Pacific Auto Carrier (NZ) Limited v Jacanna Holdings Limited
[2023] NZHC 3058
•31 October 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-2367
[2023] NZHC 3058
BETWEEN PACIFIC AUTO CARRIER (NZ) LIMITED
Plaintiff
AND
JACANNA HOLDINGS LIMITED
Defendant
Hearing: 21 June 2023 Appearances:
J W A Johnson and S D Campbell for the Plaintiff/Respondent E St John and S Maloney for the Defendant/Applicant
Judgment:
31 October 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 31 October 2023 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors/Counsel:
Wynn Williams, Auckland
Bankside Chambers, Auckland Eugene St John, Barrister, Auckland
PACIFIC AUTO CARRIER (NZ) LTD v JACANNA HOLDINGS LTD [2023] NZHC 3058 [31 October 2023]
Introduction
[1] The plaintiff, Pacific Auto Carrier (NZ) Limited (PAC), alleges that the defendant, Jacanna Holdings Limited (Jacanna), breached fiduciary duties by taking over a door-to-door (D2D) vehicle import business after PAC ceased trading. PAC’s claim against Jacanna is founded on PAC (as agent) and Autoterminal International Limited (ATI) (as principal) being entitled to the benefit of the D2D business.
[2] Jacanna originally applied for a stay of the proceedings pending proof of the matters described in two of the paragraphs of PAC’s statement of claim:
19.There is no dispute between ATI, PAC and IBC that PAC as agent and ATI as principal are entitled to the benefit of the D2D business and that IBC has no entitlement to the D2D business.
20.No other party has entitlement to the benefit of the D2D business or has ever claimed an entitlement.
[3] Jacanna says that there is reason to believe that there is ongoing litigation in foreign jurisdictions as to who is entitled to the benefit of the D2D business, specifically before the Court of Appeal of Japan and the Eastern Caribbean Supreme Court, and it is in the interests of justice that those courts determine the issues the defendant alleges arise from the above paragraphs in the statement of claim first before the New Zealand Courts.
[4] Jacanna submits that while PAC's affidavits in opposition baldly assert that there is no dispute, the documents exhibited to those affidavits raise more questions than answers and that in the end, there is no evidence that the dispute over the D2D business, which Jacanna says has been going for almost a decade, is resolved. Jacanna therefore says that until there is proof that the issue has been finally determined, PAC’s proceedings against Jacanna must be stayed.
Evidential issues
[5] The plaintiff raises a number of preliminary evidential issues in response to the affidavits filed in support of the defendant’s application for stay.
Burden of proof
[6] The plaintiff submits that the defendant bears the burden of establishing that the New Zealand Courts are not the appropriate forum, relying on New Zealand Insurance Co Ltd v NZ Forest Products Ltd.1 The plaintiff says that this fundamental precept is offended by the very orders that the defendant seeks on its application, seeking a stay until the plaintiff proves the matters in paragraphs [19] and [20] of the statement of claim.
[7] At the hearing, counsel for the defendant clarified the defendant is only seeking a stay until the appeal in Japan is determined. Although there may also be proceedings in the Eastern Caribbean Supreme Court, there is less information available in relation to that litigation and its current status. The defendant appeared to accept that it would be difficult to order a stay in relation to that litigation, given the lack of details available.
[8]I do not consider that this first issue therefore prevents the orders being granted.
Evidence of the defendant for the stay
[9] In addition, the plaintiff submits that the application is brought almost wholly on the basis of publicly available judgments, which the plaintiff submits the defendant is prevented from relying on by s 50 of the Evidence Act 2006.
[10]Section 50 provides:
Civil judgment as evidence in civil proceedings
(1) Evidence of a judgment or a finding of fact in a civil proceeding is not admissible in a criminal proceeding or another civil proceeding to prove the existence of a fact that was in issue in the proceeding in which the judgment was given.
…
(2) This section does not affect the operation of—
(a)a judgment in rem; or
1 New Zealand Insurance Co Ltd v NZ Forest Products Ltd (1994) 7 PRNZ 365 (HC) at 369.
(b)the law relating to res judicata or issue estoppel; or
(c)the law relating to an action on, or the enforcement of, a judgment.
[11] The plaintiff refers to Dorbu v Lawyers and Conveyancers Disciplinary Tribunal, where the High Court held: 2
… if a court or tribunal has an independent obligation to determine whether alleged facts are proved or not, it cannot discharge that obligation by accepting without inquiry the findings of another court or tribunal as to the existence of those facts.
[12] The plaintiff therefore seeks an order that none of the judgments referred to in the defendant’s affidavits are admissible pursuant to s 50 of the Evidence Act.
[13] However, s 50 does not prevent reliance on judgments where they are not offered to prove the existence of a fact that was in issue in the earlier judgment, assuming the judgment is relevant under s 7 of the Evidence Act and not excluded under s 8. For example in Kidd v Worldwide Leisure Ltd, the High Court held that a previous Court’s findings of fact in an overseas proceeding were admissible for the limited purpose of assisting the High Court to find a reasonably arguable case in a proceeding to sustain a caveat. The Court reasoned that the fact something had been proved in the defended hearing overseas gave grounds for believing that the same findings of fact may be made in the similar New Zealand proceeding.3
[14] In Puka v Attorney-General, the Court held that the defendants were entitled to refer to an overseas decision to show the way in which the issues of the case had been the subject of previous litigation; they were not seeking to use the findings of fact in the overseas decision to prove the existence of facts in the New Zealand proceeding.4
[15] I do not consider that it is appropriate that a blanket order is made that none of the judgments referred to in the defendant’s affidavits are admissible. Instead, as the
2 Dorbu v Lawyers and Conveyancers Disciplinary Tribunal HC Auckland, CIV-2009-404-7381, 11 May 2011 at [21].
3 Kidd v Worldwide Leisure Ltd [2014] NZHC 1351 at [20].
4 Puka v Attorney-General [2023] NZHC 2686 at [129].
relevant questions are considered below, I consider the evidence put forward in respect of that question and whether that evidence offends s 50 or not.
[16] Furthermore, the plaintiff itself attaches a copy of a decision of Hinton J to one of its affidavits, apparently with the intention of relying on the statements made in that judgment. Although the plaintiff sought to distinguish its reliance from that of the defendant, I cannot see there is any basis for doing so. A blanket order in respect of judgments would therefore appear to prevent reliance on that judgment as well.
Evidence of Kelly Rarere
[17] The plaintiff further submits that the first affidavit filed in support of the defendant’s application is the evidence of Ms Kelly Rarere, who is a personal assistant to counsel for the defendant, Mr St John. Counsel for the plaintiff says Ms Rarere has no personal knowledge of any issue in dispute, and so cannot depose to beliefs that she has no basis for holding, many of which the plaintiff says are demonstrably false.
[18] Secondly, the plaintiff submits Ms Rarere’s evidence is of a contentious nature, is produced by a member of Mr St John’s chambers and addresses the precise dispute between the parties on this application, raising issues about the propriety of Mr St John continuing to act.
[19] Following the filing of Ms Rarere’s evidence and Mr Hemi’s evidence on behalf of the plaintiff in response, an affidavit was filed by Mr Kenneth Quigley, the defendant’s sole director, in reply. Mr Quigley’s evidence corrects an error made in Ms Rarere’s evidence as to the shareholders of PAC, but otherwise confirms that her evidence is correct. In these circumstances I do not consider it necessary to further consider issues in respect of Ms Rarere’s evidence as Mr Quigley has confirmed that evidence.
Mr Quigley — statements of belief
[20] Finally, the plaintiff complains that Mr Quigley’s evidence is almost entirely premised on his “beliefs”, what he has been told by others, or information from judgments. The plaintiff says that these statements of belief are inadmissible pursuant
to r 7.30 of the High Court Rules 2016, submitting that the exceptions in r 7.30(1) are not engaged.
[21]Rule 7.30 provides:
7.30 Statements of belief in affidavits
(1) A Judge may accept statements of belief in an affidavit in which the grounds for the belief are given if—
(a) the interests of no other party can be affected by the application; or
(b) the application concerns a routine matter; or
(c) it is in the interests of justice.
(2) Subclause (1) overrides rule 7.29.
[22] Each of the limbs in r 7.30 are alternatives and the third limb is whether it is in the interests of justice for the statements of belief to be accepted. In all cases the grounds for the belief must be given but as long as that is done the third limb provides a broad discretion to the Court.
[23] Given the discretion in r 7.30, I do not consider it is appropriate for there to be a blanket refusal to consider the statements of belief in Mr Quigley’s affidavit. Again, I therefore consider the admissibility or otherwise of the evidence put forward at the time I consider the questions relevant to whether a stay ought to be ordered.
[24] I now set out the background and then the principles applying to a stay before considering whether a stay ought to be ordered in these circumstances.
[25] I record that I rely for the background largely on the judgment of Hinton J in interpleader proceedings brought by Jacanna against IBC Japan and PAC following pressure from IBC Japan and PAC to pay funds Jacanna had received as part of the D2D business to each of them.5 The affidavits filed on behalf of the defendant rely on the background as set out in the judgment of Davison J earlier in the interpleader proceedings.6 As noted above, although the plaintiff challenged the admissibility of
5 Jacanna Holdings Ltd v Pacific Auto Carrier (NZ) Ltd [2020] NZHC 3308 [Hinton J’s Judgment].
6 Jacanna Holdings Ltd v Pacific Auto Carrier (NZ) Ltd [2019] NZHC 931 [Davison J’s Judgment].
the judgments relied on by the defendant, a copy of the judgment of Hinton J in the same proceedings was annexed to one of the plaintiff’s affidavit filed in support. No issue was raised by the plaintiff in relation to the background as set out in that judgment (and no background or chronology was set out in the plaintiff’s submissions or affidavits). I expect therefore that the background as described by Hinton J is acceptable from the plaintiff’s perspective.
Background
[26] Mr Stone and Mr Hemi are jointly involved in the worldwide trade of used Japanese vehicles through a group of companies. ATI, the sole shareholder of the plaintiff in these proceedings, is one of two holding companies for the Stone/Hemi group. ATI is incorporated in the British Virgin Islands and is half-owned by a company ultimately linked to Mr Hemi and half-owned by a Cayman Islands company beneficially owned by Ms Fernandes, the life partner of Mr Stone. IBC Japan is incorporated under the laws of Japan and is also half-owned by Mr Stone and half- owned by Mr Hemi. It is involved in the sale, export, and shipping of used motor vehicles from Japan into a number of other territories.
[27] Jacanna is a freight forwarding company located in Auckland. It was used by IBC Japan as a customs and clearance broker for importation of used vehicles from Japan to New Zealand.
[28] Hinton J records that until 2012, IBC Japan’s export of vehicles to New Zealand for further sale by third parties was the group’s only New Zealand business. However, in 2012 ATI became involved in the direct sale of imported Japanese vehicles to New Zealand customers, and incorporated PAC for this purpose.
[29] Jacanna remained involved in the Stone/Hemi group’s activities post incorporation of PAC and collected funds accordingly, being the funds that were the subject of the interpleader proceedings.
[30] By the time of Hinton J’s judgment on 14 December 2020, Jacanna had been removed as a party, but the form of pleading remained. Davison J in his judgment had ordered that the funds that were originally held by Jacanna, referred to as the “Jacanna
Funds”, were to be paid into Court and would remain under the control of the Registrar pending further order to allow the dispute over ownership of the funds to be resolved. The interim injunction had been sought by Mr Stone and Ms Fernandes as interested parties on the basis they had either brought or were bringing derivative actions regarding the Jacanna Funds concerning interests they held in the funds.
[31] Davison J granted the injunction sought as he considered there was a serious question to be tried as to the ultimate ownership of the Jacanna Funds as between IBC Japan, PAC and ATI.7 Davison J considered that the balance of convenience favoured relief being granted as it would preserve the Jacanna Funds in Court, preventing any claim by the interested parties to those funds being rendered nugatory.8
[32] At the date the injunction was issued the Jacanna Funds amounted to in excess of $10,000,000. Hinton J recorded in her judgment that it appeared that Jacanna had continued to receive funds in respect of the Stone/Hemi group and at the time of the judgment those were also being paid into Court by Jacanna, pursuant to Davison J’s orders of 30 April 2019.9
[33] Hinton J records that following Davison J’s judgment IBC Japan, PAC and ATI entered into a deed of settlement. Under the deed, the three parties agreed that ATI is the rightful owner of the Jacanna Funds and to settle any claims between them as to the funds. IBC Japan, with the support of PAC and ATI, sought therefore to discharge the interim injunction on the basis there was no longer a dispute over ownership of the Jacanna Funds. Mr Stone and Ms Fernandes initially filed a notice of opposition to the application to discharge the injunction.
[34] At the hearing before Hinton J, the interested parties’ original position was that PAC, ATI, and IBC Japan were colluding to deprive them of the Jacanna Funds, submitting that Mr Stone had a good claim by reason of the derivative proceeding he was bringing in Japan on IBC Japan’s behalf. Hinton J further recorded that since Davison J had ordered the injunction, Ms Fernandes had obtained leave from the
7 Davison J’s Judgment, above n 6, at [93]–[106].
8 At [111]–[113].
9 Hinton J’s Judgment, above n 5, at [8].
Eastern Caribbean Supreme Court to commence derivative proceedings in New Zealand on ATI’s behalf. The interested parties’ position before Hinton J was therefore that, owing to the pending derivative proceedings, there remained a dispute as to the ownership of the Jacanna Funds, such that there had been no relevant change in circumstances warranting the discharge of the injunction.
[35] Hinton J expressed some misgivings about the status of ATI, as at that stage ATI was not a party to the interpleader proceedings and yet the orders sought would have ultimately resulted in the Jacanna Funds going to ATI. Hinton J suggested it would be appropriate for ATI to be formally joined as a defendant before orders were made and suggested it would be more satisfactory for any order made to direct the funds to ATI directly, rather than to PAC as an intermediary.
[36] Following the hearing, Hinton J records that Mr Campbell, counsel for PAC, confirmed that he represented ATI as well and that ATI consented to being added as a party to the proceeding if the Court considered that necessary and agreed with and adopted the position taken by PAC at the hearing. Mr Campbell further advised that two independent directors had been appointed to the board of ATI, as ATI’s former lack of independent directors had been a basis for Ms Fernandes seeking leave to bring a derivative action in ATI’s name.
[37] Counsel for the interested parties then filed an updating memorandum advising that ATI’s directors had given an undertaking to the Eastern Caribbean Supreme Court that:
[…] pending agreement between the parties to the contrary or the winding up of the Company or further order they and the Company will retain from any funds received from what are known between the parties as the “Jacanna Funds” sufficient funds to cover (1) the claim in the derivative proceedings in New Zealand together with interest thereon, (2) the Applicant’s costs in those proceedings, and (3) the Company’s and its directors’ costs in those proceedings.
[38] Counsel for the interested parties advised that the basis of Ms Fernandes’ opposition to the application to discharge the injunction and release the funds had been “made redundant”, the only issue being, “the amount to be retained and where those funds should be held.” Counsel for the interested parties therefore submitted that the
application to discharge the injunction could likely “be resolved without a decision being required”.
[39] Counsel for ATI confirmed that the undertaking had been given to the Eastern Caribbean Supreme Court and that it would be honoured if the interim junction was discharged and the Jacanna Funds paid out. PAC and ATI however submitted that given the subject of the interpleader proceeding was the issue of ownership of the Jacanna Funds, unless the interested parties agreed that the issue of ownership had been resolved in ATI’s favour, the interpleader proceeding could not be resolved by consent. IBC Japan filed a memorandum supporting PAC and ATI’s position. Hinton J then issued a minute proposing orders, including that it was agreed between all parties to the interpleader proceeding that ATI owns the Jacanna Funds and by consent they are to be paid to ATI.
[40] Counsel for the interested parties filed a memorandum in response to Hinton J’s minute stating that the interested parties now formally withdrew their notice of opposition to the application to discharge the injunction, and for orders that the Jacanna Funds held in Court be paid to ATI and that Jacanna pay any further Jacanna Funds collected by it to ATI. Counsel for the interested parties recorded that the decision to withdraw the notice of opposition had been made because the application to discharge the injunction had been amended to allow for the funds to go directly to ATI and not to PAC. The interested parties’ position remained that sufficient funds should continue to be preserved to meet the potential liability under the derivative proceeding, but that ATI had now given such an undertaking and that it would be honoured which counsel submitted meant it would be enforceable under New Zealand law. As a result, counsel for the interested parties submitted that it was no longer necessary for Hinton J to deliver a judgment because the application was moot, there was no wider public interest in a decision, and any decision on the application would not involve a finding of ownership.
[41] PAC and ATI filed a memorandum in response submitting that a judgment ought to be issued, and IBC Japan filed a further memorandum recording agreement with this. Hinton J was also of the view that a judgment was required.
[42] Importantly for the present case however her Honour held that she was not required to determine the question of ownership of the Jacanna Funds on the application to discharge the interim injunction.10 Hinton J instead held that the question was whether there remained a serious question to be tried as to the ownership of the Jacanna Funds, or, if so, whether the balance of convenience favoured relief continuing to issue”.11 Her Honour concluded:12
As noted, IBC Japan, PAC, and ATI have executed a deed compromising and settling any dispute between them as to the ownership of the Jacanna Funds in ATI’s favour. The interested parties have formally withdrawn their opposition (which necessarily means also the affidavits filed by them cannot be relied on), and so it cannot be argued that there is any more a serious question to be tried based on any claim on the part of Ms Fernandes or Mr Stone to ownership of the funds, whether evidenced by the derivative actions or by other means. In those circumstances therefore there remains no serious question for trial as to the ownership of the funds, being the question at issue in respect of whether the interim injunction should remain in place.
[43] Hinton J further recorded that she was not required to determine whether the undertaking given by the directors of ATI to the Eastern Caribbean Supreme Court was enforceable in New Zealand or elsewhere and so is not to be taken to do so.13 Earlier in her decision, her Honour had clarified that the interested parties’ withdrawal of opposition was not conditional on the undertaking being enforceable in New Zealand.14 Hinton J declined to make an order that Jacanna pay to ATI any further funds that it might otherwise pay and remit to PAC, primarily because Jacanna had been removed as a party to the interpleader proceeding. Her Honour instead held that any issue as to how Jacanna deals with any further funds received by it in relation to the Stone/Hemi group’s activities would need to be dealt with by agreement between the parties or as part of the substantive resolution of the interpleader proceedings.15
[44] The interpleader proceedings were discontinued shortly following Hinton J’s judgment.
10 Hinton J’s Judgment, above n 5, at [38].
11 At [32].
12 At [33].
13 At [39].
14 At [34].
15 At [40].
[45] PAC served these proceedings on Jacanna on 19 December 2022, bringing claims for alleged breach of fiduciary duties, breach of contract and breach of confidence. The relief claimed includes an account of profits or damages together with an injunction for two years restraining the defendant from operating the D2D business and a permanent injunction restraining the use of confidential information.
[46] The solicitors for the defendant wrote to counsel for the plaintiff on 2 February 2023 seeking evidence in support of the assertions in paragraphs 19 and 20 of the statement of claim that there is no longer any dispute as to the ownership of the funds that were the subject of the interpleader proceedings. The letter refers to there being multiple proceedings in different jurisdictions between Mr Hemi and Mr Stone (and their respective entities) and asked for an explanation as to the status of each of those proceedings.
[47] Solicitors for the defendant followed up on 15 February 2023 for a reply. Counsel for the plaintiff responded as follows:
4. The foreign proceedings, if relevant at all, are matters of evidence and do not provide a basis for your client not to plead. The issue of ownership is similarly a matter of evidence. That you have asked for evidence at pleading stage self-evidently highlights that request is premature. Your client can plead based on its knowledge.
[48] Counsel for the defendant responded saying that they regarded the failure and now refusal to provide details of the foreign proceedings to be an issue of filing and endorsing allegations known to be false, with counsel recording that was not an evidential issue.
[49] Jacanna filed the application for a stay on 3 March 2023. A one-day hearing was allocated on 22 March 2023.16
[50] On 24 April 2023 the plaintiff filed its application for further and better particulars and a more explicit pleading. The defendant filed a notice of opposition but only opposed on the basis that the stay application ought to be determined first, recording that if the stay application is dismissed the defendant will agree to provide
16 Minute of Associate Judge Gardiner, dated 22 March 2023.
the particulars. The particulars application was scheduled to be heard together with the stay application.
Legal principles applying to stay application
[51] The stay application is brought on the grounds that New Zealand is not the appropriate forum, pursuant to r 6.29 of the High Court Rules 2016.
[52] Service of these proceedings was validly effected in New Zealand as both the plaintiff and defendant are companies incorporated in New Zealand. The application must therefore be made in terms of r 6.29(3) which provides:
When service of process has been validly effected within New Zealand, but New Zealand is not the appropriate forum for trial of the action, the defendant may apply for a stay, or for a dismissal of the proceeding under rule 15.1.
[53] Counsel for Jacanna emphasised that the application is not made on the basis that the correct forum to determine this proceeding is Japan but instead that a material fact alleged in this proceeding ought to be (and currently is being) determined in another forum and that the proceedings in New Zealand should be stayed pending final determination of that matter.
[54] The defendant relies on Kidd v Van Heeren, where Mr Kidd filed proceedings in New Zealand against Mr Van Heeren in relation to a wide-ranging dispute involving a business partnership with interests in New Zealand, South Africa, and other countries.17 In that case agreements had been executed in South Africa which included an indemnity clause and an agreement granting exclusive jurisdiction to the South African courts.
[55] Mr Van Heeren obtained a stay of the proceedings in New Zealand on the basis of the exclusive jurisdiction clause, and because the indemnity clause could only be determined under South African law.18 Mr Kidd then applied to lift the stay before the South African courts had determined the meaning and effect of the indemnity clause. Allan J declined to lift the stay, holding that the South African courts needed to hear
17 Kidd v Van Heeren [1998] 1 NZLR 324 (HC).
18 At 341.
the issue of the scope of the indemnity before the New Zealand proceedings could move forward.19
[56] It appears that on a prima facie basis, if an issue in a proceeding that requires determination is before another Court in another jurisdiction for determination there, then the Court may stay the proceeding in New Zealand pending final determination in the foreign proceeding. The plaintiff did not appear to resist this. The plaintiff agreed that in determining whether New Zealand is the appropriate forum the Court is required to consider whether:20
(a)there are proceedings in train in another Court in another jurisdiction;21
(b)the New Zealand Court provides the most effective relief, or whether a foreign Court is in a better position to do so;22 and
(c)a party will suffer an unfair disadvantage if the New Zealand Court assumes jurisdiction.23
[57] I therefore turn to whether a stay should be ordered in the circumstances of this case by considering each of the three questions above.
[58] McGechan on Procedure helpfully summarises the principles to be applied in considering an application for a stay based on the doctrine of forum non conveniens as follows:24
(a)A stay will be granted for forum non conveniens only where the Court is satisfied that there is some other available forum having competent jurisdiction, and which is the appropriate forum for the trial of the action, ie, the forum in which the case may be tried more suitably for the interests of all the parties and the ends of justice.
19 Kidd v Van Heeren [2006] 1 NZLR 393 (HC) at [53] and [91].
20 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR6.29.02(3)].
21 GAF Corp v Amchem Products Inc [1975] 1 Lloyd’s Rep 601 (CA).
22 Beck v Value Capital Ltd (No 2) [1975] 1 WLR 6 (Ch).
23 Carvalho v Hull Blyth (Angola) Ltd [1979] 1 WLR 1228 (CA); and Owners of Cargo on Board the Morviken v Owners of the Hollandia [1983] 1 AC 565 (HL).
24 At [HR6.29.05]; referring to Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460 (HL).
(b)In general, the burden of proof rests on the defendant to persuade the Court to exercise its jurisdiction to grant a stay. The various parties will seek to establish the existence of certain matters which will assist them in persuading the Court to exercise its discretion in their favour, and in respect of any such matter, the evidential burden will rest on the party asserting its existence. If the Court is satisfied that there is another available forum which is prima facie the appropriate forum for the trial of the proceeding, the burden will then shift to the plaintiff to show that there are special circumstances indicating that justice requires that the trial should take place in New Zealand.
(c)In determining the appropriate forum, it is pertinent to ask whether the plaintiff has founded jurisdiction as of right in accordance with the law of New Zealand.
(d)Since the question is whether there exists some other forum more clearly appropriate for the trial of the proceeding, the Court will first look at what factors point in the direction of another forum. These include questions of comparative cost and convenience.
(e)If the Court concludes at that stage that there is no other available forum which is clearly more appropriate for the trial of the proceedings, it will ordinarily refuse a stay.
(f)If, however, the Court concludes at that stage that there is some other available forum which prima facie is clearly more appropriate for the trial of the proceeding, it will ordinarily grant a stay unless there are circumstances indicating that justice requires that a stay should not be granted. In this inquiry, the Court will consider all the circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions. One example given by Lord Goff was the fact (if established objectively by cogent evidence) that the plaintiff would not obtain justice in the foreign jurisdiction.
Are there proceedings in train in another Court in another jurisdiction?
[59] As set out above, at the hearing the defendant clarified that the stay sought was until determination of the proceedings currently before the court in Japan. I therefore consider the application for a stay on that basis.
[60] The plaintiff submits that the defendant wrongly asserts that the alleged factual dispute is currently before the Court of Appeal in Japan or the Eastern Caribbean Supreme Court and says that the defendant produces no evidence that this is true. Counsel submits therefore that the defendant’s purported reliance on the doctrine of forum non conveniens is misconceived and that “there are no proceedings on foot anywhere in the world, where the ownership of the D2D business is in dispute.”
[61] In support of PAC’s opposition, Mr Hemi (director of IBC Japan) and Michael Pearson (director of ATI and PAC) have sworn affidavits which state that there is no longer any dispute over the D2D business. The plaintiff relies on three documents as evidence that the dispute has been resolved:
(a)a letter from Mr Hemi’s lawyers in Japan stating that Mr Stone’s proceedings in Japan have been determined in Mr Hemi’s favour;
(b)a deed of settlement;
(c)the judgment of Hinton J referred to above, which directs the funds held pursuant to the interpleader order to be paid to ATI.
[62] The defendant submits that these documents do not establish that the dispute over the D2D business has been resolved. I consider each of the documents below.
Letter from Mr Hemi’s lawyers
[63] The letter from Mr Hemi’s Japanese lawyers records that the Kyoto District Court rendered its judgment on 9 March 2023 on the derivative action brought by Mr Stone as the shareholder of IBC Japan against Mr Hemi as the director of IBC Japan. The letter confirms that in the Japanese proceedings Mr Stone alleged that Mr Hemi incorporated and operated a New Zealand company, PAC, engaged in a competing business with IBC Japan, in breach of his fiduciary duty, duty of royalty (presumably loyalty) and non-compete obligations, claiming damages of approximately NZD $18.4 million. The letter confirms that the Kyoto District Court held that Mr Stone had consented to PAC’s operation of the D2D business and dismissed the claim asserted against Mr Hemi by Mr Stone. However, the letter further records that Mr Stone has 14 days from the date of receipt of the judgment to appeal to the Osaka High Court, and that the lawyers would let Mr Hemi know as soon as they have information regarding whether Mr Stone has appealed or not.
[64] Mr Quigley attaches a letter to his affidavit in reply for Jacanna from Mr Stone’s lawyers in Japan, confirming that an appeal was filed within 14 days on 23 March 2023 and recording that the process from there was for the initial hearing of the
appeal to “probably be held in July or August this year”, with a decision likely to be issued at the earliest several months after the hearing.
[65] In his affidavit, Mr Quigley records that “as he understands it”, the litigation in Japan involves a dispute between Mr Hemi and Mr Stone regarding control of IBC Japan and who is entitled to the title of “representative director”.
[66] The plaintiff challenges the admissibility of Mr Quigley’s evidence on this point, as it says that it is a statement of Mr Quigley’s belief, and so ought not to be admissible because it is clearly inconsistent with the evidence from the plaintiff. Counsel for the plaintiff submits that the plaintiff’s evidence, on the other hand, is from the directors of all three parties referred to in paras 19 and 20 of the statement of claim, both of whom have direct knowledge of the matters in dispute.
[67] The difficulty with the plaintiff’s submission is that the letter attached to Mr Hemi’s affidavit from his lawyers confirms that an appeal may be filed, and the letter attached to Mr Quigley’s affidavit then confirms that an appeal has, in fact, been filed. No further updating affidavit was filed on behalf of the plaintiff to dispute this and so the fact an appeal has been filed must be accepted as correct.
[68] Furthermore, in the judgment of Davison J in the interpleader proceedings, his Honour quotes from correspondence sent by Mr Stone to Mr Quigley on 31 May 2018, following the appointment of Mr Hemi as representative director of IBC Japan, in which Mr Stone says that the appointment of Mr Hemi as representative director “… adversely affects IBC Japan, considering his continuing acts constitute breach of fiduciary duties as director. Pertinently, as an example, [Mr Hemi] set up PAC and put in place the transactions to generate a separate income stream independent of IBC Japan which he could use to advance loans to himself and pay his own personal expenses”.25 The letter then advises Mr Quigley that it should be taken as formal notice, as director of Jacanna, that Mr Stone is contesting the appointment of Mr Hemi as representative director of IBC Japan before the Japanese courts to protect the interest of IBC Japan and the group. The letter finishes by saying that the funds that Jacanna is holding belong to IBC Japan, and that Mr Stone expects that those funds
25 Davison J’s Judgment, above n 6, at [28].
are sent back to IBC Japan. Although not expressly referred to in Mr Quigley’s affidavit, this correspondence provides a basis for Mr Quigley’s belief. Relying on this letter as quoted in Davison J’s judgment does not offend s 50 of the Evidence Act as the judgment sets out the letter in full.
[69] In my view it is in the interests of justice, as provided for in r 7.30 of the High Court Rules, to admit Mr Quigley’s evidence on this question, including the letter from Mr Stone’s lawyers which is technically hearsay.
[70] From the evidence that has been filed it appears that the Japanese proceedings relate to the ownership of the D2D funds through the litigation of issues in relation to the control of IBC Japan. The plaintiff may be technically correct in saying that there are no proceedings in relation to the ownership of those funds as between the corporate entities. However, because there are proceedings in relation to the control of the entities who have rights to those funds, then from a substantive perspective I consider that the defendant has established there are proceedings which are currently before the Japanese courts in relation to the ownership of those funds.
[71] As the defendant submits, the plaintiff could have obtained evidence from Mr Stone confirming that there was no dispute about ownership, but it chose not to do so. Furthermore, the plaintiff could have provided a translation of the decision of the Japanese Court if it wished to challenge the subject of the litigation as alleged by the defendant but again it chose not to do so. I accept it is for the defendant to establish that there are proceedings in train in another jurisdiction but consider the defendant has done so sufficiently here where the plaintiff is the party that has more ready access to the information and has been asked for that information but has declined to provide other than bare details.
Deed of settlement
[72] The second document relied on by the plaintiff as evidence that there are no other proceedings concerning the ownership of the benefit of the D2D business is a deed of settlement entered into between ATI, IBC Japan and PAC regarding the D2D funds. The plaintiff says that the execution of the deed between ATI, IBC Japan and
PAC settled any dispute between them as to the ownership of, or benefit from, the D2D business.
[73] The defendant however says that the deed does not stand up to scrutiny. Firstly, the defendant points to the fact that it is undated, and not signed by Mr Pearson, one of the directors of ATI and PAC. Secondly, it is not witnessed and so does not comply with the formal requirement for deeds. Finally, and most importantly, the defendant says it is not signed by Mr Stone. As Mr Stone is the party disputing ownership of the D2D business, Mr Stone is the only party with whom a meaningful settlement could be reached.
[74] In short, the defendant says the deed produced by PAC is “nothing more than a self-serving document signed by parties between whom there is no dispute”. Furthermore, the defendant says that under Japanese law, Mr Hemi’s authority to sign documents on behalf of IBC Japan flows from his position as representative director of IBC Japan. If the Court of Japan grants Mr Stone’s appeal, counsel for the defendant says that it is likely that Mr Hemi will lose his position, and that his actions taken as representative director will be challenged — especially any attempts to prejudice IBC Japan’s claims while he held that position.
[75] There is no evidence before me of Japanese law in respect of representative directors other than in Davison J’s judgment on the interpleader proceedings. There is no evidence that the status of representative director as described by Davison J was contested before his Honour. I therefore consider that I am able to rely on Davison J’s description for the purposes of this application without offending s 50 of the Evidence Act. Furthermore, the evidence for the plaintiff describes proceedings as a derivative action on behalf of IBC Japan, with claims for breach of fiduciary duties by Mr Hemi as director which may therefore impact on the validity of the deed. As discussed above, although the question of ownership of the funds technically may be settled, it does not appear to be settled as far as control of the entities is concerned. In these circumstances I do not consider the deed is sufficient evidence of the real dispute having been settled.
Judgment of Hinton J
[76] The third document relied on is the judgment of Hinton J. The plaintiff relies on the fact that Hinton J directed the interpleader funds to be paid to ATI, and that the funds were paid out of the Court to ATI as PAC’s principal (with PAC’s consent). The plaintiff says that these are the only parties that had potential claims regarding ownership of the D2D business, and they have resolved the matter.
[77] Mr Hemi’s evidence for the plaintiff acknowledges that there was a derivative action brought by Mr Stone against Mr Hemi personally, but refers to this as having been dismissed, without noting that an appeal was possible. As stated, the letter from his Japanese lawyers annexed to his affidavit however noted that Mr Stone had 14 days to appeal and that the lawyers would keep Mr Hemi updated. Mr Hemi’s affidavit was sworn on 15 March 2023, and the correspondence attached to Mr Quigley’s affidavit confirms that the appeal was filed on 23 March 2023. As referred to above, however, no updating affidavit was filed on behalf of Mr Hemi updating the position in respect of the appeal in the Japanese proceedings. As discussed above, Hinton J expressly records that she was not required to determine ownership of the funds. I do not therefore consider that the plaintiff’s reliance on Hinton J’s decision advances their position.
[78] Considering the above, the first question as to whether there are proceedings in train in another jurisdiction can therefore be answered in the affirmative.
Will the New Zealand Court provide the most effective relief, or is a foreign court in a better position to do so?
[79] The question that is currently before the Court of Japan in the appeal (assuming the appeal has not yet been determined) is whether Mr Hemi has breached his duties as director of IBC Japan in incorporating and operating PAC in a competing business with IBC Japan, and also in relation to Mr Hemi’s status as representative director. The action is being brought as a derivative action by Mr Stone as shareholder of IBC Japan.
[80] The question of whether there is a dispute between ATI, PAC and IBC Japan as to whether PAC, as agent, and ATI, as principal, are entitled to the benefit of the D2D business, and not IBC Japan, is a question that it would be in the interests of justice for the Court in Japan to determine first as it may mean these proceedings are not continued if the appeal is successful. Given the progress of that proceeding, with an appeal likely to have been heard by now, it seems sensible to await the decision of the Court in Japan rather than continue with the proceeding here in advance of that determination.
Will a party suffer an unfair disadvantage if the New Zealand Court assumes jurisdiction?
[81] If the Court of Japan finds that Mr Hemi did breach his duties, and IBC Japan is entitled to the benefit of the D2D business, rather than PAC as agent for ATI, then the proceedings in New Zealand will not succeed.
[82] It is clear therefore that if the proceedings in New Zealand are not stayed, then the defendant will incur costs, particularly the costs of completing discovery and responding to particulars when the proceeding may not ultimately proceed if Mr Stone succeeds in his appeal in Japan.
[83] The delay if a stay is ordered until the determination of the appeal only appears to be a matter of months on the basis of Mr Stone’s lawyers’ letter. The disadvantage is therefore minor in comparison to the prejudice to the defendant.
Conclusion on whether stay ought to be ordered
[84] Taking the above considerations into account, I therefore conclude that it is appropriate for a stay to be ordered until final determination of the Japanese proceedings. At the time of the hearing it was not disputed that an appeal had been filed in the proceedings in Japan. The outcome of that appeal may result in this claim not proceeding. Jacanna will incur significant costs if this claim is able to progress, as the next step is discovery. A critical factor is that the disadvantage suffered by the plaintiff if a stay is ordered would only be a delay of several months in progressing
these proceedings and so is minor in comparison to the prejudice that is likely to be suffered by the defendant.
Particulars Application
[85] As I have reached the view that a stay ought to be ordered I do not consider that it is appropriate for the particulars application to be determined now. I record that however the defendant does not oppose the application other than on the basis that a stay ought to be ordered. If the appeal in the Japanese proceedings is dismissed the particulars application is likely to be able to be determined by consent. I do not expect that a costs orders on this application would be appropriate given the timing of the application.
Result
[86] The defendant’s application for a stay of these proceedings until the appeal in Japan of the derivative proceedings brought by Mr Stone as a shareholder of IBC Japan is determined is granted.
[87] The plaintiff’s application for particulars is adjourned pending the lifting of the stay.
Costs
[88] The defendant has succeeded and there appears no reason either why costs should not follow the event or be on a 2B basis. I expect the parties ought to be able to agree. I therefore ask the parties to confer and only if agreement cannot be reached to file memoranda, on behalf of the plaintiff within 25 working days and the defendant within a further 10 working days.
Associate Judge Sussock
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