEN JUDITH MADESEN-RIES AND HENRY DAVID LEVIN

Second Defendant

AND

JOHANNES VAN DUYN (SENIOR) AND GERARDA JACOBA MARIA VAN DUYN & OTHERS

Defendants

AND

MCLAREN GUISE ASSOCIATES LIMITED

Third Party

Hearing:	16, 18, 19, 20, 23 May 2016
Counsel:	P C Murray and K H Morrison for Plaintiffs I M Hutcheson and K F Quinn for Defendants S-J Telford and L G Cox for Third Party
Judgment:	25 May 2016

JUDGMENT OF HEATH J

This judgment was delivered by me on 25 May 2016 at 4.00pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Meredith Connell, Auckland Morgan Coakle, Auckland Forest Harrison, Auckland Counsel:

I M Hutcheson, Auckland

EBR HOLDINGS LTD (IN LIQUIDATION) v VAN DUYN & OTHERS [2016] NZHC 1112 [25 May 2016]

Background

[1]      EBR Holdings Ltd (in liquidation) (EBR) and its liquidators, Ms Madsen- Ries and Mr Levin, sue interests associated with the van Duyn family; namely:

(a)      Mr Johannes van Duyn snr and his wife Mrs Gerarda van Duyn, each of whom hold a 50 percent shareholding in EBR.  They are the first defendants. They are sued on an alleged current account debt.

(b)Their sons, Mr Rene van Duyn and Mr Johannes van Duyn jnr, as directors of EBR.  Mr Rene van Duyn is the second defendant.  Mr van Duyn jnr is the third defendant.  They are sued both on alleged current  account  debts,  and  for various  breaches  of their duties  as directors of EBR.

(c)      Mr van Duyn snr, Mrs van Duyn, Mr Rene van Duyn and Mr van Duyn jnr, who are the trustees of the Awaroa Family Trust, which was settled on 23 June 2000.  They are the fourth defendants.  The trustees are sued in respect of both a loan said to be due to EBR, and in respect of alleged insolvent transactions.  As to the latter, the liquidators seek disgorgement of the sums paid.

(d)South Head Trustees Ltd as the trustee of the South Head Trust, which was settled on 29 September 2003.  It is the fifth defendant. Although previously removed  from  the Register of Companies,  South  Head Trustees Ltd has now been restored.  South Head is sued on the same basis as the trustees of the Awaroa Trust.

[2]      The debts arise out of payments made by EBR to Fidelity Life Assurance Ltd that the plaintiffs assert were made for personal purposes. All defendants accept that the financial statements of EBR record the debts on which EBR is suing, the most recent of which appears in the financial statements for the year ended 31 March

2008.  Those statements were signed by the directors (Mr Rene van Duyn and Mr van Duyn jnr) on 4 December 2008.  That was just over one month before EBR was placed in liquidation on 30 January 2009.  The defendants contend that the accounts

are wrong.   Originally, it was claimed that all of the amounts should have been treated as company expenditure.  That position has changed as a result of proposed changes to their defence.1

[3]     The defendants have joined the accountants who prepared the financial statements  for  the  year  ended  31  March  2008,  McLaren  Guise Associates  Ltd (McLaren Guise).  They allege negligence on their part.  The defendants assert that errors were made in the accounting treatment of the moneys paid by EBR in the financial statements for the years ended 31 March 2005, 2006, 2007 and 2008. McLaren Guise deny liability, and support the liquidators’ view that the amounts as recorded in the 2008 accounts were owed.

[4]      The  trial  was  scheduled  to  begin  on  16  May  2016.    12  days  had  been allocated for the hearing.  As a result of a number of significant problems, a trial on substantive issues did not eventuate.  Despite that, it was necessary for the Court to sit on at least parts of five distinct sitting days, to deal with the problems that did arise.

[5]      On 20 and 23 May 2016, I heard argument on two oral applications by the defendants: one was to amend their statement of defence to the plaintiffs’ claim; the other was to amend their third party claim against McLaren Guise.  I reserved my judgment on both applications.

[6]      Mr Murray, for the plaintiffs, accepted that whether or not the amendments were permitted, the time taken up in dealing with peripheral issues meant that an adjournment of the substantive hearing of both the plaintiffs’ and the third party claim would be required.  Reluctantly, Ms Telford, for the third party, agreed.

Result

[7]      The applications for leave to amend the statement of defence and the third party claim are granted, so as to permit new pleadings to be filed in a form that

strictly follows the draft amended statement of defence and draft third party claim

1      See paras [5], [9](a) and [13] below.

submitted to the Court on 19 May 2016.  Each application is granted on conditions.2

The conditions have been crafted to meet both the indulgence granted in permitting the defendants to amend and the prejudice caused to both the plaintiffs and the third party as a result of an inevitable and lengthy adjournment.

[8]      The trial of this proceeding is adjourned to 10am on 7 February 2017.  Nine days have been allocated.  I will be the trial Judge.

[9]      Unless the defendants pay the following amounts to the plaintiffs, by midday on 30 June 2016, they shall be debarred from defending the plaintiffs’ claim:

(a)       The sum of $152,559, together with interest calculated on that sum at the rates prescribed from time to time by the Judicature Act 1908 from

31 August 2009 (being the date on which this proceeding was first filed in the District Court at Waitakere) to the date of payment.3

(b)The sum of $65,000, representing a global assessment of wasted costs and disbursements occasioned by the adjournment of the proceeding.

[10]     Unless the defendants pay the sum of $30,000 to the third party (representing a global assessment of wasted costs and disbursements occasioned by the adjournment of the proceeding) by midday on 30 June 2016, the claim brought by the defendants against the third party shall be struck out.

[11]     Unless the defendants file and serve an undertaking to the Court, on or before

30 June 2016, that they will not take any limitation points if the plaintiffs seek and are granted leave to amend their statement of claim in any respect that is consequential on the amendments permitted by this order, the order granting leave to amend  will  be  revoked  and  the  plaintiffs’ claim  and  the  third  party  claim  will

proceed on the existing pleadings.

2      In respect of the plaintiffs’ claim see paras [9] and [11] below.  In respect of the third party claim

see para [10] below.

3      See also para [13] below.

[12]     The Registrar shall convene a case management conference before me, in

Court for chambers, at 9am on the first available date after 8 July 2016:

(a)      If compliance has not been made in full with the conditions on which leave to amend has been granted, the proceeding will be set down for formal proof on a date to be fixed.

(b)If  compliance  were  made  with  all  conditions  imposed,  further timetabling directions will be made at that stage to ensure any further interlocutory issues can be addressed well before the resumed trial date.

(c)      If there were non-compliance with only the “undertaking” condition,4 timetabling directions will be made on the basis of the existing pleadings.

[13]     In relation to the condition that the sum of $152,559 plus interest be paid by midday on or before 30 June 2016,5 I record that that sum is calculated by reference to the admissions filed in Court by the first and third defendants, on 20 May 2016. They are to be paid without prejudice to the plaintiffs’ right to argue that the amounts should be credited against moneys alleged to be owing by defendants other than those who have executed the admissions.  The purpose of the order is to ensure that

the plaintiffs receive the benefit of what has been admitted without suffering any potential prejudice with enforcement rights that might otherwise arise.  It is for the defendants to decide which of them should make the payments at this stage, subject

to any adjustments that may need to be made later as among themselves.

4      See para [11] above.

5      See para [9](a) above.

[14]     Full  reasons  for  this  judgment  will  be  delivered  in  writing  as  soon  as

practicable.

P R Heath J

Delivered at 4.00pm on 25 May 2016