Midgen Enterprises Limited v Morgan

[2014] NZHC 1799

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-000445 [2014] NZHC 1799

BETWEEN

MIDGEN ENTERPRISES LIMITED

Plaintiff

AND

STEWART MORGAN First Defendant

WATER GUARD NZ LIMITED Second Defendant

Hearing:	30 July 2014
Appearances:	D W Grove for Plaintiff H Hui for Defendants
Judgment:	1 August 2014

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 1 August 2014 at 3.00 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date.....................................

MIDGEN ENTERPRISES LTD v MORGAN & OR [2014] NZHC 1799 [1 August 2014]

[1]      These  are  the  reasons  for  my  decision  yesterday  granting  the  plaintiff, Midgen Enterprises Ltd leave to discontinue its claim.

[2]      Midgen  sold  its  business  to  Stewart  Morgan/Water  Guard  in  late  2013. Under the contract stock already ordered at the date of possession was to be stored by  Midgen  at  Now  Couriers  with  the  storage  costs  borne  by  Mr  Morgan.    In February 2014 Mr Morgan and Water Guard moved the stock to another storage facility.   Midgen brought these proceedings to enforce the contract, alleging conversion of the stock.  It obtained an interim injunction under which the stock was moved back to premises that it controlled, though it had to meet any difference in

cost between the storage facilities pending reconciliation of the stock costs.1   There

has not been a reconciliation but in January 2015 Mr Morgan/Water Guard will be required by the terms of the contract to purchase all remaining stock held by Midgen.

[3]      In the meantime Water Guard has counterclaimed against Midgen alleging misrepresentations inducing the purchase of Midgen’s business.  The counterclaim is, as yet, largely unquantified, but seems likely to be in the order of several hundred thousand dollars. I was not required to express any view on the strength of the counterclaim.

[4]      Midgen indicated its intention to discontinue its claim. Because interim relief had been granted it was required to obtain leave to do so.2    Midgen said that it is content to store the stock in accordance with the interim injunction but that any loss that may ultimately be found to have sustained will be modest, perhaps less than

$10,000 and it did not wish to be engaged in High Court proceedings for that amount of money.  It said further that because it is absorbing the difference between the costs of the storage facilities it is very unlikely that it will be found to owe any money to Mr Morgan or Water Guard.

[5]      Mr  Morgan  and  Water  Guard  did  not  want  Midgen  to  discontinue  its proceeding.  Their main concern was that there may be a loss to them, albeit modest,

as a result of the cost of transferring the stock in accordance with the injunction and

1      Midgen Enterprises Ltd v Morgan & Anor [2014] NZHC 704.

2      High Court Rules, r 15.20.

if the plaintiff were permitted to discontinue they would no longer have the benefit of Midgen’s undertaking as to damages filed in support of the interim injunction application.

[6]      I granted Midgen leave to discontinue because I could not see that there was prejudice to the defendants  that  would  justify forcing Midgen  to  remain  in  the proceedings as a plaintiff.  Mr Morgan and Water Guard will only have a claim for the cost of transferring the stock if they prevail in the conversion claim but Fogarty J, who granted the interim injunction, considered their position to be weak.  Their counterclaim can continue unaffected.   The undertaking as to damages was given only in relation to the injunction application so discontinuance will not disadvantage Mr Morgan and Water Guard in relation to the counterclaim.

[7]      There  remains  a  possibility  that  Midgen  could  resume  its  claim  for  the additional costs of moving and storing the stock pursuant to the terms of the interim injunction in the Disputes Tribunal.  That prospect seems remote, however, not least because any attempt to do so will likely be met with the defence that there is in existence the substantial counterclaim on foot in the High Court.

[8]      Costs were allowed on a 2B basis in accordance with Mr Grove’s calculation.

P Courtney J