Finnigan v Ellis

[2017] NZHC 3291

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2016-404-1590 [2017] NZHC 3291

IN THE MATTER

of the liquidation of WENZTRO CO-

OPERATION LIMITED (IN LIQUIDATION) formerly called Trojan Foods (NZ) Limited

AND

IN THE MATTER

of an application by liquidators and a creditor under s 301 of the Companies Act

1993

BETWEEN

PERI MICAELA FINNIGAN AND BORIS VAN DELDEN

First Plaintiffs

AND

WENZHOU HONGLIANG TRADING CO. LIMITED

Second Plaintiff

BRIAN ROBERT ELLIS First Defendant

GERALD NORMAN WILLIAMS Second Defendant

JAMES NEIL BLACK Third Defendant

Hearing:	21 December 2017
Counsel:	J K Boparoy and A A Alipour for Plaintiffs P D Sills for First Defendant No appearance for Second Defendant Third Defendant in person
Judgment:	21 December 2017

FINNIGAN AND VAN DELDEN v WENZHOU HONGLIANG TRADING CO. LIMITED [2017] NZHC 3291 [21 December 2017]

ORAL JUDGMENT OF WYLIE J

Introduction

[1]      These proceedings were initially commenced by the liquidators of a company known as Wenztro Co-operation Limited (in liquidation) and Wenzhou Hongliang Trading Co Ltd (“Wenzhou”).   The first and second defendants were directors of Wenztro.  The plaintiffs alleged that the third defendant, Mr Black, was a “shadow” director.  In very broad terms the pleadings alleged reckless trading and/or trading while the company was insolvent.

[2]      The proceedings are set down for hearing over a period of eight days, due to commence on 12 February 2018.

[3]      In March of this year, Sargisson AJ set the matter down for hearing and put in place a timetable designed to ensure that it was readied for trial.

[4]      The plaintiffs complied with that timetable and filed and served their briefs of evidence on 30 October 2017. At the time those briefs were filed the plaintiffs advised that they were still waiting for further documents to be discovered from China.  The documents had to be translated into English.

[5]      In compliance with their obligations to discover on an ongoing basis, an additional affidavit of documents was filed by the plaintiffs on 16 November 2017. The documents  were provided on  a  USB  stick.   The USB  stick  was  password protected, but the password was provided at or about the same time. For some reason, it seems that neither the first nor the third defendant could access all of the documents until late November 2017.

[6]      It is accepted by the plaintiffs that the additional documents discovered relate to that part of the claim as was brought by Wenzhou and in particular to consequential losses it was claiming.

[7]      The defendants were due to file their briefs of evidence by early December

2017.  They did not do so but given the delays with their additional documents the plaintiffs granted them an extension until 20 December 2017.

The applications

[8]      On 14 December 2017, the plaintiffs filed an application seeking to file a second amended statement of claim.  The first and third defendants filed a notice of opposition and also an application to adjourn the fixture.  The plaintiffs for their part, filed a notice of opposition to the application for an adjournment.

[9]      The matter was called before me today. Mr Sills appeared on behalf of the first defendant.   The second defendant is abiding the decision of the Court.   The third defendant, Mr Black, appeared in person.

[10]     The first issue for discussion was the plaintiffs’ application to amend the pleadings.

Application to amend the Statement of Claim

[11]     Leave is required because the close of pleadings date was 25 September 2017. In the course of the hearing, I was advised by Mr Sills that the first defendant did not oppose the amended statement of claim, as long as one aspect was clarified.   He advised that the first defendant also wishes to seek costs because one of the amendments is that Wenzhou will drop out of the proceedings.  The first defendant says that it is entitled to costs as a result of the discontinuance by Wenzhou.

[12]     Mr Black adopted the submissions of Mr Sills and also agreed to the amended statement of claim being filed.

[13]     The clarification sought was provided by Ms Boparaoy to the satisfaction of the defendants.

[14]     Accordingly,  I make an  order  granting leave to  the filing of the second amended statement of claim.  I reserve leave to both the first and second defendants

to apply for costs against the former second plaintiff – now no longer a plaintiff – Wenzhou Hongliang Trading Co Limited.  In that regard I direct that any application for costs is to be filed and served by 19 January 2018.  Any response from Wenzhou Hongliang Trading Co Limited is to be filed and served on or before 2 February 2018. The application is then to be referred to the trial Judge who will deal with it.

[15]     I now turn to the application to adjourn the trial.

Application for adjournment

[16]     The reason for the filing of the second amended statement of claim is that the liquidators have belatedly accepted a proof of claim by Wenzhou.   Initially the liquidators were not prepared to accept the Wenzhou’s proof of claim. It was claiming approximately $3.6 million.  The bulk of that claim related to consequential losses Wenzhou said the company’s alleged breach of contract had caused it.  Wenzhou had obtained a summary judgment at the time the company went into liquidation in the sum of $617,000 but it had not sued for its consequential losses.  An initial sum was claimed of $2.5 million in this regard . Wenzhou employed an expert – a Mr Shepherd

- and he determined that its consequential losses were in the sum of $1.2 million. Wenzhou decided to accept Mr Shepherd’s views in this regard, rather than pursue a claim in Court, or with the liquidators.   The liquidators in light of Mr Shepherd’s evidence decided to accept the proof of claim comprising the earlier judgment amount of $617,000 plus Mr Shepherd’s assessment of $1.2 million for consequential losses.

[17]     The first and third defendants say that late discovery of the additional material, relating as it does to the consequential losses claimed, puts them in a difficult position. They say that there is considerable additional work required from them and that they cannot properly expect to be in a position to proceed to trial on 12 February 2018.

[18]     The  plaintiffs  deny  this  assertion.    They  accept  that  the  first  and  third defendants were not able to open all relevant documents until late November, but point out that they do not seek to amend or change the evidence they filed as long ago as 31

October 2017. They also say that various of the matters which Mr Black has intimated he wishes to raise are not properly causes of action open to him, and at best, may be causes of action  open  to the liquidators.   They say that  the matters  tentatively

suggested by Mr Sills and more positively asserted by Mr Black, have not to date been pleaded, notwithstanding that the consequential losses were sought by Wenzhou when they were parties to the proceeding.

[19]     I am not persuaded that an adjournment of the hearing is required.   The consequential losses formerly claimed by Wenzhou, but now accepted in a lesser sum by the liquidator are the subject of an application under s 307 of the Companies Act. They have been in issue for some time.  I accept that at least some of the relevant documentation was not made available until mid-November and that there were initially problems  in  accessing  the  documents.    Who  was  responsible  for  those problems is not clear, but in any event, in my judgment, the defendants have been aware of the claim for consequential losses for some considerable time. It makes little difference whether the claim was brought by Wenzhou, or by the liquidators.  The issues it is now claimed need to be clarified should have been foreshadowed and the defendants should have been getting their respective houses in order to meet the claim at a very much earlier point of time.  They have had the additional documents since late November. They appear to have done very little if anything.

[20]     Accordingly, I refuse the application for an adjournment. Some amendment to the timetable will, however, be required, if for no other reason than that the defendants are in breach.  I canvassed amendments to the timetable with counsel.  By consent, I put in place the following amendments:

(a)       any amended statements of defence are to be filed and served on or before 5pm on 12 January 2018;

(b)      the  defendants’  briefs  are  to  be  filed  and  served  on  or  before

25 January 2018;

(c)       any reply briefs from the plaintiffs are to be filed and served on or before 5pm on Wednesday 7 February 2018;

(d)a synopsis of the plaintiffs’ opening submissions is to be filed and served on or before 5pm on Thursday 8 February 2018.

[21]     The costs incidental to today’s hearing are to be dealt with at the substantive trial.

Solicitors:

Shieff Angland, Auckland

Ellis Law, Auckland

Counsel: P Sills

Copy to:

J N Black