Internet Traders Limited v Hutson (formerly Williams) - [2016] NZHC 1269

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2014-470-158 [2016] NZHC 1269

UNDER the Companies Act 1993

BETWEEN

INTERNET TRADERS LIMITED First Plaintiff

IT PHARMACEUTICAL SUPPLIES LIMITED

Second Plaintiff

JOHN ROULSTON HEALE Third Plaintiff

JOHN ROULSTON HEALE

LAUREN JOYCE HEALE as trustees of the JR and LJ HEALE FAMILY TRUST and

HOLLAND BECKETT TREUSTEE NO.5

LIMITED Fourth Plaintiffs

AND

NICOLE JEAN HUTSON (FORMERLY NICOLE JEAN WILLIAMS)

Defendant

Hearing: 9 May 2015 at 2:15pm

Appearances:

D H McLellan QC and A Sinclair for Plaintiffs
R E Harrison QC for Defendant

Judgment:

13 June 2016

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 13 June 2016 at 5:00pm
pursuant to Rule 11.5 of the High Court Rules

Solicitors/Counsel:

…………………………………………………….

Registrar/Deputy Registrar

Daniel H McLellan QC, Auckland, for Plaintiffs
Ken Patterson, Tauranga, for Plaintiffs
Rodney E Harrison QC, Auckland, for Defendant
Abernethy Broatch Law, Mt Maunganui, for Defendant

INTERNET TRADERS LIMITED v HUTSON (FORMERLY WILLIAMS) [2016] NZHC 1269 [13 June 2016]

Introduction

[1] This is another decision on the plaintiffs’ pleadings. In the first decision I dealt with the plaintiffs’ second amended statement of claim.1 In the second, Heath J addressed the third amended statement of claim.2 After that, the plaintiff instructed new counsel and a fourth amended statement of claim was filed. The defendant objected to that pleading. I gave directions on 10 February 2016 for the plaintiffs to
file and serve a draft proposed amended pleading and for the defendant to file any applications in respect of that proposed pleading. She applied to strike out the proposed amended pleading, or for further particulars.

[2] The background to the proceeding has been given in earlier judgments,

especially Heath J’s decision on the plaintiffs’ application for an interim injunction.3

Notwithstanding changes in pleadings, the most important part of the plaintiffs’ case has always been that, leading up to her resignation as director on 23 June 2014, Mrs Williams (now Mrs Hutson4) breached duties she owed to IT Pharmaceutical Supplies Ltd. Those breaches affected the business of the company adversely and also enabled her to set up a competing business. In that new business she has used confidential information obtained while a director of IT Pharmaceutical Supplies
Ltd.

[3] The draft pleading has these causes of action:

1Internet Traders Ltd sues Mrs Hutson for breach of directors’ duties under the Companies Act 1993 for making unauthorised payments, and also for certain actions, which are pleaded elsewhere (in paragraph 29), as detrimental to and in breach of duty to
IT Pharmaceutical Supplies Ltd.

1      Internet Traders Ltd v Williams [2015] NZHC 1809.
2      Internet Traders Ltd v Williams [2015] NZHC 2562.
3      Internet Traders Ltd v Williams [2014] NZHC 3407, [2015] NZCCLR 7.
4      At the start of the proceeding, she was Nicole Jean Williams, but she has remarried and is now
Nicole Jean Hutson.

2In the alternative to the first, Internet Traders Ltd sues her for breach of fiduciary duty, relying on the same…

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: [2016] NZHC 1269
Decision Date: 13 June 2016

CaseChat Overview and Summary

In the High Court of New Zealand, the plaintiffs, Internet Traders Limited, IT Pharmaceutical Supplies Limited, and others, filed a suit against Nicole Jean Hutson (formerly Nicole Jean Williams) alleging breaches of directors' duties and fiduciary duties, misuse of confidential information, and oppressive or unfairly prejudicial conduct under the Companies Act 1993. The court addressed several legal issues, including the survival of fiduciary duties after resignation, causation and monetary relief, and the scope of section 174 of the Companies Act. The court ruled that certain fiduciary duties could survive a director's resignation, but other duties ended with the resignation. The plaintiffs needed to provide more information on the effects of the breaches, the financial losses, and the calculations of damages. The court also found that the plaintiffs' claim under section 174 of the Companies Act was not necessarily dismissible, but the plaintiffs needed to provide more details on the alleged oppressive conduct and its effects on the company's affairs. The court denied the defendant's application for disciplinary strike-out, as the plaintiffs had arguable cases and the delay in amending the pleadings did not justify striking out the proceedings. The court ordered the plaintiffs to file a fresh statement of claim following the directions in the judgment and set a further case management conference to discuss discovery and other pre-trial matters.

Orders