Hilary Jane Calvert v Grant Bruce Reynolds as liquidator of James Developments Limited (in liquidation)
[2016] NZSC 100
•9 August 2016
| IN THE SUPREME COURT OF NEW ZEALAND |
| SC 51/2016 [2016] NZSC 100 |
| BETWEEN | HILARY JANE CALVERT AND HGW TRUSTEES LIMITED AS TRUSTEES OF THE FRONGOPOULOS TRUST CHRIS JAMES |
| AND | GRANT BRUCE REYNOLDS AS LIQUIDATOR OF JAMES DEVELOPMENTS LIMITED (IN LIQUIDATION) |
| Court: | William Young, Arnold and OʼRegan JJ |
Counsel: | M R Sherwood King and M A F Gilkison for Applicants |
Judgment: | 9 August 2016 |
JUDGMENT OF THE COURT
A The application for leave to appeal is dismissed.
BThe applicants (jointly and severally) must pay costs of $2,500 to the respondent.
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REASONS
The first applicants (the trustees) are trustees of the Frongopoulos Trust (the trust). They were found liable for a debt of $740,000 owing to the respondent as liquidator of James Developments Ltd (JDL). Dunningham J found they were liable for this sum and that their limitation defence (and a number of other defences no longer in issue) failed.[1] Their liability arose from an advance that had been made to the then trustees of the trust. In addition the second applicant, Mr James, was found in breach of his duty as a director of JDL to act in good faith and in the best interests of JDL.[2] However, the Judge found that this breach did not cause loss to JDL.[3]
[1]Reynolds v Calvert [2015] NZHC 400 [High Court judgment].
[2]At [113] and [115].
[3]At [110]–[111] and [119].
On appeal, the Court of Appeal dismissed the applicants’ appeal and allowed a cross-appeal by the liquidator. It found that Mr James was also liable to the liquidator for $740,000 plus interest under s 301 of the Companies Act 1993.[4]
[4]Calvert v Reynolds [2016] NZCA 151 (Harrison, Stevens and Miller JJ) [Court of Appeal judgment].
The trustees did not dispute that the $740,000 was owed to JDL but argued that the action to recover it was out of time. This limitation defence failed because it was found that the trustees concealed the right of action first by alteration of records of JDL and the trust prior to the liquidation of JDL and secondly by the evasiveness of their dealings with the liquidator when he was inquiring about the debt.[5]
[5]High Court judgment, above n 1, at [77]–[98]; Court of Appeal judgment, above n 4,The trustees seek to raise three points about the operation of s 28 of the Limitation Act 1950, which provides for the postponement of the limitation period in cases in which the right of action is concealed by fraud. We see the issues arising in respect of those points as essentially factual issues. None gives rise to a point of public or commercial significance. The Court of Appeal largely upheld the High Court findings, and we do not see any risk of a miscarriage if leave to appeal is not granted on those points.
Mr James seeks to raise on appeal an argument that the Court of Appeal was wrong to find him liable to pay $740,000 to the respondent under s 301 of the Companies Act on the basis that there was a causal link between his breach of director’s duties and the loss to JDL of $740,000. Mr James succeeded on this point in the High Court, on the basis that his breach of duty in participating in the alteration of the records of JDL and of the trustees to conceal the advance made to the trustees by JDL was not causative of loss to JDL. This was because of his belated admission that those steps should not have been taken and the consequent finding that the $740,000 was owed by the trustees to JDL.[6] The Court of Appeal said the alteration of JDL’s records (in breach of his director’s duty to JDL) was an attempt to give the trust a limitation defence it did not have to defeat JDL’s and, subsequently, the respondent’s claim to recover the $740,000.[7] The fact the loss was contingent on the success of the limitation defence did not affect the causative nature of his misconduct and he should be concurrently liable (with the first applicants) for JDL’s loss.
[6]High Court judgment, above n 1, at [119].
[7]Court of Appeal judgment, above n 4, at [60].
We sought further information from counsel as to whether the trustees had paid, or could pay, the amount they owe to the respondent. Counsel advised that the total amount for which the trustees are liable to the respondent, being the $740,000 debt, plus interest and Court costs, is $1,203,599.69. The trustees have paid $1,150,000, so only $53,599.69 is outstanding and arrangements have been made for payment of this. The trustees’ payment of the amount they owe to the respondent means that the loss for which Mr James would be liable under s 301 under the Court of Appeal judgment is made good, which means he will have no liability in practical terms. In those circumstances, we do not consider it would be in the interests of justice to allow a further appeal on this point.
The final proposed appeal ground effectively seeks the reversal of this Court’s decision in a case decided six years ago between JDL and Mana Property Trustee Ltd.[8] This is misguided, not only because Mana Property Trustee Ltd is not a party to the current proceeding, but also because the decision of this Court was final and was made six years ago.
[8]Mana Property Trustee Ltd v James Developments Ltd [2010] NZSC 90, [2010] 3 NZLR 805.
It is not in the interests of justice to grant leave to appeal and the application is therefore dismissed.
The applicants must pay costs of $2,500 to the respondent. Their liability is joint and several.
Solicitors:
Mackay & Gilkison, Wellington for the Applicants
Whitlock & Co, Auckland for the Respondent
at [21]–[57].
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