Lochar Estate Limited (in liq) v Donaldson
[2019] NZHC 911
•29 April 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2018-485-811
[2019] NZHC 911
UNDER the Companies Act 1993 BETWEEN
LOCHAR ESTATE LIMITED (in liq)
Plaintiff
AND
JAMIE ROSS DONALDSON
Defendant
Hearing: 11 April 2019 Appearances:
K P Sullivan and D A Bleier for plaintiff A J Forbes QC for the defendant
Judgment:
29 April 2019
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
Introduction
[1] The plaintiff, Lochar Estate Ltd (in liq), through its liquidator, Mr Robert Walker, sues the defendant, Mr Jamie Donaldson, the company’s sole director, to recover a debt that Mr Walker says is owed to Lochar by Mr Donaldson, arising out of a payment made to purchase a parcel of 420 shares in the company.
[2]Lochar seeks summary judgment.
The factual background
[3]The factual background against which the claim arises is not straightforward.
[4] Lochar was incorporated on 21 December 2009. On incorporation the shareholders and directors were Mr Donaldson and Mr Owen Jennings. The original
LOCHAR ESTATE LIMITED (in liq) v DONALDSON [2019] NZHC 911 [29 April 2019]
share capital consisted of 1,000 shares. Between them Mr Donaldson and Mr Jennings subscribed for 100 per cent of these shares. The company was incorporated for the purposes of establishing a vineyard in order to facilitate the manufacture of wine to be sold into Asia. The evidence is that Mr Donaldson and Mr Jennings envisaged from the outset that they would attract foreign investors wishing to participate in the New Zealand wine manufacturing industry and – I infer – eventually quit the company.
[5] On 16 April 2010, Lochar entered into an agreement to purchase an 18-hectare vineyard in Central Otago from Mr John and Mrs Anne Cook or their interests. The sale and purchase price was $950,000. Lochar was to pay $550,000 in cash. The balance of the purchase price – $400,000 – was to be discharged by the transfer of 420 shares in Lochar, attached to which both parties would have certain rights.
[6] Thus, the sale and purchase agreement, and a related shareholder agreement, provided – broadly – that 420 Lochar shares would be transferred to Mr and Mrs Cook at an agreed price of $400.000. At any time during the three years following settlement, Lochar’s other shareholders would be entitled to buy back the shares at the agreed price (the call option). If the call option was not exercised, then, after the expiry of that three-year period, Mr and Mrs Cook would be entitled to require Lochar’s other shareholders to buy back the shares at the agreed price (the put option). The transaction was settled in August 2010. Lochar paid Mr and Mrs Cook $550,000 and 420 shares owned by Mr Donaldson and Mr Jennings were transferred to Mr and Mrs Cook on the terms described.
[7] It is common ground that in Lochar’s financial records the call/put component of this arrangement was recorded as a loan from Mr and Mrs Cook to Lochar. It is not difficult to imagine how this occurred. The reality is that this was vendor finance. But that is not how it was structured. It was structured as a sale and purchase of shares. It is – just – conceivable that neither the call nor put options might have been exercised in which case the Cooks would have become long term investors. To that extent, the company’s financial records were misleading.
[8] Following the purchase by Lochar of the vineyard, Mr Donaldson and Mr Jennings managed to interest a small group of – mostly Hong Kong-based – overseas investors in taking positions in the company.
[9] It is apparent that all concerned were well aware of the prohibitions in the Overseas Investment Act 2005 on foreign ownership of certain New Zealand enterprises. Under that legislation, foreign ownership of a company that owns an interest in sensitive land of 25 per cent or more requires the consent of the Overseas Investment Office. The vineyard falls within the definition of sensitive land in sch 1 of the Act.
[10] Prior to the expiry of the three-year period, the overseas investors had between them acquired shareholdings totalling 24.9 per cent (although, in order to keep the foreign ownership percentage below 25 per cent, the company had to issue one further share to Mr Donaldson).
[11] Lochar’s performance was not as Mr Donaldson and Mr Jennings might have hoped. As the end of the three year period approached, Mr Jennings had either already withdrawn or was in the process of doing so, with the result that Mr Donaldson was effectively in control.
[12] At this point, the call option not having been exercised, the Cooks made it clear that they proposed to exercise the put option at the earliest opportunity.
[13] Understandably, Mr Donaldson was concerned to ensure that the Cooks’ anticipated exercise of their put option would not de-rail the company. He obviously concluded that the best – or possibly only – option was to raise the necessary funds from amongst the overseas shareholders in order to re-purchase the shares.
[14] He sought advice from Lochar’s solicitors, Duncan Cotterill. Duncan Cotterill advised that, as foreign ownership was already at 24.9 per cent, no further shares could be acquired by foreign interests without OIO approval, or on terms that were conditional upon such approval.
[15] Mr Donaldson corresponded with the overseas shareholders. In a letter dated 30 January 2013, which attached a share subscription form, he conveyed that the time had come to re-purchase the Cooks’ shares at a cost of $400,000 and said:
… having taken the view of all remaining foreign shareholders, it seems we have no alternative but to solve this (purchase of Cook’s shares) issue now and then revert to discussions on the new capital issue.
Shareholders are therefore invited to subscribe for the Purchase of 50 Cook shares at the agreed price of NZ$50,000 per lot. To ensure that we are not in default or delay of this commitment, the Purchase has been fully underwritten already.
All subscriptions for the Purchase are due by close of banking hours on Monday 4th February 2013 to the bank account of the Company in Hong Kong.
As previously noted, transfer of the shares will require approval of the Overseas Investment Commission of New Zealand (OIC).
[16] The share subscription form anticipated that those investors subscribing for shares would deposit funds to a Hong Kong bank account. It turns out – Mr Forbes informed the Court from the bar – that this was a sub-account of an account held by Mr Donaldson’s Hong Kong-based consultancy firm with the China Construction Bank (Asia) Corp Ltd. The account was styled “Lochar Estate”.
[17] On 13 March 2013, Mr Donaldson sent a further letter to the overseas shareholders recording that four of them had agreed to acquire additional shares:
Finally, after long and frustrating delays, the Cooks bankers and lawyers have confirmed their agreement to retire the loan and transfer the shares. At present, in compliance with NZ law, the 420 shares will be transferred to my name. I assume you all agree with the plan to submit a full application for expanding the foreign shareholding asap so the share register can be properly amended. I will definitely need your help in this application as it is technically made by “you” not the company.
[18] In the meantime, Mr Donaldson negotiated a reduction in the price at which the Cooks’ shares were to be repurchased to $380,000. As an aside, it is not obvious to me how the remaining $20,000 was treated. The liquidators contend it was treated as working capital by Lochar. In a management report dated 28 March 2013, Mr Donaldson said it was to cover the legal costs associated with the exercise of the put option. These may amount to the same thing. It is unnecessary to reach a
conclusion as to this. The purchase funds were transferred from the Hong Kong account to Lochar’s solicitors’ trust account. The transaction was then settled, with the purchase price of $380,000 being transferred to the Cooks’ solicitors and the shares being transferred into Mr Donaldson’s name.
Proper characterisation of the transactions
[19] That summary of the factual background brings me to the heart of the case – the proper characterisation of the various transactions. To be blunt, the way in which the original transaction and the exercise of the put option were recorded in Lochar’s financial records was shambolic. Neither party contends that those records reflect the situation accurately.
[20] Rather than go to those records, I focus on the parties’ contentions as to the substance of the transaction, because that is where the real contest resides.
Mr Walker’s evidence
[21] In his evidence, Mr Walker expressly says that he does not regard the company’s financial records as accurately recording the original transaction. Here is what he says about this:
67The issue of shares to the Cooks was intended in the original agreement for sale and purchase to be an issue of new shares up to an agreed value of $400,000.00. What actually happened was that various shares held by Mr Donaldson and Mr Jennings were transferred to the Cooks.
68The purchase of the vineyard was for the price of $950,000.00.
69Part of the purchase price was paid using funds from the FICO Finance loan of $450,000.00 and the deposit of $50,000.00 was paid from funds held by Lochar. It seems to have been contemplated that the balance of the consideration, being $400,000, would be recorded as a vendor loan pending the issue of new shares. It would have been those shares which were the subject of the input and call option. No such vendor loan was discharged by the issue of shares as that element of the transaction took place between Messrs Donaldson and Jennings transferring shares already in issue.
70The share transfer and put/call option could therefore have satisfied the consideration for the balance of the purchase price, but Lochar still recorded a balance owing of $400,000 as a vendor loan.
71This transaction was recorded in the Lochar financial statements as set out below.
Dr Vineyard etc. 950,000 Cr Cash 550,000 Cr Vendor loan 400,000
72Simply put the accounting does not make sense because the Cooks received 420 shares in Lochar in satisfaction of the balance of the purchase price. The 420 shares were subject to an agreement that these would be purchased either voluntarily, or, after the expiry of the three-year term at the Cooks demand. The cost to Lochar of the vineyard is only the sum of $450,000.
[22] Insofar as it goes Mr Walker’s analysis appears to me to be correct but incomplete. Certainly, as between the Cooks and Lochar, this transaction involved the sale and purchase of shares. It did not involve a loan of any sort. However, if what happened on settlement was that $400,000 of Lochar’s obligations were discharged by Mr Donaldson and Mr Jennings transferring their own shares to the Cooks, then Lochar’s financial statements should have recorded the company as being indebted not to the Cooks but to Mr Donaldson and Mr Jennings in the sum of $400,000.
[23]Mr Walker then turns to the exercise of the put option:
73I believe the correct characterisation of the transaction to purchase the Cooks’ shares results in a $380,000.00 obligation from Mr Donaldson to Lochar. I explain this below.
74Prior to the transfer of the $380,000 from Lochar to JT Law the various parties identified at paragraph 55 paid to the Lochar’s trust account at Duncan Cotterill the sum of $400,000 in total. Such a payment was neither in respect to an issue of shares nor for a transfer of ownership of shares in Lochar from the Cooks or Mr Donaldson to them. The first case prevails because any shares that might have been passed into the ownership of the person set out at paragraph 55 were already in issue. The second case prevails because it would have been illegal for those persons to hold such shares without OIO approval. In respect to the collective moneys received into the solicitors’ trust account the only conceivable entry (expressed as a composite) was:
Dr Trust account 400,000.00 Cr Liability to investors 400,000.00
75When substantially all the moneys were paid away to the JT Law trust account on 15 March 2013 the only entry consistent with both the legal and substantive position was:
Dr Debtor 380,000 Cr Trust account 380,000
76The payment cannot constitute a reduction of paid up capital because such capital does not exist and, furthermore, the shares survived the transaction. The owner of the shares originally transferred to the Cooks is the debtor. That person can only be Mr Donaldson.
77There was a liability arising from sale and purchase transaction with the Cooks. But it was not the Company’s liability. It was a liability of the person(s) who wrote the put option, being the shareholders (predominantly Mr Donaldson but conceivably Mr Jennings). Therefore the Company lent Mr Donaldson the money to honour his obligation.
78The $400,000.00 should not have been recorded as a vendor loan to Lochar. It was in reality an obligation of the Messrs Donaldson and Jennings as the original shareholders to the Cooks. This becomes important because when Mr Donaldson sought funds from the other shareholders to purchase the Cooks shares these funds should not have been paid to Lochar but rather to the Cooks directly if they were in satisfaction of the call option or, following the exercise of the put option they should have been paid to Mr Donaldson as he was, in his words, purchasing the shares on their behalf.
79An illustration of this is that following the transaction and purchase of the shares was completed Lochar’s financial position effectively did not change. The invalidly recorded ‘Vendor loan’ of $400,000.00 was purportedly discharged. However the recorded shareholder loans were also increased by the same amount. The net effect is that Lochar was not better off, it simply had a liability to a different party; a liability which differed to the extent it was true whereas the liability it replaced was false.
80What transpired was that Mr Donaldson raised funds from the overseas shareholders to purchase the Cooks shares that were paid to Lochar. [H]e then used Lochar funds in the amount of $380,000.00 to pay to the Cooks’ receiver. He used those funds to satisfy an obligation to purchase the Cooks shares and then following the transfer held these shares in his own name.
81Therefore the correct characterisation of the transaction is a debt owed by Mr Donaldson to Lochar in the amount of $380,000.00. This is correctly [an] advance from Lochar to Mr Donaldson and is either an undocumented loan or an advance against Mr Donaldson’s current account.
[24]In my view, aspects of this analysis are misconceived.
[25] For a start, Mr Walker appears to assume that only Mr Donaldson and Mr Jennings were obliged to satisfy the put option because they were the shareholders at the time of the original transaction. However, cl 6.2 of the sale and purchase
agreement provided that the Cooks were entitled to call upon “any other shareholder of the Purchaser (including any new shareholder of the Purchaser who has purchased
… shares in the Purchaser after the date of this agreement … )” to do so. Accordingly, the overseas shareholders too were liable to be called upon to satisfy the exercise of the put option, placing to one side for the moment the restrictions contained in the Overseas Investment Act.
[26] Further, Mr Walker’s discussion of the purported discharge of the $400,000 “Vendor loan” is confusing. There was no “net effect” as that amount should never have been recorded in the financial accounts as a debt owed by Lochar to the Cooks. However, the financial accounts dated 30 April 2013 do record an increase in “Shareholder Loans” by $400,000 in the 2013 year. If Mr Walker sought to relate this increase to the purported discharge of the “Vendor loan”, then that would be an error, but it is not obvious he has done so.
Mr Sullivan’s submissions
[27] On Lockar’s behalf, Mr Sullivan put the matter differently. He said that Mr Donaldson was the only shareholder able to satisfy the put option at the relevant time because OIO approval had not been sought or obtained to any increase in foreign ownership.
[28] Mr Sullivan submitted that the $400,000 paid by the overseas shareholders must be treated as a shareholder loan because it was recorded as such in the company’s financial records and because it had been deposited in one of Lochar’s bank accounts. Mr Sullivan then submitted that, since the Cooks’ shares were placed into Mr Donaldson’s name, it followed that Lochar’s funds had been expended to acquire assets owned by Mr Donaldson, and, in the absence of explanation, the payment should be treated as a debt repayable by Mr Donaldson to Lochar on demand.1
1 Referring to Mizeen Painters Ltd (in liq) v Tapusoa [2015] NZHC 826, [2016] NZAR 423 at [24]–[25].
Mr Donaldson’s evidence
[29] In his affidavit evidence, Mr Donaldson offered an altogether different explanation.
[30]Here is how he described events:
Four overseas investors, including existing shareholders, agreed to provide
$400,000 on the basis that once OIO approvals were obtained the Cook shares (ie, the shares previously held by the Cooks) would be transferred to them. I was to hold those shares as trustee until the approvals were obtained in accordance with advice received by me from Lochar’s solicitors, Duncan Cotterill.
Mr Forbes’ submissions
[31] For Mr Donaldson, Mr Forbes submitted that Mr Donaldson’s interpretation is more consistent with the contemporaneous documents, and in particular the communications between Mr Donaldson and the overseas shareholders referred to above that purported to call for subscriptions to purchase the Cooks’ shares. Mr Forbes also referred to two later documents that he said also supported Mr Donaldson’s interpretation.
[32] The first is an internal company document entitled “Register of Shareholder Loans” that was apparently maintained by Lochar’s solicitors. That document records the payments made by the four overseas shareholders to the Hong Kong bank account under the heading “Loans used to acquire parcels of ‘Cooks shares’ in the proportions below”. There is also a note next to each entry saying “Held on Trust by Jamie Donaldson”. The loan amounts are recorded and included in a column that totals the loan balance.
[33] This lends a degree of support to the interpretations advanced by each side, and further serves to demonstrate the confused state of affairs that existed as between all those involved.
[34] The second document is an email sent on 14 August 2014 to Lochar’s solicitors by the solicitors acting for one of the overseas shareholders. The email records the overseas shareholder’s view of the put transaction as follows:
On 21 April 2013 Pacific Tiger paid to the Company a further amount of NZ$150,000.00 which was to purchase 158 shares held by the Cook shareholding interest. Our client understood that the Cook shares were supposed to be transferred to them, but would be held in trust by Mr [Donaldson] until this occurred. Accordingly, there should be an “effective” shareholding by Pacific Tiger of 208 shares …
Overseas shareholders’ evidence
[35] While this documentation does support the interpretation advanced by Mr Donaldson, it must be weighed against contrary statements made by three of the overseas shareholder in affidavits filed in support of the plaintiff’s application for summary judgment.
[36]Ms Kwan, the senior accountant for Pacific Tiger Group Ltd, said:
Mr Donaldson was supposed to be handling the purchase of the Cook shares on [Pacific Tiger’s] behalf, and also on behalf of three other shareholders including Mr John Nash …
However, neither Mr Donaldson nor [Lochar] have ever properly accounted to us for the Cook buy-out shares and we have neither received confirmation of any registration of those shares nor our money back. Instead, those shares appear to have been registered in Mr Donaldson’s name.
[37]Mr Bennett said:
I never understood the arrangements to be that Mr Donaldson was to receive the shares in his personal name and hold them “on trust” for me. My understanding of the transaction from the documents sent to me by Mr Donaldson was that the advances were to be treated as shareholder advances/loans to the company until such time as an application was made to increase our shareholding under New Zealand Law (which needed Overseas Investment Office approval) such that they would be converted into equity.
[38]Mr Nash said:
I never understood the arrangement to be that Mr Donaldson was to receive the shares in his personal name and hold them “on trust” for me. My understanding of the transaction from the documents sent to me by Mr Donaldson was that the advances were to be treated as shareholder advances/loans to the company until such time as an application was made to increase our shareholding under New Zealand Law (which needed Overseas Investment Office approval) such that they would be converted into equity.
I have never received confirmation of any registration of those shares nor the refund of the shareholder loan. I now know that Mr Donaldson used the funds we loaned the company to transfer the shares into his name. I therefore
support the application of the liquidator to get the monies repaid by Mr Donaldson to Lochar.
[39]It is unnecessary to analyse this evidence in detail.
[40] I make two observations about it. First, the overseas shareholders obviously have something to gain from Mr Donaldson contributing to the sum available in the liquidation. Second, the statements made by Mr Bennett and Mr Nash are identical, word-for-word.
Mr Donaldson’s 1 January 2013 letter
[41] Prior to his letter dated 30 January 2013 enclosing the share subscription form, Mr Donaldson had written to the overseas shareholders saying:
As previously explained, prior to completion and approval of an application to the Overseas Investment Commission of New Zealand (“OIC”) by Duncan Cotterill (our NZ lawyers) proceeds would be treated as “shareholder advances”. Allocation of the old and new shares to subscribers of the Purchase
… will occur only after approval of restructuring by the OIC. Once the Purchase of Cook’s shares is completed, we shall finally be in a position to complete that application.
[42]The letter went on to say:
Each existing holding of 50 shares shall entitle the Shareholder to acquire one unit of 50 shares of the Purchase for the face value of NZ$50,000, which amount shall be settled (prior to OIC approval) by making a Shareholder Advance.
[43] Finally, the share subscription form attached to the letter included the following note:
I agree that the total amount of my Purchase … to be accrued as “shareholder advances” in the accounts of the Company pending OIA approval for a change in share distributions.
[44] It is not clear from the evidence whether the shareholders still intended this to be the arrangement following the second letter on 30 January 2013. This letter may support the plaintiff’s interpretation of events, though it seems to me that, more than anything else, it reflects Mr Donaldson’s imperfect understanding of the difference between legal and beneficial ownership.
A trust relationship
[45] There are two obvious difficulties with Mr Donaldson’s explanation of events. The first is it is entirely unclear what kind of trust relationship was involved, how it came into existence and what its terms were. If what is under consideration is some sort of express trust, then there is very little evidence of an intention on the part of the overseas investors to create a trust. If the proposition is that the situation is one in which the courts will impose a trust, then it is not easy to see how a constructive or resulting trust might have arisen. Mr Forbes suggested that the facts could give rise to a Quistclose2 trust. Even here there are difficulties. On Mr Donaldson’s evidence the funds were expended for the very purpose for which they were paid.
[46] These difficulties might not be insurmountable, however, and of course it is the plaintiff that carries the burden of establishing that there is no defence to its claim.
[47] A second problem arises from the Overseas Investment Act. Section 43 of that Act makes it a criminal offence to enter into a transaction having the effect of defeating, evading or circumventing the operation of the Act. For different reasons, neither Mr Sullivan nor Mr Forbes considered it necessary to pursue this.
[48] There are other provisions in the Overseas Investment Act that are also relevant for present purposes. It is clear from the contemporaneous correspondence that Mr Donaldson was purchasing the Cooks’ shares in his own name because the shareholders were all aware of the 25 per cent limit on foreign shareholders. Section 12(b)(ii), which contains the relevant restriction, provides:
An overseas investment in sensitive land is the acquisition by an overseas person, or an associate of an overseas person, of—
…
(b) rights or interests in securities of a person (A) if A owns or controls (directly or indirectly) an interest in land described in paragraph (a) and, as a result of the acquisition,—
…
2 Barclays Bank Ltd v Quistclose Investments Ltd [1970] A.C. 567.
(ii) the overseas person or the associate (either alone or together with its associates) has an increase in an existing 25% or more ownership or control interest in A; or
…
[49] Relevantly, “associate” is defined in s 8(1)(b) to include a “trustee”. In other words, the Overseas Investment Act also prohibited the overseas shareholders from becoming beneficial owners of the shares through Mr Donaldson.
[50] The short point is that on any view the arrangement Mr Donaldson now says took place would have contravened the Overseas Investment Act. Whilst, arguably, this is not strictly relevant for present purposes, it does raise doubts about Mr Donaldson’s interpretation. If the parties were cognisant of the restrictions imposed by the Act, then it is not unreasonable to expect that they would have structured their affairs in a way which did not breach their obligations thereunder.
[51] The interpretation contended for on behalf of the liquidator does not appear to contravene the Act. Mr Sullivan contends that Mr Donaldson became the legal and beneficial owner of the Cooks’ shares, and that the share subscription by the overseas shareholders was to be given effect by the shareholder loans being converted into equity once OIO approval had been obtained. There is evidence that this is how Lochar had dealt with earlier investments made by the overseas shareholders.
[52] It is difficult to know how far this argument can be taken. Theoretically, there was nothing stopping the shareholders from entering into an arrangement in breach of the Overseas Investment Act. It is fair to say this is a matter of evidence and should not preclude the defendant from advancing his defence at trial.
Subscription for purchase of the Cooks’ shares
[53] The main difficulty for the plaintiff’s case, as Mr Forbes emphasised, is its inability to make sense of the correspondence concerning the overseas shareholders subscribing to purchase the Cooks’ shares.
[54] The reconstruction offered by the liquidator makes sense of the odd situation in which the shareholders found themselves – as a combined result of the restrictions
under the Overseas Investment Act and the structuring of the call and put options – but where it comes up against a logical barrier is that it does not account for how the overseas shareholders were eventually to come to own the Cooks’ shares, as they plainly anticipated they would. Nor does it address the point made earlier that in the original transaction shares owned by Mr Donaldson and Mr Jennings were used to discharge company obligations.
Summary judgment
[55] This, as already said, is a summary judgment application. The principles that apply to such applications are now well settled. It is unnecessary to do more than quote the Court of Appeal’s description of those principles in Krukziener v Hanover Finance Ltd:3
The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at
341. In the end the court’s assessment of the evidence is a matter of judgment. The court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corporation Ltd v Patel (1987) 1 PRNZ 84 (CA).
[56] In my judgement, Lochar is unable to establish that Mr Donaldson has no defence to this claim. There are two equally arguable, if equally problematic, interpretations of the put transaction. There are issues entailed in accepting either interpretation as correct. Most of these are matters going to the intention of the shareholders at the time. The documents are sparse in this respect. In my judgement, this is not a case that can be resolved on affidavit evidence. Although the parties seem largely to agree on what took place, and the dispute is as to the legal form of the
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
transaction, that issue involves considerable inference, which it would be unwise to engage in without the benefit of viva voce evidence subjected to cross-examination.
[57] In order to succeed at trial, the plaintiff will have to establish that its reconstruction of what took place is more likely than not to be accurate. In my judgment, the description of what took place advanced on behalf of Mr Donaldson is at least arguable.
[58]For those reasons, I dismiss the plaintiff’s application.
[59] The proceeding is to be set down for a case management conference as soon as conveniently possible, and the Registrar is directed to liaise with counsel in that regard.
[60] Costs are reserved. If any costs issues arise, counsel may file and serve memoranda in the usual way.
Associate Judge Johnston
Solicitors:
WCM Legal, Wellington for plaintiff David Stock, Christchurch for defendant
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