Johnson v Johnson - [2020] NZHC 1563

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2018-485-144

[2020] NZHC 1563

BETWEEN
B E JOHNSON, D H WALE and

C D WILLIAMS as trustees of the Abel Trust

Plaintiffs

AND

C B JOHNSON and M B JOHNSON

First Defendants

LITTLE SCHOOL LIMITED
Second Defendant

JOHNSON PRESCHOOL LIMITED

Third Defendant

Hearing: 17 June 2020

Appearances:

R Fowler QC for plaintiffs (leave to withdraw)

C Stevens and T Mijatov for first-named first defendant
M Wigley for second-named first defendant and third defendant No appearance for the second defendant

Judgment:

3 July 2020

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction and the primary matter for determination

[1] This is a debt recovery proceeding. The plaintiffs are the trustees of a family trust known as the Abel Trust. The first-named plaintiff, Mr Bryan Johnson, is the father of the first-named first defendant, Mr Craig Johnson (Craig). Craig and the second-named first defendant, Mrs Maria Johnson (Maria), are a married couple, though they separated some years ago. Craig and Maria are equal shareholders and

JOHNSON v JOHNSON [2020] NZHC 1563 [3 July 2020]

the two directors of the third defendant, Johnson Preschool Ltd. Johnson Preschool is one of several businesses apparently owned and operated by Craig and Maria. Between June 2011 and December 2012 the plaintiff trustees advanced monies on three occasions in connection with Craig and Maria’s businesses. To the extent that these loans have not been repaid and are due and owing, the trustees sue to recover outstanding principal and interest. They sue Craig, Maria and Johnson Preschool. They have abandoned any claim against the second defendant (which, I am told, did not exist at the time any of the loans were made).

[2] Since it was commenced on 28 February 2018, the scope of the proceeding has expanded. Why that has happened is not difficult to discern. Craig and Maria appear to be engaged in a no-holds-barred relationship property dispute in which their liabilities and those of their businesses to the plaintiff trustees are relevant.

[3] The primary matter before the Court for determination is an interlocutory application for an order pursuant to s 165 of the Companies Act 1993 granting leave for a cross-claim in this proceeding against Craig by Maria on behalf of Johnson Preschool.

[4] Mr Fowler for the plaintiff trustees indicated at the outset of the hearing that they were taking a neutral position as to whether or not the Court should grant the leave sought. Presumably, the plaintiff trustees are reluctant further to complicate matters by engaging in this interlocutory skirmish. For that the Court should probably be grateful. Mr Fowler was granted leave to withdraw.

Law

[5]Section 165 of the Companies Act provides:

165 Derivative actions

(1)Subject to subsection (3), the court may, on the application of a shareholder or director of a company, grant leave to that shareholder or director to—

(a)bring proceedings in the name and on behalf of the company or any related…

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 Johnson v Johnson

Details

AGLC: Johnson v Johnson [2020] NZHC 1563
Case: [2020] NZHC 1563
Decision Date: 3 July 2020

CaseChat Overview and Summary

This proceeding is a debt recovery action brought by the trustees of the Abel Trust against Craig and Maria Johnson and Johnson Preschool Ltd. The trustees claim that monies advanced to Craig and Maria were not repaid and are now due and owing. The trustees have abandoned any claim against the second defendant. The primary matter before the Court is an interlocutory application for leave to bring a derivative action against Craig on behalf of Johnson Preschool Ltd pursuant to s 165 of the Companies Act 1993. The Court must consider the statutory criteria set out in s 165(2) and any other relevant considerations. The trustees have taken a neutral position as to whether leave should be granted. It is well settled that the Court will entertain applications for leave to commence derivative actions where a company is deadlocked, which is the case here. The Court concluded that, while the proposed derivative action had some merits, the likely costs and the ulterior purpose behind the application weighed against granting leave. The Court also revoked the consent order made by Ellis J on 21 October 2019 as to the representation of Johnson Preschool Ltd, and invited counsel to liaise and agree on new solicitors and counsel for the company. Costs were reserved.

Orders