Hansa Ltd (in liq) v Hibbs - [2017] NZHC 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-001214 [2017] NZHC 2014

BETWEEN
HANSA LIMITED (IN LIQUIDATION)

First Plaintiff

DAMIEN GRANT AND STEVEN KHOV

Second Plaintiffs

AND

PAUL CLIFFORD HIBBS First Defendant

CAMERON GLADSTONE INVESTMENTS LIMITED Second Defendant

HALDON RANGE VINEYARDS LIMITED

Third Defendant

CONTAINERS DIRECT LEASING LIMITED

Fourth Defendant

Hearing: 16 August 2017

Appearances:

A S Botterill for Plaintiffs
No Appearance for First Defendant

Judgment:

22 August 2017

JUDGMENT OF GENDALL J

Introduction

[1] This proceeding involves what is known as a classic Ponzi scheme. The first

plaintiff, Hansa Limited (In Liquidation) (“Hansa”), formerly known as Hansa

Capital Limited, was placed into liquidation by this Court on 24 November 2016.

HANSA LIMITED (IN LIQ) v HIBBS [2017] NZHC 2014 [22 August 2017]

[2] The first defendant, Paul Clifford Hibbs (Mr Hibbs), is the sole director of Hansa, having been appointed and acted as such since the company was first incorporated.

[3] In this proceeding:

(a) The second plaintiffs who are the liquidators of Hansa (“the liquidators”) claim that Mr Hibbs breached ss 131, 133, 135, 136 and
137 Companies Act 1993 (“the Act”). As a result and pursuant to s 301 Companies Act 1993 the liquidators seek an order be made that Mr Hibbs contribute to the assets of Hansa. Specifically, before me the liquidators sought judgment by way of formal proof against Mr Hibbs pursuant to r 15.9 High Court Rules.

(b)Hansa claimed against the second to fourth defendants in this proceeding for money had and received.

[4] On 28 February 2017 Hansa obtained judgment by default against the second, third and fourth defendants with regard to the money had and received claim noted at para [3](b) above.

[5] Then, on 27 March 2017, given that Mr Hibbs had failed to file a statement of defence in this proceeding, an order was made that the claim against him would proceed by way of formal proof. That hearing occurred on 16 August 2017. This judgment relates to that formal proof hearing.

[6] To expedite matters the formal proof hearing principally considered Hansa’s s 136 claim. This was the claim that Mr Hibbs, as the person involved with the company from its outset and its sole director, breached duties under s 136 of the Act by causing Hansa to continue to trade and incur obligations, notwithstanding that no reasonable ground existed to believe that the company would be able to meet its obligations when required to by its creditors.

[7] Hansa and the liquidators seek compensation from Mr Hibbs in his capacity as director of the company under s 301(1)(b)(ii) of the Act for alleged breaches of duties imposed on him both under s 136 and under other provisions in the Act as follows:

(a) Section 136 – as noted above by causing the company to continue to trade and incur obligations, notwithstanding that no reasonable ground existed to believe that the company would be able to meet its obligations when required.

(b)Section 131 – a failure to act…

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: [2017] NZHC 2014
Decision Date: 22 August 2017

CaseChat Overview and Summary

Hansa Limited (in liquidation), along with its liquidators, Damien Grant and Steven Khov, filed a claim against Paul Clifford Hibbs, the sole director of Hansa, alleging breaches of several sections of the Companies Act 1993, including sections 131, 133, 135, 136, and 137. The plaintiffs sought compensation from Hibbs for the losses incurred by Hansa due to his alleged mismanagement and misappropriation of funds through a Ponzi scheme. The primary focus of the case was on whether Hibbs breached his duty under section 136 by allowing Hansa to incur obligations it could not meet. The court concluded that Hibbs did breach his duties under section 136 and other sections of the Act by causing Hansa to continue trading while knowing it could not meet its obligations. The court ordered Hibbs to contribute $7,062,597.67 to Hansa's assets, the full extent of Hansa's indebtedness from 4 November 2008 to 24 November 2016, along with paying liquidators' fees and disbursements totaling $396,002.90. Additionally, Hibbs was ordered to pay the plaintiffs' full costs and disbursements of the proceeding.

Orders