Mike Pero Mortgages Ltd v Pero - [2018] NZHC 528

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-2193

[2018] NZHC 528

UNDER the Companies Act 1993

IN THE MATTER

of MPRE Limited

BETWEEN

MIKE PERO MORTGAGES LIMITED

Plaintiff

AND

MIKE PERO

First Defendant

MPZ ONE LIMITED
Second Defendant

MPRE LIMITED
Third Defendant

MP REAL ESTATE LIMITED

Fourth Defendant

Hearing: 19 February 2018

Appearances:

G P Blanchard QC and J E M Lethbridge for Plaintiff N A Till QC and M E Gall for Defendants

Judgment:

23 March 2018

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 23 March 2018 at 4 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

MIKE PERO MORTGAGES LIMITED v PERO [2018] NZHC 528 [23 March 2018]

Introduction

[1] This judgment determines an application by the first and second defendants (“application”, “Mr Pero” and “MPZ”) for orders:1

Staying the proceeding, or staying the execution of the judgment of Her Honour Justice Katz in this proceeding dated 27 October 2017 and/or staying the enforcement of that judgment and the judgment of Her Honour Justice Katz in this proceeding dated 21 December 2016.

Background

[2]The ownership structure of the parties relevant to this proceeding is as follows:

Liberty Financial Pty Limited (“Liberty”)

100%

Mike Pero Group Limited (“MP Group”)

Mr Mike Pero (“Mr Pero”)

Trustees of the Mike Pero Trust (“MPT”)

100% 50%

Mike Pero Mortgages Limited (“MP Mortgages”)

MPZ One Limited (“MPZ”)

MPRE Limited (“MPRE”)

100%

Mike Pero Real Estate Limited (“MP Real Estate”)

1 Amended Interlocutory Application on Notice for Stay of Judgment Pending Appeal and for Stay of Enforcement dated 26 January 2018.

[3] MPRE is a joint venture between MPZ and MP Mortgages, formed in 2011. MPRE and its subsidiary, MP Real Estate (together the “jv companies”), operate a national chain of real estate agencies.

[4] Mr Pero has been the Chief Executive of the jv companies since inception and he and Mr Mark Collins, a director of MP Mortgages, are the companies’ current directors. Mr Sherman Ma is Mr Collins’ alternate director on the board. MPZ and MP Mortgages are parties to a shareholders’ agreement executed in February 2011 (“shareholders’ agreement”).

[5] As a result of two judgments given by Katz J, one as to liability in December 2016 and the other as to quantum in October 2017, Mr Pero and MPZ are required to pay MPRE a principal sum of $2,179,370.34, including GST, plus interest at five per cent per annum running from various dates.2 The principal sum comprises sums that Mr Pero wrongly paid away to himself or related entities. As of 10 October 2017, the principal sum and accrued interest totalled $2,381,725.45.

[6] After determining quantum, Katz J granted MP Mortgages leave to bring derivative proceedings in the name of, and on behalf of, MPRE (“s 165 application”).3 Although Mr Pero and MPZ are appealing this judgment to the Court of Appeal, they do not dispute their liability or…

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.

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Details

Case: [2018] NZHC 528
Decision Date: 23 March 2018

CaseChat Overview and Summary

The High Court of New Zealand was presented with an application by Mike Pero and MPZ One Limited for a stay of judgment and enforcement, filed by Mike Pero Mortgages Limited. The applicants sought to halt the enforcement of judgments requiring them to pay MPRE Limited a substantial sum, including interest, due to misappropriation of funds by Mr Pero. The court had to decide whether a substantial miscarriage of justice would likely result if the judgments were enforced.

The court considered the principles governing the stay of enforcement under High Court Rules 2016, r 17.29. It noted that the onus was on the applicants to demonstrate that a substantial miscarriage of justice would likely occur if the judgment was enforced. The court balanced the conflicting interests of the parties, considering factors such as the apparent strength of the claim, the ability of the applicants to meet the judgment, and the potential consequences of enforcing the judgment. The court also examined the applicants' ability to pay the judgment debt and the potential means of doing so, including borrowing, the sale of assets, and the declaration of a dividend by MPRE.

The court concluded that enforcing the judgment would likely result in a substantial miscarriage of justice due to the risk of an irreversible alteration to the status quo if the charged shares were sold. It also noted that MPRE had no urgent need for the funds and that there was no real risk of a shortfall if the applicants were unsuccessful in their appeal and separate proceedings. Therefore, the court granted the stay sought under High Court Rules 2016, r 17.29 until 5 pm on 28 September 2018, subject to any further order of the court. The court reserved the right to impose conditions on the stay and encouraged the parties to agree on costs.

Orders