Kidd v Van Heeren

[2020] NZHC 3198

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-725

[2020] NZHC 3198

BETWEEN

MICHAEL DAVID KIDD

Plaintiff

AND

ALEXANDER PIETER VAN HEEREN

Defendant

Hearing:

11 November 2020

Appearances:

S J Mills QC and B O’Callahan for the plaintiff

M D O’Brien QC and S D Williams for the defendant
T B Fitzgerald and B J Ward for Worldwide Leisure Limited
J S Cooper QC and A E Murray for LCM Operations Pty Limited

Date of judgment:

4 December 2020

JUDGMENT OF JAGOSE J

[Funds advance: final orders]

This judgment was delivered by me on 4 December 2020 at 4.00pm.

Pursuant to Rule 11.5 of the High Court Rules.

…………………………

Registrar/Deputy Registrar

Counsel/Solicitors:

S J Mills QC, Auckland
M D O’Brien QC, Auckland

B O’Callahan Barrister, Auckland S D Williams Barrister, Auckland

K3 Legal, Auckland (EJH Morrison)

Fee Langstone, Auckland (C R Langstone and JRS Lewis)

KIDD v VAN HEEREN [2020] NZHC 3198 [4 December 2020]

[1]                  By application dated 21 October 2020, Mr Kidd seeks  orders advancing NZD [redacted] from Worldwide Leisure Limited’s bank account to enable him to meet further litigation costs in New Zealand and Liechtenstein.

[2]                  This judgment embodies my final orders, after consultation with counsel on their form as set out in my 25 November 2020 judgment.1 While this judgment replicates its content, for reasons of its redactions, the prior judgment is suppressed from publication, and may only be inspected with the leave of a Judge of this Court.

Context

[3]                  After hearing from counsel on 11 November 2020, I reserved my decision, but recorded in a minute:2

I accord [Worldwide Leisure] all necessary status to be heard on and adduce evidence in the present application and to appeal my decision, which will lie in Court briefly to give LCM Operations Pty Ltd opportunity to be heard on any matter as may concern it.

At the close of the hearing, I noted my preliminary view – while recognising both [Worldwide Leisure]’s independent standing and its directors’ views of its prudent liquidity, and the lack of specificity as to what the fund is proposed to finance – it might be appropriate presently to order [Worldwide Leisure]’s payment of Mr Kidd’s certified liability on invoices progressively rendered by forensic accountants Browning and Jordan in connection with this proceeding and other such disbursements. There may be analogy to be drawn from similar litigation funding decisions under the Property (Relationships) Act 1976, which has some resonance in the presumed-equal partnership between Mr Kidd and Mr van Heeren, who also is the sole beneficial owner of [Worldwide Leisure]’s shares. My preliminary view substantially was drawn from the desirability of maintaining this proceeding’s March 2021 trial, which Mr Mills indicated otherwise may be sought to be adjourned until funds alternatively become available from sale of Huka Lodge on account of this Court’s interim order for Mr van Heeren’s payment of USD 25 million.

Recognising the parties had not opportunity to consider if lesser but sufficient funding consensually may be achievable (including by staying the Liechtenstein proceedings, and/or borrowing by [Worldwide Leisure], whether secured or unsecured), I direct the parties file a joint memorandum by Friday, 20 November 2020, either advising such a position has been established, or seeking my judgment on the application.

1      Kidd v van Heeren [2020] NZHC 3126.

2      Minute, 11 November 2020, at [2]–[4], citing Biggs v Biggs [2020] NZCA 231.

[4]                  My judgment remains sought, on grounds Mr Kidd has exhausted his funds (including those made available to him by LCM Operations Pty Limited) in pursuing the proceedings; he has been put to increased cost by Mr van Heeren’s conduct in the proceedings, who is alleged not to have disclosed his access to substantial funds, despite failing to make the ordered USD 25 million interim payment, which could have been drawn on to fund the proceeding; and the shares in Worldwide Leisure, whose operational requirements may be met by the balance of its NZD [redacted] bank account holding, are held on bare trust for Mr van Heeren.

[5]                  The Court of Appeal has summarised the factual background in related proceedings.3 Of direct relevance is the Court’s determination the interim payment order can be enforced against the shares in Worldwide Leisure,4 and “[t]he interests of justice in this case overwhelmingly demand that meaningful relief be granted to enforce that order”:5

The context is highly relevant. Satchwell J found that Mr van Heeren had been “cheating” Mr Kidd out of partnership profits for years at the time he fraudulently sought to procure a binding indemnity precluding all claims in January 1991. Mr Kidd has been pursuing his entitlement to his share of the partnership assets ever since. Notwithstanding the final judgment given in his favour in South Africa giving rise to an issue estoppel as to the extensive partnership assets held by Mr van Heeren or his associated entities, Mr Kidd has still not received anything towards his entitlement. Fogarty J was satisfied Mr Kidd will receive at least USD 25 million following the account. This Court was not persuaded to interfere with that assessment and the Supreme Court declined leave for a further appeal against the order. Mr Kidd has been kept out of his entitlement to his share of the partnership assets for over 28 years and he is now in his mid-seventies.

The Interim Payment Order made by Fogarty J was intended to provide immediate partial relief to redress the serious injustice Mr Kidd has suffered for well over two decades. Mr van Heeren’s various attempts to overcome the effect of that order have all failed. For the Court now to deny Mr Kidd a remedy would deliver the result Mr van Heeren has sought all along and perpetuate the injustice the Interim Payment Order was designed to redress. This Court said in November 2015, when denying Mr van Heeren’s application for a stay of the Interim Payment Order, that Mr Kidd is entitled to the fruits of his judgment “now” and he should not have to wait indefinitely “as if the High Court judgment does not exist”. That observation applies with even greater force now, over three years later. As Lord Neuberger said, if court orders are disobeyed, a sanction is almost inevitable to ensure they continue to be respected. We have no hesitation in concluding that relief is justified. In

3      Kidd v van Heeren [2019] NZCA 275, (2019) 24 PRNZ 596 at [9]–[25].

4 At [32(b)] and [66].

5      At [73]–[74] (internal citation omitted).

our view, the Court would be failing in its duty to deny it. The only real issue is as to the appropriate form of relief.

[6]The Court thus ordered appointment of:6

… receivers of the shares in Worldwide Leisure Ltd for the purpose of realising as soon as reasonably practicable sufficient of the company’s assets found to be partnership assets, being Huka Lodge and (if necessary) Dolphin Island, to enable USD 25 million to be paid into the High Court.

[7]                  Still no “immediate partial relief” has been made available to Mr Kidd, with the impecuniosity he now claims (which is not materially contested). Mr van Heeren “does not, in principle, oppose funds being paid out” of Worldwide  Leisure for     Mr Kidd’s litigation funding in the present proceeding, subject to its ability to do so, but proposes any justifiable expenditure met from such resource partially discharge the interim payment order, and be subject to repayment and security. He also says the Liechtenstein proceeding should be  stayed,  to  avoid  further  expenditure  there.  Mr Kidd would agree to the stay (as he previously sought but Mr van Heeren successfully opposed), if his evidence here and in South Africa was to be available there. Until that is determined, the Liechtenstein proceeding continues to require funding.

[8]                  Worldwide  Leisure’s   other   directors,   Constant   Peter   Engels   and David McGregor, said the most it prudently can pay is NZD [redacted] in each November and December 2020 and January 2021, for reconsideration on the results of summer trading and sale of Huka Lodge. It also pointed to the Court of Appeal’s refusal to include in its order “that the receivers may, in the interim, call for funds from Worldwide Leisure to pay into Court in partial satisfaction of the appointment purpose”.7 On reconsideration in light of subsequent developments, the directors would consent to orders for payment of up to NZD [redacted] on expert witness invoices and Mr Kidd’s solicitors’ or counsel’s disbursements (but not legal fees) for attendances in this proceeding from November 2020 until 31 January 2021, on terms of partial discharge and repayment and with leave for Mr Kidd to apply further.

6      At [79] and [84].

7      Kidd v van Heeren [2019] NZCA 352 at [11].

[9]                  Mr Kidd rejects the proposal as inadequate, not covering his current and forecast expert and disbursement expenses in this proceeding, let alone extending to his legal fees here and in Liechtenstein. He reiterates his claim for NZD [redacted] to the end of March 2021, amounting to at least NZD [redacted] (plus Court-appointed expert fees) to 31 January 2021. He would allow Mr van Heeren or Worldwide Leisure leave to apply to vary the orders in light of the circumstances as they then appeared.

Discussion

[10]              Mr Mills made it very plain in argument, unless Mr Kidd’s expert and other expenses incurred for trial (expressly excluding legal fees, whether incurred here or in Liechtenstein) were able to be met, trial of this proceeding should be vacated pending availability of funding from performance of the interim payment order. Mr Kidd forecasts his own expert costs and disbursements for this proceeding to 31 January 2021 may be less than NZD [redacted] (but he will have to bear a share of the Court- appointed expert’s fees).

[11]              I am not able to disregard the directors’ advice (subject to unforeseen vicissitudes) of the company’s ability presently to pay no more than that amount, which advice I take to have been given in performance of their duties to:8

… act in good faith and in what the director believes to be the best interests of the company[, and]

…

… not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

Certainly I am given no reason to doubt that presumption.

[12]              I do not see the Court of Appeal’s refusal to expand its order as disqualifying. Instead the Court simply was reinforcing its requirement for “the parties to file memoranda setting out the precise terms of the orders needed to give effect to the judgment”.9 Neither should litigation funding be in partial discharge of the interim

8      Companies Act 1993, ss 131(1) and 136.

9      Kidd v van Heeren, above n 7, at [1].

payment order. Instead, it is to enforce performance of the order in full. But performance of either or both should be taken into ultimate substantive account. In that sense, security for repayment is unnecessary.

[13]              This Court has “broad powers to make such orders as may be required in the interests of justice where its orders are not complied with”.10 It is in the interests of justice Mr Kidd’s resultant impecuniosity should not put trial of this proceeding at risk. (I do not extend that rationalisation to maintenance of the Liechtenstein proceeding, which is a decision to be taken in that jurisdiction.) I take some support for that position from cognate decisions in proceedings on other close relationships, in which the interests of justice also is a feature determinant.11

Result

[14]              Balancing the interests of justice as best I can, I am driven back to my preliminary view. I order Worldwide Leisure:

(a)to pay any invoices progressively rendered by forensic accountants Browning and/or Jordan, and any other disbursements (excluding any legal fees), certified by Mr Kidd’s solicitors as due and payable in connection with this proceeding, within 10 working days of their presentation for payment; and

(b)has leave to apply to vary my order in relation to invoices or disbursements (to be) certified after 31 January 2021, or on any earlier change of circumstances as adversely affects the directors’ assessments of the company’s ability so to pay.

—Jagose J

10 Kidd v van Heeren, above n 3, at [41].

11 For example – as well as Biggs v Biggs, above n 2 – pre-hearing, pre-emptive, or protective costs orders as referred to in Environmental Defence Society Incorporated v New Zealand King Salmon Company Ltd [2014] NZSC 167 at [17], citing Re UEB Industries Ltd Pension Plan [1989] 2 NZLR 252 (HC) at 255 and Berkett v Cave [2001] 1 NZLR 667 (CA) at [13]; Woodward v Smith [2014] NZHC 407 at [30], citing Re Westdock Realisations Ltd [1988] BCLC 354 (Ch) at 359 and McDonald v Horn [1995] 1 All ER 961 (CA) at 971–972; Fundación Pimjo AC v Aguilar & Aguilar Ltd [2015] NZHC 1402 at [30]–[40]; and McLaughlin v McLaughlin [2018] NZHC 3198 at [20].