Jackson v Kerr
[2021] NZHC 3067
•12 November 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2021-404-000812
[2021] NZHC 3067
UNDER Sections 12 & 34 of the Receiverships Act 1993 BETWEEN
NEALE JACKSON and NATALIE GYTHA
BURRETT, insolvency practitioners, as receivers of PYNE HOLDINGS LIMITED (in receivership)
Applicants
AND
GEORGE CHARLES DESMOND KERR
Respondent
Hearing: 12 November 2021 Appearances:
J Marcetic & N D Whittle for the Applicants
G P Blanchard QC & S J Nicolson for the Respondent
Judgment:
12 November 2021
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 12 November 2021 at 4.30pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Counsel:
G Blanchard QC, Auckland Chapman Tripp, Auckland Lowndes Jordan, Auckland
JACKSON v KERR [2021] NZHC 3067 [12 November 2021]
Introduction
[1] The applicants, Mr Jackson and Ms Burrett, are the receivers of Pyne Holdings Ltd (in receivership) (PHL).
[2] The respondent, Mr Kerr, is the sole director of PHL. Mr Kerr is currently resident in the United Kingdom.
[3] Since May 2021, the receivers have been seeking documents and information from Mr Kerr concerning the assets of PHL and its interests in related entities.
[4] Despite Court orders requiring Mr Kerr to provide documents and information and documents, some of which were made by consent, and despite undertakings by Mr Kerr to comply with those orders, Mr Kerr has still not provided all the documents and information ordered by the Court. The receivers say Mr Kerr’s failure to provide the documents is seriously impeding their ability to discharge their responsibilities as receivers.
[5] In this application, the receivers seek further orders requiring Mr Kerr’s compliance with the earlier Court orders. The receivers foreshadow an intention to seek an order against Mr Kerr under the Contempt of Court Act 2019 if he does not comply with the orders now sought. They also seek costs of this application on an indemnity basis.
Background
[6] On 29 April 2021, Mr Jackson and Ms Burrett were appointed receivers of PHL by the Bank of New Zealand Ltd (BNZ) pursuant to a General Security Agreement (GSA).
[7] The receivers say PHL owes BNZ a debt of approximately $67.7 million. They were advised by the BNZ that PHL’s main asset is a significant shareholding in Pyne Gould Corporation Ltd (PGC), a company registered in Guernsey.
PHL’s interests in PGC
[8] The receivers say PHL is the sole shareholder in Australasian Equity Partners GP (No1) Ltd (AEP) and that AEP was at all material times a general partner of Australasian Equity Partners Fund No 1 Ltd Partnership (AEPLP), a New Zealand registered limited partnership. The most recent financial statements for PGC show that, as at 31 December 2020, AEP, as general partner of AEPLP, owned 65.74 per cent of the shares in PGC.
[9] The receivers also say that their investigations show that AEPLP was established by PHL and others for the purpose of taking over PGC and that PHL committed to providing 80 per cent of the funding required for the takeover. It follows that, if AEP owned 65.74 per cent of the shares in PGC and if PHL held 80 per cent of the shares in AEPLP, PHL would have an indirect shareholding in PGC of approximately 52 per cent.
[10] On 14 May 2021, in partial response to orders made by Lang J (see [14] below), Mr Kerr’s solicitors advised the receivers that AEPLP was being terminated and that a 14.13 per cent shareholding in PGC was being distributed in specie to PHL. The deregistration of AEPLP and the in specie distribution has since occurred without the involvement or consent of the receivers.
[11] The receivers have not been able to reconcile the in specie distribution of approximately 14 per cent of PCG shares with the much larger shareholding they understood PHL to have had in PGC. The receivers also say Mr Kerr has repeatedly failed to comply with requests for documents to enable them to understand what assets, in particular the shareholding in PCG, they have control over as receivers.
Court orders
[12] On 30 April 2021, the receivers wrote to Mr Kerr a standard letter which confirmed their appointment as receivers of PHL and set out the obligations of directors of companies in receivership under the Receiverships Act 1993 to give such assistance to receivers as may reasonably be required. Among other things, the letter requested Mr Kerr to deliver to the receivers any assets, books, correspondence and
records of PHL that he had in his possession. The letter also asked Mr Kerr to urgently provide information, correspondence and documentation in his possession relating to shares PHL held in PGC and other assets owned by PHL.
[13] Because the receivers were dissatisfied with Mr Kerr’s responses to the requests in the letter of 30 April 2021, on 7 May 2021, the receivers applied for orders directing Mr Kerr to provide documents and information concerning PHL and its assets, including its shareholding in PGC. The application was opposed by Mr Kerr, although the notice of opposition filed by Mr Kerr’s solicitors indicated a willingness to provide some of the documents sought if more time was allowed. The notice of opposition also asserted that the receivers were not entitled to certain documents under the GSA or under the Receiverships Act and that certain documents were confidential and subject to legal privilege.
[14] On 12 May 2021, Lang J made by consent orders directing Mr Kerr to deliver to the receivers documents related to the assets of PHL as set out at [1.1(ii)] of the applicants’ application, other than certain privileged documents.1 Lang J directed that the documents be provided by 18 May 2021. In addition, Lang J directed Mr Kerr to advise the receivers by 14 May 2021 whether PHL owned any shares in PGC and, if so, how those shared were held. Lang J also made timetable directions for a hearing to resolve any matters in the applicant’s application that were still in contention.
[15] Although Mr Kerr provided some documents and information in response to Lang J’s orders, the documents provided were from publicly available sources and were not the documents that the receivers had expected to receive. In particular, they had not received PHL’s financial statements and tax returns and documents and information about PHL’s involvement in AEPLP and the in specie distribution of PGC shares.
[16] On 21 May 2021, the receivers applied for orders requiring Mr Kerr to file an affidavit confirming compliance with Lang J’s orders and to attend at Court, by videoconference if necessary, in order to be examined by the receivers or their counsel in respect of PHL’s assets, including its shareholding in PCG.
1 Jackson v Kerr HC Auckland CIV-2021-404-812, 12 May 2021 (Minute of Lang J).
[17] On 9 June 2021, Mr Kerr was interviewed by the receivers by videoconference. The receivers say that during that interview Mr Kerr committed to providing, by 16 June 2021, a letter that would respond to the receivers’ questions about PHL’s affairs (the Letter) and to provide relevant supporting documents. To date, the Letter has not been provided.
[18] On 15 June 2021, Walker J issued a judgment on the receivers’ application for certain privileged documents which Mr Kerr had opposed providing.2 Her Honour held that the receivers were entitled to the privileged material for the sole purpose of use in their functions as receivers,3 and directed Mr Kerr to deliver to the receivers within seven days:4
(a)All books, records, documents and information of PHL or under PHL’s control, being personal property of PHL over which the applicants had been appointed receivers; and
(b)All books, records, documents and information in Mr Kerr’s possession or control relating to assets of PHL.
[19] On 15 June 2021, the orders made by Lang and Walker JJ were sealed together in one set of orders (the Sealed Orders).5
[20] On 23 June 2021, Nation J made by consent an order to provide the Letter to the receivers by 2 July 2021.6
[21] By 7 July 2021, Mr Kerr had not provided the Letter and had not provided all documents and information required under the Sealed Orders.
2 Jackson v Kerr [2021] NZHC 1413.
3 At [60].
4 At [61].
5 Jackson v Kerr HC Auckland CIV-2021-404-812, 15 June 2021 (Sealed Orders).
6 Jackson v Kerr HC Auckland CIV-2021-404-812, 25 June 2021 (Minute of Nation J), at [10(b)].
Application for further orders
[22] On 7 July 2021, the receivers filed an application for the following declaration and orders, numbered as set out in that application:
1.1A declaration that Mr Kerr had not complied with [2.1], [3.1] and [3.2] of the Sealed Orders and has not provided the Letter as ordered by Nation J;
1.2Orders directing Mr Kerr, within two working days of the declaration in [1.1], to comply with the Sealed Orders and the order made by Nation J, including provision of:
(i)PHL’s financial accounts from 2012 to 2021;
(ii)PHL’s tax returns for 2012 and the years 2015 to 2021;
(iii)PHL’s statutory records (such as its share register);
(iv)Transaction records showing how PHL used funds lent to it by the BNZ;
(v)Documentation relating to PHL’s involvement in the establishment of AEPLP, the funding of AEPLP (including any alleged default by PHL in funding AEPLP), the transfer of shares and any other assets by PHL into AEPLP, and AEPLP’s takeover of PGC (including transaction documents);
(vi)All documents and correspondence amounting to or recording reporting, or any notice being given, by AEPLP to PHL;
1.3Orders directing Mr Kerr, within two working days of the declaration in [1.1], and at the same time as complying with the orders in [1.2], to file and serve an affidavit:
(a)confirming that he has provided all books, records, documents and information of PHL or under PHL’s control (including those specified in [1.2]), or, if not, explain why he has made available documents only to the extent provided and why he has provided no further documents as requested by the receivers; and
(b)confirming the information provided in the Letter is true and/or explaining why he is not able to provide the information in response to the relevant queries put to him by the receivers;
1.4In the absence of compliance with the orders at [1.2] and [1.3], a declaration that Mr Kerr has, under s 16(3)(b)(ii) of the Contempt of Court Act, without reasonable excuse knowingly failed to comply with those Court orders; and
1.5An order that Mr Kerr pay the receivers’ costs on an indemnity basis.
[23]The receivers’ application was set down for hearing on 26 July 2021.
Adjournment of application
[24] In a letter dated 19 July 2021 to the receivers’ solicitors, Mr Kerr’s solicitors advised, among other things that:
(a)They had received a draft of the Letter but it was privileged and required explanation. Even so, Mr Kerr’s solicitors expected to have the completed Letter with supporting documents to the receivers’ solicitors by 23 July 2021.
(b)Mr Kerr did not have some financial statements and that others were under preparation but would be made available upon completion.
(c)Mr Kerr had documents in the categories of [1.2(d) – (f)] of the receivers’ application which were in the process of being located and retrieved.
(d)Mr Kerr considered it would take him a further four weeks to confirm he had disclosed all PHL documents because of the time required to review a substantial volume of email records.
[25] Following receipt of that letter, the receivers and Mr Kerr sought and obtained an adjournment of the hearing scheduled for 26 July 2021. The joint memorandum of counsel seeking the adjournment recorded that Mr Kerr anticipated providing the receivers the Letter by 5 pm on 23 July 2021 and any remaining PHL documents by 5 pm on 16 August 2021.
[26]In the event, the Letter and further PHL documents were not provided.
Rescheduling of hearing
[27] On 9 September 2021, Venning J, at the request of the receivers, set down the receivers’ application for further orders for hearing on 12 November 2021 and made timetable directions for the filing of evidence and submissions.7
Submissions of counsel for the parties
Submissions for the receivers
[28] Counsel for the receivers, Mr Marcetic and Mr Whittle, advise that the receivers no longer seek a declaration that Mr Kerr has not complied with Lang J’s orders of Lang J (at [2.1] of the Sealed Orders) because:
(a)Mr Kerr has now adequately provided information enabling the receivers to take control of the PHL’s acknowledged 14.13 per cent shareholding in PGC, even though the receivers do not accept that that is the extent of PHL’s rights in PGC’s shares; and
7 Jackson v Kerr HC Auckland CIV-2021-404-812, 9 September 2021 (Minute of Venning J).
(b)the aspects of Lang J’s orders that have not been adequately complied with have been subsumed in the orders made by Walker J.
[29] Accordingly, the declaration sought at [1.1] of the application need refer only to [3.1] and [3.2] of the Sealed Orders and to the Letter order made by Nation J.
[30] Counsel for the receivers refer to Mr Kerr’s persistent failure to provide documents and information, despite consenting to and being subject to Courts orders, as illustrated by a timeline exhibited to Mr Jackson’s fifth affirmation dated 1 November 2021. They explain why the receivers believe certain documents exist or ought to exist, and why it is appropriate for Mr Kerr to be required to provide the information sought within two working days of the declaration sought in [1.1] of the application. They note that Mr Kerr was first asked for all relevant documents on 30 April 2021 and he has already had over four months to comply with the orders made by Walker and Nation JJ in June 2021.
[31] Counsel for the receivers confirm that they do not seek an immediate order under [1.4] of the application but set out the basis on which they will seek an order under the Contempt of Court Act if Mr Kerr fails to comply with orders made in accordance with [1.2] (as amended) and [1.3] of the application. They explain that the orders sought at [1.2] and [1.3] are intended to provide Mr Kerr one last chance to comply with the Court’s orders and to lay a foundation for satisfying the requirements of s 16(3) of the Contempt of Court Act.
[32] Counsel for the receivers confirm that the receivers seek indemnity costs because the application was required only because of Mr Kerr’s failure to comply with earlier Court orders. However, they agree that costs should be determined in the round and after it has been established whether Mr Kerr has complied with the orders now sought at [1.2] and [1.3] of the application. They emphasise that the costs sought relate only to the present application and they do not seek to revisit the earlier orders of costs made on a 2B basis.
Submissions for Mr Kerr
[33] Mr Kerr’s counsel, Mr Blanchard QC and Ms Nicholson advise that Mr Kerr does not oppose:
(a)The declaration sought at [1.1] of the receivers’ application;
(b)The orders sought at [1.2] but that Mr Kerr should be ordered only to provide documents in the categories enumerated that are “in his possession and/or control”, and that he will provide such documents and the Letter to counsel with instructions to provide these to the receivers’ solicitors by 16 November 2021; and
(c)The orders sought at [1.3] and will swear or confirm the affidavit sought with instructions to provide it to the receivers’ solicitors by 16 November 2021.
[34] Mr Kerr’s counsel submit that it would not be appropriate for a prospective order to be made under the Contempt of Court Act but propose that the proceeding should be called soon after the date for compliance with the orders so that appropriate orders can be made if required. They also submit that costs be determined at that point as well but say that costs should be ordered on a 2B basis and that it would not be appropriate to order indemnity costs. Among the reasons advanced are that Mr Kerr has not substantively opposed the orders sought and has not filed evidence in opposition to the receivers’ application, and Mr Kerr cooperated with the receivers in participating in the videoconference in June 2021.
Discussion
[35] As was apparent at the hearing on 12 November 2021, there is no significant difference between the parties on the declaration and principal orders sought by the receivers.
[36] Mr Marcetic’s preference is not to include the qualification regarding Mr Kerr’s possession and control of documents in the order sought at [1.2] of the
application. He notes that those words do not appear in Walker J’s orders, which were based on the language of the GSA. He observes that, under [1.3(a)] of the orders sought, Mr Kerr is required to explain why he has not made available documents ordered and says that will be Mr Kerr’s opportunity to explain if he does not have documents in his possession and control and whether he has taken steps to try to obtain such documents.
[37] Mr Blanchard’s preference is to include the qualification. However, he considers the qualification is necessarily implicit and accepts that Mr Kerr will have the opportunity to explain if and why he does not have documents sought and why.
[38] I am satisfied that is preferable not to include the qualification because the orders sought are intended to reinforce compliance with Walker J’s orders. I accept that Mr Kerr cannot be compelled to provide documents that are not in his possession or control. Given the history of this proceeding, however, the Court will scrutinize closely any claim by Mr Kerr not to have relevant documents and will expect an explanation of steps taken to obtain any documents he says are not in his possession and control.
[39] Because orders under the Contempt of Court Act will be the subject of a separate hearing if Mr Kerr fails to comply with the orders I make below, I make no comment on that aspect of the receivers’ application other than to note that a further failure by Mr Kerr to comply with the Court’s orders will be regarded seriously.
[40] Similarly, I make no findings as to costs at this stage but record, as I stated at the hearing, that, given the history of this proceeding and Mr Kerr’s non-compliance with Court orders, an award of indemnity costs would appear to be appropriate in principle.
Declaration and orders
[41] I make the following declaration and orders, as amended in discussion with counsel:
(a)I declare that George Charles Desmond Kerr has not complied with this Court’s orders in this proceeding:
(i)As recorded at [3.1] and [3.2] of the Sealed Orders dated 15 June 2021;
(ii)As recorded at [10(b)] of the Minute of Nation J dated 25 June 2021;
(b)I order George Charles Desmond Kerr to comply with the orders at (a) above no later than 5 pm on Tuesday, 16 November 2021 (New Zealand Daylight Time) including but not limited to Mr Kerr providing the applicants any of the following documents:
(i)The financial accounts of Pyne Holding Limited (PHL) from 2012 to 2021;
(ii)The tax returns of PHL for 2012 and the years 2015 to 2021;
(iii)The statutory records of PHL such as its share register;
(iv)Transaction records showing how PHL used funds lent to it by the Bank of New Zealand;
(v)Documentation relating to PHL’s involvement in the establishment of Australasian Equity Partners Fund No 1 Limited Partnership (AEPLP), the funding of AEPLP (including any alleged default by PHL in funding AEPLP), the transfer of shares and any other assets by PHL into AEPLP, and AEPLP’s takeover of Pyne Gould Corporation Limited (registered in Guernsey Number 57987) (PGC), including transaction documents;
(vi)All documents and correspondence amounting to or recording reporting, or any notice being given, by AEPLP to PHL;
(c)I order George Charles Desmond Kerr, no later than 5 pm on Tuesday, 16 November 2021 (New Zealand Daylight Time), to file and serve an affidavit:
(i)Confirming that he has provided all books, records, documents and information of PHL or under PHL’s control (including those specified at (b) above), or, if not, explaining why he has made available documents only to the extent provided and why he has provided no further documents as requested by the applicants; and
(ii)Confirming the information provided in the Letter directed pursuant to [10(b)] of the Minute of Nation J of 25 June 2021 is true and/or explaining why Mr Kerr is not able to provide the information in response to the relevant queries put to him by the applicants.
Next steps
[42] As agreed at the hearing on 12 November 2021, I set down this proceeding for a telephone conference before me at 9 am on Wednesday, 18 November 2021 to ascertain whether Mr Kerr had complied with the orders made above and, if not, to set down a hearing of the receiver’s application for an order under the Contempt of Court Act. The telephone conference will also consider the procedure for determining costs on the receivers’ application.
G J van Bohemen J