Grant v Jesse & Associates Barristers & Solicitors
[2020] NZHC 168
•14 February 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-002394
[2020] NZHC 168
UNDER Section 266 of the Companies Act 1993 IN THE MATTER
of the liquidation of Carlton Capital Limited (In Liquidation) and GEP Limited (In
Liquidation)
BETWEEN
DAMIEN GRANT as liquidator of GEP
Limited (In Liquidation) and Carlton Capital Limited (In Liquidation)
Applicant
AND
JESSE & ASSOCIATES BARRISTERS & SOLICITORS
First Respondent
AND
JESSE SEANG TY NGUY
Second Respondent
Hearing: 13 February 2020 Appearances:
A S Botterill and S Chambers for Applicant P Napier for Defendant
Judgment:
14 February 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 14 February 2020 at 10.00 am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
GRANT v JESSE & ASSOCIATES BARRISTERS & SOLICITORS [2020] NZHC 168 [14 February 2020]
[1] The applicant is the liquidator of GEP Ltd (In Liquidation) and Carlton Capital Ltd (In Liquidation) (GEP and Carlton Capital respectively).
[2]The first respondent is a firm of solicitors.
[3]The second respondent is the principal of the first respondent (Mr Nguy).
[4] At various times the respondents have acted as solicitors for both GEP and Carlton Capital. Their instructions apparently included acting in respect of some large loan transactions.
[5] The applicant applies under s 266 of the Companies Act 1993 (the Act) for orders that:
(a)The respondents produce to the applicant all books, records, correspondence, notes, trust account bank statements and documents relating to the business, accounts or affairs of GEP and Carlton Capital that are in their possession or under their control; and
(b)Mr Nguy attend the High Court at Auckland for an examination on matters relating to the business, accounts or affairs of the companies.
[6] The application is made to further the applicant’s investigation into the loans, to unravel inter-company transactions and to seek recovery of monies owing to the companies.
[7] In his affidavit, the applicant describes a history of requests of the respondents for documents and/or information concerning GEP and Carlton Capital and non- compliance with those requests. I do not need to set out the evidence. It is largely unchallenged.
[8] The applicant says that whilst the respondents have provided some of the companies’ documents, they have not provided bank statements to verify the first respondent’s trust account ledger (the accuracy of which is a matter that the applicant
wishes to investigate) and there is a surprising absence of email correspondence and file notes.
[9] Mr Nguy was interviewed by the applicant on 25 June 2019 pursuant to a request made of him under s 261 of the Act. At that time, he said he was not able to answer questions in relation to Carlton Capital as he did not have access to files. Since then he has not attended for a further interview despite requests.
[10]The relevant provision of the Act is s 266(2) that provides:
The Court may, on the application of a liquidator, order a person to whom section 261 of this Act applies to ̶
(a)Attend before the Court and be examined on oath or affirmation by the Court or the liquidator or a barrister or solicitor acting on behalf of the liquidator on any matter relating to the business, accounts, or affairs of the company;
(b)Produce any books, records, or documents relating to the business, accounts or affairs of the company in that person’s possession or under that person’s control.
[11] The respondents do not dispute that they are persons to whom s 261 of the Act applies or otherwise challenge the Court’s power to make the orders sought. In the notice of opposition, supported by an affidavit of Mr Nguy, the respondents contend that the orders sought should not be made as they have not refused to produce documents, nor attend an interview, have provided documents and continue to search for more, and the second respondent is prepared to attend further interviews.
[12] In admirably succinct submissions, Mr Napier advises that recently the respondents provided the applicant with what they believe to be all the documents sought and that upon the second respondent’s return from overseas he will willingly attend an interview with the applicant.
[13]Mr Napier referred to Dalton v Hong, where Associate Judge Smith said:1
The Courts have noted that the discretion to make an order under s 266 must be exercised after a careful balancing of the factors involved. On the one hand, the Court should consider the reasonable requirements of the administrator to
1 Dalton v Hong [2018] NZHC 2266 at [70].
carry out his or her task; on the other hand, there is a need to avoid making an order which would be wholly unreasonable, unnecessary, or oppressive to the person concerned.
[14] Here, Mr Napier asserts that the orders sought are “unnecessary” given the respondents’ co-operative positions.
[15] Attached to his submissions is a letter that Mr Napier sent on behalf of the respondents to the applicant on 5 February 2020 which states:
Please find enclosed herewith copies of the documents sought in the originating application for order to produce books, records and documents dated 16 October 2019. Our client informs that these are all of the documents that he has. We are informed that the originals were given to the Police following a production order.
Our client is travelling to Asia today for a week and will, as advised, self- quarantine for two weeks thereafter. He will be available for an interview at a time suitable to you from the week commencing Monday 2 March 2020 onwards.
[16] At the hearing today, Mr Botterill presented a somewhat different picture. The bank statements requested have not been provided. These have been required since at least 25 June 2019. Mr Botterill also notes that only one email has been produced and an absence of file notes. I am satisfied that the respondents must have the bank statements and have failed to produce them. The respondents’ failure to produce the bank statements has gone on for a long time despite several requests. They are clearly important to the applicant’s investigation of the loans. In these times, the absence of emails and file notes between solicitors and their clients involved in commercial transactions is surprising in the absence of any explanation. I do not accept the submission that making an order that the respondents produce documents is unnecessary. I make an order on the terms set out below.
[17] In relation to the examination application, Mr Botterill says this is necessary as Mr Nguy has not been interviewed in relation to the affairs of Carlton Capital and was evasive in his previous interview. Because of the possibility that Mr Nguy might assert grounds to withhold information in any further interview, Mr Botterill argued that it is desirable that he be examined before the Court, where any issues arising can be ruled upon immediately. There is force in these submissions but a risk of delay if Court-time to conduct an examination is not immediately available. Mr Botterill
agreed that the examination application should be adjourned until the end of March 2020. This will give Mr Nguy the opportunity to submit to a voluntary interview by the applicant, as he said he will do. Assuming he does so, is fully co-operative and no legal issues arise requiring a ruling from the Court, I would expect the examination application may be withdrawn. I note that Mr Napier had no instructions to agree to an adjournment of the examination matter.
Result
[18] There shall be an order under s 266(2)(b) of the Act that by no later than 9 March 2020 the respondents are to produce any books, records, or documents (that they have not already produced) relating to the business, accounts, or affairs of GEP and Carlton Capital in their possession or under their control to the applicant. The documents must include (but are not limited to) any bank statements or transaction records confirming the first respondent’s trust account ledger transactions relating to GEP or Carlton Capital, as well as any email correspondence between the respondents and those companies and any file notes relating to the affairs of those companies.
[19] The application to examine Mr Nguy is adjourned. There will be a telephone conference convened before me at 9.30 am on 30 March 2020. The liquidator is to advise the respondents and the Court no later than 26 March 2020 whether it wishes to pursue or withdraw the examination application.
[20]Costs are reserved. I will hear from Counsel on the matter on 30 March 2020.
O G Paulsen Associate Judge
Solicitors:
A S Botterill, Waterstone Insolvency, Auckland Keegan Alexander, Auckland
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