O'Brien v Parkinson - [2020] NZHC 3402

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002814

[2020] NZHC 3402

UNDER The Companies Act 1993

BETWEEN

LOUISA JANE O’BRIEN, on behalf of GENERAL DYNAMICS CORPORATION LIMITED

First Plaintiff

GENERAL DYNAMICS CORPORATION LIMITED
Second Plaintiff

AND

KEVIN PARKINSON

First Defendant

KEVIN PARKINSON, as trustee of KEVIN PARKINSON FAMILY TRUST
Second Defendant

ANNA VALERIENA KEDRINSKAIA and LISTON TRUSTEE SERVICES LIMITED,

as trustees of ANNA KEDRINSKAIA TRUST

Third Defendants

Hearing: 12 November 2020

Appearances:

J McCartney QC for Plaintiffs

Z Kennedy and A Morris for Defendants

Judgment:

18 December 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

O’BRIEN & OR v PARKINSON & ORS [2020] NZHC 3402 [18 December 2020]

Introduction

[1] This is an application for security for costs in a shareholder derivative action pursuant to s 165 of the Companies Act 1993. In my judgment of 14 July 2020,1 I granted Ms Louisa O’Brien’s application to bring proceedings in the name of General Dynamics Corporation Ltd (GDC) against her former husband, the first defendant, Mr Kevin Parkinson, and entities associated with him. I directed that the proceedings were to be under the control of Ms O’Brien. She is funding them.

[2] There are related, Family Court relationship property proceedings between Mr Parkinson and Ms O’Brien which have now been transferred to this Court. Both proceedings are to be heard together at a trial in February 2022.2

[3] In the substantive derivative proceedings, it is alleged that Mr Parkinson’s actions in transferring the property of GDC and its profits to interests associated with him were a breach of fiduciary duty. Ms O’Brien also seeks, in the name of GDC, a resulting trust in relation to a property in Wanaka, owned by the third defendant trustees. It is claimed that the third defendant trustees have received property and profits of GDC and have participated dishonestly in a breach of fiduciary duty.

[4] There is no dispute that GDC is impecunious and thus the threshold in r 5.45 has been made out. The critical issue I must determine is whether, as a matter of discretion, an order for security for costs should be made, and if so, on what terms.

Factual background

[5] A comprehensive factual background is set out at paragraphs [7] – [28] of my earlier judgment dated 14 July 2020. The following summary is what is necessary for the purposes of this application.

[6] Ms O’Brien and Mr Parkinson were in a relationship for 29 years. They married in 1994 and separated in 2013.

1 O’Brien v Parkinson & Ors [2020] NZHC 1681.
2 Parkinson v O’Brien DC North Shore FAM-2017-044-751, 3 November 2020.

[7] Ms Anna Kedrinskaia, one of the third defendant trustees, and Mr Parkinson, are in a de facto relationship.

[8] GDC was incorporated around 1981 by Mr Parkinson and his father. In 1997, the Kevin Parkinson Family Trust and the Louisa Parkinson Family Trust were established. In 2003, there was a change of shareholding…

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.

Continue reading O'Brien v Parkinson

Details

AGLC: O'Brien v Parkinson [2020] NZHC 3402
Case: [2020] NZHC 3402
Decision Date: 18 December 2020

CaseChat Overview and Summary

The case of O'Brien v Parkinson involved an application for security for costs in a shareholder derivative action. The first plaintiff, Louisa Jane O’Brien, on behalf of General Dynamics Corporation Limited (GDC), sought to bring proceedings against the first defendant, Kevin Parkinson, and associated entities, alleging breaches of fiduciary duty and seeking a resulting trust over a property in Wanaka. The defendants argued that GDC, being impecunious, should provide security for costs. The court was required to determine whether, and if so on what terms, an order for security for costs should be made. The court considered the discretionary nature of such orders under rule 5.45 of the High Court Rules 2016, balancing the defendant's interest in protection against the plaintiff's right of access to court. The court also assessed the merits of the plaintiff's claims and the financial capacity of the parties involved.

The court rejected the defendants' application for security of $150,000 and instead found that Ms O’Brien should provide an undertaking that $50,000 held in the Barter & Co trust account be held as security for an adverse costs award in these proceedings. The court reasoned that the plaintiffs' claims had a reasonable likelihood of success, and that it would be harsh to impose a significant financial burden that might prevent Ms O’Brien from advancing her claims. The court also noted that the defendants were not at risk of a barren or grossly inadequate costs award if the plaintiffs were unsuccessful, as there were other avenues for recovering costs. The court concluded that the proposed undertaking was both an appropriate form and an acceptable amount of security, and ordered that Ms O’Brien provide this undertaking by a specified date. In relation to costs, the court preliminarily found that Ms O’Brien should be entitled to costs on a 2B basis plus disbursements, subject to final determination.

Orders