Mason v McKay

[2021] NZHC 1794

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1265

[2021] NZHC 1794

IN THE MATTER

of Sacred Hill Marlborough Vineyard Limited (in Receivership and in
Administration) and Sacred Hill Vineyard Limited (in Receivership)

BETWEEN

DAVID HAMILTON MASON

Plaintiff

AND

ANDREW MCKAY and REES LOGAN

First defendants

WESTPAC NEW ZEALAND
Second defendant

LEONARD MAGINNESS and JARED WAIATA BOOTH

Third defendants

VINLINK MARLBOROUGH LIMITED

Fourth defendant

Hearing:

15 July 2021

Appearances:

B O’Callahan and A Cherkashina for plaintiff M Kersey and C F Butters first defendants SCDS Gollin for second defendant

E C Gellert and R A Morris for third defendants L H Scott for fourth defendant

M D O’Brien QC for Mach Flynt Inc

Date of judgment:

15 July 2021

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 15 July 2021 at 4.00pm.

Pursuant to Rule 11.5 of the High Court Rules.

………………………… Registrar/Deputy Registrar

MASON v MCKAY [2021] NZHC 1794 [15 July 2021]

[1]                  The plaintiff — David Mason, sole director of the Sacred Hill Group (all but one of which five companies presently are in receivership and at least two in voluntary administration) — seeks by urgent interim injunction opportunity as guarantor to redeem security held by the third defendant (“Westpac”).

Background

[2]                  The companies are in serious default of the terms of that security. In addition to various acts of deemed insolvency, including a failure to comply with Customs’ statutory demand for some $4.304 million, Westpac’s demand for payment of some

$52.360 million remains unpaid. Property Law Act notices to remedy these defaults were to have expired on 13 July 2021,1 but this Court directed be extended until midnight tonight, 15 July 2021.2

[3]                  The first defendants (the “receivers”) have sold the companies’ assets to the fourth defendant (“Vinlink”), including conditionally on default not being remedied by the time of the notices’ expiry.3 Vinlink is to fund the companies’ continuing business to 30 July 2021 (but, if the sale is not then settled, for repayment by the receivers).

[4]                  Mr Mason alleges the sale agreement is at a gross undervalue, because it does not include the value of the companies’ long-term and renewable contract with the United States’ Mach Flynt Inc, in turn to supply the companies’ wine to a substantial United States supermarket chain. The interim orders sought are for the notices’ expiry to extend to 30 July 2021.

[5]                  In those urgent circumstances, the application was argued on a Pickwick basis, meaning other parties appeared only to assist the Court to the extent they could or wished to do, given the absence of notice.4 Such appearance alone is not submission

1      Property Law Act 2007, s 119.

2      Mason v McKay [2021] NZHC 1766.

3      Property Law Act, s 124.

4      Pickwick International Inc (GB) Ltd v Multiple Sound Distributors Ltd [1972] 1 WLR 1213 (Ch) at 1214–1215.

to this Court’s jurisdiction. Nonetheless, I direct the proceeding be served on Mach Flynt Inc to formalise its position.

Applicable legal principle

[6]                  Interim injunction applications are determined on the basis if the plaintiff has a serious question for trial, and the balance of convenience and overall interests of justice favour granting the injunction.5

[7]                  By ‘serious question’ is meant one not vexatious or frivolous, on which the plaintiff has a real prospect of succeeding at trial.6 On the remaining consideration(s), the question is if refusing the injunction would be harder on a plaintiff who was successful at trial, than granting it would be on the successful defendant.7 This assessment is undertaken by reference to the adequacy of damages, preservation of the status quo, the uncompensable disadvantages to either party, and the relative strengths of their cases.8 The merits of the cases (in so far as they can be ascertained at the interim injunction stage) can be relevant to the balance of convenience and to the overall justice of the case.9

[8]                  But more than inconvenience is required:10 interlocutory injunctions lie to protect a plaintiff against “irreparable damage” for which they cannot adequately be compensated.11

5      American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL); and Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA). See also NZ Tax Refunds Ltd v Brooks Homes Ltd [2013] NZCA 90 at [12], citing Roseneath Holdings Ltd v Grieve [2004] 2 NZLR 168 (CA) at [35]–[37].

6      Intellihub Ltd v Genesis Energy Ltd [2020] NZCA 344 at [24] and [27].

7      Wellington International Airport Ltd v Air New Zealand Ltd HC Wellington CIV 2007-485-1756, 30 July 2008 at [4] citing [Cayne] v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.

8      At [6]–[14].

9      See, for example, Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, above n 5, at 142, and

Roseneath Holdings Ltd v Grieve [2004] 2 NZLR 168 (CA) at [41]–[42].

10 Pollen-Plus Ltd v Znel Ltd HC Tauranga CIV 2010-470-0848, 20 October 2010 at [40].

11 Finnigan v New Zealand Rugby Football Union Inc (No 2) [1985] 2 NZLR 181 (HC) at 183; and

American Cyanamid Co v Ethicon Ltd, above n 5, at 406.

Discussion

—serious question for trial

[9]                  On its face, I accept the allegation the receivers are in breach of their duties offers a serious question for trial. The company is in receivership; they are exercising their powers; and that exercise has resulted in a commercial transaction open to scrutiny. For the receivers, Matt Kersey was keen I accepted the Mach Flynt contract was valueless, as unarguably terminable and in any event not assignable. But that is a matter for trial. Also emphasised was the receivers’ sale’s similarity to but improvement on the companies’ earlier terms agreed for sale to Vinlink, although  Mr Mason emphasised the latter enabled him to continue to pursue alternative or supplementary benefit. Again, these are matters for trial.

—balance of convenience

[10]              Continued opportunity for that alternative pursuit is what Mr Mason now seeks. The prospect is of an investor able to clear the companies’ liabilities to Westpac, which now include some $16 million incurred in the receivership (including in taking on future obligations), and to invest in the companies’ continued operation.

[11]              Doubtless Mr Mason has been pursuing such a prospect for some time. But any optimism for its substance appears to be fading. Previous comprehended conditional interest from a Japanese financial institution, and then subject to an international consortium settling another substantial transaction, has evolved today only into an indeterminate entity’s exceptionally open-ended and unsubstantiated expression of an “intention to allocate NZ$100m to wine investment in New Zealand”, albeit including “to allow Sacred Hill to settle its debts with Westpac Bank”. While such is asserted to “be settled by 30 July 2021”, it necessarily remains subject to foreign investment approval. The expression of interest carries little more weight than the paper on which it is written. Even as ‘letterhead’, the document is light on detail.

[12]              In the meantime, the notices’ delayed expiry contributes to commercial uncertainty for a range of third parties, including vineyard landowners, growers, wine manufacturers and exporters, and intermediate and ultimate wholesale customers.

While that limited duration uncertainty is not particularly weighty, something of greater substance still is required to offset it on a balance of convenience. The indicated investment interest is not it, being only very marginally above the prospect of investment interest at all. That a more acceptable commercial arrangement may hove into view is no basis to interfere with that already established here.

[13]              In those circumstances, I leave aside questions about the appropriateness of effectively mandatory interim relief, or the adequacy of damages.

—overall justice

[14]              Standing back, I see no reason to intervene. The PLA notices were issued on 17 May 2021, for expiry on their extended dates legislated to manage COVID-19’s impact in the community. Mr Mason’s last-minute plea for further time has no foundation beyond his optimism an alternative may be established.

Result

[15]              The plaintiff’s 14 July 2021 without notice interlocutory application for an interim injunction is dismissed. This Court’s 13 July 2021 order will lapse in its terms.

Costs

[16]              In principle, being unsuccessful, Mr Mason is liable to pay the other parties’ costs. In my preliminary view, as the proceeding was conducted on a Pickwick basis, that is only for their two-hour appearances before me today, including second counsel. If that is not accepted by the parties, or they cannot otherwise agree, I reserve costs for determination on short memoranda of no more than five pages  — annexing        a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate — to be filed and served by any claiming party within ten working days of the date of this judgment, with any response or reply to be filed within five working day intervals after service.

Confidentiality

[17]I confirm my oral orders:

(a)the terms of each the heads of agreement with Vinlink, the companies’ contract with Mach Flynt, Inc, and the contract for sale with Vinlink are confidential to the parties to them, and may not be published; and

(b)the Court’s file of this proceeding may not be accessed without the permission of a Judge.

—Jagose J

Counsel/Solicitors:

M D O’Brien QC, Auckland

B O’Callahan, Barrister, Auckland Norling Law, Auckland

Russell McVeagh, Auckland

MinterEllisonRuddWatts, Auckland Lowndes Jordan, Auckland

Anthony Harper, Auckland