Lookman v Design Electronics Limited - [2020] NZHC 1066

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2018-442-41

[2020] NZHC 1066

BETWEEN MICHAEL ANDREW LOOKMAN AND 187 BRIDGE TRUSTEES 53 LIMITED
(as Trustees of the Lookman Family Trust) Plaintiffs

AND

DESIGN ELECTRONICS LIMITED

First Defendant

AND

RICHARD WARWICK JONES

Second Defendant

Hearing: 12 May 2020

Appearances:

G M Downing for Plaintiff s (via AVL to Nelson)

S J Jamieson and J V Ormsby for First and Second Defendants

Judgment:

21 May 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 21 May 2020 at 10am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 21 May 2020

LOOKMAN v DESIGN ELECTRONICS LIMITED [2020] NZHC 1066 [21 May 2020]

[1] The background to this application for summary judgment can be found in an earlier judgment dated 23 September 2019 between the parties, Design Electronics Ltd v Lookman.1 That judgment in turn referred back to an earlier judgment of Associate Judge Matthews between the parties.

[2] In the 23 September 2019 judgment, I adopted the background contained in two paragraphs from Associate Judge Matthews’ judgment of 2 May 2018.2 (The parties referred to are Design Electronics Ltd (“DEL”) and Lookman Family Trust (“LFT”)).

[12] On 14 December 2016 the parties entered an agreement titled “Investment and Shareholding Agreement 14 December 2016”. The agreement was for a term of five years “unless terminated earlier in accordance with its conditions”. It recorded that the Lookman trustees would advance $2,100,000 “on a reimbursement model” to Design Electronics from the date of an earlier promissory note issued on 8 May 2016. The funds were to be interest free for a period of one year from the date of the first advance, after which interest would be charged at 10 per cent per annum payable monthly. The document is expressed to be the entire agreement between the parties in relation to its subject-matter, replacing and extinguishing all prior agreements, draft agreements, arrangements, undertakings or collateral contracts of any nature made by the parties, whether oral or written, in relation to such subject-matter.

…

[14] The Lookman trustees have advanced $1,820,000 pursuant to this agreement. The security to be given to the Lookman trustees was “security over SenSys IP” the name SenSys being the defined name of Design Electronics in this agreement. A personal guarantee was also to be given to the Lookman trustees from the director of Design Electronics, Mr Warwick Jones.

[3] In the May 2018 decision, the issue was whether the advance was repayable upon demand. Associate Judge Matthews concluded DEL had established an arguable case that the advance made by LFT were not repayable on demand, but rather were term advances for the five years of the Investment and Shareholding Agreement (“the Agreement”). The statutory demand was issued on the basis that the advance was repayable upon demand was therefore invalid and the liquidation proceeding on which the demand was based was stayed.

1 Design Electronics Ltd…

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 Lookman v Design Electronics Limited

Details

AGLC: Lookman v Design Electronics Limited [2020] NZHC 1066
Case: [2020] NZHC 1066
Decision Date: 21 May 2020

CaseChat Overview and Summary

In this case, Michael Andrew Lookman, acting as a trustee of the Lookman Family Trust, sought summary judgment against Design Electronics Limited (DEL) and its director, Richard Warwick Jones, over alleged breaches of an Investment and Shareholding Agreement. The primary issues for the court were whether DEL had complied with the specific performance orders, whether the orders should be discharged, if there was non-compliance, whether the agreement should be cancelled, what loss the Lookman Family Trust (LFT) had suffered, and how the court should treat the outstanding advance if the agreement was cancelled. The court found that DEL had failed to comply with the specific performance orders in substantial and material ways, including not providing access to its electronic accounting system and not providing the necessary monthly information. The court concluded that the specific performance orders should be vacated as they served no real purpose and tied LFT's hands in respect of the remaining life of the agreement. The court found that the damages flowing from DEL's breach related to the loss of opportunity by LFT to determine whether to exercise the option to purchase shares in DEL. However, the court held that LFT had not demonstrated that DEL did not have a defence in respect of the issue of cancellation. The court vacated the specific performance orders made by Associate Judge Matthews on 18 December 2018 and reserved costs. LFT was advised to carefully consider the issue of affirmation and the section of the Act it relied on if it wanted to pursue the issue of cancellation in respect of breaches prior to this decision.

Orders