Gower v FTG Securities Limited
[2020] NZHC 2011
•10 August 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV–2018–409–229
[2020] NZHC 2011
UNDER the Receiverships Act 1993 IN THE MATTER
of the receivership of Tuam Ventures Limited (in receivership and in liquidation)
BETWEEN
COLIN ANTHONY LATHAM GOWER
and STEPHEN JOHN TUBBS as receivers of Tuam Ventures Limited (in receivership and in liquidation)
Applicants
AND
FTG SECURITIES LIMITED
First Respondent
AND
ROBERT BRUCE WALKER as liquidator of Tuam Ventures Limited (in receivership and in liquidation)
Second Respondent
AND
BANK OF NEW ZEALAND
Third Respondent
AND
CROWN ASSET MANAGEMENT LIMITED
Fourth Respondent
AND
BRENTON JOHN HUNT
Fifth Respondent
CIV-2019-409-511 UNDER
the Companies Act 1993
IN THE MATTER
of the receivership of Tuam Ventures Limited (in receivership and in liquidation)
BETWEEN
ROBERT BRUCE WALKER as liquidator of Tuam Ventures Limited (in receivership and in liquidation)
GOWER v FTG SECURITIES LIMITED [2020] NZHC 2011
Applicant AND
FTG SECURITIES LIMITED
First respondent
AND
COLIN ANTHONY LATHAM GOWER
and STEPHEN JOHN TUBBS as receivers of Tuam Ventures Ltd (in receivership and in liquidation)
Second respondents
Hearing: 10 June 2020 Representation:
J M Appleyard for the receivers R B Walker (liquidator) in person
A J Forbes QC and H Weston for FTG Securities Ltd K M Paterson and A E Cao for Bank of New Zealand
R P Coltman and K Rowe for Crown Asset Management Ltd
Judgment:
10 August 2020
JUDGMENT OF OSBORNE J
This judgment was delivered by me on 10 August 2020 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Introduction
[1] This judgment is concerned with matters arising in the receivership and in the liquidation of Tuam Ventures Ltd (in receivership and in liquidation) (Tuam). Both the receivers and the liquidator have applied to the Court for directions. Colin Anthony Latham Gower and Stephen John Tubbs were appointed as receivers of Tuam on 27 July 2009 by Bank of New Zealand (BNZ) as the holder of a general security agreement (GSA). Robert Bruce Walker was appointed by this Court as liquidator of Tuam on 9 February 2012.
These applications
[2] The receivers and the liquidator respectively apply under the Receiverships Act 1993 and the Companies Act 1993 for directions relating to the receivership and/or liquidation.
[3] These proceedings were consolidated with other proceedings to be heard together. By reason of overlapping matters, it is convenient to issue this single judgment in relation to these two proceedings.
[4] I am today issuing separate judgments in relation to the two other consolidated proceedings. In the first, FTG Securities Ltd v Crown Asset Management Ltd (the
-1710 proceeding), I determine that the plaintiff, FTG Securities Ltd (FTG) does not have interest or title (through equitable assignment) in debts and securities provided by Tuam and purportedly assigned by Crown Asset Management Ltd (CAML) to Tuam in 2015.1 As the Court had previously determined that the 2015 transaction did not constitute an effective statutory assignment (see below at [13]–[14]), FTG has no enforceable interest or title in Tuam’s debts and securities.
[5]In the remaining proceeding FTG Securities Ltd v Bank of New Zealand (the
-2013 proceeding), I have dismissed an application by FTG to set aside a statutory demand issued by BNZ in relation to court costs issued in an earlier proceeding.2
Tuam – the company
[6] Tuam was a property development company which owned property at 179 Tuam Street, Christchurch (179 Tuam). It operated there as a landlord. Tuam was associated with a Christchurch property developer, David Ian Henderson, and with Property Ventures Ltd (PVL). PVL and a number of subsidiaries and associated companies were the subject of a financial collapse some 10 years ago.
1 FTG Securities Ltd v Crown Asset Management Ltd [2020] NZHC 2007 [the -1710 proceeding].
2 FTG Securities Ltd v Bank of New Zealand [2020] NZHC 2009 [the -2013 proceeding].
[7] After Tuam’s receivership commenced in 2009, BNZ’s progress in recovery of Tuam’s indebtedness was impeded by the damaging events of the Canterbury earthquake sequence (2010-2011).
[8] BNZ was at the point of concluding a mortgagee sale of 179 Tuam when the 22 February 2011 earthquake massively damaged the buildings. The process of insurance claims and sale of the property became extended, with the final settlement of Tuam’s insurance claim achieved on 22 February 2018.
[9] At that point the receivers considered that all assets available in the receivership of Tuam had been realised.
Competing positions of BNZ and FTG
[10] Relying upon a Deed of Transfer of Debt and Securities dated 15 June 2015 (the Transfer Deed) which FTG entered into with the fourth defendant, CAML, FTG took steps to enforce what it asserted to be its title and interest in debts and securities of Tuam. The title and interest intended under the Transfer Deed to be transferred to FTG included the rights and interest arising under a Deed of Priority dated 25 February 2008 between Tuam, BNZ and Canterbury Finance Ltd (CFL) (the Priority Deed).
[11] Under the Priority Deed, broadly speaking BNZ held the first-ranking security for $7,500,000 (together with other sums) and CFL held the second-ranking security for $10,000,000 (together with other sums).
[12] After entering into the Transfer Deed with CAML, FTG asserted first that it had taken an effective assignment of the CFL interests and, secondly, that in terms of the Priority Deed correctly construed, the receivers had paid to BNZ a sum in excess of BNZ’s priority entitlement.
[13] FTG in 2016 commenced a proceeding (the -659 proceeding) against BNZ and the receivers. FTG sought declarations as to the interpretation of the Priority Deed. This Court determined as a preliminary question that FTG had not become a party to the Priority Deed through a valid statutory assignment of the debts and securities
originally held by CFL.3 Accordingly it was held that FTG had no standing to seek the declarations.4
[14] FTG was unsuccessful in an appeal to the Court of Appeal.5 FTG failed also in an application for leave to appeal to the Supreme Court.6
[15] Those decisions left open as an issue whether FTG had nonetheless taken an effective equitable assignment of the debts and securities and the rights and obligations under the Priority Deed originally held by CFL.
[16] For that reason FTG in 2018 commenced the -1710 proceeding. FTG asserted that it had taken an effective equitable assignment of CAML’s title and interest in debts and securities of Tuam. It asserted that it was entitled to enforce rights as holder of the second priority, either by joining CAML (as it did) as second defendant in the
-1710 proceeding or by the Court requiring CAML as plaintiff to commence a claim against BNZ for priority entitlement, with fruits of that claim to then flow to FTG.
[17] In the judgment issued today in the -1710 proceeding, I have found that FTG does not have interest or title as the Transfer Deed did not effect an equitable assignment.7
Receivers’ application (in the -229 proceeding)
What the receivers have applied for
[18] As a result of the receivers’ receipts up to February 2018, the receivers considered they might have a surplus (as defined by s 30D Receiverships Act) of up to $3,500,000. That calculation was in addition to any sum which the High Court might find had been overpaid to BNZ in the course of the receivership.
3 FTG Securities Ltd v Bank of New Zealand [2018] NZHC 1516.
4 At [107].
5 FTG Securities Ltd v Bank of New Zealand [2019] NZCA 16, [2019] 3 NZLR 607.
6 FTG Securities Ltd v Bank of New Zealand [2019] NZSC 93.
7 The -1710 proceeding, above n 1.
[19] The receivers in April 2018 filed their application for directions (the -229 proceeding) in connection with the performance of their functions as receivers (under s 34(1) Receiverships Act). In particular, the receivers sought orders as to the priorities for distribution of the surplus arising from the receivership of Tuam in accordance with ss 30A(2) and 30B Receiverships Act after repayment of all amounts for which BNZ, FTG and the receivers agree or this Court determines BNZ is or was first- ranking secured creditor.
[20] The receivers also initially sought a direction as to whether one Brenton John Hunt, purportedly appointed by FTG as a receiver of Tuam, was validly appointed. That issue was subsequently resolved and is not a subject of this judgment.
[21] Mr Tubbs, as one of the receivers, filed an affidavit in support of their application. Mr Tubbs identified four parties who appeared to the receivers to have an interest in the application, being:
(a)BNZ – as holder of the first-ranking security pursuant to the Priority Deed;
(b)FTG – claiming, under the Priority Deed and pursuant to CAML’s assignment, the second-ranking security;
(c)FCS Loans Ltd (in liq) (FCS) (being the descendant entity of CFL as entities in the chain of title through to CAML) and CAML itself – as the successors to CFL’s interest and title in Tuam’s debts and securities; and
(d)Mr Walker – as liquidator of Tuam, who through his solicitors had in February 2018 notified the receivers that Tuam had a claim ahead of FTG to the surplus (after payment to BNZ).
[22] The receivers simply sought the Court’s directions. They recorded that they abided the outcome of the other proceedings. Mr Tubbs in his affidavit evidence
referred to the ongoing expenses which the receivers continued to face with matters unresolved between the various claimants.
The positions of the -229 respondents
[23] BNZ filed a notice that it did not oppose the receivers’ application and otherwise reserved its position.
[24] FTG filed a notice that it did not oppose the receivers’ application but sought further directions including that the receivers pay all surplus funds to FTG. FTG by its notice also rejected the validity of the appearance entered by Mr Walker as liquidator of Tuam.
[25] Mr Walker, as liquidator of Tuam, entered an appearance. He did not oppose the receivers’ application but applied for additional directions or orders, including a declaration that the surplus arising from the receivership of Tuam, following repayment of sums to which BNZ is entitled (as agreed by the parties or determined by the Court), is held by the receivers for the benefit of Tuam itself.
Outcome of the -1710 proceeding
[26] As the parties anticipated when this and other proceedings were consolidated with the -1710 proceeding, the Court’s judgment in the -1710 proceeding is of fundamental importance to the receivers’ application in the -229 proceeding which focused on the priorities of BNZ and FTG and the distribution of surplus arising thereafter.
[27] As it happens, in the judgment delivered today in the -1710 proceeding, the Court has determined that the transaction by which CAML purported to assign to FTG CAML’s interest and title in Tuam’s debts and securities, including the Priority Deed, was ineffective as an equitable assignment. The interest and title as a matter of law therefore remain in CAML.
[28] In case the receivers may still require an outcome in this proceeding in relation to priorities as between BNZ and CAML and as to any relevant sums of entitlement,
the Court will be adjourning this proceeding and reserving leave to the receivers, BNZ and CAML to bring the receivers’ application on for further hearing if issues of priorities between them are not otherwise resolved.
Liquidator’s application (in the -511 proceeding)
Striking out of liquidator’s applications in -229 proceeding
[29] The receivers had appropriately made Mr Walker, as liquidator of Tuam, a respondent to their application commencing this -511 proceeding in October 2019.
[30] Mr Walker, in entering his appearance on the receivers’ application, was entitled to cross-apply for the declaration as to surplus funds from the receivership which I refer to at [25] above. But Mr Walker sought a number of additional directions and declarations.
[31] FTG applied for an order striking out those remaining cross-applications. In July 2019, Gendall J granted FTG’s application.8 His Honour observed that those remaining claims were essentially claims between the parties after the receivers’ distribution has been completed.9 Gendall J noted submissions for Mr Walker as to his arguments needing to be addressed either in the -229 proceeding or another.10
[32] That – the filing of his own application as liquidator of Tuam – is what Mr Walker then attended to, commencing the -511 proceeding.
The declarations sought by the liquidator
[33]The declarations Mr Walker seeks in this -511 proceeding are whether:
(a)FTG obtained a valid legal or equitable assignment of debts and securities asserted against Tuam;
8 Gower v FTG Securities Ltd [2019] NZHC 1610.
9 At [23].
10 At [25]–[26].
(b)FTG is entitled against Tuam to any surplus arising out of the receivership of Tuam conducted by the receivers; and
(c)Tuam has any available defences to rights asserted by FTG against Tuam by reason of the fact that:
(i)if claiming as an equitable assignee, FTG does not come to the Court with clean hands; and
(ii)by reason of the rule in Cherry v Boultbee.11
Response to directions/declarations sought
[34] Mr Walker is entitled to the first direction sought, as to the validity of the legal or equitable assignments by which FTG has purported to take an interest or title in the Tuam debts and securities. The ineffectiveness of the Transfer Deed as a statutory assignment was determined through the judgment of this Court in the -659 proceeding, and upheld by the Court of Appeal.12 The ineffectiveness of the Transfer Deed as an equitable assignment has been determined in the judgment delivered by this Court today in the -1710 proceeding.13
[35] Accordingly, it is appropriate that the first declaration/direction sought by Mr Walker be answered in the negative.
[36] It follows that the second declaration/direction sought by Mr Walker is also to be answered in the negative – FTG has no entitlement to any surplus arising out of the receivership as the right and title in the Tuam debts and securities remains with CAML.
[37] It further follows that the third declaration/direction sought by Mr Walker does not require the Court’s determination. By reason of the directions as determined above it is not necessary to determine whether Tuam would have had valid defences to any claim by FTG following upon an otherwise valid assignment from CAML.
11 Cherry v Boultbee (1839) 4 My & Cr 442 (HL).
12 FTG Securities Ltd v Bank of New Zealand, above n 3; and FTG Securities Ltd v Bank of New Zealand, above n 5.
13 The -1710 proceeding, above n 1.
Mr Walker’s evidence in relation to Tuam’s “defences”
[38] Lest it is subsequently determined (contrary to my finding in the -1710 proceeding) that FTG took a valid equitable assignment of the Tuam debts and securities, I will consider whether the defences raised by Mr Walker on Tuam’s behalf were valid.
[39] Mr Walker filed extensive evidence, with many exhibits, in the -229 proceeding and the -511 proceeding, all of which he relied upon in the -511 proceeding.
[40] It is sufficient for the present purposes to summarise the gist of Mr Walker’s evidence.
[41] Mr Walker referred to his examination of very many documents comprising records or information relevant to companies associated with Mr Henderson, including PVL, FTG itself and a group of companies which have been referred to as the “FTG Group”, and concluded that ownership and interest in the various companies is shrouded in opacity. Mr Walker cited my judgment in Re Henderson.14 Mr Henderson had been adjudicated bankrupt in November 2010. The Henderson judgment followed a lengthy public examination of Mr Henderson under the Insolvency Act 2006. The Court ordered the discharge of Mr Henderson from bankruptcy at 27 January 2017 but with a business prohibition until December 2022.15 Mr Walker, in this proceeding, cited particularly the Court’s description of the control which Mr Henderson and his wife (Katrina Buxton) had over the FTG No 2 Trust and the relationship between that trust and a number of companies including FTG itself.16
[42] Mr Walker asserted that PVL had a beneficial title to the Tuam debts and securities by way of a constructive trust because funds had been diverted from PVL Group entities (other than Tuam) to obtain the Tuam debts and securities.
14 Re Henderson [2016] NZHC 2969.
15 At [446(d)].
16 At [273].
[43] Mr Walker also cited passages in the Henderson judgment which recognised that Mr Henderson had provided a number of personal guarantees in relation to the debt of numerous companies at a time when he did not have the wherewithal to meet the guaranteed obligations.17
[44] Mr Walker then developed the proposition that the various agreements which Tuam had entered into with CFL (the benefit of which FTG has since claimed interest in through the Transfer Deed with CAML) involve a “convolution and over- complexity” which is “typical of the empire [Mr Henderson] built”. Mr Walker continued:
This convolution necessitates the most careful accounting analysis to provide the sort of clarity that only accounting is capable of. No such accounting exists, or if it does, it has not been adduced in the series of matters being contemplated here.
[45] Mr Walker also expressed concern and uncertainty as to the source of funds FTG used to pay CAML in June 2015 the purchase price of $100,000 agreed in the Transfer Deed.
[46] Mr Henderson provided affidavits in the -229 proceeding in response to the issues raised by Mr Walker. He referred to Mr Walker’s claim that PVL funds had been used (by FTG) to obtain the Tuam debts and securities. Mr Henderson deposed that the funds used to purchase the Tuam debts and securities from CAML had been independently advanced to FTG by Secured Finance Ltd (Secured Finance). Mr Henderson exhibited:
(a)a term loan agreement for $105,000 entered into between Secured Finance and FTG on 29 June 2015; and
(b)the trust ledger of Canterbury Legal evidencing the receipt of a loan of
$102,000 into the firm’s trust account on 30 June 2015 followed by the payment of $100,000 on 1 July 2015 narrated as “Settlement purchase of debts and securities”.
17 For example, at [74].
[47] Mr Walker’s raising of the defences to FTG’s asserted interest and title was founded on the basis of the complicated ownership structures, poor or unclear record- keeping and general opacity of the numerous companies (including PVL and FTG) which are associated with Mr Henderson. In his submissions, Mr Walker emphasised what he viewed as examples of failures by Mr Henderson and others to comply with information obligations, including by reference to a proceeding which is continuing.18
[48] That Mr Walker feels frustrated by not being able to obtain to his reasonable satisfaction a full understanding of the inter-company relationships and financial dealings involving PVL, FTG, Tuam and others is understandable. But the defences he sought to invoke on behalf of Tuam in this proceeding ignore the clarity of the financial commitments which Tuam initially entered into with its financiers (both BNZ and CFL) as long ago as 2007, and indisputable rights which accrued and subsist under those agreements. Mr Walker’s suspicion that the ($100,000) funds for FTG’s attempted purchase of the Tuam debts and securities may have been sourced through diversion of funds from other entities associated with Mr Henderson, perhaps illegitimately, is not supported by the evidence. The documentary evidence produced on behalf of FTG establishes, to the contrary, that the precise sum needed for payment to CAML was obtained from Secured Finance under a finance contract and was in fact paid on to CAML. To the extent that Mr Walker had concerns in relation to the FTG/CAML transaction arising from the manner in which Mr Henderson and his associated entities had operated, the onus of establishing on the balance of probabilities that such approaches had tainted the FTG/CAML transaction through some specific, inappropriate conduct lay with Mr Walker. He has not adduced evidence of such a taint. Rather, his submissions had a distinct emphasis upon the extent to which he continued to have uncertainties around the dealings of entities associated with Mr Henderson through what he considers to still be significant gaps in the documentary evidence he has been able to obtain from those involved.
[49] This Court in determining contractual rights is not in a position to speculate as to information which might become available through further discovery. It is for the parties to provide all their evidence or, where further discovery is reasonably required
18 Following on from orders made in Commissioner of Inland Revenue v Livingspace Properties Ltd (in liq) [2018] NZHC 1232.
from other parties or non-parties, to pursue that discovery before proceeding to a hearing.
[50] Upon the basis of the evidence adduced for this hearing, and had the Court found that FTG had taken a valid equitable assignment of Tuam’s debts and securities from CAML, I would have found that Tuam did not have available defences to FTG’s entitlements based upon the second-ranking securities. Similarly (and Mr Walker responsibly did not suggest otherwise), Tuam cannot resist the receivers’ releasing funds from the receivership to CAML as the entity which, with second-ranking securities, retains the interest and title in Tuam’s debts and securities originally held by CFL.
Costs
[51]It is appropriate that matters of costs and disbursements be reserved.
Orders
In the -229 proceeding
[52] There is a declaration that after payment of Bank of New Zealand’s entitlement as the holder of the first-ranking security granted by Tuam Ventures Ltd (in rec and in liq), Crown Asset Management Ltd holds the second-ranking security pursuant to the Deed of Priority dated 25 February 2008.
[53] The cross-applications of FTG Securities Ltd and Robert Bruce Walker (as liquidator of Tuam Ventures Ltd) for other directions or orders are dismissed.
[54]This (-229) proceeding is adjourned for mention in a telephone conference at
2.00 pm, 14 September 2020, reserving leave to the applicants to seek further directions should such be necessary in relation to any matter arising in connection with the performance of their functions as receivers.
[55] The costs and disbursements of this (-229) proceeding are reserved. Any party wishing to apply for costs is to file and serve a memorandum containing submissions within 30 working days after the date of this judgment and any response to such
application is to be filed and served by memorandum within 10 working days thereafter (five page limit in each case), with costs and disbursements to be determined on the papers. In the event no application is made for costs within the said 30 working days, the order of the Court (without further direction) will be that there is no order as to costs and disbursements.
In the -511 proceeding
[56] There is a declaration that FTG Securities Ltd has not obtained either a valid legal or equitable assignment of debts and securities asserted against Tuam Ventures Ltd (in rec and in liq).
[57] There is a declaration that FTG Securities Ltd is not entitled against Tuam Ventures Ltd to any surplus arising out of the receivership of the said Tuam Ventures Ltd as conducted by the receivers.
[58]The applicant’s application for directions is otherwise dismissed.
[59] The costs and disbursements of this (-511) proceeding are reserved. Any party wishing to apply for costs is to file and serve a memorandum containing submissions within 30 working days after the date of this judgment and any response to such application is to be filed and served by memorandum within 10 working days thereafter (five page limit in each case), with costs and disbursements to be determined on the papers. In the event no application is made for costs within the said 30 working days, the order of the Court (without further direction) will be that there is no order as to costs and disbursements.
Osborne J
Solicitors:
Canterbury Legal, Christchurch Buddle Findlay, Christchurch Chapman Tripp, Christchurch Meredith Connell, Christchurch
Copy to: R B Walker
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