Longworth v Pirovich HC Auckland Cp202-Sw01

[2001] NZHC 356

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP202-SW01

BETWEEN ROCHELLE EDNA LONGWORTH and KENNETH BRIAN YALLOP
First Plaintiffs

AND ERICA MARIE CURRIE and ALANNA ROCHELLE CURRIE
Second Plaintiffs

AND MICHAEL JOHN PIROVICH
First Defendant

AND LABIA HOLDINGS LIMITED
Second Defendant

AND PISTOIA LIMITED
Third Defendant

AND MERCERIA HOLDINGS LIMITED
Fourth Defendant

AND RAUARUHE LIMITED
Fifth Defendant

AND VECCHIO HOLDINGS LIMITED
Sixth Defendant

AND OLTRARNO LIMITED
Seventh Defendant

AND TORCELLO HOLDINGS LIMITED
Eighth Defendant

AND WAINUIOTOTO BAY PROPERTY CO LIMITED
Ninth Defendant

Hearing: 7 May 2001

Counsel: T Allan for plaintiffs
R Wallis for defendant

Judgment: 7 May 2001

ORAL JUDGMENT OF NICHOLSON J

[1] I have considered an application for an interim injunction which was filed in this Court last Wednesday 2 May 2001 and served on the defendants later that day. Notice of opposition was filed on Friday 4 May 2001, it stating that there would be an affidavit filed in support. There has been discussions between counsel, namely Mr Allan for the plaintiffs and Mr Wallis over the weekend and earlier today but agreement has not been reached.

[2] There is considerable urgency in the matter and allegation by the plaintiffs that Mr Pirovich with knowledge of the application for interim injunction has actually acted in prejudice of the position of the plaintiffs by signing on behalf of the defendant companies an agreement for sale of the properties which are the subject of dispute last Saturday 5 May 2001. The situation therefore is highly charged.

[3] I have only been able to spend limited time on the matter. I have quickly skim read the relevant papers and have only been able to hear from counsel for a period of approximately an hour because of other commitments on the Duty Judge list today. I do not have thorough knowledge and understanding of the papers which are before me. In particular there is an affidavit by Ms Longworth in support of the interim injunction application which, although occupying just twelve pages, has annexed to it exhibits exceeding 500 pages, most of which are documents which relate to various trusts and the properties the subject of the dispute. I note that on 27 April 2001 Mr Allan acting for the plaintiffs wrote to Mr Pirovich advising of his clients concerns that share transfers had been registered in breach of trust, that appropriate explanations had not been given, requiring Mr Pirovich to execute share transfers of 75% of the shares in the companies to new trustees, asking for information about any contracts entered into on behalf of the companies and advising that if the matters requested were not attended to he had instructions to apply to the High Court for an injunction.

[4] The response to this letter was a letter from Mr Pirovich objecting the assertion of the shares being subject to trusts, asking that Mr Allan contact his lawyer, Mr Sweetman, and advising that Mr Wallis had been instructed to act on anything contentious. So dispute was in the air to say the least on late last month which is only a week or so past.

[5] The application for interim injunction seeks first a mandatory order requiring Mr Pirovich to execute share transfers of 75 of the 100 shares held in his name in each of the other defendant companies, secondly restraining him from entering into any obligation or undertaking with relation to the affairs of the defendant companies without first obtaining the written authorisation of the first plaintiffs, Ms Longworth and Mr Yallop, thirdly appointing Mr Ian Duff, chartered accountant, to make inspection of documents and audit the accounts.

[6] As I understand the position which appears from the documents and particularly from counsels’ submissions, there is substantial coastal property at Coromandel which is owned by the defendant companies. Mr Pirovich claims that the shares in those companies are legally and beneficially fully held by him in his own right and not subject to any trust obligation. He is of the firm view that it is in the interests of the companies that the coastal property be sold. That there is an opportunity to sell to the best advantage and that he has endeavoured to realise this by executing on behalf of the companies the agreement for sale and purchase on 5 May 2001 for a consideration of $6,750,000. He is concerned to ensure that that sale proceeds because he is of the view that that is the best market opportunity for realisation of that property. Also there is substantial debt on the property which can only be paid and serviced by the sale of the property. In particular there is the loan for $3,300,000 which falls due for payment on the 12th of this month. Mr Pirovich is acutely concerned because he is liable on a personal guarantee in respect of that loan. He considers that if the property is not sold on the available basis then a latter sale may be by way of a forced sale by the mortgagee which will yield less and mean loss to him. He alleges he would not be indemnified for this loss by the plaintiffs because they do not have sufficient assets to honour their damages undertaking. The position of the plaintiffs is that the best realisation of the property will be by way of subdivision and sale over time.

[7] The agreement for sale and purchase dated 5 May 2001 is subject to condition 21.0 that the agreement shall be null and void in the event that in any time within 30 working days from the signing of the agreement an interlocutory order is made in the High Court against Mr Pirovich or any one or more of the vendors having the effect of restraining any one or more of them from selling or otherwise disposing of any part of the land which is the subject of the agreement and/or causing the vendors or any one or more of them to sell or otherwise dispose of any part of the land that is the subject of the agreement. Thirty working days from the signing of the agreement seems to expire on Saturday 16 June 2001.

[8] From my quick reading of the documents and after hearing counsel, I am of the view that, because of the background of the trust relationship referred to in the affidavit of Ms Longworth and the documents exhibited to it, there is a serious issue to be tried about whether the shares in the defendant companies are impressed with trusts which oblige Mr Pirovich to act in the interests of beneficiaries under those trusts and whether he is discharging that obligation. Accordingly I consider that this is an appropriate case in which the balance of convenience and justice of the case principles should apply to preserve the status quo until the Court is able to adjudicate further with the benefit of being able to spend more time considering all the documents which all parties wish it to consider and to receive and consider more detailed submissions.

[9] I therefore make an interim injunction order in terms of para (b) of the application restraining the first defendant or by his servants or agents from entering into any obligation agreeing to any obligation, undertaking any commitment, negotiating any agreement, obligation or undertaking, executing any document or continuing to do so in relation to the affairs of the defendants without first obtaining the written authorisation of the first named plaintiff.

[10] I state that this is in the nature of a status quo holding interim injunction and is not intended to be and should not be regarded as an interlocutory order within the meaning of cl 21 of the agreement for sale and purchase. I have in mind that there be a timetable prescribing steps to be taken to ensure that, provided the Court is able to give Judge time to do so, there be a hearing to consider an interlocutory application of the nature stated in cl 21 before 16 June 2001 with, of course, appropriate time for a decision to be given. It would seem to be in the interests of all concerned that once the cards are on the table there be a judicial settlement conference at which the legal and practical realities are canvassed with a view to reaching agreement about what is in the best interests of all concerned. To facilitate this I direct that counsel apply to the appropriate Court officer who in turn may need to put the matter before the Executive Judge to seek a one day settlement conference during the week commencing Monday 28 May 2001. This is predicated upon compliance of the timetable order which I now make:

[i] The defendants file all affidavits in support of the notice of opposition by 5 pm Monday 14 May 2001.

[ii] The plaintiffs to file all affidavits in response by 5.00 pm on Tuesday 22 May 2001.

[11] In the interim, counsel should enquire whether there can be a judicial settlement conference in the week commencing Monday 28 May 2001. However, if it can be arranged, there should be also a back up fixture available for resolution should settlement not be reached. Mindful of the deadline of Saturday 16 June 2001, this should, if at all possible, be in the week starting Tuesday 5 June 2001 bearing in mind that Monday 4 June is Queens Birthday holiday. If not available that week, then it should be as early as possible in the following week starting Monday 11 June. Counsel should enquire if such a fixture can be made at this early stage.

[12] Costs are reserved on the proceedings to date.

[13] I decline to make orders as sought in paras (a) and (c) of the interim injunction.

[14] Leave is given to any party to apply for review of the interim injunction order in the event of an insurmountable difficulty arising which may prejudice the position of any of the parties.