Houghton v Saunders - [2019] NZHC 1061

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2008-409-348

[2019] NZHC 1061

BETWEEN
ERIC MESERVE HOUGHTON

Plaintiff

AND

TIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG

EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS and JOAN WITHERS
First Defendants

CREDIT SUISSE PRIVATE EQUITY INCORPORATED

Second Defendant

CREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP

Third Defendant

Hearing: 8 May 2019

Counsel:

C R Carruthers QC and P A B Mills for plaintiff

A R Galbraith QC, D J Cooper and M C Harris for first defendants (except for separate representation noted below)

T C Weston QC for Mr Magill
B D Gray QC and A E Ferguson for Ms Withers
J B M Smith QC, A S Olney and C J Curran for second and third defendants

Judgment:

15 May 2019

RESERVED JUDGMENT OF DOBSON J

[Applications for strike-out, identification of claimants and discovery of funding documentation]

HOUGHTON v SAUNDERS [2019] NZHC 1061 [15 May 2019]

Strike-out application

[1] The defendants have pleaded, by way of an affirmative defence, an application for relief from any liability they are held to owe to claimants, pursuant to the provisions in s 63 of the Securities Act 1978 (the Act) as they applied at the time of the issue of the prospectus. By consent, or at least without any opposition, when I settled the scope of issues for the stage two hearing of the proceeding, I included as an issue:1
The availability for any defendants of a defence under s 63 of the Securities Act.

[2] Since then, the plaintiff has applied for an order to strike out the defence that would rely on s 63 of the Act and the defence relying on an analogous approach under the Fair Trading Act 1986.

[3] The strike-out application relies on reasoning in the judgment of the Supreme Court in which it considered the potential availability to the defendants of a defence under s 56(3)(c) of the Act. That provided a defence to liability for an untrue statement in the prospectus in the following terms:

56 Which persons are liable for misstatements

…

(3)No person shall be liable under subsection (1) of this section in respect of any untrue statement included in an advertisement or registered prospectus, as the case may be, if he or she proves that—

…

(c)… as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he or she had reasonable grounds to believe and did, up to the time of the subscription for the securities, believe that the statement was true; or

…

[4] The Supreme Court ruled that this statutory defence would not be available to the defendants. The judgment included:2

1 Houghton v Saunders [2019] NZHC 142 at [25].
2 Houghton v Saunders [2018] NZSC 74, [2019] 1 NZLR 1 at [291].

… If the directors knew as at 2 June…

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.

Continue reading Houghton v Saunders

Details

AGLC: Houghton v Saunders [2019] NZHC 1061
Case: [2019] NZHC 1061
Decision Date: 15 May 2019

CaseChat Overview and Summary

In Houghton v Saunders, the High Court of New Zealand heard an application to strike out a defence that relied on a provision in the Securities Act 1978 for relief from liability. The plaintiff argued that there was no tenable basis for the defendants to rely on this defence as the Supreme Court had found that the directors could not have had reasonable grounds for believing that a statement in respect of the 2004 financial year revenue forecast was a true statement when they knew that it was not. The defendants argued that the relief provision in the Securities Act could still apply to them and they should not be precluded from invoking it. The Court found that the plaintiff had not discharged the onus of establishing the high threshold that all prospects of invoking the relief provision were clearly untenable. Therefore, the application to strike out the defence was dismissed. The Court also declined to make an order for production of documents relating to funding and insurance arrangements as sought by the defendants, and instead adjourned the application. The parties were directed to file and serve submissions in support of their respective applications for costs and security for costs.

Orders