OPTIMIZER HQ LIMITED as trustee of the Justice for Optimizer Trust AND BANK OF NEW ZEALAND SMARTPAY LIMITED …/2
[2025] NZHC 755
•2 April 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-586
[2025] NZHC 755
BETWEEN OPTIMIZER HQ LIMITED as trustee of the Justice for Optimizer Trust
Plaintiff
AND
BANK OF NEW ZEALAND
First Defendant
SMARTPAY LIMITED
Second Defendant…/2
Hearing: 19 March 2025 Appearances:
N Williams and C Morris for Plaintiffs
S A Comber and T Watson for First Defendant
D J Chisholm KC and J D Ryan for Second Defendant No appearance for liquidators in 2179Judgment:
2 April 2025
JUDGMENT OF VENNING J
This judgment was delivered by me on 2 April 2025 at 2.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
OPTIMIZER HQ LTD v BNZ & OPTIMIZER TRUSTEE LTD v McLENNAN [2025] NZHC 755 [2 April 2025]
CIV-2024-404-2179
BETWEEN OPTIMIZER TRUSTEE LIMITED
Plaintiff
AND
IAIN McLENNAN and KEATON ALEXANDER PRONK
First Defendants
BANK OF NEW ZEALAND
Second DefendantSMARTPAY LIMITED
Third Defendant
Solicitors: Cameron Morris, Auckland
Simpson Grierson, Auckland
Claymore Partners Ltd, Auckland McVeagh Fleming, Auckland
Counsel: D J Chisholm KC/J D Ryan, Auckland
[1] There are three applications before the Court. In CIV-2020-404-586 (the 586 proceeding) Optimizer Trustee Limited (OTL) has filed interlocutory applications seeking:
(a)a new party order; and
(b)an extension of time for service.
[2] In CIV-2024-404-2179 (the 2179 proceeding) OTL has brought an originating application in which it seeks the Court’s approval of an assignment by the liquidators.
[3] The applications are opposed by the Bank of New Zealand (BNZ) and Smartpay Limited (Smartpay).
Factual Background
[4] These are not the first proceedings involving parties associated with OTL that have been brought against BNZ and Smartpay in this Court. The general factual background is conveniently set out in a judgment of Wylie J in proceedings brought by Optimizer HQ Limited (OHQL) against BNZ and Smartpay (the 1763 proceedings) where his Honour recorded:1
[15]There is however no dispute about the following:
(a)OHQL was incorporated on 11 April 2013. It was originally named OPH Holdings Limited. It changed its name to OHQL on 30 April 2013. Although there are a number of shareholders, the majority of its shares are held by Mr Kumar and he is its sole director.
(b)On 3 October 2012, the BNZ provided a company which was, at the time, named Optimizer HQ Ltd but was subsequently renamed Odev Ltd (Odev) with a letter of acceptance for the provision of merchant services for MasterCard and Visa card transaction processing. The letter was signed by the Odev directors (including Mr Kumar) on 3 and 8 October 2012.
(c)Odev was incorporated in 2005 as Intel Media Ltd. It then changed its name to Genesis Web Strategies Ltd. From 2011 to 30 April 2013, it was called Optimizer HQ Limited. From 30 April 2013, it was renamed Odev. Its shares were held by
1 Optimizer HQ Ltd v Bank of New Zealand [2020] NZHC 1253 at [15].
OHQL and Mr Kumar was initially one of two directors and then subsequently its sole director.
(d)Another company, Optimizer Corporation Ltd (OCL), was incorporated on 5 June 2013. It changed its name to 4468440 Ltd on 9 December 2015. Its shares were held by OHQL and its sole director was Mr Kumar.
(e)On 2 May 2014, OCL entered into a service agreement with Spark. Under that agreement Spark was given the exclusive right to market and facilitate the sale and distribution of the Swipe HQ product and the associated technology. In exchange, OCL was to provide Spark business customers with a mobile payment facility. Spark agreed to promote the service to its existing customers and prospective new customers.
(f)On 18 September 2014, OCL entered into a distribution agreement with Smartpay. Under the agreement, Smartpay agreed to grant OCL the right to promote and rent EFTPOS terminals owned by Smartpay to OCL customers. OCL agreed to pay fees to Smartpay. In the event of default, all terminals supplied by Smartpay to OCL were to be returned to Smartpay at OCL’s cost. It was recorded that the agreement created a security interest in the terminals and OCL was required to register a financing statement under the Personal Property Securities Act 1999 against each of its customers who had possession of a terminal and provide Smartpay with the associated verification statement.
(g)On 27 November 2014, the BNZ sent through a new letter of acceptance for the provision of merchant services for Mastercard and Visa card transactions to OHQL. The copy of the document made available in the agreed bundle is not signed, but the BNZ, for the purposes of this hearing, accepted that the document bound it and OHQL.
(h)On 3 June 2015, Smartpay issued a statutory demand against OCL in respect of outstanding invoices issued by Smartpay to OCL under the September 2014 distribution agreement. Subsequently, on 15 October 2015, Smartpay issued a further statutory demand to OCL on account of another outstanding invoice also issued under the distribution agreement.
(i)On 1 December 2015, Odev and OCL sold all or substantially all of their Swipe HQ businesses and assets to Cybercom Hospitality Solutions Limited (Cybercom).
(j)On 10 December 2015, Odev and OCL were put into liquidation.
(k)On 18 December 2015, OHQL entered into an “Account and Merchant Agreement Transfer Deed” with Cybercom and the BNZ. Pursuant to that deed, OHQL:
(i)acknowledged that it subsidiaries (Odev and OCL) had “sold all or substantially all of their business and assets to” Cybercom;
(ii)transferred “all its rights, title, interests in relation to” various account numbers which were set out in an appendix to Cybercom. The account numbers related to client accounts then operated by OHQL with the BNZ;
(iii)transferred “all its rights, title, interests and novates its obligations and liabilities in relation to the [November 2014] Merchant Agreement” to Cybercom;
(iv)acknowledged and confirmed that “neither it nor any of its authorised signatories appointed by [it would] from (and including) the Effective Date have any rights or powers to operate the Client Accounts on the Account Numbers, the [November 2014] Merchant Agreement, … and instruct[ed] BNZ accordingly”;
(v)agreed that the BNZ would not have any obligation or liability in relation to the assignments and novations provided under the transfer deed or any transactions transacted on the account numbers;
(vi)indemnified (together with Cybercom) the BNZ against all liabilities, costs, expenses, damages and losses arising out of or in connection with the assignments and novations.
The BNZ agreed that on and from the effective date Cybercom was entitled to exercise all of OHQL’s rights under and in respect of the 27 September 2014 Merchant Agreement “as if the Transferee was the original owner of the Merchant Agreement in place of the Transferor”. The effective date was defined as the day following the date that the BNZ confirmed that various conditions set out in the deed were satisfied.
(l)OHQL was removed from the Companies Office register on 24 January 2017. It was restored to the register as from 27 June 2019.
Procedural background
[5] In the 1763 proceedings OHQL had pleaded the following causes of action against BNZ, and in two causes of action, Smartpay as well:
(a)breach of confidence (both BNZ and Smartpay);
(b)unlawful interference with business;
(c)conspiracy by unlawful means (BNZ and Smartpay);
(d)breach of the Fair Trading Act 1986;
(e)deceit;
(f)breach of master services agreement entered 2012; and
(g)injurious falsehood.
[6] Wylie J concluded that each of the seven causes of action was untenable against both BNZ and Smartpay. In the judgment delivered on 12 June 2020 he struck them all out.2
[7] In the course of the proceeding and prior to the hearing before Wylie J, OHQL had purported to file an amended statement of claim on 3 June 2020. The Judge dealt with that as follows:3
[45] I direct the Registrar to return the amended statement of claim filed on 3 June 2020 to OHQL. If OHQL wishes to start afresh, it will have to refile the document through a solicitor and either pay the appropriate filing fee or obtain a fees waiver. It will of course be open to the BNZ and Smartpay to respond to the amended statement of claim as they see fit.
[8] Despite that direction and the fact that the claims brought by OHQL had been struck out in their entirety, and therefore the proceedings were, in June 2020, at an end, on 31 October 2020 OHQL endeavoured to file an amended statement of claim in the CIV-2019-404-1763 proceeding. Then counsel for OHQL filed a memorandum with the proposed amended statement of claim noting that there were “potential limitation issues arising if the plaintiff was prevented from filing the claim in an amended form”.4
2 Optimizer HQ Ltd v Bank of New Zealand, above n 1.
3 Optimizer HQ Ltd v Bank of New Zealand, above n 1.
4 Memorandum of Ms M Taylor-Cyphers, dated 10 November 2020.
[9] The Judge dealt with the matter peremptorily. He noted that although his original judgment was subject to an appeal:5
[8] It follows that these proceedings – CIV-2019-404-001763 – are at an end. There is no live statement of claim which can be amended. The plaintiff, or any assignee from the plaintiff, can commence fresh proceedings. If there are limitation issues, then there are limitation issues. That is not a matter which justifies a departure from the correct legal position and/or the High Court Rules.
[10] The Judge directed the purported amended statement of claim be returned to OHQL. He reiterated that fresh proceedings were required if the matter was to be taken further by OHQL or its assignees.
[11]OHQL was then placed into liquidation on 27 November 2020.
[12] Despite Wylie J’s direction, and OHQL’s liquidation, entities associated with Mr Kumar and OHQL persisted with their intended claims against BNZ and Smartpay. OTL was incorporated on 6 April 2021 to be the Trustee of the Justice for Optimizer Trust which was itself created by Deed of Trust on 7 April 2021. Raymond Lewis, a former BNZ employee is its director.
[13] On 19 April 2021, the liquidators of OHQL assigned the rights, title and interest in its claims against BNZ and Smartpay to OTL as trustee of the Justice for Optimizer Trust.
[14] In the meantime, Smartpay had brought proceedings against OCL’s director, Manus Kumar alleging he had breached his duties as a director and had thereby caused Smartpay a loss. In an interim judgment delivered on 13 May 2022, Downs J held that Mr Kumar had breached his duties as a director and had thereby caused Smartpay a loss.6 On 19 October 2022, Downs J subsequently quantified that loss at
$850,427.43.7
5 Optimizer HQ Ltd v Bank of New Zealand [2021] NZHC 462.
6 Smartpay Ltd v Kumar [2022] NZHC 997.
7 Smartpay Ltd v Kumar [2022] NZHC 2685.
[15] Prior to its liquidation, OHQL had filed these proceedings with the Court. OHQL sought to rely on the same allegations (word for word) as were contained in the amended claim that it had purported to file in the 1763 proceedings which Wylie J had rejected. It seems OHQL simply provided a fresh cover sheet although the allegations and claims remained unaltered. The Registry allocated a new file number to the new proceeding: CIV-2020-404-586. It was recorded as being lodged on 10 November 2020.
[16] In accordance with r 5.72 of the High Court Rules 2016, service of the new 586 proceeding was required within 12 months. But the 586 proceedings were not served on either BNZ or Smartpay within 12 months. As such, r 5.72(2) applies. The
586 proceeding is treated as having been discontinued against both BNZ and Smartpay. OTL, which seeks the extension on behalf of OHQL, must obtain the extension because it is accepted that otherwise the claim would be out of time and statute barred.
[17] Against that background, OTL applies for an order that it be substituted as a new party as plaintiff in place of OHQL on the basis it has taken an assignment of OHQL’s claims against BNZ and Smartpay and also seeks an extension of time to serve the claim.
Preliminary procedural issues
[18] There is a fundamental conceptual difficulty for OTL with the applications it has brought before the Court. OTL seeks a new party order. It seeks to replace OHQL as the plaintiff in the 586 proceedings. However, as noted, those proceedings are currently treated as discontinued. There are no extant proceedings to which OTL can or could be appointed as plaintiff whatever the merits of the application for a new party order might otherwise be.
[19] Similarly, there is a fundamental difficulty with OTL’s application for an extension of time under r 5.73 for service of the statement of claim. It has no standing as it is not a party to the proceeding.
[20] Mr Williams suggested the Court’s inherent jurisdiction could be relied on to resolve that procedural impasse and referred to the decision of Hobday v Selwyn District Council.8 In that case the Associate Judge accepted the plaintiff could apply for an extension of time for service even though both the 12 month period for service under r 5.72 and the relevant limitation period had both expired. However, that was a different case. In Hobday, importantly, the plaintiffs remained the same. The Associate Judge simply accepted that the procedural discontinuance under r 5.72 was effectively subject to a reservation of leave under r 5.73 to apply for an extension of time (out of time). Similarly, I accept that, in principle, it would be open for OHQL to apply for an extension of time under r 5.73. That position is, however, somewhat complicated in the present case by the purported assignment of OHQL’s rights to OTL.
[21] As I discussed with counsel, Mr Williams, at the outset of the hearing, logically the appropriate way to deal with the applications is to first determine whether an extension of time ought to be granted to the existing plaintiff (or perhaps its assignee OTL), to serve the 586 proceedings. Until such an order is made, there are no proceedings before the Court on which an order substituting OTL as the plaintiff could be made. I understood Mr Williams to accept the force of that logic.
Extension of time for service
[22] Putting the conceptual procedural difficulties to one side, I propose to deal with the merits of the application for the extension of time for service.
[23]Rule 5.73(2) provides two bases upon which the Court may grant an extension:
The court, if satisfied that reasonable efforts have been made to effect service on that defendant or person, or for other good reason, may extend the period of service for 6 months from the date of the order and so on from time to time while the proceeding has not been disposed of.
[24] Mr Williams accepted that reasonable efforts had not been made to effect service. The applicant relies on the alternative ground, namely “other good reason” to extend the period of service.
8 Hobday v Selwyn District Council [2024] NZHC 550.
[25] In Hibbs v Towle the Court of Appeal considered the principles to apply in a case where the requirement to take reasonable efforts to serve the proceedings had not been satisfied.9 The Court adopted the approach taken by the House of Lords in Kleinwort Benson Ltd v Barbrak Ltd and identified three categories of cases:10
(a)where the statement of claim is still valid and the limitation period has not expired;
(b)where the statement of claim is valid but the limitation period has expired; and
(c)where both the statement of claim has ceased to be valid, and the limitation period has expired. In these circumstances the defendant(s) will have accrued a limitation defence.
[26] As noted, the applicant accepts that the defendants have a limitation defence and unless an extension is granted the claim will be barred, so that this case falls within the third category of cases.
[27] In Hibbs v Towle the proceedings had not been served on one of the two principal beneficiaries of the deceased’s will.11 The Court of Appeal confirmed that the Court should consider the balance of hardship between the parties, including whether allowing an extension would cause any prejudice to the defendant in all the circumstances of the case.
[28] In Hibbs v Towle the Court accepted that the proceedings had been served on the executor and the other beneficiary within time and Mrs Renshaw, the remaining beneficiary, must have known of them. The Court noted the lack of prejudice to Mrs Renshaw and against that, considered the plaintiffs’ claim had merit and they would be prejudiced if leave was refused.
9 Hibbs v Towle CA60/87, 21 July 1988.
10 Kleinwort Benson Ltd v Barbrak Ltd [1987] 1 AC 597.
11 Hibbs v Towle, above n 9.
[29] In Hibbs v Towle the Court held that in the third category of case, the applicant must give a satisfactory explanation for his failure to apply for an extension before the validity of the proceedings expired. Similarly, in Melgren v Public Trustee Moller J held that, where a defendant would be deprived of a limitation defence, the reason for extending the time for service must be strong.12 Ultimately, in that case the Judge accepted that the delays in effecting service were caused by the time necessary for the Public Trustee to establish beneficiaries of the deceased’s estate which, in the circumstances, constituted good reason.
[30] Mr Williams submitted that the following were good reasons for extending the period for service in this case:
(a)OTL understood that the new proceeding had been served on BNZ and Smartpay around the time it was filed in November 2020;
(b)between May 2021 and early December 2023, (Mr Lewis) on OTL’s behalf made a number of inquiries of then legal counsel who had filed the new proceeding and with the Court querying why no statement of defence had been filed;
(c)while Mr Lewis was advised the BNZ considered the proceeding had not been served in December 2021, when he made queries with OHQL’s lawyer she confirmed the new proceeding had in fact been served;
(d)the High Court Registry continued to confirm the proceeding was on foot until 19 December 2023. If Mr Lewis had been advised on 15 November 2021 or 1 December 2021 the proceeding was deemed to have been discontinued for lack of service OTL would have applied for an extension of service at that time;
12 Melgren v Public Trustee [1971] NZLR 681.
(e)BNZ and Smartpay were sent a copy of the new proceeding not endorsed by the Court at the time it was filed so were aware of the general nature of the claim;
(f)the endorsed notice of proceeding was sent by the High Court Registry to counsel in early November 2021, only days before the 12 month period prescribed by r 5.72(b) expired; and
(g)despite repeated communications with the High Court Registry about this file OTL was not advised by the High Court until 19 December 2023 that the file was closed due to no proof of service.
[31] Mr Williams argued there was no substantial prejudice to BNZ and/or Smartpay because they knew the new proceedings had been filed. The defendants had been sent a copy of the statement of claim at the time the proceeding was filed. They had not been required to incur significant costs in relation to the proceeding. They had considered the issues raised in this proceeding and had filed evidence in the previous and related proceedings. Further, there had been recent proceedings in the Employment Relations Authority involving the BNZ which traversed the events relied on in these proceedings. The evidence required to respond to the claim would be available to the defendants.
[32] Mr Williams submitted that, on the other hand, OTL would be prejudiced if an extension was not granted as it would be unable to pursue the existing proceedings and would be time barred from commencing new proceedings against BNZ and Smartpay.
[33] The grounds at [30](a), (b) and (c) relied on by the applicant essentially amount to the same point. The applicant (through Mr Lewis) blames its former legal adviser for the failure to serve the proceedings within time.
[34] In Hobday v Selwyn District Council the Court declined to extend the time for service where the failure to serve within time resulted from the plaintiffs’ solicitors
apparent negligence.13 Mr Williams sought to distinguish that case on the basis that the defendant Council was not aware the proceeding had been filed until after time had expired. He argued that in this case the defendants were generally aware of the claim, and, in addition, he argued that the High Court Registry repeatedly advised Mr Lewis the proceeding was still active when in fact it no longer was.
[35] I do not consider that Hobday can be distinguished on the basis suggested. OHQL’s legal advisers at the time had responsibility to ensure the proceedings were served. Wylie J clearly drew to their attention that a new proceeding was required. It may well be, as the Associate Judge noted in Hobday, that the OHQL has a good claim for negligence against its former legal adviser, but that is not itself a good reason to extend the time. Mr Williams noted any such claim may be difficult as it will be a loss of chance claim, but again, that is no answer. That is often the basis of the claim in cases involving professional negligence.
[36] Despite Mr Williams’ submission that the defendants were aware of the proceedings as referred to at [30](e), I consider that Mr Williams overstates the position when he says the defendants had been sent a copy of the statement of claim. Neither BNZ nor Smartpay were sent a copy of these 586 proceedings. They had been sent a copy of the proposed amended statement of claim that OHQL had purported to file in the 1763 proceedings and had successfully opposed its filing. That cannot be taken as de facto service of these separate proceedings.
[37] It was only much later in September 2021 that the BNZ through its counsel’s inquiries that it became aware the proceedings had even been filed.
[38] In any event, even if BNZ and Smartpay were generally aware of the fact OHQL still intended to pursue them, in a commercial case such as the present, BNZ and Smartpay were entitled to sit on their rights and wait to see whether the fresh proceedings would be properly served on them.
[39] The grounds at [30](d), (f) and (g) relate to the involvement of the High Court Registry in this case. It is said that Registry staff continued to confirm the 586
13 Hobday v Selwyn District Council, above n 8.
proceedings were on foot and active until 19 December 2021. A number of points should be made about that. The first is, that it is not the role of the High Court Registry to provide legal advice to parties, particularly where, as here, the parties are represented by lawyers..
[40] Next, the communications from the Court do not go so far as suggested on behalf of OTL. Despite the numerous documents relied on as communications from the Registry staff, none state that service had been effected on the defendants. While there were references to the case being an active case that was correct, at least until 10 November 2021. Mr Lewis says in his affidavit that he contacted the Registry contact centre on 2 December 2021 and told them his (OHQL’s) counsel had told him she had proof of service. He says he was assured the case was still active. While there is a record of the call, there is no email record of advice to that effect. In any event, the Registry staff had no way of knowing whether the claim had been served as it was the responsibility of OHQL and its counsel to attend to that. Next, by that time, Mr Lewis was aware that BNZ’s position was that it had not been served with the 586 proceedings. He accepts that he was advised to that effect on 1 December 2021 by BNZ’s lawyer. Mr Lewis apparently followed that matter up with OHQL’s legal adviser and was apparently assured the matter was in hand. That simply supports the point that any claim OHQL may have is against its former legal adviser.
[41] Then, on 19 January 2022, in response to a communication from Mr Comber on behalf of BNZ on the same date, the Registry wrote to all counsel (including OHQL’s counsel) to confirm the proceeding was closed (for the reasons set out in Mr Comber’s letter, namely that they had not been served).
[42] If OHQL’s former legal adviser failed to advise it of that communication, which could not be clearer, then that is a further issue for the adviser. Finally, even OTL accepts it knew from two communications with the Registry on 19 and 22 December 2023 that the case was closed. Mr Lewis accepted that in his affidavit. Despite that, the application for an extension of time for service and application for new party order were not served until 16 October 2024.
[43] Mr Williams referred to Mr Lewis’ evidence about the notice of proceeding not being released until shortly before or even after the time for service had expired. I consider the issue about the endorsed notice of proceeding to be somewhat of a red herring. Given the position taken by OHQL’s legal adviser at the time, nothing turns on that as she apparently considered the proceeding had been served in any event.
[44] Finally on this point, even if the advice from the Registry was incorrect, which it was not, in Sgargetta v ASB Bank incorrect advice from the Registry did not excuse a failure to take reasonable steps to serve a proceeding or to seek an extension earlier.14 In that case the Registry had incorrectly advised Mr Sgargetta (one working day before the expiry of the 12 month period) that service on receivers through the post was considered service.
[45] In short, for whatever reason, and it may well be in part the fault of former legal counsel, OTL took no steps to serve its proceeding within time, and even after that failure was drawn to the attention of its legal adviser and to Mr Lewis, it failed to act promptly to apply for an extension of time.
[46] There remains no satisfactory explanation why it took OTL until 16 October 2024 to apply for orders pursuant to r 5.73 to extend the time for service of the statement of claim in respect of both BNZ and Smartpay even when Mr Lewis accepts that he was aware of the position by December 2023, quite apart from the earlier advice which should have put him and OHQL on inquiry.
[47] The final consideration is the prejudice to the applicant if leave is not granted against the prejudice to BNZ and Smartpay if leave were granted. In that regard, it is relevant that OHQL has already had an opportunity to pursue a claim against BNZ and Smartpay and has had that claim dismissed. This is not a case where a party will be denied their day in Court.
[48] Next, I note that Mr Williams accepted the proposed claim will need further amendment – it is not yet in a final form. Mr Williams accepted that the second cause of action had been previously pleaded and struck out and OTL does not intend to
14 Sgargetta v ASB Bank [2024] NZHC 2109.
pursue the third, fifth and sixth causes of action. The remaining causes of action in the first, fourth and seventh causes of action to be pursued are intentionally causing economic harm by unlawful means against both BNZ and Smartpay, conspiracy to injure against BNZ and Smartpay and conspiracy to injure against BNZ alone.
[49] It is also a relevant consideration that for the reasons given above, OHQL will not necessarily be left without redress. It may have a claim against its former legal adviser.
[50] Against that, the specific and very real prejudice to the BNZ and Smartpay is that to allow the extension would deny them of a limitation defence. That is particularly relevant where they have already faced a claim by OHQL which has been dismissed. Further, the proposed claim is based on meetings in November 2015, now almost some 10 years ago, and about which there will be conflicting evidence and, on some points, an issue of credibility. Given that a substantive fixture would not be heard before 2026 at the earliest and more likely 2027, that is unsatisfactory (and one of the reasons for the limitation provisions).
[51] Finally, there are real issues with the merits of the proposed claim. Without going into the detail of it, there is a strong argument for BNZ and Smartpay that OHQL was not a trading entity and as such could not have sustained the losses which are sought to be recovered in these proceedings. The relevant businesses including customer lists and know-how belonged to its subsidiaries who contracted with Smartpay and BNZ. It is those parties that potentially may have had a claim but as discussed later, their rights were arguably assigned to Cybercom Hospitality Solutions Limited on 1 December 2015 (Cybercom), shortly before they were placed into liquidation.
[52] For the above reasons, the application for an extension of time to serve the proceedings is dismissed.
New party order
[53] As the proceedings are discontinued, there is nothing to which OTL could be substituted. That effectively deals with the application by OTL for a new party order.
[54] However, I propose to deal briefly with the merits. The relevant principles applying to a new party order are set out in rr 4.51 and 4.52. Rule 4.51 applies particularly where there is an assignment as is proposed in this case. In Re Liu, ex parte Hu,15 the Court confirmed that reading the two rules together authorises the continuation of the proceeding by an assignee instead of a plaintiff.
[55] The Court may order that the proceedings be carried on between continuing parties and a new party where, in this case, there has been an event causing a change or transmission of interest after the proceeding commenced, and it is necessary or desirable that, in this case, OTL be made a party.
[56] OTL relies on the Deed of Assignment dated 19 April 2021 which assigned OHQL’s rights in 586 to OTL while the proceeding was pending.
[57] Apart from the basic premise that there are no extant proceedings, BNZ and Smartpay also oppose the application on the basis that the liquidators of OHQL had no rights, title or interest in proceeding 586 to assign to OTL on 19 April 2021 because all the relevant rights arising out of the SWIPE HQ business were held by OCL or Odev and on 1 December 2015 those rights were sold to Cybercom. Then, under the 18 December 2015 Account and Merchant Transfer Deed between OHQL, Cybercom and BNZ, OHQL confirmed that it had transferred all its rights, title, and interest in relation to various account numbers and had novated its obligations and liabilities in relation to a November 2014 Merchant Agreement to Cybercom.
[58] Mr Williams accepted that OHQL had transferred its rights, title and interest in relation to account numbers and had novated its obligations and liabilities in relation to the merchant agreement with BNZ. However, he argued that OHQL did not assign its business generally nor its rights to choses in action against BNZ and Smartpay. Further, the claims assigned by the liquidators and now advanced by OTL are founded in tort rather than contract and are not affected by the Cybercom assignment.
15 Re Liu, ex parte Hu [2023] NZHC 2588.
[59] In response, BNZ and Smartpay make the point that OHQL did not actually carry out a business and therefore it could not have sustained any recoverable loss. They also note that the costs order from the previous proceeding remains unpaid.
[60] I consider there is real force in the submissions for BNZ and Smartpay given that Wylie J held in the previous proceedings that OHQL was a holding company which did not carry out any trading and could suffer no direct losses. While the proposed remaining causes of action in the statement of claim in the 586 proceedings focus on tortious rather than contractual liability the claims still fail to address the fundamental issue as to how OHQL could have suffered any actionable loss given the assignment to Cybercom.
[61] The documents before the Court confirm that from 1 December 2015 OCL and Odev had sold their business and assets, including all customer contracts, good will and intellectual property to Cybercom for $255,000 plus GST. OHQL entered an account and merchant agreement transfer deed on 18 December 2015 with Cybercom and BNZ in which it acknowledged that its subsidiaries Odev and OCL had sold all or substantially all of their business and assets to Cybercom and transferred all rights, title, and interest in relation to various account numbers to Cybercom. OHQL also acknowledged that it had transferred all its rights, title, interest and novated its obligations and liabilities in relation to the previous merchant agreement with BNZ to Cybercom.
[62] In relation to the failure to pay costs Mr Williams noted that the litigation funder behind these proceedings had agreed to pay the costs award made by the High Court on 3 July 2020 against OHQL and in favour of Smartpay and BNZ in the event the applications were granted by the Court. He noted that in La Famia No 1 Ltd (in liq) v Gan,16 the assignees acceptance that the award of costs would be paid obviated unpaid costs as a consideration. However, I regard the Funder’s proposal that it will pay costs but only if, or on condition, the Court grants the orders it seeks to be an unsatisfactory position for it to adopt on their applications.
16 La Famia No 1 Ltd (in liq) v Gan 2014 NZHC 3158.
[63] However, in any event, for the fundamental reason that there are no extant proceedings for OTL to be substituted as plaintiff to, the application for a new party order must also be dismissed.
[64] In the circumstances it is unnecessary to consider the alternative arguments that OTL has no proper or genuine commercial interest in the proceeding as it is an entity which has been created solely for the purpose of bringing the current claim which may or may not be for the benefit of creditors.
The assignment application
[65] The originating application for approval of the assignment by OTL is made under s 260A of the Companies Act 1993. Section 260A provides:
260A Liquidator may assign right to sue under this Act
(1)The liquidator may, if the court has first approved it, assign any right to sue that is conferred on the liquidator by this Act.
(2)The application for approval may be—
(a)made by the liquidator or the person to whom it is proposed to assign the right to sue; and
(b)opposed by a person who is a defendant to the liquidator’s action, if already begun, or a proposed defendant.
[66] The issue is whether the right to sue which has been purported to be assigned is one conferred by the Companies Act. The distinction is between company claims, namely claims that existed at the commencement of the liquidation and claims bestowed on liquidators by the operation of the Companies Act. While sch 6 confirms the powers of the liquidators to commence, continue, discontinue and defend legal proceedings, that is a general provision rather than conferring a specific right to sue under the Companies Act.
[67] The purported tortious claims by OHQL are not rights to sue conferred on the liquidators by the Act.
[68] The respondents consider that to the extent the applicant seeks orders under s 260A it is not required in this case. Mr Williams effectively conceded that point in
his submission, noting that OTL now does not consider approval is required given the causes of action existed prior to the appointment of the liquidators.
[69] I agree. I consider the application to be unnecessary. The plain wording of s 260A confirms that it is directed at rights to sue that are conferred on a liquidator by the Companies Act.
[70] In the event I am wrong, and approval of the Court is required then approval would be declined for the reasons given above, namely that there are no extant proceedings, the proposed proceedings lack apparent merit and there are still outstanding costs orders.
[71]That application is also dismissed.
Costs
[72] I reserve the issue of costs. BNZ and Smartpay are entitled to costs, but I note there was a suggestion that they may wish to pursue costs against Mr Lewis personally. In that event a formal application for costs against Mr Lewis should be made as he would be entitled to be separately represented and heard.
[73] Any application for costs (including against Mr Lewis if that is to be pursued), accompanied by supporting memorandum is to be filed and served within 10 working days of this decision. Any opposition and reply memorandum to be filed and served within a further 10 working days with any response by BNZ and Smartpay to be filed and served within a further five working days. I will then deal with the issue of costs on the papers.
Venning J
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