Paape v Fahey HC Wellington Civ-2001-485-810
[2005] NZHC 1220
•18 May 2005
IN THE HIGH COURT OF NEW ZEALANDCIV-2001-485-810 WELLINGTON REGISTRY
IN THE MATTER of the Securities Act 1978
AND
IN THE MATTER of a representative action
BETWEEN JONATHAN CHARLES GRIFFITHS PAAPE
Plaintiff
AND J P FAHEY
First Defendant
AND B M SUTCLIFFE
Second Defendant
AND R J NEWSON
Third Defendant
AND J A BUTT
Fourth Defendant
AND D C ADEY
Fifth Defendant
AND J P REUHMAN
Sixth Defendant
AND G E MAYCROFT
Seventh Defendant
Hearing: 14 – 16 February 2005
Appearances: S J Brown for the Plaintiff
C Finlayson and A Cottrell for the First, Second, Third, Fifth and Seventh Defendants
B Gibson for the Fourth Defendant
W M Wilson QC and S J Peacock for the Sixth Defendant
Judgment: 18 May 2005
In accordance with r 540(4) I direct the Registrar to endorse this judgment with the delivery time of 10am on 18 May 2005.
JUDGMENT OF ELLEN FRANCE J
CONTENTS
Introduction Chronology Pleadings
Does the proviso apply? Contribution
Result Costs
Para No.
[1]
[6]
[7]
[12]
[119]
[123]
[124]
Introduction
[1] These proceedings arise out of a share offer by Greentek Limited, now in liquidation. Greentek’s business was environmentally friendly weed control technology. Greentek registered a prospectus dated 2 September 1999, on 3 September 1999 offering for sale to the public 1,850,000 ordinary shares at $1.00 per share. The prospectus stated that the closing date for applications for the shares was 29 October 1999, and that a minimum level of $500,000 in subscriptions would be required for the float to proceed. On 26 October, when it became apparent that the minimum amount would not be achieved by the closing date, the company extended the deadline for subscriptions to 31 December. The share offer was declared unconditional in early January 2000 even though by then the minimum amount of subscriptions had not been achieved. In terms of s 37(6) of the Securities Act 1978, if subscriptions are not then repaid within the statutory timeframe, the issuers and all the directors are jointly and severally liable to repay the subscriptions together with interest at the prescribed rate.
[2] There was insufficient money in the trust account to repay subscribers their funds. The plaintiff, who is representative of those who subscribed for shares in Greentek, then brought these proceedings for recovery of the funds. The plaintiff obtained summary judgment against the sixth defendant, John Reuhman, who was the organising broker and a promoter of the share issue. Mr Reuhman unsuccessfully appealed against the summary judgment to the Court of Appeal. (Reuhman v Paape (2002) 9 NZCLC 262,998).
[3] The other defendants, Messrs Fahey, Sutcliffe, Newson, Butt and Adey were all directors of Greentek. Apart from Messrs Adey and Reuhman, the other directors were appointed at the time the company was incorporated. Mr Adey did not become a director until 1 July 1999 and Mr Reuhman on 31 January 2000. Mr Butt was removed as a director from 31 January 2000.
[4] The issue in the proceedings is whether these other defendants are liable under s 37(6) to contribute to the loss. This turns on whether the proviso to s 37(6) applies to excuse the actions of the other directors, Mr Reuhman having failed in his argument that the proviso applied. The proviso excuses directors from liability where they have not been negligent. The directors say the proviso applies to them. The plaintiff disputes that and Mr Reuhman argues that the other directors are in the same position as him and should contribute to the loss.
[5] By consent, at the commencement of the trial, the seventh defendant, Mr Maycroft, was struck out of the proceedings. He became a director after the relevant time.
Chronology
[6]The chronology of relevant events is as follows:
26 May 1999 Greentek Limited registered under Companies Act 1993.
Fahey, Sutcliffe, Newson and Butt appointed as directors.
1 July 1999
Adey appointed a director.
3 September 1999
Greentek registers a prospectus dated 2 September 1999 and issues an investment statement offering 1,850,000 ordinary shares at $1.00 per share; minimum subscription
level of $500,000.
26 October 1999
Closing date for applications for shares extended from 29
October 1999 to 31 December 1999 by resolution of directors.
26 November 1999
Reuhman, Fahey, Sutcliffe and Newson meet in Palmerston North – first mention of Reuhman
underwriting the float.
November-December
Directors seeking and receiving updates on course of float
28 December 1999
Board meeting at Reuhman’s house – Reuhman, Fahey and Sutcliffe present. Newson arrives late. At this point
$431,000 subscribed.
31 December 1999
Draft letter prepared by Reuhman. At this stage $445,000 subscribed. Contents of letter discussed with some of the
other directors.
7 January 2000
Final version of draft 31 December letter sent out. Records share issue is unconditional.
10 January 2005
Reuhman’s fee paid from trust account.
31 January 2000 Reuhman appointed a director of Greentek.
Butt ceases to be a director.
30 June 2000
Maycroft appointed a director of Greentek.
Pleadings
[7] The plaintiff’s claim is that by 3 January 2000, that is, the expiration of four months after the date of the prospectus, the applications for subscriptions received did not amount to “a minimum level of public investment of $500,000”. Accordingly, s 37(2) of the Securities Act meant that the shares subscribed for could not be allotted by the company. Therefore, the plaintiff says that the company was obliged to comply with s 37(5) of the Securities Act and ensure that the subscriptions were kept in a trust account on behalf of the subscribers. Further, that the subscriptions plus any interest earned should have been repaid to the subscribers as soon as reasonably practicable in terms of s 37(6). However, rather than putting the money in a trust account and repaying it as required, the plaintiff says the defendants used the money to pay themselves.
[8] Next it is pleaded that on 3 February 2000 the defendants were under a statutory duty to repay the subscriptions plus interest. Each and all of the defendants, it is pleaded, failed to repay and the funds had been reduced to the extent that less than $100,000 of interested persons’ monies are now in the hands of the company’s liquidator.
[9]The relief sought is:
a)Judgment jointly and severely against each of the defendants in the sum of $522,000.
b)Interest in terms of s 37.
[10] A cause of action based on fiduciary duty was abandoned at the commencement of the trial.
[11] The defendants, broadly, deny the claim. But, in any event, they plead that the proviso applies. In addition, Mr Reuhman claims as against the other defendants, that they should contribute equally to the judgment amount payable by him on the basis that it would be inequitable if they did not do so. Mr Butt similarly claims against all of the other defendants and says he should not be called on for contribution. That is because the others had control of the company at the relevant time. Finally, the first, second, third and fifth defendants claim that if they are found liable, Messrs Butt and Reuhman should contribute to any judgment against them. They should not be required to make any contribution to the judgment entered against Mr Reuhman because they relied on his expertise and advice.
Does the proviso apply?
(i) The factual position
[12] There are a number of factual matters about which there is no real dispute, namely:
a)Mr Reuhman was to have responsibility for organising the float. He confirmed that in his evidence. Mr Reuhman was to receive 5% commission for the brokerage and his directorship and shares in lieu of an advisory fee.
b)The first, second, third and fifth defendants were all directors at the relevant time. Mr Butt was removed as a director from 31 January 2000.
c)Directors had their particular focus. In particular, Mr Butt’s focus was on the financial modelling. Messrs Fahey, Sutcliffe and Newson were to focus on developing the technology/IP side of the products
and, to some extent, marketing of the product. Mr Adey was to come into play when the company extended to Australia.
d)Burrowes & Co acted as the legal advisors on the float and Sherwin Chan & Walshe as the accountants.
e)Mr Reuhman, in particular, had regular contact with Burrowes & Co over the float. The other directors had little, some no, direct contact with Burrowes & Co.
f)All of the directors signed a prospectus in which the minimum subscription figure was set at $500,000.
g)All directors signed resolutions extending the closing date for the float to 31 December 1999.
h)As subscriptions came in, they were reconciled by Reuhman’s staff as Reuhman & Co managed the trust account. (Mr Reuhman confirmed that.) Funds, once cleared, were transferred from Greentek’s ASB account to the trust account.
i)Mr Reuhman told Messrs Fahey, Sutcliffe and Newson on a number of occasions that he or his company would underwrite any gap in subscriptions either through his company buying shares or by commuting his fees to equity. Mr Newson advised Mr Adey that provisions were in place to cover a shortfall situation. Mr Butt also understood that if the cash was not in hand, there would be an underwriting. Christine Reuhman, a fellow director of John Reuhman and Christine Reuhmans’ family company, Gobion Enterprises Limited, confirmed John Reuhman had consulted her about the underwriting and she agreed to it.
j)Mr Reuhman’s fee of some $90,000 was paid from the trust account on 10 January 2000, that is, at a point in time when the float was under-subscribed.
[13] The dispute is over exactly what the directors knew about the requirements of the Securities Act and what they knew about compliance with the Act in this case. Associated with that is a dispute about exactly what Mr Reuhman told them at the critical time.
[14] I find that in terms of the requirements of the Securities Act, all of the directors knew that having $500,000 “in the bank” was a pre-requisite to declaring the issue unconditional.
[15] The level of their understanding about the exact nature of the requirements varied.
[16] In terms of Mr Fahey, his evidence is that he knew that the share issue would be unconditional when the money was “in the bank”. He says he was not aware of the strict conditions of s 37, in particular, he was not aware that all of the money had to be in at the end of the day’s trading on 2 January 2000.
[17] Mr Sutclifffe similarly said he knew that there had to be $500,000 “in the bank” but that he did not know the time limits in relation to the $500,000. Mr Newson says he was aware of the time limit for receipt of subscriptions. Mr Adey confirmed that he knew that $500,000 had to be “in the bank”. Mr Butt says he was aware that there was a need to obtain $500,000 in subscriptions to declare the issue unconditional. But, he says Mr Reuhman never told him that the monies had to be received by the company within four months of the date of the prospectus. Mr Butt agreed that he knew that if the minimum subscription was not made to and received by the company by the closing date the subscriptions had to be refunded.
[18] The important point is that all were aware of the need for $500,000 to have been obtained before the issue would be unconditional.
[19] As to compliance with the Act in this case, it is necessary to consider the position of each of the directors.
[20] In the initial phase (November and December 1999), I accept that the focus of Messrs Newson, Fahey and Sutcliffe was primarily on the technical development of the product. However, while it was Mr Reuhman’s role to manage the float, the other three did know what was going on with the float. Mr Sutcliffe confirms that the three of them wanted to know when the share issue would be unconditional and they knew progress was slow.
[21] The updating took place through their regular, Monday morning meetings with Mr Reuhman at the Heretaunga Yacht Club and through telephone calls from Mr Reuhman. Mr Butt was also at some of those meetings. I accept the submission for Mr Reuhman that there was a clear pattern involving Mr Reuhman meeting with or telephoning the others to advise of progress in this phase. That pattern is reflected in a telephone log of calls kept by Mr Reuhman at the time and in, for example, Mr Butt’s note of the meeting on 1 November 1999 where he records “$355,000” being the amount subscribed at that point, followed by “$365,000” in his note of the meeting of 6 November 1999.
[22] The pattern of meetings and phone calls continued in late November, late December and early January. Mr Reuhman refers to a meeting with Messrs Newson, Fahey and Sutcliffe in Palmerston North in early December. (In oral evidence, he confirmed that this meeting took place on 26 November.) Mr Reuhman also says he met various directors in Wellington on 28 and 31 December 1999. He also met with Mr Butt on 21 December 1999 and e-mailed him when Mr Butt was in the Philippines.
[23] Mr Reuhman says he particularly recalls the Palmerston North meeting at which three of the directors were present (Messrs Newson, Fahey and Sutcliffe) and where the underwriting undertaking was discussed. He says it was also discussed on a number of other occasions. Of the Palmerston North meeting, Mr Sutcliffe says that at that point Mr Reuhman told them that the public float would most likely only raise the minimum subscription and so they would have to be working directors.
[24] In terms of these three directors, the next critical meeting took place on 28 December.
[25] Mr Reuhman’s evidence, that on 28 December he told Messrs Fahey, Sutcliffe and Newson that there was $431,000 in the bank, is confirmed by Mr Sutcliffe’s handwritten notation (“$431,000”) on the agenda for that meeting. Messrs Fahey, Sutcliffe and Newson accept that.
[26] Mr Reuhman recalls that at the meeting of 28 December it was determined that the share issue would be declared unconditional. The others present at the meeting, Messrs Fahey and Sutcliffe, do not dispute that. Mr Newson was late to the meeting and he says that Mr Reuhman told him later that the minimum subscription had not been met; there was $431,000 in the bank; but if the $500,000 figure was not met by 31 December 1999, then Gobion would underwrite the matter. Mr Reuhman also told him that Messrs Fahey and Sutcliffe had decided to accept Reuhman’s offer to underwrite the float so that it would become unconditional based on Mr Reuhman’s guarantee. Mr Fahey similarly refers to an undertaking to underwrite being given at the meeting and Mr Sutcliffe talks about the underwriting being an item discussed at the meeting. He says he raised some concerns about the float not being unconditional but Mr Reuhman assured them Gobion would underwrite.
[27] Mr Sutcliffe’s annotated copy of a letter of 28 December 1999 from Reuhman & Co which formed the agenda for the meeting is consistent with the oral evidence. The letter records:
“ Agenda
1. Status of fundraising $431,000 105 investors
strategy, shortfall, unconditional agreement, extension 31/1/2000? Reuhman underwrite.” (The italicised portions are in Mr Sutcliffe’s handwriting as notes on the printed copy.)
[28] There are some differences about what was said after 28 December. Mr Reuhman talks about a meeting with Mr Fahey on 5 January. Mr Fahey has no recall of a meeting on 5 January 2000 with Mr Reuhman. However, although he has no particular recall, he does not dispute that he was told on 5 January that there was
some $445,000 in the bank. Mr Sutcliffe initially said that on 3 or 4 January 2000, Mr Reuhman told him by telephone that the minimum subscription had been met and the offer was unconditional. Further, that money was coming in and so they would keep their offer open for a bit longer. In cross-examination Mr Sutcliffe said that he had a conversation on the phone around that time but he could not recall that far back now. He did accept that he was told on 6 January that there was less than the
$500,000 in the bank. Mr Newson says that Mr Reuhman told him in the New Year (around 4 or 5 January 2000) that the offer was unconditional and he assumed that was met by underwriting if necessary. He denies there was any reference in the telephone discussion on 4 or 5 January to the sum of $445,000. He says, “quite simply the $455k [sic] was really an irrelevance all I was interested in was the float unconditional or not based on Mr Reuhman’s undertaking to underwrite it.” He says that to the best of his knowledge the figure of $445,000 was not referred to in this discussion. Mr Reuhman’s log of that call suggests the “$455,000" figure was mentioned but, in any event, it is clear Mr Newson knew the figure was less than
$500,000.
[29] The next step was the circulation of the draft of a letter to go out to subscribers declaring the issue unconditional.
[30]The draft letter said:
The Share Issue is now Unconditional and GreenTek has commenced business.
Share float extended to 31 January 2000. Although the issue is unconditional the directors decided to extend the closing date for applications for shares in GreenTek Limited’s current issue to 31 January 2000. This is due to the issue previously closing in the middle of the Christmas holidays and some potential investors raising their concern, about the timing of the closing date.
[31] Mr Reuhman said the draft letter was discussed with other directors. In an affidavit filed in support of the application for summary judgment, Mr Sutcliffe deposed that the letter of 7 January 2000 was not reviewed by the Board. However, in cross-examination, he accepted that some of the directors did discuss it before the final letter was sent out. He says that what he meant in his affidavit was that the letter had not been given “the Board’s blessing”.
[32] In the final version of this letter of 7 January 2000, the reference to the issue being extended is repeated. After the words “the share issue is now unconditional, the final version reads that “Greentek has commenced business and is now rapidly pushing ahead with sales initiatives and various product developments.”
[33] I turn then to Mr Adey. Mr Adey explains that he had limited involvement in the setting up of the company and the float. His active involvement was to commence only when Greentek came to market its products in Australia.
[34] He says that Mr Newson told him that the float was at a lower level. However, he understood from Mr Newson that if the minimum was not met then Mr Reuhman had other provisions in place. He says he did not know as at 5 January whether or not there was in fact $500,000 “in the bank”. Mr Reuhman says he could not be certain whether or not the draft letter telling subscribers the float was unconditional was sent to Mr Adey.
[35] Mr Butt accepts there were regular meetings of directors on Monday mornings at the Heretaunga Boating Club. Mr Reuhman would usually attend these meetings and would report on progress on the float. As mentioned, Mr Butt’s handwritten notes of the meetings confirm Mr Reuhman’s evidence that the directors were kept “up to speed” with progress of the float.
[36] Mr Butt says he continued to attend meetings in early November. The last directors meeting he attended was 8 November. At that point he told the others he had been offered a contract consulting in the Philippines. He said he intended to take up that offer and that the contract would involve his absence for six weeks. He told them he would be able to be contacted by e-mail and he asked the other directors to keep him informed as to progress on the float. They agreed. He also said they gave him leave for this purpose for the next six weeks or so.
[37] Hence, he did not attend the next scheduled directors meeting for 15 November as he was on the way to the Philippines. He was in the Philippines from 16 November 1999 to 18 December 1999. He went back to the Philippines on 8 January 2000 and was there until 16 February 2000.
[38] When he came back to New Zealand on 20 December 1999 he says he was concerned about the lack of contact from the other directors, but principally John Reuhman over the company’s affairs and in particular progress on the float. He called to see Mr Reuhman on 21 December 1999. He says Mr Reuhman told him that subscriptions had been slow but he expected the company would be able to obtain the minimum amount of $500,000 by the end of the month. He says Mr Reuhman did discuss with him what would happen if there was a shortfall and Mr Reuhman told him he would make up the difference.
[39] At the 21 December meeting, Mr Butt says Mr Reuhman did not mention his intention to take shares instead of paying cash but he said he would make up any shortfall. Even if he had mentioned taking shares, Mr Butt says he would not have known at that time that he was unable to do that.
[40] Mr Butt says he was not told there was to be a meeting of directors on 28 December 1999. As he was not told about that meeting, he did not attend. He only learned of the meeting when Mr Reuhman advised him by an e-mail. The email is dated 30 December 1999 and refers to the meeting on 28 December. It continues,
“It would be no surprise to you, as we discussed when you were in the office prior to Christmas, that we are still struggling to raise the funds. We have therefore decided to extend the issue until 31 January 2000.”
[41] The email went on to say that the others had decided the best course was for Mr Butt to stand down as Chairman and resign as a director. He replied on 10 January 2000.
[42] Mr Reuhman confirms that Mr Butt would not have been given a copy of the draft letter telling subscribers the float was unconditional.
[43] On 17 January 2000 Mr Butt received an e-mail from Mr Reuhman telling him that there would be a meeting of shareholders for the purpose of removing him as a director and he replied the following day. He says he was unaware that the issue had been made unconditional until later in January.
[44] When asked what steps he took to ensure the funds received were returned, he said he was informed on 21 December as were the other directors that in fact the subscriptions were coming in slow “but that that was of no effect because John Reuhman would underwrite any shortfall.”
[45] When asked further what steps he had taken to ensure the underwriting occurred, he said he was completely kept out of finding out any information by not being informed of the meeting on 28 December,
I was unable to find out about that meeting therefore I had no chance to participate in any further activities of the company.
[46] He accepts that on 10 January Mr Reuhman was telling him that they were still struggling to raise funds and were going to extend the offer to 31 January. In terms of his response he says:
I was under the understanding as were the other directors that had the cash not been received there would have been underwriting.
[47] The evidence on the critical points is reasonably consistent. I find that Messrs Fahey, Sutcliffe, Newson and Butt were aware that by late December the issue was under-subscribed. They do not deny being up-dated on a regular basis about the state of subscriptions by Mr Reuhman and, indeed, they were keen to know about progress. Further, by one means or another, Messrs Fahey, Sutcliffe and Newson knew in early January that the minimum figure had still not been reached. Mr Butt and Mr Adey did not know exactly what the position was in early January but certainly by 10 January Mr Butt accepts he knew they were struggling to raise funds and were going to extend the offer to 31 January.
[48] There was a dispute about whether or not the other directors saw the draft letter before it went to subscribers noting the offer was unconditional. That dispute arose primarily out of the statement in Mr Sutcliffe’s affidavit that the Board had not seen the letter. Mr Sutcliffe retreated from this in cross-examination and it is now clear the position is that there was discussion amongst some of the directors about the letter before it went out. That is consistent with Mr Reuhman’s handwritten annotations on the draft of the letter which are headed up “Comments/feedback
please”; the reference to the letter being a draft, and the note that there was “$445 in the bank.”
[49] The other disputed issue is whether or not Mr Reuhman told the other directors the minimum subscription had been met. Again, this arises from Mr Sutcliffe’s affidavit in which he said this was the position. However, as noted above, in cross-examination Mr Sutcliffe retreated saying he could not now recall and he accepted he was told the subscriptions were less than $500,000 as at 6 January. Mr Butt said at one point that he was told in an e-mail he received around 8 January that in fact the subscriptions had been met. However, Mr Butt went on to talk about the “final situation” being that the float was unconditional and I consider that was the language used. The e-mails between Messrs Reuhman and Butt which are before the Court support that. Again, I consider it is clear that Mr Reuhman did not say that the minimum subscription had been met.
[50] The state of the evidence is consistent with everyone proceeding on the basis the offer could be declared unconditional because of the underwriting. Given the pattern of regular updates about the position, it is also unlikely Mr Reuhman would then use the language of “minimum subscription”. Nor is there any documentation indicating the minimum subscription had been reached. Although “after the event”, a letter of 8 November 2000 from Burrowes & Co to the Companies Office and a letter of 5 May 2001 from Mr Reuhman to NZIJ Stockbrokers Limited are both consistent with the view Mr Reuhman said he would underwrite if the minimum subscription was not achieved.
[51] It is necessary to examine how the directors explained what they said or were told.
[52] In cross-examination, when asked about telling Mr Sutcliffe the float was unconditional, Mr Reuhman said:
I would have told him the level of subscription and it would have been a continuation of the discussion about the underwrite but I wouldn’t have told him that the minimum subscription had been met.
[53] He says he did not say that the offer was unconditional. He was then asked whether he referred to the underwriting and he said:
It is the underwriting that made us in a position where we could say it was unconditional.
[54] In answer to the question whether he was saying there were no grounds for Messrs Sutcliffe, Newson, Fahey and Adey to proceed on the basis that the offer was now unconditional, Mr Reuhman said “it all turns on the underwrite”. He was then asked whether he was saying, that based on the advice he was giving about the amount of subscriptions and the intention of Gobion to underwrite, the other directors were not reasonably able to rely on what he said. Mr Reuhman’s response was as follows:
We provided the underwrite. Perhaps I can explain it another way if not one more dollar had been subscribed after 31 December the Reuhmans knew that they would make up any shortfall. It’s as simple as that. We had an expectation that if there had not been one more dollar subscribed we would have written a cheque, made an application for shares and the half million would have been in the bank.
[55] He said that was what he told the directors. When asked whether he told them that the offer was unconditional based on the level of subscriptions and the underwriting agreement he answered “based on the underwrite agreement.” It was put to him then, “right or wrong?”. He said: “yes because of the underwrite.”
[56] This is consistent with what he said was the legal advice he had received, that is, the key issue was that the minimum subscription was guaranteed either by the funds received or by being underwritten.
[57] Importantly, Mr Fahey says he was “under the impression” that the whole allotment was underwritten. He was never formally told the shares had been picked up and nor was he told that Mr Reuhman’s company had subscribed. He accepted that he was told about the sum subscribed ($445,000) but was “under the impression” that the share offer was unconditional because of the underwriting. Specifically, he says:
I was also under the impression that we were told the offer would stay open until 31 January but no longer advertised and that Mr Reuhman expected
more monies to be coming in in allotments, so therefore I saw the updatings of these monies coming in as being quite natural.
[58] His position is that he knew the money subscribed was less than $500,000 but he was “under the impression” that the underwriting “took care of that situation, I was not seeing the bank statements on a daily basis or anything else I was just relying on what Mr Reuhman was telling us.”
[59] In answer to a question from Mr Wilson, he accepted that as at 5 January he was contending that the underwriting had taken place as opposed to taking place at some future time. He said, “yes I was under the impression that the underwriting was done and dusted.”
[60] In re-examination, Mr Finlayson asked what he meant by “under the impression”. Mr Fahey said:
I believed that when John Reuhman told us that he was going to underwrite the share float that the level of subscription at that point in time would never be in contention there would still be further funding coming in up until 31 January.
[61] He was under that impression, he said, from Mr Reuhman’s statement on several occasions. Mr Fahey thought that at the November meeting in Palmerston North that Mr Reuhman said he would underwrite the flotation.
[62] He made no inquiries to satisfy himself but relied on what Mr Reuhman told him.
[63] As noted, Mr Sutcliffe was no longer able to recall being told the minimum subscription had been met.
[64] Mr Butt knew what the position was up until late December but was not then told about the meeting on 28 December when the decision was made to declare the float unconditional. It is a little unclear exactly when he did know that the float had been declared unconditional. Mr Reuhman’s email of 30 December 1999 refers to the “struggle” to raise funds and to the decision to extend the issue until 31 January 2000. It is not entirely clear when Mr Butt received that e-mail. In any event, I
consider the better view is that he did not know the offer was unconditional until after 5 January.
[65] The directors did know the offer was being kept open although not advertised and, presumably, knew that it was in the hope that there would be further subscriptions. That said, I do not accept the submission for Mr Reuhman that the others proceeded on the basis that the shortfall would be made up through subsequent subscriptions. The evidence most supportive of Mr Reuhman’s contention on this point comes from Mr Fahey who acknowledges Mr Reuhman maintained that up until 31 January they would accept further investment. So, Mr Fahey says, “it was always going to be interesting to see where that final level got to.”
[66] Mr Newson, similarly, refers to Mr Reuhman’s confidence that the money would come in and hence Gobion “felt secure” in underwriting. And, Mr Newson said, “John was right, the money did come in but he told me the share issue was unconditional.”
[67] The better view is that the position is as Mr Reuhman put it, ie he told them the offer was unconditional, “because of the underwrite”.
[68] There is then a difference over whether they all knew the underwriting had occurred. I consider they did not believe it had occurred but rather that it would. Mr Fahey is the only one who goes on to say that he thought the underwriting was “done and dusted”. But that was an impression based on John Reuhman’s statement he would underwrite the share issue.
[69] The question then is whether in these circumstances, the directors should have made further inquiries, in particular, satisfied themselves the underwriting had occurred.
(ii) The relevant statutory provisions
[70] Two statutes require consideration, the Securities Act 1978 and the Companies Act 1993.
(a)Securities Act 1978
[71] The purpose of the Securities Act is to establish a Securities Commission, and to “consolidate and amend the law relating to the offering of securities to the public, and to extend the application thereof”. The protective purpose of the Act is emphasised by counsel for the plaintiff and that purpose is noted by the Court of Appeal in Lawrence v Registrar of Companies [2004] 3 NZLR 37 at [24]. The protective purpose is referred to also by Associate Judge Lang in Parsons v Archer (HC TGA, CIV 2003-470-395, 26 February 2004).
[72] There is a helpful discussion of the history of the regulation of securities in the United Kingdom and New Zealand and of the objectives of regulation in Farrar and Russell Company Law and Securities Regulation in New Zealand (1985) at 346-
348. The authors note that the initial technique for regulating securities was “laissez- faire” ie leaving it to the industry to deal with by self-regulation. Subsequently, public disclosure and various forms of regulatory quality control were developed, amongst other techniques.
[73] Part 2 of the Securities Act 1978 imposes restrictions on the offer and allotment of securities to the public. In terms of s 33, no security shall be offered to the public for subscription, by or on behalf of an issuer unless, as here, the offer is made in or accompanied by a registered prospectus that meets the requirements of the Act and regulations.
[74] Section 34 imposes various restrictions on the distribution of a prospectus, for example, requiring in certain cases that distribution is accompanied by financial statements registered under the Financial Reporting Act 1993.
[75] The key provision in Part 2 is s 37 of the Securities Act 1978. Section 37 in this form was introduced by the Securities Amendment Act 1982. It provides as follows:
37. Void irregular allotments
(1) No allotment of a security offered to the public for subscription shall be made unless at the time of the subscription for the security there was a registered prospectus relating to the security.
(2) No allotment shall be made of an equity security or a participatory security or a unit in a unit trust offered to the public for subscription .. unless the amount stated in the registered prospectus relating thereto as the minimum amount which, in the opinion of the directors of the issuer, must be raised by the issue of the securities in order to provide for the matters specified in regulations made under this Act, is subscribed, and that amount is paid to, and received by, the issuer within 4 months after the date of the registered prospectus; and, for the purposes of this subsection—
(a) A sum shall be deemed to have been paid to, and received by, the issuer if a cheque for that sum is received in good faith by the issuer and the directors of the issuer have no reason to suspect that the cheque will not be paid:
(b) The amount so stated in the registered prospectus shall be reckoned exclusively of any amount payable otherwise than in cash.
(2A) Subsection (2) does not apply if there is no minimum amount which, in the opinion of the directors of the issuer, must be raised by the issue of the securities in order to provide for the matters specified in regulations made under this Act.
(3) No allotment of a participatory security offered to the public for subscription shall be made unless, at the time of allotment the statutory supervisor has received a written statement from the subscriber authorising the subscription for that particular security.
(4) Any allotment made in contravention of the provisions of this section shall be invalid and of no effect.
(5) Where subscriptions for securities are received by or on behalf of an issuer, but, by virtue of this section, the securities may not be allotted, or for any reason the securities are not allotted, the issuer shall ensure that—
(a) At all times while held by it, the subscriptions are kept in a trust account on behalf of the subscribers; and
(b) The subscriptions, together with such interest (if any) as has been earned thereon, are repaid to the subscribers as soon as reasonably practicable.
(6) If any subscriptions to which this section applies are not so repaid within 2 months after the date on which the subscriptions were received by
or on behalf of the issuer (or, in any case to which subsection (2) of this section applies, within 5 months after the date of the date of the registered prospectus), the issuer and all the directors thereof shall be jointly and severally liable to repay the subscriptions, together with interest at a rate prescribed from time to time by regulations made under this Act from the date on which the subscriptions were received by or on behalf of the issuer:
Provided that a director shall not be so liable if he or she proves that the default in the repayment of the subscriptions was not due to any misconduct or negligence on his or her part.
[76] In the 1978 Act, described as an Act “aimed at regulating financial advertising across the board”, there was a similar provision to the present s 37 restricting the ability to proceed without a full subscription and provision for civil and criminal liability for mis-statements in the prospectus.
[77] There has not been a great deal of consideration about the ambit of the proviso.
[78] In Robinson v Tait [2002] 2 NZLR 30, Keith, Blanchard and McGrath JJ (in a judgment delivered by Blanchard J) stated of s 37: “[81] … The Court is concerned with the interpretation of an additional liability imposed for the purpose of better protecting the subscribers. Obviously Parliament was intending to widen the net and catch the directors when the company was unable to repay the subscriptions.” Tipping J in his judgment in that case observed that the nature of the obligation in s 37 is “essentially that of a statutory debt. The liability is to ‘repay’.” (at [91])
[79] The Court of Appeal in Reuhman similarly described ss 37(5) and (6) as creating what is basically “a statutory debt”. Further, the Court observed that s 37(5) imposes a “strict” duty on the part of the issuer, namely,
It must “ensure” – make certain (Oxford English Dictionary, 2ed) – two things. The first is that at all times while the subscriptions are held by it, they are kept in a trust account on behalf of the subscribers. So the .. The second duty, which is the one invoked by the statement of claim in this case, is that the subscriptions, together with any interest earned on them, must be repaid to the subscribers as soon as reasonably practicable. Obviously this is to occur whether or not a trust fund has actually been constituted or remains intact. The obligation to pay continues so long as any part of the money, and interest earned, has not been paid over to the subscribers.
[80]Blanchard J for the Court continued by noting that the proviso,
Enables a director to escape from this strict liability if he or she can prove that the default – the failure to make the repayment (and presumably also the failure to pay interest, though the statute is silent about this) – was not due to any misconduct or negligence on his or her part. An example might be if the director was incapacitated by illness or accident at the relevant time. (In this case misconduct is not alleged, but the Master has found that the appellant was negligent in relation to the repayment and that finding, which was plainly open to the Master, is not challenged on this appeal.) (at [14] and [17])
[81] The Court in Alexander v De Lacy (1992) 6 NZCLC 68,020 at 68,022 accepted a submission that negligence in the context of the proviso,
“… should be construed as meaning the absence of reasonable care and skill that a reasonable director would exercise in all the circumstances, including the size of the company, its financial circumstances, the nature of the security offered and its purpose. It would be relevant to take into account the difference between a professionally advised director of large public company, compared with the director of a small private company with, perhaps, limited business skills.”
[82] Finally, for completeness, reference should be made to s 63 which gives the Court power to grant relief in certain cases.
(b)Companies Act 1993
[83] Reference should then be made to ss 137 and 138 of the Companies Act 1993. Section 137 provides that a director, when exercising powers or performing duties as a director, must exercise the care, diligence, and skill that a reasonable director would exercise in the circumstances, taking into account, but without limitation,
(a)The nature of the company; and
(b)The nature of the decision; and
(c)The position of the director and the nature of the responsibilities undertaken by him or her.
[84]Section 138 deals with the use of information and advice and states:
(1) Subject to subsection (2) of this section, a director of a company, when exercising powers or performing duties as a director, may rely on reports, statements, and financial data and other information prepared or supplied, and on professional or expert advice given, by any of the following persons:
(a) An employee of the company whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned:
(b) A professional adviser or expert in relation to matters which the director believes on reasonable grounds to be within the person’s professional or expert competence:
(c) Any other director or committee of directors upon which the director did not serve in relation to matters within the director’s or committee’s designated authority.
(2) Subsection (1) of this section applies to a director only if the director—
(a)Acts in good faith; and
(b) Makes proper inquiry where the need for inquiry is indicated by the circumstances; and
(d) Has no knowledge that such reliance is unwarranted.
[85] The first, second, third and fifth defendants submit there are two approaches to the inter-relationship of the Securities and Companies Acts provisions. One is to assess the appropriate standard for s 37(6) by reference to ss 137 and 138 of the Companies Act. Alternatively, if the Securities Act is a code, the issue of negligence is to be determined by reference to the common law (see: Beck and Borrowdale, Guidebook to New Zealand Companies and Security Law, 7ed 2002); and Kuwait Asia Bank EC v National Mutual Life Nominees Limited [1990] 3 NZLR 513; and Grayburn v Laing [1991] 1 NZLR 482).
[86] The other parties take the view the Securities Act is a code in this respect relying on s 4(1) of that Act which provides that,
The provisions of this Act shall have effect notwithstanding anything to the contrary in any other enactment or in any deed, agreement, application, prospectus, registered prospectus, or advertisement
[87] Mr Wilson for Mr Reuhman points out also that when the Securities Act was enacted, the Companies Act 1955 then in force did not contain any provisions corresponding to s 137 of the 1993 Act.
[88] The authors of Brookers Company and Securities Law state that the Act is not a code and it should not be “considered in isolation” (SE Intro.02).
[89] The Brookers’ commentary also states that the common law applies generally to the offer of securities to the public. For example, liability may arise at common law for misstatements in offering documents, under the torts of deceit or negligent misstatement (SE Intro.02).
[90] I take the view that the Court in considering the scope of the proviso can be informed by the sorts of matters set out in ss 137 and 138. As I indicated in the course of hearing, the New Zealand approach appears to be to consider the statutory framework as a whole reflecting the piecemeal development of the legislation. The standard will be that of common law negligence but can be assessed by reference to ss 137 and 138 matters.
[91] The matters in ss 137 and 138 are also the sorts of issues likely, as a matter of common sense, to have some influence on an assessment as to whether the common law threshold is met. In any event, there has been some movement in recent cases which suggests that the duty of care at common law (gross negligence) is closer now to that in s 137 (see Brookers at CA137.2; cf Beck and Borrowdale, at paras 317- 319; and A S Sievers “Director’s Duty of Care: What is the new standard?” (1997) 15 Company and Securities Law Journal 392; see also the discussion in Farrar J H “The Duty of Care of Company Directors in Australia and New Zealand” (1996) 15
(7) Cantab Law Review 228). In other words, I am not sure there is a great deal of difference in application to this case between the two approaches.
(iii) Submissions
[92] The plaintiff’s submission is that ignorance of the law on the part of the directors is not excusable. They should have known what the position was and acted accordingly. The plaintiff relies on the test in Burton v Bevan [1908] 2 Ch 240 at 247 where Neville J stated:
I think that “knowingly” means with knowledge of the facts upon which contravention depends. I think it is immaterial whether the director had knowledge of the law or not. I think he is bound to know what the law is, and the only question is, Did he know the facts which made the act complained of a contravention of the statute?”
[93] In this context, Mr Brown for the plaintiff submits that Messrs Fahey, Sutcliffe and Newson knew that the float was under subscribed and they should have then asked for Mr Reuhman to write out a cheque for the shortfall. Mr Adey did not know that the full amount had been received by 1 January. He too was at fault in that regard. As for Mr Butt, he did not take any steps to find out if the minimum subscription had been paid or the underwriting had taken place. They all relied on the assertion that there would be a subscription from underwriting if necessary. By implication, therefore, it is submitted that the directors all knew that the float had failed on the closing date. Hence, it is submitted that none of the defendants are in any different position from Mr Reuhman.
[94] Mr Brown for the plaintiff in this context advocates a narrow view of the proviso to support the consumer protection policy underlying the Act.
[95] For Mr Reuhman, Mr Wilson submits that the directors knew that the float was under subscribed and they knew that the underwriting had not occurred. Accordingly, shares should not have been allotted and the funds should have been returned. The submission for Mr Reuhman is that there is a crucial difference between the agreement of Mr Reuhman to underwrite the float at some point in the future as opposed to confirmation he had in fact underwritten. Hence, like the plaintiff, it is submitted that there is no material difference between Mr Reuhman and the other directors. All were, or should have been, aware of the shortfall.
[96] As to Mr Adey, Mr Wilson submits that having accepted appointment as a director he was under a duty to ensure that s 37 was complied with but he did not do so. Similarly, Mr Butt had an obligation not to let the money be released from trust unless the float was fully subscribed. The obligation to ensure that was the case arose as at 5 January at which time he was still a director.
[97] It is further submitted that the step required, that is confirmation of the writing of the cheque, was a simple and obvious step and the directors should have taken it. It did not require any stock or securities knowledge on their behalf. In this context, Mr Wilson submits that the distinction sought to be drawn by the first, second, third and fifth defendants between an undertaking to underwrite and actually
underwriting is a specious one. It is fatal to the defendants’ case, Mr Wilson argues, because they have to persuade the Court that the agreement to underwrite at some point equates to an underwriting at the actual date. In relation to Mr Reuhman, the Courts have decided that is not sufficient. That is because, the money has to be “in” on the due date.
[98] For Mr Reuhman it is also submitted that the proviso is directed to the narrower situations as identified by Blanchard J. It is not intended to subvert the statutory scheme of making directors personally liable for return of the under- subscribed funds.
[99] Finally, it is submitted that it would be unjust if Mr Reuhman had to carry all of the burden particularly when:
a)The other directors were in materially the same position;
b)Mr Reuhman had judgment entered against him summarily on the basis in part of affidavit evidence of Mr Sutcliffe which, when tested during this trial, proved not to be correct; and
c)Mr Reuhman was the only director to be prosecuted, with devastating consequences for his career.
[100] The position of the first, second, third and fifth defendants is that they cannot be criticised for taking Mr Reuhman at his word. They relied on him. He made a representation to them and it was appropriate for them to rely on that given their relative expertise. The expertise of the other directors was in weed technology and Mr Reuhman’s in the share float. Further, it is submitted that Mr Reuhman’s assurances were clear and unequivocal and that the directors could take some comfort from the involvement of the legal advisers in the process of the float.
[101] Hence, it is submitted that these directors are in a different position from that of Mr Reuhman. In developing the argument for the directors, Mr Finlayson submits that the distinction between “would underwrite” and “had underwritten” ignores the
reality of the situation. That is, what Mr Reuhman told the directors and what he did in early January.
[102] These directors rely in this context on the expert evidence of Roger Taylor, an economist and accountant. He gave evidence on behalf of Messrs Fahey, Sutcliffe, Newson, and Adey. In particular, Mr Finlayson emphasised Mr Taylor’s response to Mr Wilson’s question in cross examination as follows:
QDo you still assert Mr Taylor that Mr Reuhman had advised the board members that the minimum subscription level had been met?
AYes I do and I could perhaps say why, it is because in his advice to them and their understanding the minimum subscription would be met by two ways. One by cash from new investors and by the underwriting agreement. Now as a director hearing that advice and given that there may have been some uncertainty in Mr Reuhman’s mind and the advisors as to how the minimum subscription would be met then I think it is quite understandable that the director having heard that advice that $455k or whatever it was being received and there may well have been other cheques in the mail and the underwriting agreement would have understandably accepted that the minimum subscriptions had been received.
[103] In terms of Mr Adey, it is noted in particular that he understood Mr Reuhman had provisions in place in case the minimum subscription level was not met by the public. He relied on Mr Reuhman’s advice that the issue had gone unconditional.
[104] In terms of Mr Butt, Mr Gibson submits that the relevant date in terms of s 37(6) of the Act is 3 January 2000 (the initial three months from registration runs from 3 September 1999) but that is extended to 5 January 2000 by reason of s 35(6) of the Interpretation Act 1999. (Section 35(6) provides that a thing that must be done within a time period under an enactment, may be done on the next working day where the time limit expires on a day that is not a working day.) As at 5 January 2000, the issue was under subscribed. Section 37(6) of the Securities Act mandated the return of subscriptions to the investors. The relevant date for directors’ liability in terms of s 37(6) is, Mr Gibson says, 3 February 2000. Liability attaches to the issuer and all of the directors if the subscription moneys are not repaid within five months after the date of the registered prospectus unless the proviso applies.
[105] Mr Butt was removed as a director by resolution of shareholders on 31 January 2000. Hence, at the date liability arises, that is 3 February 2000, Mr Butt was not a director. The fourth defendant’s position is that provided a resignation or removal was not effected with the intention of defeating the obligations imposed by s37(6) a bona fide resignation or removal before liability attaches is permissible (see Blanchard J in the Reuhman decision).
[106] The fourth defendant then focuses on the critical date in terms of the directors deciding to proceed with the float, namely, 28 December 1999. The point made is that Mr Butt was not present at that meeting and was not made aware of the date. Consequently, Mr Butt says that at the date of that decision he was not informed by the other directors of the decision to proceed. In that respect he is in a similar position to the director in Burton v Bevan where liability was not imposed because the director was not present at the meeting in which an allotment of shares was made.
[107] Hence, it is submitted that actual knowledge is required. Knowledge that is unable to be gained because of incapacity or absence is not to be imputed to a director merely because he happens to be one.
[108] If there is potentially any liability, then Mr Gibson submits that the position of the fourth defendant is different to that of Mr Reuhman. He did not have any specific knowledge of the requirements of the Act and was reliant on professional advice at all times in relation to the float and any issue of under subscription.
[109] In expanding on this submission, Mr Gibson points out that Mr Butt was aware that Mr Reuhman, in the carrying out of his tasks with managing the float, had recourse to professional advice from the company solicitors and was himself an experienced stock broker of many years standing and a member of the Stock Exchange. He was entitled to rely on Mr Reuhman’s representations made to him on 21 December 1999.
[110] Like the other defendants, Mr Gibson also relies on Mr Taylor’s evidence that, as far as the directors were concerned, they were entitled to believe that the
float had been properly completed. It is further submitted that it was only reasonable for the directors to be able to rely on Mr Reuhman’s representation. Once he was aware that the float had proceeded, it was reasonable for Mr Butt to rely on the fact that Mr Reuhman had performed his duties. He knew he was going to be removed and the decision to declare the float unconditional was made without any reference to him.
(iv) Discussion
[111] In the circumstances, I believe the directors, other than Messrs Adey and Butt, were negligent. They should have required Mr Reuhman to write out a cheque or to confirm that the money was “in the bank”. This was not hard for them to do. The obligation imposed by the Act is a serious one. The size of the company and the various roles of the directors do not, in my view, alter the position. The point is that the company was going out to the public and seeking public funding. In that context, the arrangements in place were too loose to meet the statutory threshold. I do not see it as a matter of fairness to Mr Reuhman vis a vis the other directors but, rather, the standard of care the Act imposes on directors towards members of the public and, particularly, subscribers has not been met.
[112] In reaching this view, I have considered Mr Taylor’s evidence. The thrust of it was that it was reasonable for the directors to rely on Mr Reuhman. I do not accept, however, that the directors could simply leave everything to Mr Reuhman.
[113] Mr Taylor’s evidence proceeds on the basis that the directors had been told the minimum subscription had been met but he says there is no practical difference in saying the offer was unconditional rather than that the minimum subscription had been met. In the circumstances of this case, I do not consider that is right. Further, Mr Taylor accepts that if all Mr Reuhman had told them was that there was $450,000 odd in the bank, they should have required the subscription under the underwriting as quickly as practicable. They did not do that. He also says he would have required some documentation evidencing the underwriting agreement and a formal decision of the board authorising payment from the trust account. There was no such documentation. Accordingly, I am not persuaded that, in the circumstances it was
enough to just leave it to Mr Reuhman to underwrite at some future point, if that became necessary. The fact Mr Reuhman had legal advice at various points in time does not alter the position in this case. The directors had not taken the necessary steps themselves.
[114] Obviously, the proviso contemplates a director will be relieved from liability where he or she is not negligent. The proviso has to be given an interpretation that achieves the objective of ameliorating the otherwise strict application of s 37. However, the threshold cannot be set so low as to undermine the protective goal of the legislation. These directors do not meet the threshold, and have been negligent.
[115]I need to address the positions of Messrs Adey and Butt further.
[116] In terms of Mr Adey, he knew the offer was under-subscribed. Accordingly, on one view, he too should have made inquiries to assure himself the underwriting or other “provisions” were in place. However, it is clear that the idea was he would be something of a “silent player” until the company expanded to Australia. While he did still accept a directorship, and so the associated responsibilities, he was not involved in the decision to declare the float unconditional. Accordingly, while absenteeism will not ordinarily be a basis for avoiding responsibility, the set of circumstances surrounding Mr Adey’s appointment and his non-attendance at the critical meeting, are sufficient to conclude he was not negligent.
[117] Mr Butt’s position is similar to that of Mr Adey although perhaps more stark. That is because he was not told about the 28 December meeting in a context where he was being shifted out of the company’s affairs. Arguably, he, too, should have made further inquiries. However, by the relevant point in time the other directors were willing to grant him leave to go to the Philippines, they were considering his removal, and he was not even told about the critical meeting. In these circumstances he, too, was not negligent. (I add that I accept Mr Wilson’s submission that Mr Butt was potentially liable, but for the proviso, because he was still a director as at 5 January when the obligation to ensure money was not released arose.)
[118] It is accepted, appropriately, that there is no question of negligence arising from the directors’ actions from 3 February 2000 onwards.
Contribution
[119] My finding of liability means I have to consider the question of contribution. The authors of Blanchard (ed) Civil Remedies, observe, by reference to Robinson v Tait, that,
“Where liability is imposed by a statute on several persons, the nature and extent of liability will be a matter of statutory interpretation. However, the answer is likely to be informed by common law notions.” (at para 14.3.6)
[120] Mr Reuhman’s claim that the other directors should contribute to his judgment is based on the submission any other result is inequitable. They are in the same position as him.
[121] Messrs Fahey, Sutcliffe, and Newson, submit that, as against Mr Reuhman, they should not have to contribute to his judgment. That is because of his position and knowledge and the extent to which they all depended on him.
[122] I am satisfied that the responsibility of each of the directors who have been found liable is such that there should be no contribution as between them. While Mr Reuhman had a particular responsibility for the float, the others equally had obligations to make inquiry and did not do so. It is appropriate for them to bear liability on the same basis.
Result
[123] The plaintiff’s application accordingly succeeds in part. Messrs Fahey, Sutcliffe and Newson are liable under s 37(6).
Costs
[124] The parties agree the appropriate costs category is 2C. I agree. All of the parties, except the plaintiff, consider costs should follow the event.
[125] The plaintiff says, first, the subscribers should have the costs of the summary judgment application in any event, either from all of the directors, or from Mr Sutcliffe. Second, the Court should exercise its discretion to award costs in favour of the subscribers on the substantive proceeding because the subscribers effectively had no choice but to bring these proceedings.
[126] I am not convinced it is appropriate to depart from the principle that costs follow the event. I am not convinced Mr Sutcliffe’s explanation at trial of the material in his earlier affidavit warrants any award of costs against him or against any of the other directors who successfully argued against summary judgment. Nor should those defendants who have been successful in the present case have to bear the costs of their defence.
[127] Costs are accordingly to follow the event on a category 2C basis in relation to the summary judgment and the present application (subject to any earlier award made by Master Thomson, as he then was). The successful parties are also entitled to any reasonable disbursements, to be determined by the Registrar if necessary. If there is a need for any clarification in relation to the implementation of these awards, memoranda may be filed by 5pm on 30 June 2005.
Ellen France J
Counsel/Solicitors:
S J Brown, Solicitor, Wellington, for the PlaintiffRussell McVeagh, Solicitors, Wellington, for the First, Second, Third, Fifth and Seventh Defendants B A Gibson, Barrister, Wellington, for the Fourth Defendant
Gaskin Avison, Lower Hutt, for the Fourth Defendant W M Wilson QC, Wellington, for the Sixth Defendant
Gilbert Swan, Solicitors, Wellington, for the Sixth Defendant
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