Ng v Harkness Law Ltd (No 2) - [2014] NZHC 1667

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-1389 [2014] NZHC 1667

BETWEEN
ADRIAN HWEE KIAT NG and

ALICIA SOCK HOON GO First Plaintiffs

MATTHEW HSUN YEAN LIM Second Plaintiff

AND

HARKNESS LAW LIMITED First Defendant

JOHN RENWICK HARKNESS Second Defendant

Hearing: 15 July 2014

Appearances:

S Barter for the Plaintiffs
S Shortall and A E Gordon for the Defendants

Judgment:

15 July 2014

ORAL JUDGMENT OF ASSOCIATE JUDGE BELL (No 2)

Solicitors:

Barter & Co, Albany Village, Auckland, for Plaintiffs
MinterEllisonRuddWatts, Wellington, for Defendants

NG and GO v HARKNESS LAW LIMITED [2014] NZHC 1667 [15 July 2014]

[1] This matter is the resumption of the hearing of the defendants’ application for summary judgment and to strike out the plaintiffs’ claims. On 29 April 2014 I gave an interim decision on the plaintiffs’ claims against the defendants under the Fair Trading Act 1986. The plaintiffs have another cause of action. That is for dishonest assistance under the second limb in Barnes v Addy.1 I did not deal with that cause of action in my earlier decision. Since then, the parties have filed further evidence. The argument has been fuller than the parties would have been able to give at the earlier hearing.

[2] The plaintiffs’ claim is that the first and second defendants gave dishonest assistance to directors and de facto directors of Hunter Gills Road Ltd and Albany Heights Villas Ltd in breaching fiduciary duties which those directors owed to their companies. They say that as a result of the breaches of fiduciary duties by those directors and the dishonest assistance given by the defendants, they have suffered losses and they are entitled to look to the defendants to make good those losses.

Dishonest assistance as a claim of accessory liability

[3] I begin by considering what is involved in a claim for dishonest assistance. I refer to the Court of Appeal’s decision in Fletcher v Eden Refuge Trust,2 where the court summarised how Duffy J at first instance characterised the cause of action. There were three ingredients:

(a) money is lost as a result of breach of trust or fiduciary duty;

(b)the defendant has participated in the breach of duty by helping or assisting in some way in those breaches; and

(c) there is dishonesty, objectively assessed, on the part of the defendant.

The Court of Appeal followed that approach.

1 Barnes v Addy (1873-74) LR 9 Ch App 244.
2 Fletcher v Eden Refuge Trust [2012] NZCA 124, [2012] 2 NZLR 227 at [52].

[4] As to the matters to be proved in a claim against a fiduciary for breach of fiduciary duty, the defendants have referred to Tipping J’s decision in Everist v McEvedy:3

To succeed in a claim for breach of fiduciary duty the plaintiff must show three things: first that the defendant owed the plaintiff a fiduciary duty; second that the defendant was in breach of that duty; and third that the plaintiff has suffered a loss…

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: [2014] NZHC 1667
Decision Date: 15 July 2014

CaseChat Overview and Summary

The case of Ng v Harkness Law Limited involves a claim by the plaintiffs, Adrian Hwee Kiat Ng, Alicia Sock Hoon Go, and Matthew Hsun Yean Lim, against the defendants Harkness Law Limited and John Renwick Harkness. The plaintiffs alleged that the defendants provided dishonest assistance to the directors of Hunter Gills Road Limited and Albany Heights Villas Limited, causing breaches of fiduciary duties owed by the directors to the companies. The plaintiffs sought to hold the defendants liable for the losses they suffered as a result of these breaches. The defendants applied for summary judgment and to have the claims struck out, arguing that the plaintiffs did not have standing to bring the claims and that the claims were not legally valid. The court had to decide whether the plaintiffs had the legal standing to bring a claim for dishonest assistance and whether the claims met the legal requirements.

The court first outlined the legal requirements for a claim of dishonest assistance, which includes proving that money was lost due to a breach of trust or fiduciary duty, that the defendant assisted in the breach, and that the defendant acted dishonestly. The court noted that such claims are claims of accessory liability, meaning that the accessory cannot have greater liability than the primary party who breached the duty. The court then considered whether the plaintiffs had standing to bring the claims, which depended on whether the directors owed fiduciary duties directly to the plaintiffs. The court reviewed case law and concluded that directors owe fiduciary duties only to the company, not to creditors like the plaintiffs, and that creditors can only enforce those duties through the company or liquidators. The court found that the plaintiffs, as creditors, did not have standing to bring a claim for dishonest assistance against the defendants.

The court also briefly discussed the substantive merits of the claims, noting that there was sufficient circumstantial evidence to suggest that the defendants may have acted dishonestly. However, the court emphasized that this part of the decision was obiter and did not affect the outcome regarding standing. The court concluded that the plaintiffs did not have standing to bring the claims and granted the defendants' application to strike out the claims based on dishonest assistance. The court also granted summary judgment to the defendants on the claims under the Fair Trading Act.

In summary, the court held that the plaintiffs did not have legal standing to bring a claim for dishonest assistance against the defendants because the fiduciary duties in question were owed to the companies, not to the plaintiffs as creditors. The court struck out the claims based on dishonest assistance and granted summary judgment to the defendants on the other claims. The court left open the possibility that other parties, such as liquidators, might have standing to bring similar claims.

Orders