Ingenious Asset Management Limited v McConnon

[2024] NZHC 1256

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-2103

[2024] NZHC 1256

IN THE MATTER OF

the Companies Act 1993

BETWEEN

INGENIOUS ASSET MANAGEMENT LIMITED

Plaintiff

AND

SIMON MCCONNON

First Defendant

JOHN BAIRD MCCONNON
Second Defendant

… cont over

Hearing:

On the papers

Appearances:

J Farmer KC /G Jindal for the Plaintiff

M Wallace/ K Maclean for the First and Second Defendants K McDonald / N Percy for the Third Defendants

R Stewart / A Wakeman for the Fourth and Fifth Defendants

Judgment:

20 May 2024

JUDGMENT OF ASSOCIATE JUDGE BRITTAIN

[application for recall]

This judgment was delivered by me on 20 May 2024 at 4 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors/Counsel:

Ormiston Legal, Auckland

D’Archy Thompson Law, Christchurch Fee Langston, Auckland

Kevin McDonald & Associates, Auckland Freedom Chambers, Christchurch

INGENIOUS ASSET MANAGEMENT LTD v MCCONNON [2024] NZHC 1256 [20 May 2024]

AND  KEVIN BRUCE RAMSEY

Third Defendant

STEPHEN MARK LAWRENCE

Fourth Defendant

CHRISTOPHER CAREY MCULLAGH

Fifth Defendant

Introduction

[1]    On 21 March 2024, I gave judgment for the defendants granting their applications for security for costs (the judgment).1 I ordered that the plaintiff pay

$25,000 into Court as global security for costs for all defendants, for all steps in the proceeding until determination of the plaintiff’s application for strike out and any cross-applications by the defendants for strike out and/or summary judgment.

[2]    The proceeding is stayed until the plaintiff, Ingenious Asset Management Ltd (Ingenious), complies with that order.

[3]    Ingenious has applied for the judgment to be recalled under r 11.9 of the High Court Rules 2016 (HCR), on the ground that the judgment includes a criticism of Ingenious’ director, Dr Jindal, that was unfair. The defendants consent to recall of the judgment and amendment as proposed by Ingenious.

Legal principles

[4]    The Court may recall a judgment under r 11.9 of the HCR in three situations where:2

(a)counsel failed to direct the Court’s attention to a legislative provision or precedent which is clearly relevant; or

(b)since giving judgment there has been amendment to a relevant statute or regulation or a new judicial decision of higher authority; or

(c)for some very special reason justice so requires.

[5]    The discretion to recall is exercised with circumspection and does not extend to a challenge of substantive findings of fact or law. It is not a mode for parties to re- run previous arguments.

1      Ingenious Asset Management Ltd v McConnon [2024] NZHC 624.

2      Horowhenua County v Nash (No.2) [1968] NZLR 632; Rainbow Corporation Ltd v Ryde Holdings Ltd (1992) 5 PRNZ 493 (CA).

[6]    A non-party witness may seek recall of a judgment in respect of adverse findings that are unjustified.3 In O’Regan v Lousich, Tipping J said: 4

The public are entitled to take the view, and do take the view that if a Judge criticises someone in a judgment the Judge has carefully weighed the evidence after giving the person criticised the opportunity to be heard.

[7]    This does not amount to a general right of a witness to be heard about prospective criticism in a judgment.5

The judgment that is sought to be recalled

[8]    In this proceeding, Ingenious brings causes of action against three directors of Global Dairy Ltd (in liquidation) (Global Dairy) and the liquidators of Global Dairy, on the basis that the causes of action were available to creditors of Global Dairy and assigned by those creditors to Ingenious.

[9]    The judgment includes a preliminary assessment of the merit of Ingenious’ substantive claims, as part of the exercise required where defendants apply for security for costs. This preliminary assessment included consideration of issues raised by the defendants regarding the validity of the purported assignments of the causes of action to Ingenious. The relevant extract of the judgment follows:6

[33]      Even if the creditors’ claims against the directors and liquidators are arguable, the more fundamental problem is the validity of the assignments. All defendants have a strong argument available to them that the assignments are impermissible assignments of bare causes of action.

[34]      The creditors proved in the liquidation, and the liquidators’ reports confirm that the distributions were made to the creditors as unsecured creditors. After the distributions, the creditors’ outstanding debts were prima facie worthless. The creditors were prepared to assign their rights for $1. There is no evidence that the creditors have any interest in the outcome of this proceeding.

[35]      Ingenious had no antecedent commercial interest in the subject matter of the assignments. Ingenious has offered no explanation of its motivation for accepting the assignments and commencing this proceeding.

3      Shed4 Trading Co. Ltd v Sanson [2020] NZHC 2836.

4      O’Regan v Lousich [1995] 2 NZLR 620 (HC).

5      Hampton v Christchurch District Council [2014] NZHC 1750, [2014] NZAR 953.

6      Above n1.

[36]      At the time of the assignments, Ingenious was aware that there would be no further distributions in the liquidation towards satisfaction of the debts, and it is at least arguable that in substance the rights assigned were the creditors’ personal causes of action against the directors and the liquidators.

[37]      It is common ground that Ingenious has no assets, and its sole director is Dr Jindal, the wife of Mr Jindal, counsel for Ingenious. This raises the issue of whether Ingenious is simply a vehicle for Mr Jindal and Dr Jindal to pursue causes of action personal to the creditors, which suggests trafficking in litigation.

The argument for recall

[10]   Counsel for Ingenious accepts that the last sentence in paragraph [37] of the judgment states an issue and not a finding of fact. Counsel submits that [37] includes a criticism of Dr Jindal that was unfair to Dr Jindal because her only participation at the hearing of the application for security for costs was as the deponent of affidavits and she was not given the opportunity to respond to the matters stated in [37] of the judgment.

[11]   Ingenious and Dr Jindal propose that [37] of the judgment be amended as follows:

It is common ground that Ingenious has no assets. This raises the issue of whether Ingenious is simply a vehicle to pursue causes of action personal to the creditors, which suggests trafficking in litigation.

[12]The defendants consent to a re-issue of the judgment on that basis.

Discussion

[13]   Ingenious’ application for recall is in substance an application by Dr Jindal, as acknowledged by counsel for Ingenious.

[14]   Counsel for Ingenious submits that an inference that can be drawn from paragraph [37] of the judgment is that Dr Jindal may be personally engaged in litigation trafficking. It is argued that if that proposition had been clearly articulated at the hearing of the application for security for costs, then an opportunity would have existed for Ingenious to adduce further evidence from Dr Jindal as to the arrangements

that exist between Ingenious and the creditors for the disposal of any proceeds recovered in this proceeding.

[15]   That submission from counsel is the first time that there has been any assertion by or on behalf of Ingenious that “arrangements” exist between Ingenious and the assignors of the causes of action for the disposal of any proceeds recovered in this proceeding.

[16]   Dr Jindal affirmed three affidavits in opposition to the application for security for costs. Dr Jindal’s affidavit affirmed on 4 March 2024 provided the substance of her evidence on behalf of Ingenious, running to 48 paragraphs. In paragraph [30] of her affidavit affirmed on 4 March 2024, Dr Jindal avers:

It is acknowledged that IAML has no other assets nor any business activity other than it being the assignee of HNDTL, NGI and NFL.

[17]   There was no mention of any arrangements between Ingenious (IAML) and the assignees (HNDTL, NGI and NFL). That is despite the defendants pleading the invalidity of the assignments in their statements of defence.

[18]   The assignments were before the Court at the hearing, and purport to be absolute assignments. The written submissions filed in advance of the hearing on behalf of the defendants argued that the assignments are invalid assignments of bare causes of action. At the hearing, counsel for Ingenious, Mr Jindal, made no mention of any arrangements between Ingenious and the assignor creditors for the disposal of any proceeds recovered in this proceeding.

[19]   However, I accept that paragraph [37] of the judgment might be read as carrying an inference that Dr Jindal may have personally engaged in litigation trafficking, which is an unintended inference. Ingenious is the assignee and the plaintiff, and the party that is arguably pursuing invalid assignments.

[20]   I accept that eliminating the potential for an unintended inference is a sufficient reason in this case to recall the judgment and amend paragraph [37] as proposed, where the amendment is consented to by Dr Jindal and all defendants.

Orders

[21]The judgment dated 21 March 2024 is recalled.

[22]   The judgment dated 21 March 2024 shall be re-issued with paragraph [37] to read as set out in [11] above.

[23]Costs are reserved.

Associate Judge Brittain