Insurego Limited v Harris - [2014] NZHC 2261

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-003789 [2014] NZHC 2261

UNDER the Companies Act 1993

BETWEEN

INSUREGO LIMITED First Plaintiff

AND

PACIFIC TRUSTEES & NOMINEES LIMITED

Second Plaintiff

AND

PETER ALLAN HARRIS First Defendant

AND

ALISTAIR LEIGHTON HUTCHISON Second Defendant

Hearing: 16 September 2014

Appearances:

A R Gilchrist for Applicants (Plaintiffs)
R E Harrison QC for Respondents (Defendants)
F J Thorp for non-party, Crowe Horwath New Zealand
(appearing but then excused)
No appearance for non-party, ANZ National Bank Limited
(attendance excused)

Judgment:

18 September 2014

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to particular discovery

This judgment was delivered by me at 3.30 pm on 4 July 2014 pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

INSUREGO LIMITED v PACIFIC TRUSTEES & NOMINEES LIMITED [2014] NZHC 2261 [18 September
2014]

Introduction

[1] The plaintiffs apply for orders that the defendants discover particular documents.

Background to the plaintiffs’ claim

[2] The plaintiffs’ claim relates to the sale of their shares in CBL Insurance Ltd (CBL). The plaintiffs are associated with Anthony Thomas, who was previously involved, alongside the defendants, in governance and executive positions within CBL. The plaintiffs held shares in CBL.

[3] In December 2008, after Mr Thomas had left CBL, each plaintiff entered into an agreement for the sale and purchase of its shares to the defendants and entities associated with them. The purchase price of each share was 23 cents, equating to a total sale price of $1,150,000 for the first plaintiff and of $115,000 for the second plaintiff.

[4] The plaintiffs now assert that the fair value of the shares at the time of the sale was 72 cents per share.

[5] The plaintiffs assert that the defendants, in their capacities as directors of CBL, were in possession of information which would not otherwise have been available to them and which was material to an assessment of the value of the shares. The plaintiffs plead six alternative causes of action, including a breach of s 149 of the Companies Act 1993. They sue for the 49 cent per share difference between the sale price and the asserted value (representing claims of $2,450,000 and $245,000 for the first and second plaintiffs respectively).

[6] The plaintiffs assert that the negotiated sale price was based on the accuracy of the audited accounts of CBL for the year ending 31 December 2007. The plaintiffs assert that although those accounts reflected fair value as at 31 December
2007, they did not indicate the fair value of the shares at the time of the agreement in December 2008. The plaintiffs say that management accounts provided by the defendants in June 2008 were consistent with the 31 December 2007 accounts but

differed significantly from the subsequent December 2008 accounts (the December accounts not being shown to the plaintiffs before the agreements were signed). They further say that there were oral representations by the defendants throughout 2008 that the financial position of CBL was “not great”.

[7] The defendants deny…

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: [2014] NZHC 2261
Decision Date: 18 September 2014

CaseChat Overview and Summary

The plaintiffs in the case of Insurego Limited v Harris sought orders for the defendants to discover particular documents in relation to the sale of their shares in CBL Insurance Ltd. The plaintiffs alleged that the fair value of the shares at the time of sale was 72 cents per share, and that the defendants had information that was material to an assessment of the value of the shares. The defendants denied the claims and counterclaimed for a declaration that they did not contravene s 149(1)(a) of the Companies Act 1993. The court was required to decide whether there were grounds to believe that the defendants had not discovered one or more documents or a group of documents that should have been discovered. The court found that there were grounds to believe that the defendants had not discovered documents in relation to the CBL audit for 2008 and correspondence between CBL and any rating agency. However, the court found no grounds to believe that bank correspondence should have been discovered, or that a schedule of outstanding insurance claims or management fees or a copy of the agreement concerning the RMSEA receivable should have been discovered. The court ordered the defendants to file and serve a supplementary verified list of documents and to provide inspection of their supplementary documents within 25 working days. Costs were reserved and the parties were directed to file submissions if they were unable to agree on costs.

Orders