Fullarton v Awn Holdings Limited - [2021] NZHC 1873

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-551

[2021] NZHC 1873

COMMERCIAL PANEL

UNDER

the Securities Act 1978

the Fair Trading Act 1986
the Securities Markets Act 1988

the Financial Markets Conduct Act 2013 High Court Rule 4.24

BETWEEN

FRANCES JANE FULLARTON

First Plaintiff

NEWTON PONTES
Second Plaintiff

AND

AWN HOLDINGS LIMITED

First Defendant

……………………… continued

Hearing: On the papers

Counsel:

LJ Taylor QC, ZG Kennedy and RA Havelock for plaintiffs DJ Friar, JWA Johnson and AM Boberg for first and ninth defendants

DJ Cooper, AIC Denton and KP Woodword for second, third, fourth, fifth and sixth defendants

BJ Upton and NM Blomfield for tenth and eleventh defendants

Judgment:

23 July 2021

JUDGMENT OF FITZGERALD J

[As to costs]

This judgment was delivered by me on 23 July 2021 at 2.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date………………………

FULLARTON v AWN HOLDINGS LIMITED [2021] NZHC 1873 [23 July 2021]

ROBERT CHARLES FACER
Second Defendant

CHRISTOPHER MORTON KELLY
Third Defendant

CRAIG DOUGLAS McINTOSH
Fourth Defendant

JAMES ALEXANDER CHARLES TURNER
Fifth Defendant

RUSSELL JOHN WOODARD
Sixth Defendant

GLEN WILLIAM DOBBIE
Seventh Defendant

NICO ANDREW MARX
Eighth Defendant

KEVIN TSER FAH CHIN
Ninth Defendant

DAVID MALCOM KEEFE
Tenth Defendant

JOHN COLINTON MOORE
Eleventh Defendant

Solicitors: Adina Thorn Lawyers, Auckland
Bell Gully, Auckland Wilson Harle, Auckland
Simpson Grierson, Auckland

Introduction

[1] By judgment delivered on 29 April 2021, I dismissed the first plaintiff’s application for summary judgment on liability, and granted the plaintiffs’ application for leave to commence these proceedings as representative proceedings (pursuant to r 4.24 of the High Court Rules 2016).1 The plaintiffs’ claims arise out of the 2014 initial public offering (IPO) of Intueri Education Group Limited (Intueri). The defendants are sued in their respective capacities as the promoters of the IPO2 and/or as directors of the issuer.3 The plaintiffs say materials relating to the IPO and circulated to potential investors were misleading and the defendants are liable as a result.

[2] The full background to the IPO and the plaintiffs’ claims is set out in my substantive judgment and is not repeated here. At the conclusion of my judgment, I encouraged the parties to agree the costs of the two applications. They have not been able to do so and this judgment accordingly determines the competing costs claims.

[3] Before turning to the parties’ respective submissions, I record that the proceeding has, since my substantive judgment, now been categorised for costs purposes as a Category 3 proceeding.

Costs of the summary judgment application

The defendants’ submissions

[4] The defendants who appeared in opposition to the two applications are grouped into three sets:

(a)the first and ninth defendants (sued as promotors);

1      Fullarton v Arowana International Ltd [2021] NZHC 931.
2      The first, ninth, tenth and eleventh defendants.
3      The second to sixth defendants. The seventh and eighth defendants as sued in relation to alleged breaches of the Securities Markets Act 1988. Those causes…

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: [2021] NZHC 1873
Decision Date: 23 July 2021

CaseChat Overview and Summary

The High Court of New Zealand was presented with a case involving multiple defendants in a securities litigation matter. Frances Jane Fullarton and Newton Pontes, the plaintiffs, initiated proceedings against several defendants, including Awn Holdings Limited and others, stemming from the 2014 initial public offering (IPO) of Intueri Education Group Limited. The plaintiffs alleged that the IPO materials were misleading, and the defendants were liable for the same. The defendants, grouped into different sets based on their roles as promoters or directors, contested the claims and opposed the plaintiffs' applications for summary judgment and representative proceedings. The primary legal issue before the court was the determination of costs associated with the unsuccessful summary judgment application by the first plaintiff, Frances Jane Fullarton. The defendants argued that the summary judgment application was unsuitable for the complex nature of the claims and was misconceived due to reliance on inadmissible hearsay evidence. They sought costs on a Category 3 basis, arguing that the application was an abuse of process. In contrast, the plaintiffs maintained that the usual approach of reserving costs into the substantive proceedings should apply. The court found that the summary judgment application was indeed inappropriate due to the complex nature of the claims and the reliance on inadmissible evidence. The court awarded costs on a Category 3 basis to the defendants, noting that the use of summary judgment in this case had caused unnecessary delay and did not serve the interests of justice. The court also addressed the issue of costs for the r 4.24 application, which pertained to the plaintiffs' leave to commence representative proceedings. The court ruled that the plaintiffs were the successful party in this aspect of the proceedings and awarded costs on a Category 3B basis.

Orders