Ngati Awa Asset Holdings Limited v Birnie

[2012] NZHC 1304

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-582 [2012] NZHC 1304

BETWEEN  NGATI AWA ASSET HOLDINGS LIMITED

First Plaintiff

ANDPETERS CAPITAL LIMITED Second Plaintiff

ANDWILLIAM NORMAN BIRNIE Defendant

Hearing:         11 June 2012

Counsel:         ZG Kennedy and M Pascariu for plaintiffs

RJ Hollyman and E Krishnan for defendant

Judgment:      11 June 2012

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for stay]

Solicitors:           MinterEllisonRuddWatts, PO Box 3798, Auckland

Palmer Macauley, PO Box 576, Kerikeri

NGATI AWA ASSET HOLDINGS LIMITED V BIRNIE HC AK CIV-2012-404-582 [11 June 2012]

Introduction

[1]      The  plaintiffs  apply  for  summary  judgment  against  the  defendant  for

$2,078,356.85 plus interest and costs.  The proceeding concerns the enforceability of a deed of indemnity and guarantee dated 3 March 2011 given by the defendant to the plaintiffs.  That indemnity was given to secure the purchaser’s obligation under an agreement for sale and purchase of shares in Birnie Capital Property Partnership Ltd dated 3 May 2011 and entered into by the first and second plaintiffs as vendors, BJF Properties Ltd as purchaser and Mr Birnie as guarantor.  BJF Properties Ltd failed to complete the purchase.

[2]      The defendant has filed a notice of opposition to the plaintiffs’ application for summary  judgment  and  has  filed  affidavits  in  opposition.    Counsel  advise  that further affidavits in opposition will be required. The notice of opposition alleges that the deed of indemnity is unenforceable and, in particular, pleads:

(ii)       the Deed of Guarantee is part of a transaction (“Transaction) under review in other proceedings, in particular involving the same parties under CIV-2011-404-3508 (McCulloch & Ors v Quinn & Ors) (the “Totara proceeding”).  The Court in the Totara proceeding has held that Court approval of the Transaction was required under s 168 of the Companies Act, because it amounted to the settlement of a derivative proceeding (under CIV-2010-404-3000).

(iii)      Without  such  approval,  the  Transaction  (including  the  Deed)  is prima facie void and unenforceable.

[3]      In addition it is pleaded that:

(b)       The question of the enforceability of the Transaction and the Deed is to be determined by the Court in the Totara proceeding and/or in the derivative proceeding.

(c)       The Court in the Totara proceeding will make orders regarding the terms, content, and entitlement to benefit of the Transaction (including the Defendant’s  obligations  under  the  Deed).     The  Court  in  the  Totara

proceeding will also determine which party should control the enforcement of the Transaction.

(d)       The  matter  is  inappropriate  for  summary  judgment  because  in  order  to determine (in this proceeding) the question of the enforceability of the Transaction and the Deed, the Court would have to investigate the background of the derivative proceeding, and consider of the position of the other parties interested in that proceeding and the Totara proceeding.  That would involve service of this proceeding on those other parties.

The application

[4]      The defendant has also filed the application that I must now deal with.  It is an application seeking orders:

(a)       Staying this proceeding pending a final determination in McCulloch v

Quinn (the Totara proceedings);[1]

[1] McCulloch & Ors as Trustees of the Totara Trust v Quinn HC Auckland CIV-2011-404-3508,

23 January 2012 Venning J.

(b)Extending  the  time  for  filing  documents  in  opposition  to  the application for summary judgment.

The application is made in reliance on r 15.1(3) of the High Court Rules and the

Court’s inherent jurisdiction.

[5]      The relevant parts of r 15.1 are as follows:

15.1     Dismissing or staying all or part of proceeding

(1)      The court may strike out all or part of a pleading if it—

…

(d)      is otherwise an abuse of the process of the court.

…

(3)Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.

(4)       This rule does not affect the court's inherent jurisdiction.

[6]      The defendant claims that the deed indemnity and guarantee is at issue in the Totara proceedings.   The parties to this proceeding are all parties to the Totara proceeding, plus other parties who might have an interest.   The issue that the defendant will raise in opposition to summary judgment is that the deed is unenforceable because court approval was not obtained for it pursuant to s 168 of the Companies Act 1993.   It is also alleged that the deed was entered into by the plaintiffs in this proceeding in breach of obligations owed by them to other parties. The defendant therefore says that the issue should be resolved in the Totara proceedings so that there is no duplication and so that all parties who might have an interest in it are able to advance their particular position.

The opposition

[7]      The plaintiffs advance three main reasons why a stay should not be granted, namely:

(a)       The two sets of proceedings involve discrete issues of fact and law.

The enforceability of the indemnity against Mr Birnie is not an issue in the Totara proceeding.  The enforceability of the agreement is not an issue in the Totara proceeding either;

(b)Recovery  of  the  amounts  payable  under  the  agreement  or  the indemnity is fundamental to the Totara proceedings. The relief sought by the trustees in the Totara proceedings is the distribution of the fruits of this summary judgment proceeding.  A stay of the summary judgment will frustrate the proper progress and determination of the Totara proceedings;

(c)      Any stay of the summary judgment proceedings will cause undue delay and is contrary to interests of justice.

Background

[8]      The background to this proceeding is set out in the judgment of Venning J.[2]

That judgment was given on an application by Mr BP Quinn and Mr AP Peters and their respective companies seeking an order striking them out as defendants in the Totara proceedings.  The genesis of the application is that if an arrangement entered into concerning the sale of Mr Quinn’s, Mr Peters’ and their companies’ interests in shares held in Birnie Capital Property Partners Ltd is not a settlement of derivative proceedings, then there was no cause of action against them.  The Judge refused the strike out application.

Analysis

[2] Ibid, at [86].

[9]      In the course of counsel’s submissions it became reasonably clear to me that if the summary judgment application was run in the Totara proceedings, the reason for the stay beyond its determination in that proceeding would go. There has been an amended statement of claim in the Totara proceedings.  I was advised that Mr Birnie and those interests associated with him had not pleaded to it.

[10]     I was also advised by counsel that there was no known reason why a cross- claim would not be made by the plaintiffs in this proceeding, who are defendants in the Totara proceedings, against Mr Birnie and interests associated with him.  There would seem to be no reason why an application for summary judgment could not be made based on such cross-claim.   Indeed, provided that leave was given, it would seem to be possible by applying rr 12.16 and 4.18 of the High Court Rules.

[11]     Mr Hollyman  advised  me  that  his  client  would  raise  no  objection  to  an application for summary judgment based on any cross-claim filed by the plaintiffs in this proceeding in their capacity as defendants in the Totara proceeding, other than the standard basis for opposing summary judgment.   In addition, because counsel

understood that the Totara proceedings were in the Commercial List, both indicated

their agreement to the matter coming out of the Commercial List for the purposes of determining a summary judgment application based on a cross-claim.

[12]     The  approach  that  I  have  just  referred  to  would  seem  to  best  meet  the objectives  of  the  High  Court  Rules,  namely  to  secure  the  just,  speedy  and inexpensive determination of any proceeding or interlocutory application.[3]

[3] Hcr 1.2.

[13]     It is anticipated that if the steps that I have set out were followed, namely the filing of a cross-claim accompanied by a summary judgment application, the appropriate steps up to the time for the filing of a notice of opposition would be completed within 20 working days.  Out of an abundance of caution, the application would seek leave to invoke the summary judgment proceeding and the removal of the case from the Commercial List for the purpose of determining the summary judgment application only.  At the listing of the summary judgment application, on the understanding that the times that I have referred to are strictly complied with, a fixture for the disposal of the summary judgment application on the merits could be made.

[14]     The procedure that I have outlined has the advantage of having the issue fairly put before the Court and with all parties who conceivably might have an interest in same having the opportunity of participating if they wish.   I do not overlook Mr Kennedy’s submission that there are no other parties, other than those involved in the current proceeding, who are likely to be involved in any summary judgment application in the Totara proceedings.   This course of action in some respects may be seen as following a counsel of perfection.   Having said that, it removes all obstacles to the issue that is raised by the summary judgment application being fairly considered on its merits.

[15]     Accordingly, it is appropriate that I grant a short stay for the express purpose of seeing if the steps outlined in this judgment have been undertaken.

Orders

[16]     I order that:

(a)       this proceeding be stayed until 9:30am on 31 July 2012;

(b)      the application shall be listed before me at 9:30am on 31 July 2012.

No more than half-an-hour is allowed for disposal at that time.  The purpose of the listing is to see if the summary judgment application in the Totara proceedings has been filed, and if a notice of opposition has been filed and served and a fixture made.  If that occurs the intention is that a further stay, up until the disposal of the matter in the Totara proceedings, will be considered.

Costs

[17]     Although the defendant has been partly successful in this application it is my view that any question of costs should await the disposal of the summary judgment application itself.   Accordingly, costs are reserved.   The matter may be looked at either at the time of disposal of the summary judgment application in the Totara proceedings  or  on  the  conclusion  of  the  summary  judgment  application  in  this

proceeding, should that course become appropriate.

JA Faire

Associate Judge