NZAGBIZ Limited v Hanley
[2024] NZHC 3633
•11 December 2024
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2022-419-037
[2024] NZHC 3633
BETWEEN NZAGBIZ LIMITED
Plaintiff
AND
PHILIPPA MARY HANLEY, MARCHAL JOSEPH HEAD and HANLEY
SUPPLEMENTS LIMITED
First DefendantsMARCHAL JOSEPH HEAD
Second DefendantPHILIPPA MARY HANLEY
Third DefendantHANLEY SUPPLEMENTS LIMITED
Fourth Defendant
Hearing: 11 September 2024 Appearances:
MD Branch for the Plaintiff
GN Bradford for Philippa Mary Hanley and Hanley Supplements Limited
Judgment:
11 December 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 11 December 2024 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Harkness Henry, Hamilton Hill Lee & Scott, Christchurch
NZAGBIZ LTD v HANLEY [2024] NZHC 3633 [11 December 2024]
Introduction
[1]This judgment determines two applications:
(a)an application by the plaintiff, NZAGBIZ Ltd, for leave to commence summary judgment proceedings against the first defendants (excluding Marchal Head), the third defendant, Philippa Hanley, and fourth defendant, Hanley Supplements Limited (HSL); and
(b)an application by Ms Hanley, for a stay of these civil proceedings pending the outcome of criminal proceedings.
[2] NZAGBIZ first filed its claim in March 2022. On 16 February 2024, a minute was issued allocating a five day back-up fixture on 31 March 2025 and a firm fixture on 22 September 2025. NZAGBIZ submits that given that delay it is in all parties’ interests to have the issue of whether the alleged secret commission is a qualifying fraud for the various causes of action decided. NZAGBIZ says this will determine its claim for judgment for the secret commission of $449,239.07 and for liability in respect of its other claims. NZAGBIZ says it will then elect whether to proceed to determine the quantum of its other claims for which it seeks $1,149,591.76.
[3] The defendants oppose leave being granted at this late stage and Ms Hanley instead applies for a stay of these proceedings pending the outcome of the criminal proceedings against her. The date for the criminal trial has not yet been set but counsel has been advised it will be in the first half of 2025.
[4] I consider the application for leave to commence summary judgment proceedings first as if leave is granted it may affect the decision in respect of whether a stay ought to be ordered or not.
Application for leave to commence summary judgment proceedings
[5] Rule 12.4(2) of the High Court Rules 2016 provides that a plaintiff may apply for summary judgment either at the time it serves its statement of claim or later with
the leave of the Court. NZAGBIZ first filed its claim in March 2022 so it requires leave.
[6] Determining whether leave ought to be granted is not a formality and must be determined separately from the application itself.1
[7] In deciding whether to grant leave, the Court considers the following questions:2
(a)Has the delay been satisfactorily explained?
(b)Are the merits of the applicant’s case for the relief sought particularly strong and therefore deserving of determination at a later time by the Court than is prescribed by the Rules?
(c)Is there any risk of a miscarriage of justice by determining the application at the later point in time?
[8] In Waihopai Valley Vineyard Ltd v Savvy Vineyards 3550 Ltd, Andrews J held that the Court ought not to grant leave to commence summary judgment proceedings out of time unless doing so will have the effect of avoiding prolonged proceedings.3
[9] I consider each of the questions above to determine whether leave ought to be granted.
Is the delay satisfactorily explained?
[10] NZAGBIZ filed these proceedings in March 2022. A five-day substantive fixture hearing was allocated following a case management conference on 16 February 2024 as a back-up fixture on 31 March 2025 and as a firm fixture on 22 September 2025.
1 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734 at [13].
2 Tip Top Ice Cream Co Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 (HC) at [28].
3 Waihopai Valley Vineyard Ltd v Savvy Vineyards 3550 Ltd [2015] NZHC 592, (2015) 22 PRNZ 724 at [34]–[35].
[11] Counsel for NZAGBIZ explains the delay on the basis that counsel was surprised at the date given for the fixture and that given the delay in being able to advance its case, leave ought to be granted to commence summary judgment proceedings.
[12] Counsel for the defendants however points to the fact that there have been four versions of the statement of claim filed and that NZAGBIZ raised the possibility of filing a summary judgment application a year before it was eventually filed.
[13] Obtaining a back-up fixture on 31 March 2025 or a firm fixture on 22 September 2025 at a conference in February 2024, a year to 18 months after the conference, should not have come as a surprise to counsel. Furthermore, the 12 February 2024 memorandum filed by NZAGBIZ for the February 2024 conference proposed pre-trial directions including steps up to 15 August 2024. I do not, therefore, find this explanation for the delay very persuasive and so do not consider that the delay has been satisfactorily explained. This factor is at best neutral in terms of leave.
Are the merits of NZAGBIZ’s case particularly strong and therefore deserving of determination at a later time by the Court than prescribed by the rules?
[14] Counsel for NZAGBIZ submits that the relief sought by NZAGBIZ is advanced on two alternative bases being:
(a)a claim for the difference between the replacement cost of the whole milk powder portion of the HSL product and the price the whole milk powder was sold to HSL for, being $1,149,591.76; or
(b)the sum of $449,239.07, being a commission, kick-back or bribe, pleaded as being the “secret commission”.
[15] I record that the statement of claim does not clearly set these out as alternative claims and includes a claim for an account of profit (together with claims for interest and indemnity costs). The essential point made by counsel however is that NZAGBIZ’s leave application focuses on the alleged secret commission.
[16] Kate Carter, originally a defendant in these proceedings and a former employee of NZAGBIZ, has settled with NZAGBIZ, entering into an agreement in March 2023. Ms Carter has filed an affidavit in support of NZAGBIZ’s application for leave in which she records that she acknowledged in the settlement agreement that she defrauded NZAGBIZ together with Ms Hanley and HSL. On 8 September 2023 she was sentenced to 12 months’ home detention in respect of the fraud against NZAGBIZ. Ms Carter confirms that she has agreed to assist NZAGBIZ in these proceedings.
[17] In addition, Ms Carter says that she acknowledged in the settlement agreement that Ms Hanley and her actions resulted in a loss to NZAGBIZ of $726,057.96.
[18] Ms Carter says further that she understands that in the summary judgment application NZAGBIZ is only seeking to obtain judgment for $449,239.07 which she describes as “the sum of the payments made to me for facilitating sales to the Defendants”. Ms Carter then says:
I further understand the Defendants disagree that they received preferential pricing or that they had any knowledge of the fraud. While I dispute that claim I have been asked to just focus on what I was doing that was in breach of my employment agreement.
[19]NZAGBIZ submits that the defendants do not dispute that payment of
$449,239.07 was made and that, in those circumstances, the case law regarding secret commissions makes it clear that the merits of summary judgment are strongly in their favour.
[20] NZAGBIZ says further that if the Court finds that a secret commission was paid, then liability will follow for its second cause of action. Quantum will still need to be determined because NZAGBIZ’s claim for the replacement cost for the product is likely to be disputed but NZAGBIZ says it may elect to accept the lesser sum and not pursue its alleged loss of $1,149,591.76.
[21] NZAGBIZ submits the issues to be decided in the summary judgment application would be:
(a)Can summary judgment be obtained for the sum of the secret commission?
(b)Is the secret commission a fraud which can found liability in relation to the claimed losses of $1,149,591.76 (acknowledging that the quantum would need to be decided at a substantive hearing)?
[22] NZAGBIZ relies on a decision of the English Court of Appeal Wood v Commercial First Business Ltd where the Court held that there did not need to be a fiduciary relationship between the recipient of a secret commission and the plaintiff in order for the plaintiff to recover the sum paid by way of secret commission from the payer of the commission.4 The English Court of Appeal referred to the definition of a secret commission or bribe in the early decision of Hovendeen & Sons v Millhoff, where Romer LJ held:5
Without attempting an exhaustive definition, I may say that the following is one statement of what constitutes a bribe. If a gift be made to a confidential agent with the view of inducing the agent to act in favour of the donor in relation to transactions to the donor and the agent’s principal and that gift is secret as between the donor and the agent—that is to say without the knowledge and consent of the principal—then the gift is a bribe in the view of the law.
[23] The Court of Appeal in Wood then commented in relation to the above passage:6
43. This passage makes clear that the meaning of bribe, for the purposes of civil remedies, extends well beyond its popular connotation of a corrupt payment, to include any payment or gift made as an inducement to an “agent” and not disclosed to the “principal”. Romer LJ goes on to set out special rules that apply to such payments, two of which are of general application. First, the court does not inquire into the payer’s motives in making the payment or allow evidence to be given as to motive. Second, the court will presume in favour of the principal and against the payer and the agent that the agent was influenced by the payment, and this presumption is irrebuttable. These rules are applied by the law, Romer LJ said, “in the interests of morality with a view of discouraging the practice of bribery”.
44. The vice involved in the payment of a bribe, for the purpose of civil remedies, is that it may induce the payee to depart, consciously or otherwise, from the duty he owes to another person.
4 Wood v Commercial First Business Ltd [2021] 3 WLR 395 (CA).
5 Hovendeen & Sons v Millhoff (1900) 83 LT 41.
6 Wood v Commercial First Business Ltd, above n 4.
45. The circumstances in which such a duty may be owed will vary greatly. Some may involve persons who clearly owe fiduciary duties in any event, such as trustees, directors or employees. At perhaps the other extreme, a person may be retained for the purpose of giving a single piece of advice. In any of these cases, and in the many other cases that will arise somewhere between them, the person owing the duty is at risk of being suborned by a payment or offer from a third party as an inducement to favour the payer or others.
[24] Where a secret commission is held to have been paid, the amount of the secret commission is recoverable from the payer, notwithstanding that they have already paid that sum to the payee.7
[25] NZAGBIZ refers to the pleading of the secret commission in paragraph 13(b) of the second amended statement of claim:
Ms Carter and/or Mr Carter receiving payments from Ms Hanley and/or HSL as a commission or kickback in the sum of $449,239.07 (more particularly set out in schedule 1 attached) paid to Ms Carter on the false basis that she was an employee of HSL and $10,000 cash (the Secret Commission).
[26] NZAGBIZ submits that the fact of these payments, which the defendants do not dispute:
(a)triggers a liability for the sum of $449,239.07; and
(b)establishes liability for fraud on the further bases pleaded (with the actual damage to be quantified at a substantive hearing), on the basis that the secret commission procured a breach of fiduciary duty thereby exposing the defendants to a range of remedies including the cost of replacing the product sold.
[27] Counsel for NZAGBIZ submits that at the leave stage, the Court does not need to be satisfied that NZAGBIZ would succeed on summary judgment emphasising that it is a lesser test because it is only a leave application. I accept this but do not consider that the merits of summary judgment are as straightforward as NZAGBIZ submits.
7 Wood v Commercial First Business Ltd, above n 4, at 49.
[28] At this stage, Ms Hanley has denied paragraph 13(b) of the second amended statement of claim and all the particulars therein. The particulars in the second amended statement of claim included:
(c) Variously selling whole milk powder, skim milk powder, butter milk powder and nutritional powder as less expensive products namely whey powder, cheese powder, insoluble protein, soluble protein, cheese and lactose.
[29] In the third amended statement of claim, to which Ms Hanley has not yet pleaded, further particulars are added as follows:
(c)Preferring HSL over other customers in return for, or on the promise of, the Secret Commission;
[30] NZAGBIZ proceeds on the basis that Ms Hanley’s knowledge of Ms Carter’s role through Ms Hanley’s past employment at NZAGBIZ, means Ms Hanley is not able to dispute that she knew that Ms Carter preferred HSL over other customers.
[31] However, Ms Hanley denies knowledge of this in her affidavit opposing leave and I do not consider the circumstances are as clear cut as in Wood where the person receiving the secret commission was a broker and the person paying a lender.
[32] Furthermore, in her affidavit Ms Hanley refers to her application in the criminal proceedings under s 147 of the Criminal Procedure Act 2011 which was made on the basis that there was no evidence that she knew or ought to have known about Ms Carter’s offending. Ms Hanley records:8
The Judge in his decision declined the application but he said there was nothing in the text messages between Kate and I that would indicate I was aware of what she was doing, and he said that there were “valid questions” for the Police case at trial. He also specifically raised the possibility of a further
s.147 application being made later.
[33]Ms Hanley goes on to say:
7.[Ms Carter] says that the defendants have disagreed that we received preferential pricing or that we had any knowledge of her fraud. I want to make it very clear that I was never aware of what Kate was doing in terms of altering product codes, altering invoices, or providing HSL
8 The referenced s 147 application decision has not been annexed to Ms Hanley’s affidavit or otherwise provided to the Court.
with product that it was not supposed to be receiving. I was never aware that HSL was receiving product at a lesser price than it should have. At all times I dealt honestly with the plaintiff, and I believed that HSL was paying the fair price for the product that was received.
8.I had no idea that [Ms Carter] was doing any of these things. I always made it clear to her that I would take as much product as possible but only if the plaintiff did not want it.
9.[Ms Carter] has made a number of other allegations against me in her affidavit that are simply untrue.
[34] Ms Carter’s evidence is that there was no way that Ms Hanley did not know that what Ms Carter was doing was wrong as Ms Hanley had also worked for NZAGBIZ and she knew the business. But Ms Carter records in respect of the code alterations:
56I do not recall having any specific discussions with [Ms Hanley] about the mechanics of what I was doing with the code changes.
[35] Ms Carter deposes that Ms Hanley knew it was entirely wrong for Ms Carter to take benefits from her in return for selling her product and that she also knew perfectly well that Ms Carter was not performing any real role for HSL.
[36] As I have said above, Ms Hanley disputes this evidence. Her counsel points to the fact that tax was being paid on the payments made to Ms Carter, submitting they were not confidential payments as is required for a payment to amount to a secret commission.
[37] NZAGBIZ goes on to submit that where there is a fiduciary relationship, as it says there is here because Ms Carter was an employee, then the payment of the secret commission by the defendants who knew of that relationship will mean that the defendants are assisting a breach of fiduciary duty. That assistance will make the defendants liable for a range of remedies, not limited to repayment of the secret commission. NZAGBIZ relies on Wood in support of this.9
[38] The defendants do not accept Ms Carter was in a fiduciary relationship with NZAGBIZ simply by reason of being an employee, submitting that while employees
9 Wood v Commercial First Business Ltd, above n 4, at 49.
may owe fiduciary duties to their employer in some circumstances it does not follow automatically from status as an employee.
[39] For the reasons discussed above, I do not accept therefore that the position is as straightforward as NZAGBIZ submits. The merits of the summary judgment application proposed are not so strong that in my view they necessarily ought to outweigh the other factors.
Is there any risk of miscarriage of justice by determining the summary judgment application at a later time than the rules provide for?
[40] There is a risk of miscarriage of justice because of the potential prejudice to Ms Hanley as she is facing criminal charges that are likely to be heard around the same time as any summary judgment application and potentially the substantive trial if the backup fixture is available.
[41] Allowing summary judgment proceedings to commence at this stage will add to the steps, costs, and time involved for all parties. There will be no advantage from a timing perspective if the back-up fixture is available in March 2025 and, if it is not, any time advantages of a summary judgment hearing in the first quarter compared to a September substantive trial, may be negated by the disruption to the pre-trial process.
[42] In addition, contrary to the usual position on summary judgment, NZAGBIZ proposes that if it is found that a secret commission was paid and that Ms Hanley is liable for assisting a breach of fiduciary duty, a trial may still follow to determine quantum.
[43] In terms of the difference in trial duration, NZAGBIZ Ltd submits that instead of a five‑day trial as currently allocated, only three days is likely to be necessary. In my view this is not such a significant difference that it ought to hold much weight in terms of determining whether leave ought to be granted.
[44] NZAGBIZ further submits that it may elect to accept the lesser sum and bring finality to the matter so the remainder of the proceeding may not go ahead if
NZAGBIZ succeeds in obtaining orders for repayment of the secret commission but NZAGBIZ is not prepared to make that election now.
[45] In circumstances where the criminal trial is likely to go ahead in the first half of 2025 and there is a back-up civil fixture scheduled to commence in 31 March 2025, there appears to be no advantage in granting leave to apply for summary judgment now. It will only add to and complicate the steps necessary in each of the proceedings.
Conclusion on leave
[46] In all of these circumstances, I am not prepared to grant leave to commence summary judgment proceedings at this stage. As referred to above, the overall aim of summary judgment applications is to avoid prolonged proceedings and it appears very unlikely that summary judgment will do so in this case.
[47]I therefore decline NZAGBIZ’s application for leave.
Application for stay of the proceedings pending the outcome of criminal proceedings
[48] Ms Hanley has applied for a stay of these civil proceedings pending final determination of the criminal proceedings against her in the Timaru District Court. NZAGBIZ is the complainant in the criminal proceedings, having laid the complaint in 2021 prior to the filing of these civil proceedings in March 2022.
[49] Memoranda on behalf of Ms Hanley have been filed following the hearing of these applications providing updates in respect of the criminal proceedings. In the memorandum filed on 12 November 2024, Counsel for Ms Hanley records that the Crown filed an amended Charging document on 6 November 2024 now alleging 62 counts of deception. These include an allegation that the deception caused loss to the complainant (the plaintiff in this proceeding) with the Crown seeking reparation payable to NZAGBIZ. Paragraph 18 of the third amended statement of claim currently alleges that the loss suffered by NZAGBIZ amounts to $1,149,591.76.
[50] I set out the relevant principles below before considering and whether a stay ought to be granted.
Relevant legal principles
[51] There is no disagreement between the parties as to the applicable principles. Both parties refer to Commissioner of Police v Wei in which the Court of Appeal held:10
[41] There is no general rule that civil proceedings must be adjourned if related criminal proceedings are pending. Equally, there is no rule that a civil plaintiff is entitled to a hearing before an impending criminal trial. In a case where the prosecuting agency is, in effect, the same party as the plaintiff in the civil proceeding, considerations of entitlement of a civil plaintiff to pursue his or her case without delay are obviously diluted substantially. In our view, the High Court Judges in the decisions under review were right to see the present cases as fact-specific and as calling for a balancing exercise.
(footnote omitted)
[52] In its written submissions, NZAGBIZ relied on the fact that the intended summary judgment application was based solely on the payment of the alleged secret commission by HSL to Ms Carter (unlawfully assisted by Ms Hanley) —which is not the factual basis for the criminal proceedings. It was therefore submitted that there is no commonality of issues between the two proceedings.
[53] As I am declining leave to bring the summary judgment application, the question becomes whether there is a commonality of issues between the criminal and civil proceedings as a whole. In my view, there is no question that there is, particularly given that the criminal proceedings include an allegation that the deception caused loss to NZAGBIZ and that reparation of that amount is sought from the defendants.
[54] In addition, the updating memorandum filed on behalf of Ms Hanley in October 2024 records that a matter which has arisen in the criminal proceedings is that NZAGBIZ and Fonterra by their lawyers may have been corresponding with the officer in charge and the prosecutors in the criminal case. The prosecution had at that stage refused to disclose that correspondence.
10 Commissioner of Police v Wei [2012] NZCA 279.
[55] Counsel records that Ms Hanley has applied for disclosure with her application to be considered on 20 February 2025. Counsel notes that currently there is no reference in the list of documents filed on behalf of NZAGBIZ in these proceedings to any such documents as between NZAGBIZ, Fonterra, and the New Zealand Police. Counsel for the defendants is concerned that any information sharing has not been disclosed or discovered to date. Counsel records that the District Court has indicated an amicus could look at the documents that have not been disclosed to form a view and that a memorandum has been filed on behalf of Ms Hanley inviting the Court to settle the terms of inspection by an amicus. The memorandum filed on behalf of Ms Hanley on 12 November 2024 records that an amicus has not yet been appointed.
[56] Counsel for Ms Hanley further submits that it creates real prejudice for Ms Hanley to have to defend both the civil and criminal proceedings at the same time and that there would be no real prejudice to NZAGBIZ if the proceeding were delayed because there is a prospect that NZAGBIZ might recover in the criminal proceedings through reparation in any event.
[57] Counsel for NZAGBIZ responds that the question of prejudice is not the appropriate test and that the Court is required to consider whether there is a real risk of injustice — a much higher bar.
[58] I accept that the test is a real risk of injustice and that there are competing policy considerations as set out by Gordon J in Helen and Lucy Enterprises Ltd v Steve Taylor & Associates North Shore Ltd including:11
(a)the right of a plaintiff in a civil proceeding to advance the claim;
(b)the right of a defendant in a civil proceeding to defend the claim; and
(c)the need to ensure that the rights of a defendant in a criminal proceeding are given due effect.
11 Helen and Lucy Enterprises Ltd v Steve Taylor & Associates North Shore Ltd [2019] NZHC 2903 at [35].
[59] In addition, I agree with NZAGBIZ’s submission that the Court considers different factors in setting the appropriate reparation compared to a damages award in a civil proceeding. But there is no question that any reparation ordered will need to be deducted from the amount claimed by NZAGBIZ against Ms Hanley in these proceedings.
[60] Given the likelihood that the two proceedings will have similar timings, I consider there is a real risk of injustice if the civil proceedings are not stayed especially in circumstances where there may be an issue in respect of disclosure between NZAGBIZ and the Crown in the criminal proceedings.
[61] Ms Hanley’s application for a stay of these civil proceedings until the criminal proceedings are finally determined is granted except to the extent discussed below to ensure the civil proceedings can be advanced without delay once the criminal proceedings are determined.
Stay against HSL
[62] NZAGBIZ submits that the proceeding sought not to be stayed against HSL as only Ms Hanley has applied for a stay and different factors may be relevant.
[63] The reasons that I have relied on in determining that a stay is appropriate are: the considerable overlap in issues; the fact that the criminal proceedings may result in orders which may reduce the amount able to be claimed in the civil proceedings (and may lead to amendment to that proceeding); the issue in respect of disclosure between the two proceedings; and because of the real possibility that the timing of the proceedings may overlap or cause difficulties in terms of preparation. All of these factors are relevant to both Ms Hanley and HSL as they share counsel. Although HSL is not facing a criminal trial, the outcome of the criminal trial may affect the civil proceedings and particularly the loss claimed, including against HSL.
[64] I therefore order a stay in respect of the whole of the substantive proceedings as against all parties on the same basis as in respect of Ms Hanley.
Further directions regarding fixtures
[65] To avoid undue delay for NZAGBIZ in advancing its civil claim after the criminal proceedings have been determined, at this stage I only vacate the back-up fixture in March 2025. I include a direction for counsel to file a joint memorandum as soon as practicable after the date of the criminal trial has been allocated proposing directions in respect of the September 2025 civil fixture with any differences between counsel set out. If there is unlikely to be sufficient time between the criminal trial and the September fixture then a new date can be allocated at that stage to avoid further delay.
Result
[66] NZAGBIZ’s application for leave to commence summary judgment proceedings is declined.
[67] Ms Hanley’s application for a stay of these proceedings until the criminal proceedings have been determined is granted against all defendants except as set out in the following directions:
(a)the five day back up fixture scheduled to commence on 31 March 2025 is vacated;
(b)the five day firm fixture scheduled to commence on 22 September 2025 is to remain allocated at this stage;
(c)the parties are to file a joint memorandum (with any differences set out) as soon as practicable after being advised of the date of the criminal trial addressing whether the September 2025 civil fixture ought to be vacated and a later date allocated, confirming that five days remains appropriate for the substantive fixture, and proposing amended pre-trial directions.
Costs
[68] The defendants have succeeded in both applications and in the usual course would be entitled to costs. I ask the parties to confer and only if costs cannot be agreed, to file memoranda on behalf of the defendants by 24 January 2024 and by the plaintiff by 7 February 2025.
Associate Judge Sussock
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