Manning v Ravelich HC Auckland CIV-2011-404-002189

[2011] NZHC 588

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-002189

BETWEEN  JAMES WILLIAM OWEN MANNING First Plaintiff

ANDTHE EAGLE BAR LIMITED Second Plaintiff

ANDBRETT RAVELICH Defendant

Hearing:         15 June 2011

Appearances: M Lloyd for First and Second Plaintiffs

Defendant in Person

Judgment:      16 June 2011

JUDGMENT OF WHATA J

This judgment was delivered by Justice Whata on

16 June 2011 at 3.30 p.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors:

Chambers Craig Jarvis, PO Box 47830, Ponsonby, Auckland 1144

Copy to:

M Lloyd, William Martin Chambers, 152 Anzac Avenue, Auckland 1010

Brett Ravelich, 25A Aitken Terrace, Kingsland, Auckland

MANNING V RAVELICH HC AK CIV-2011-404-002189 16 June 2011

[1]      This  concerns  an  application  to  amend  interlocutory  orders  granted  by

Keane J on 20 April 2010.

[2]      More specifically, the defendant seeks an injunction preventing the plaintiffs from operating The Eagle Bar until substantive issues between the plaintiffs and the defendants are resolved.

Background

[3]      The  immediate  background  to  this  is  an  order  by  Keane J  prohibiting Mr Ravelich,  his  agents  or  assigns,  until  further  order,  from  using,  removing, disposing of, diminishing the value of or dealing with the property of the plaintiffs at the premises subject to the proceedings.

[4]      The wider background usefully summarised by Keane J, is that Mr Ravelich was  a  lessee  of  a  lease  he  obtained  on  16 July  2010  with  Warren  Henkell. Mr Henkell relinquished his interest to Mr Ravelich on 16 March 2011.  Mr Manning now  holds  all  the  shares  in  The  Eagle  Bar  Ltd,  a  company  Mr Ravelich  and Mr Henkell incorporated in October 2010, to be the proprietor and hold the licence of the bar.   The licence, according to Mr Ravelich has always been held by the company.  Mr Manning believes that he now holds it in his own right.

[5]      In the several weeks leading up to the first application for injunction, it appears that the bar had ceased to operate.  Mr  Ravelich had resumed possession as lessee and changed the locks.   Mr Manning contends that Mr Ravelich has been making free with the bar’s assets and his own assets and has destroyed or damaged a

$20,000 mirror.

[6]      Also, at the time of the first hearing, Mr Ravelich had been negotiating with another entity to assign his interest in the lease to enable a new venture to open up in place of The Eagle Bar.

[7]      It  in  fact  transpires  that  Mr Ravelich  did  assign  the  lease,  and  then  the assignees transferred the lease to Eagle Bar Ltd at a cost of $20,000.

[8]      Mr Ravelich recently observed the premises in use as a bar and he is now concerned that the property he says he is at least a part-owner of, is being used without his permission.  It is not disputed that the bar, under the control of The Eagle Bar Ltd, is in use by the plaintiffs.

Jurisdiction

[9]      The  plaintiffs  initially complained  that  Mr Ravelich’s  application  did  not conform  with  the  High  Court  Rules.    Quite  properly  in  my  view,  the  plaintiff however elected to get to the merits of what really is in effect a fresh application by Mr Ravelich for injunctive relief.

[10]     The threshold for grant of such relief is well know, namely that: (a)   Whether there is a serious question to be tried;  and

(b)      The balance of convenience.

Serious issue

[11]     Mr  Ravelich’s  basic  contention  is  that  50  per  cent  of  Mr Manning’s shareholding in Eagle Bar Ltd is held on trust for Mr Ravelich, that the assets used to run  the  Eagle  Bar  are  the  product  of  his  entrepreneurism,1   investment  (about

$90,000)2 and labour over the course of some six to eight months.3

[12]     Mr Ravelich acknowledges that there were serious funding issues last year and that Mr Manning was instrumental in keeping Eagle Bar Ltd afloat.4    He says that he transferred 50 per cent of the shareholding in Eagle Bar Ltd to Mr Manning to  reflect  his  contribution,  with  a  balance  held  on  trust.    Their  reason  for  this

arrangement, he says, is that he did not have the support of the police for the

1 Refer paragraph 6 of Mr Ravelich’s first affidavit.

2 Ibid refer paragraph 15.
3 Ibid refer for example paragraphs 18 and 19.

4 Ibid refer paragraphs 14 and 25.

purposes  of  licensing  and  thought  it  prudent  that  legal  ownership  rest  with

Mr Manning.

[13]     He says further that in late March this year he was effectively shut out of the business, with access to banking accounts etc. withdrawn.

[14]     Without recourse to funds he became somewhat desperate and began looking at assigning the lease so as to set up the bar on a different basis.   The injunction against the use of chattels, in effect he says, brought him to his knees.

[15]     Mr Manning denies that there is any equitable or other legitimate interest in the shares or assets of Eagle Bar Ltd.  There is, he says, no documentary evidence to support this.5

[16]     As to Mr Ravelich’s financial position, the plaintiffs say that it was already in a parlace state as was the Eagle Bar at the time Mr Manning intervened.  Indeed, the reason for Mr Manning intervening was to rescue the business.

[17]     Mr Manning makes the further point that he was then forced to purchase the lease from the assignee at an additional cost of $20,000.

[18]     There was also apparently open offer to settle by the defendant on a payment of $35,000. This was rejected by the plaintiffs.

Discussion

[19]     Notwithstanding the arguments of the plaintiff, there is in my view plainly a serious issue to be tried.  In some ways this is an orthodox dispute about entitlement to property.  Without in any way going to the substantive merits, there is evidence before  this  Court  of  a  contribution  in  money  and  effort  to  a  joint  endeavour. Whether and to what extent it was made will be a matter for trial, but a serious issue is raised by Mr Ravelich as to his entitlement to the shares and/or interest in assets

now under the control of Eagle Bar Ltd and Mr Manning.

5 Refer paragraph 16 of submissions of the plaintiff.

Balance of convenience

[20]     I have some sympathy for Mr Ravelich’s position.  He was excluded from the financial operation of the business.  There may be very good reasons for this (and I make no finding either way on that).  He has now given up the lease, with the effect that he is now totally side-lined from a business that he established.

[21]     He now wants a level playing field and both parties subject to the same rules. He, therefore, seeks orders preventing the plaintiffs from using the chattels without his permission.

[22]     While I have some sympathy for him, I cannot see how shutting down the business serves any parties interests.   It may provide leverage to Mr Ravelich in terms of negotiations with the plaintiffs.  But the direct effect of any order made by me would be to require the plaintiffs to cease operation.   If that persists, it could render any claim by Mr Ravelich fruitless, as the company may collapse and the assets forfeited to creditors.

[23]     By contrast, it is obvious to me that Mr Manning is quite legitimately trying to get the business into a successful position again.  He has committed significant funds, including a further $20,000 to obtain the lease.  He has reopened the business, and apparently it is going quite well (although it is early days).

[24]     Mr Manning has also provided an undertaking as to damages.  He is clearly capable  of  paying  those  damages  (on  the  evidence  before  me)  if  they  become payable.

[25]     In these circumstances, I see no reason to “shut down” Eagle Bar.  It would in

fact be unjust to do so.

[26]     Having said that, I am troubled that in litigation such as this, the defendant alone appears to be without any benefit of the assets he says are his, in part or in whole.    It  is  not  unusual  in  cases  such  as  this  for  there  to  be  some  interim

compromise between the parties.   I canvassed this with Mr Lloyd, who was not amenable to any orders of this nature.

[27]     Mr Ravelich did not pursue this line of inquiry.

[28]     I have therefore reached the point where I consider the best way forward is to refuse the grant of any order.  However, in making that decision, I do not preclude the potential for a more refined application that might achieve a more proportionate interim position between the parties.  I do not encourage a further application at this early stage of the proceedings and indeed, any such order is unlikely to be forth coming in the absence of undue delay.  I merely wish to state that the outcome of this particular application does not foreclose that possibility.

Costs

[29]   I propose to reserve costs on this application.   The plaintiffs are quite legitimately seeking to protect and pursue their business interests.  I also accept that the defendant’s application was framed in such a way as to render it highly unlikely that an order would be granted.  But I do have  remaining concern that the defendant finds himself without any interim remedy whatsoever while the plaintiffs continue to develop  the  business  that  he  commenced.    In  these  circumstances,  rather  than making any final costs order, I prefer to proceed on the basis that costs are reserved

and to be resolved in the final assessment.

Whata J