Joint Action Funding Limited v Eichelbaum - [2016] NZHC 2919

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2016-409-000651 [2016] NZHC 2919

UNDER the Companies Act 1993

IN THE MATTER

of an application to set aside a statutory demand

BETWEEN

JOINT ACTION FUNDING LIMITED Applicant

AND

JOHN REVANS EICHELBAUM Respondent

Hearing: 28 November 2016

Appearances:

O Peers for Applicant
J R Eichelbaum (Respondent) in person
P A B Mills on behalf of E M Houghton and claimant group

Judgment:

2 December 2016

JUDGMENT OF ASSOCIATE JUDGE OSBORNE
on application to set aside two statutory demands

Introduction

[1] The applicant, Joint Action Funding Ltd (JAFL), unsuccessfully defended a proceeding brought by John Eichelbaum in this Court. As a result, costs and disbursements orders were made in what I will refer to as “the first judgment”. Subsequently JAFL (which is appealing the first judgment in relation to the costs award) applied unsuccessfully for a stay of enforcement. As a result, the Court made a further costs order, in what I will call the “second judgment”.

[2] Mr Eichelbaum has issued statutory demands in relation to the first and second judgments (for $17,013.54 and $5,958 respectively). The mathematics of the

JOINT ACTION FUNDING LIMITED v EICHELBAUM [2016] NZHC 2919 [2 December 2016]

sums fixed by the Court in the first judgment and fixed by the Registrar following the second judgment are not in dispute. JAFL applies for orders setting aside each of the statutory demands. Several grounds were initially advanced. That which received the most attention in JAFL’s evidence relates to the interests of justice. That ground is best introduced by providing some context.

The context

[3] JAFL is a New Zealand litigation manager which was formed for the purpose of partly funding and of managing a substantial representative action (“the action”). The proceeding is for the most part funded by an offshore litigation funder.

[4] By the nature of the contractual arrangements between JAFL and others including the offshore funder, JAFL has financial obligations to the claimants in the action and to the professionals and other service providers. A deponent for JAFL has deposed that funds received for the litigation are held in a trust account for both the offshore funder and JAFL. Funds cannot be paid out of the account without the prior written approval of both the offshore funder and JAFL. Funds can only be applied for the agreed purpose of funding the action.

[5] In his submission, Mr Peers referred to the very substantial number of claimants represented in the proceeding. In his submission, he noted from the Bar that JAFL is in the process of negotiating terms with its creditors (including counsel and solicitors). Mr Peers, in his submissions, observed that there is concern on the part of JAFL that any payment it makes to Mr Eichelbaum could “undermine the ability of [JAFL] to discharge its duty to the [claimants in the action]”.

The jurisdiction to set aside a statutory demand – the principles

[6] The Court’s jurisdiction to set aside a statutory demand is contained in…

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 2919
Decision Date: 2 December 2016

CaseChat Overview and Summary

In Joint Action Funding Limited v Eichelbaum, the High Court of New Zealand dismissed an application by Joint Action Funding Limited (JAFL) to set aside two statutory demands issued by John Eichelbaum. JAFL had unsuccessfully defended proceedings brought by Mr Eichelbaum, resulting in costs and disbursements orders in two judgments. Mr Eichelbaum issued statutory demands for the amounts specified in these judgments. JAFL applied to set aside the demands on several grounds, including the appeal against the judgments, solvency, and other grounds under s 290(4)(c) of the Companies Act 1993. The Court found that JAFL could not raise a substantial dispute as to the existence of the debts and that the other grounds were insufficient to warrant setting aside the demands. The Court dismissed the application, extended the time for payment of the demands, and ordered JAFL to pay costs and disbursements to Mr Eichelbaum.

Orders