Little v Jull - [2013] NZHC 3123

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2010-441-713 [2013] NZHC 3123

BETWEEN
ROBERT STANLEY LITTLE

First Plaintiff

NARELLE LINDA LITTLE Second Plaintiff

PENELOPE JANE CHOTE Third Plaintiff

LYNETTE ALISON MOGEY and

JOHN VICTOR MOGEY Fourth Plaintiffs

AND

ALBERT EDWARD GEORGE JULL Defendant

Hearing:
22-26 April 2013

(29 & 30 April 2013 - final submissions)

Counsel:

J Toebes and J Grant for Plaintiffs
M Macfarlane for Defendant

Judgment:

26 November 2013

JUDGMENT OF WILLIAMS J

Introduction

[1] The plaintiffs (among many others) each made deposits of various sums to Waipawa Holdings Limited (WHL), a mezzanine finance company based in Central Hawkes Bay. WHL had been incorporated in 1975 and had operated for many years as an apparently reputable finance company. It transpired that Warren Pickett, the individual in effective control, was a fraudster. And by 2004, the company had
become little more than a Ponzi scheme.

LITTLE v JULL [2013] NZHC 3123 [26 November 2013]

[2] WHL collapsed in 2008, Warren Pickett was jailed and depositors lost all but

10.53 per cent of their deposits.

[3] Despite having taken deposits for nearly 30 years, WHL never issued a prospectus. Although Warren Pickett is no longer worth suing, the defendant Edward Jull is. He was a director of WHL from 1991 until either 2004 or 2005 (the end date of his tenure is a key issue in this case). The plaintiffs say that WHL’s failure to issue a prospectus means that by the terms of s 37 of the Securities Act
1978, Ed Jull is personally liable to repay all of the deposits claimed in this proceeding.

The facts

WFCL and WHL

[4] The Julls are a Central Hawkes Bay family of long standing. Successful investments in brewing, liquor retailing, agriculture and horticulture in the first half of the 20th century, led to the Julls incorporating Waipawa Finance Company Limited (WFCL) in 1949. WFCL was created to operate as a financier capitalised by the profits from the family’s successful investments elsewhere. According to Ed Jull, it was primarily used as a cash investment vehicle for the business interests of the family and the occasional related investment involving third parties.

[5] In time WFCL came to accept deposits from other family members, business associates, and local Central Hawkes Bay farmers and business people. Ed Jull took on sole directorship of WFCL from November 1991 until his retirement from that role. The date on which Ed Jull retired is disputed.

[6] In 1971, Warren Pickett, an accountant, arrived in Waipawa and joined the accounting firm that managed the books for WFCL. He did work for the Julls. He soon set up on his own account and the Jull family businesses followed him. He established himself as a leading member of the local business and professional community, developing in the process a practice that was the envy of the district. Mr Pickett in due course became company secretary and accountant for WFCL.

[7] In 1975, Ed Jull and Warren Pickett incorporated WHL, another…

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 Little v Jull

Details

AGLC: Little v Jull [2013] NZHC 3123
Case: [2013] NZHC 3123
Decision Date: 26 November 2013

CaseChat Overview and Summary

The plaintiffs in this case were long-term investors in Waipawa Holdings Limited (WHL) and Waipawa Finance Company Limited (WFCL), two companies that failed in 2008. The plaintiffs sought to recover their lost investments from Edward Jull, a former director of WHL. The case centred around the question of whether WHL's failure to issue a prospectus made Jull personally liable for the subscribers' losses. The High Court of New Zealand considered the issue and found in favour of the plaintiffs.

The court first established that WHL had indeed offered securities to the public for subscription, which triggered the requirement to issue a prospectus under the Securities Act 1978. Furthermore, the court found that Jull was a director of WHL when the subscriptions were made and thus liable under s 37(6) of the Securities Act. The court rejected Jull's argument that he was not liable because he had resigned before the two-month deadline for repayment had passed. Instead, the court held that liability could attach if Jull was a director at the time of the subscription, even if he had resigned before the two-month deadline.

The court also ruled that the repayment obligation was not a penalty or forfeiture, and therefore the six-year limitation period applied. The plaintiffs' claims were not barred by the Limitation Act 1950. Furthermore, the court found that Jull was negligent in his role as a director and thus could not claim exemption from liability under the proviso to s 37(6).

Finally, the court considered whether it was just and equitable to grant Jull relief from his liability under s 37AH of the Securities Act. The court decided that the best approach was to follow Ronald Young J's earlier directions and deduct the liquidator's repayment from the plaintiffs' entitlements. The court also awarded interest at the statutory rate of 10 per cent on the amounts owed.

In conclusion, the plaintiffs were awarded compensation for their losses, with deductions for the liquidator's repayment and interest calculated from the date of liquidation. The court also found that the plaintiffs owned the money in the disputed accounts and that Jull was liable for their losses under the Securities Act.

Orders