Eliahu v Eliahu - [2022] NZHC 1226

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2088 [2022] NZHC 1226

UNDER the Trusts Act 2019, the Companies Act 1993, and Part 18 of the High Court Rules 2016

BETWEEN

YARON ELIAHU suing in his personal capacity and as trustee of the PITA

BUSINESS TRUST

First Plaintiff

LIA ELIZABETH ELIAHU, LEO DANIEL

ELIAHU and LILY RON ELIAHU, together suing by their litigation guardian, YARON ELIAHU

Second Plaintiffs

AND

DANIEL ELIAHU sued in his personal capacity and as a trustee of the PITA

BUSINESS TRUST

First Defendant

(continued on next page)

Hearing: 12 April 2022 (via VMR)

Counsel:

G P Blanchard QC and M C Staines for Plaintiff K F Gould for First Defendant

Judgment:

30 May 2022

JUDGMENT OF BREWER J

This judgment was delivered by me on 30 May 2022 at 3 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

ELIAHU v ELIAHU [2022] NZHC 1226 [30 May 2022]

Continued

AND PITA BREAD LTD
Second Defendant
PITA HOLDINGS LTD
Third Defendant

Introduction

[1]This Judgment determines:

(a)The plaintiffs’ on notice interlocutory application for an interim injunction against the first defendant.

(b)The plaintiffs’ on notice application for leave to bring a derivative action on behalf of the second and third defendants.

Background

[2] This decision concerns a dispute between a son (the first plaintiff, “Yaron”) and his father (the first defendant, “Danny”).1

[3] Danny incorporated Pita Bread Ltd (PBL) in 1989. Yaron worked for it. PBL prospered. In 2008 Yaron joined Danny as a director. Yaron took responsibility for running PBL and Danny relinquished all day-to-day management functions.

[4] Danny and Yaron each had authority to access PBL’s bank accounts. Each had a PBL credit card (and so did Danny’s wife). According to Yaron, after Danny stepped back from involvement in PBL in 2008 he continued to access PBL’s bank accounts for his personal needs as and when he wanted to. Likewise, he and his wife used PBL’s credit cards for their personal needs as and when they wanted to.

[5] This became a point of contention between Danny and Yaron. A mediation between them failed. Yaron and his young children (Yaron is their litigation guardian) now sue Danny, PBL and the holding company, Pita Holdings Ltd (PHL).

[6]The legal structure of the business established by Danny is:

1 I will use first names not for informality but for ease of differentiation.

(a) PHL

Directors: Danny and Yaron

Shareholders: Pita Business Trust, 9,998 shares (Danny and Yaron jointly as co-trustees); Danny, 1 share; Yaron, 1 share.

(b) PBL

Directors: Danny and Yaron

Shareholder: PHL

[7]There are two associated family trusts, Ararimu Trust and Pita Property Trust.

Application for interim injunction

[8] As I have said, Danny’s use of PBL’s bank accounts for his own use and his and his wife’s use of PBL’s credit cards became a point of contention with Yaron. On 9 August 2021, at a combined board meeting of PBL and PHL, Danny and…

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 Eliahu v Eliahu

Details

AGLC: Eliahu v Eliahu [2022] NZHC 1226
Case: [2022] NZHC 1226
Decision Date: 30 May 2022

CaseChat Overview and Summary

Eliahu v Eliahu [2022] NZHC 1226 concerns a dispute between a father and son, Danny and Yaron, over the use of company funds by Danny. The case was heard by Brewer J in the High Court of New Zealand Auckland Registry. The plaintiffs, Yaron and his children, seek an interim injunction against Danny to prevent him from using company funds for personal purposes and leave to bring a derivative action against Danny and the holding company on behalf of the trading companies. Danny opposes the applications.

The court considered the test for granting an interim injunction, which requires a serious question to be tried, a balance of convenience in favour of granting the injunction, and an assessment of the overall justice of the case. The court found that there was a serious question to be tried as Danny appeared to have breached his duties as a director by using company funds for personal purposes. The balance of convenience weighed in favour of granting the injunction as the companies would suffer irreparable harm if an injunction was not granted and Danny would not suffer loss if it was granted. The overall justice of the case favoured granting the injunction as it was the appropriate means of preventing Danny from making further withdrawals from company accounts.

The court also considered the application for leave to bring a derivative action. The court found that the threshold requirement for leave to be granted was met as the companies did not intend to bring or defend the proceedings. The court then considered the factors identified in s 165(2) of the Companies Act 1993 and found that the likelihood of the proceedings succeeding, the costs of the proceedings in relation to the relief likely to be obtained, and the interests of the companies in the proceedings being commenced weighed in favour of granting leave. The court also found that Danny's limitation and acquiescence arguments did not limit the scope of the proposed causes of action to such an extent that leave should be declined.

The court granted the application for an interim injunction and the application for leave to bring a derivative action. The court made orders restraining Danny from making payments from company accounts for personal purposes and reserving leave to vary the orders if the monthly payment to Danny falls into arrears. The court also granted leave to bring a derivative action against Danny and the holding company on behalf of the trading companies. The plaintiffs are entitled to costs.

Orders